Logan Energy Corp V.LGN

CIBC: outperformer: $1.15 target

[Westcoastenergy]

LOGAN ENERGY CORP. First Look Q1/25: Cash Flow Miss On Production And Operating Costs, But Strong Well Results Are Very Encouraging Our Conclusion Logan Energy reported a weak Q1/25 update, with production and cash flow that came in below expectations while capital spending exceeded consensus estimates. Lower-than-expected production and higher-than-expected operating costs and royalty expenses were the primary contributors to the cash flow miss, partially offset by lower-than-expected transportation expenses. The company maintained its annual production guidance and indicated that it is in the process of re-evaluating its activity plans in H2/25 and winter 2026 in light of the recent volatility in commodity prices. On a positive note, the company reported strong well results at Simonette from its Montney and Duvernay wells that support underlying resource potential. Logan trades at a 2025E EV/DACF multiple of 2.7x versus gas-weighted peers at 3.6x on our price deck. Key Points Cash flow missed expectations on lower-than-expected production and higher-than-expected operating expenses and royalties: Q1/25 production of 10.0 MBoe/d was in line with our estimate of 9.9 MBoe/d but below consensus of 10.4 MBoe/d. Cash flow of $16.0MM ($0.03/share) was in line with our estimate of $16.0MM ($0.03/share) and below the Street at $18.1MM ($0.03/share). Logan reported capital spending of $96.3MM for the quarter, topping our estimate of $85.0MM and consensus of $71.8MM. Unit operating costs at $12.63/Boe were 22% above Street expectations of $10.34/Boe, which drove the bulk of the miss in conjunction with production being 4% below consensus expectations. Increased credit facility capacity to provide additional flexibility amidst the decline in commodity prices: Logan announced that its credit facility capacity has increased from $125MM to $150MM. We estimate the company exits 2025 with $102MM drawn from its credit facility (68% utilization under the new capacity) and net debt/cash flow of 1.3x under strip pricing. Duvernay result is encouraging and could compete with top-tier resource in the Kaybob region: The company noted that challenging surface conditions and a delayed onstream of the Simonette Duvernay well impacted production volumes during the quarter, although Logan does not expect an impact to full-year volume guidance. Logan’s Lower Montney pad in South Simonette delivered 84% liquids on an IP30 of 796 Boe/d, which is a good result on the recently acquired JV lands. The Duvernay well in North Simonette produced 87% oil on an IP30 of 1,503 Boe/d, which is encouraging. We previously viewed this region of the Kaybob halo as carrying higher uncertainty due to limited horizontal well control but this outcome indicates the area can compete with top-tier Kaybob resource. All figures in Canadian dollars unless otherwise stated. Chris Thompson, P.Geo. Flash Research Jamie Kubik, CPA, CA Matin Farshidian Outperformer LGN-TSXV, Sector: Energy Current Price (5/14/25): C$0.61 Price Target (12-18 mos.):C$1.15 Please see "Price Target Calculation and Key Risks to Price Target" information on page 2. For required regulatory disclosures please refer to "Important Disclosures" beginning on page 3.