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OUR TAKE: Positive. SDE reported Q4/24 Adjusted Funds Flow ahead of expectations on lower-than-expected cash costs. The company’s reserve report showed strong growth for oil bookings, with a slight decline for gas bookings on what we consider to be solid FD&A costs given SDE’s focus on building out its Duvernay oil land position in 2024. The company produced ~ 5.0 mboe/d (77% liquids) from the play in December 2024 and kicked of 2025 with two rigs active in the play (and two others drilling in the Deep Basin). In our view, SDE delivered solid overall results in a year focused on transitioning the asset base and development focus toward the emerging South Duvernay oil play. We expect the South Duvernay to garner a lot of attention as the year progresses with Paramount Resources (POU-T; SO) and Baytex Energy (BTE-T; SP) active nearby, and believe SDE should be able to capture more attention in the market with positive results. We continue to rate the stock Sector Outperform and see it as a top option for Duvernay oil growth exposure.
KEY RESULTS
Lower cash costs drive Q4/24 FCF beat. Production of ~38.5 mboe/d (35% liquids) was in line with expectations volume wise while coming in with 2% higher liquids weighting. Post-hedging realizations of $26.80 came in ~6% behind consensus on a lower realized gas price and lower hedging gains, while cash costs of $11.60 were ~11% better than expected on lower royalties, operating expense, and interest. AFF of $50M ($0.06/share) beat the Street by ~9% on lower cash costs. Capex of $40M was aligned with consensus and resulted in a FCF surplus of ~$11M, ~$5M or 69% above the Street (Positive).
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