Logan Energy Corp V.LGN

TD

[retiredcf]

Have a $1.50 target. GLTA

BRINGS IN CASH VIA ROYALTY & INFRASTRUCTURE SALE

THE TD COWEN INSIGHT

Although Logan opened down sharply post announcement, we are taking a more constructive position. There are three questions to ask:

• Does the GORR/infrastructure sale deter a future buyer of Logan? (Our View: No)

• Was the transaction done at reasonable metrics? (Our View: Yes)

• Is it likely that Logan can reinvest the proceeds at a higher return than the sale metrics (Our View: Yes)

  Event: Sells royalty interest in Pouce and a 35% W.I. in new Pouce facility.

  Impact: NEUTRAL (Potentially Positive Depending on Use of Proceeds)

  Logan tapped an often less-appreciated financing solution - a sale of a small royalty interest. The company also divested a minority working interest in infrastructure. In aggregate, Logan fetched $43mm in proceeds, will pay the purchaser ~$5mm in 2025E — equates to a sale metric of ~8x. Given the interest savings, the net CF loss is only ~$2mm to Logan (22x 2025E CF - net of interest savings). Logan will now have $60mm in net debt by year-end 2025E (0.5x CF). We estimate the company now has "dry powder" of ~$70mm to look for value creating initiatives (tuck-ins, accelerated activity...), without equity and keeping D/CF <1x by YE-2025E.

  Pouce Coupe Royalty Sale: Logan sold a 2.5% royalty interest in the Pouce Coupe area for proceeds of $17mm. Logan produced 4.3 mBOE/d (107 BOE/d net) in Q3/24. Logan holds 71 net Montney sections in the area with 118 company identified net future Montney locations. Logan is currently constructing a processing facility that should allow the asset to grow to ~8 mBOE/d in H2/25 and ultimately reach ~10 mBOE/d. We estimate that the purchase/sale metric on this portion of the asset was ~7x NTM CF (before interest savings) or an IRR of ~20%.

  Divests Pouce Coupe Facility Minority W.I.: Logan has also agreed to divest a 35% working interest in the Pouce Coupe facility for $26mm (or ~$80% of Logan's $32mm construction cost). This under-construction facility includes a 40 mmcf/d gas plant and 7 mbbls/d of oil handling capacity. Logan has committed to a 15-year take or pay commitment of ~$3mm over first 12 months. Notably the TOP is based on a sliding scale against AECO pricing. The scale itself was not disclosed. We estimate the purchase and sale metric on the infrastructure to be 8x (before interest savings) or an IRR of ~13% - assuming 2025E gas prices persist across the 15-year term.