CIBCCurrently have a $1.50 target. GLTA
EQUITY RESEARCH
March 19, 2025 Flash Research
LOGAN ENERGY CORP.
Q4/24 Results: Cash Flow Beats While Activity Profile Indicates
A Strong Growth Trajectory Is In Store For 2025
Our Conclusion
Logan posted a good quarterly update with cash flow beating expectations by 12% which we believe was driven by lower-than-expected transportation
costs, royalties, and G&A, offset by weaker-than-expected price realizations
versus our estimate. Reserves growth was strong, although acquisition
expenditures drove higher finding costs and weaker recycle ratios on an
FD&A basis versus the peer group. The company indicated that its Simonette drilling program has been successful thus far, and expects its Pouce Coupe gas plant will be commissioned in Q2/25 with nine wells planned to be onstream in August. Given the pace of activity scheduled, we expect Q3/25 will represent peak production for the year at 16 MBoe/d, which is an impressive 70% increase from Q4/24. We view the pace of growth and multiple compression in Logan as compelling, and expect that a
demonstration of strong growth this summer makes the company an
attractive takeout target. The stock is trading at 2.5x 2026E EV/DACF versus
peers at 3.5x on the CIBC price deck.
Key Points
Production was in line with expectations while cash flow beat by 12%
on lower-than-expected costs: Q4/24 production of 9.5 MBoe/d (32%
liquids), was in line with our estimate of 9.4 MBoe/d (31% liquids) and
consensus of 9.4 MBoe/d (32% liquids). Liquids production of 3.0 MBbl/d
was in line with our estimate of 2.9 MBbl/d and consensus of 3.1 MBbl/d.
Logan reported cash flow of $0.03/sh, or $16.7MM, which beat our estimate
of $0.03/sh ($14.8MM or 13%) and consensus of $0.03/sh ($14.9MM or
12%). The company reported capital spending of $39MM, before A&D, which
was lighter than our estimate and Street of $45MM, although the company
noted that $6MM of capital spending would be shifted into the 2025 budget
(increased to $201MM from $195MM prior) which makes up for the
difference. The beat to our estimate was driven by lower-than-expected
royalties, transportation, and G&A, offset by lower-than-expected price
realizations.
Absolute reserve growth was strong and remained positive on a per-
share basis, while capital efficiency is likely to screen weaker than
peers driven by acquisition expenditures: Logan grew PDP, 1P, and 2P
reserves by 48%, 45%, and 42%, respectively; and on a per-share basis,
total reserves grew by 15%. Reserve growth came at a cost of $27.08/Boe,
$21.26/Boe, and $17.01/Boe for PDP, 1P, and 2P, respectively, which drove
respective recycle ratios of 0.6x, 0.8x, and 1.0x on a cash flow net back of
$17.12/Boe. Logan’s NPV (including cash) for PDP, 1P, and 2P reserves is
$0.22/sh, $0.61/sh, and $1.31/sh, respectively, on the evaluator price deck.
We view Logan’s reserves as being conservatively booked given proved
future development capital (FDC) amounts to only 3.8x of 2025 capex and
5.6x on a 2P basis.