Surge Energy Inc (Alberta) T.SGY

Here we go, eh!

[Dibah420]

At Surge we’ve had a number of exciting , new , key developments that investors may not have caught up with:

1. Announced a $24.34 per share , December 31,2022 , INDEPENDENT 2P Sproule Net Asset Value at a flat $80/bbl WTI crude oil price assumption ( SGY’s Sproule NAV is $16.95 a share at US$70 flat oil prices) , with several of our peers ALREADY TRADING ABOVE their new 2P NAV’s ;

2. SGY has re-instated it’s attractive monthly cash dividend of $0.035/month (~4% yield!!) -  which represents just 18% of FCF in 2023e (Analyst consensus); 1^st monthly dividend cash payment starts on July 15/22 !! ;

3. Made a new 15mmbbl light oil pool extension/discovery at Steelman in SE Sask ; success at a recent Crown sale provides > 40 new locations; these Steelman wells pay out in 6-8 weeks ;
4. Crude oil hedging losses continue to unwind and expire into 2H22, giving visibility to a > $425 mm cash flow run-rate business in 2023 (@ strip prices) , and a concomitant re-rate;

5. New $30mm term debt financing allows for “tidying up“ the Surge cap structure with the redemption of $44.5mm of SGY converts coming due late this year;
6. SGY has the capability to significantly ratchet up it’s dividend in 2H22 and beyond -  with large excess Free Cash Flow at current strip prices.    For example , if SGY moved it’s dividend to 47% of SGY’s 2023 FCF (as per a few of our peers) , our dividend would more than double to $0.96 per share per yr (see chart above!! ) ; and
7. Surge has > $1.3 BILLION of tax pools providing a 4-5 yr tax horizon ie. allowing for maximum distribution of FCF through dividends and share buy-backs on a tax efficient basis.