National Bank Financial analyst Dan Payne on Friday reiterated his outperform rating on the shares of Surge Energy after the Western Canadian oil and gas producer reported second-quarter results in line with expectations. The company on Thursday reported its third-quarter profit fell 79% to C$16.58 million, or C$0.16, from C$78.06 million, or C$0.91, in the year-prior quarter, even as revenue rose 2.9% to C$184.48 million on a 13% rise in oil and gas production to 24,108 barrels of oil equivalent per day.
Payne said those results met the investment bank's expectations and expects the company to continue performing well against its peers.
The results "continue to validate the strength of the underlying asset, where its low decline (23%) and capital-efficient assets continue to compound FCF and shareholder returns. Underpinning that is ~80% of corporate production in the Sparky and SE Sask conventional, where drilling results are proving a high-velocity recycling of capital (i.e., $10, 000 - $15, 000/boed E&D Sparky & SE Sask capital efficiencies, with payouts measured on the order of months), which with a strength of duration in each (Sparky 12 years, SE Sask 7 years) and upside from thematic tailwinds from multi-laterals, should continue to drive it forward swiftly towards its next inflection to returns," he wrote.
Payne also maintained his C$13.00 price target on the company's shares.
Surge shares closed up C$0.23 to C$9.75 Thursday on the Toronto Stock Exchange.