AUGMENTS MONTNEY POSITION THROUGH 50% OPERATED INTEREST ACQUISITION
THE TD COWEN INSIGHT
Logan acquired an additional operated interest of Simonette Montney production and acreage that is contiguous with its existing assets. The transaction was largely (~85%) funded with a concurrent equity financing which preserves LGN's go forward financial flexibility. Given the relatively attractive acquisition metrics and expected synergies, we see the transaction positively.
Event: We are resuming coverage following the acquisition of Montney assets and equity financing announced Nov. 26
Impact: POSITIVE
Acquired 50% operated W.I. in Montney assets from Gran Tierra Energy (GTE-T, $6.69, not covered) for $52mm. LGN purchased a 50% interest in additional Simonette assets with Q3/24 volumes of 795 BOE/d (48% liquids) and are expected to grow to average 1,440 BOE/d in 2025E. The acquisition also transfers 5-10% GORRs on 16 Montney sections to LGN (some of which were on LGN lands, effectively eliminating cost). Concurrent with the acquisition, LGN completed a $45mm equity financing (62mm shares at $0.73).
Our View: The acquisition fits like a glove (Figure 1) and was completed at an attractive valuation. We estimate the deal adds ~$19mm in operating CF in 2025E, implying a metric of ~2.7x. Our 2025/2026 CFPS estimates increase by 8% and 5%, respectively.
Adds Land, Locations and Synergies. The deal adds 25 net Montney sections, 45 net drilling locations and 2P reserves of 14 mmBOE. Logan expects to realize synergies from current infrastructure in the area and the deal also comes with interest in certain oil/ water infrastructure. This is expected to result in both operating and capital cost synergies through the 5 year plan ($7.5mm from opex and $13mm from reduced infrastructure capital).
Tweaked 2024 Guidance. 2024 volumes are expected to come in modestly lower than prior guidance (now 8.4 mBOE/d down from 8.7) on price-related shut-ins and downtime at Lator. FY24 capex guidance was also increased to $157mm (from $140mm) which includes accelerating certain early-2025 capital.
Updated 2025 Budget and LT Plan. P.F. the deal, LGN now expects 2025 volumes to average 13.7 mBOE/d (up from 12.8) on capex of $195mm (up from $170mm). Longer- term, LGN now expects volume to average 24-27 mBOE/d in 2028 (up from 20-25 mBOE/d) with opex reaching <$8.00/BOE by 2027.