Surge Energy Inc (Alberta) T.SGY

Payback on Astra and Fire Sky Acquisitions

[geezer21]

Payback on aquisition of Astra and Fire Sky (data from announcements)

                 boe/d    net back     $/day                                Cost               

Astra         4,100       $52+       172,200     90% liquids   160 million
Fire Sky    1,500       $42+         78,000     95% liquids     58 million

Combined  5,600      $44.68    250,200                           218 million

Daily Net Back          $250,200
                times                    30

Monthly Net back      $7,506,000

Payback     218,000,000/7,506,000 =  29 months or 2.4 years


The payback will likely be a lot less than 2.4 years as the price of oil has risen since acquistions were made and also the net backs above will likely be higher with synergy savings that should more than offset carrying charges on the $18 million in assumed debt from the acquistions.

Surge 2022 Guidance calls for free cash flow of $135 million.
The $18 million in assumed debt will be paid off in approximately
7 and a half weeks.

[ppp]

You have to use FCF numbers that production has higher declines. 

[ppp]

Full cycle corporate production efficiencies (9) of less than $22,000 per flowing boe per day. So use 35% declines. They are a bit higher. so they have to replace about 2000 bbls a year cost x 22,000 = 44 mil per year

[Kontrary]

Thanks! I was just trying to figure that out. Just looking at Surge's Press Releases this year, they appear to have gone from an average 19% decline rate to 26%. If a third of their production is around 35%, that will explain the average increase.