A generally positive reveiw from an analyst who hasn't been much of a fan (ie. he only has a $4.00 target). GLTA
SPARTAN DELTA CORP.
Step-out Is Intriguing
Our Conclusion
Spartan’s 2024 guidance came in slightly better than expectations on
production and in line on spending. The company guided to 31% liquids
weighting versus Street at 29% which should offer a lift to cash flow
estimates in 2024. Spartan announced it has acquired 400 Boe/d and ~200
net sections of Duvernay acreage in the West Shale basin. While it is still
early in the growth of this new asset, the step-out echoes Spartan’s strategy
in the Montney and is intriguing. Overall we expect the update should be
modestly positive for the stock, and we expect growing interest in the
Duvernay could be a longer-term catalyst for the shares as more is revealed
with respect to the company’s development plans there. The stock is trading
at 3.4x 2024E EV/DACF on strip pricing versus gas-weighted peers at 4.6x.
Key Points
Capital spending as expected for 2024 but production comes in slightly
better with higher-than-expected liquids growth. Midpoint production of
39.5 MBoe/d (31% liquids) is ahead of consensus at 38.7 MBoe/d (29%
liquids) and our previous estimate of 38.1 MBoe/d (29% liquids). Capital
spending of $130MM is in line with consensus of $132MM and our previous
(and current) estimate of $130MM. Spartan indicated that it plans to target
oil-weighted zones such as the Viking, Wilrich, and Rock Creek, which it
expects will add outsized growth to oil volumes next year.
West Shale Duvernay acquisition is intriguing, as Spartan embarks on
its next consolidation strategy. During the quarter, Spartan acquired 400
Boe/d and 203 net sections of Duvernay for $25MM. Public licensing data
indicates a number of wells were transferred to Spartan from Kiwetinohk
(KEC-TSX) earlier in November. The acquired lands sit between Duvernay
developments by Paramount (POU-TSX) to the South and Baytex (BTE-
TSX) to the North, but they are sparsely drilled compared to the East Shale
Duvernay basin. Ownership in this part of the play is largely fragmented and
offers an intriguing oil-weighted step-out for Spartan which echoes its
previous strategy in the Montney.
CFO Geri Greenall to retire and be succeeded by Mr. Ronald Williams.
Mr. Williams is a CPA with 31 years of industry experience and has been
part of the Spartan team since 2021. Mr. Williams previously served as CFO
for two junior oil and gas producers.