McFranki
Logan Energy (OTCPK:LOECF) reported rapid growth in the first quarter with the promise of more rapid growth in the second quarter. It looks as though production will take a fast trip through the teens towards 20,000 BOED. The last article noted the sizable production growth and what it has done to costs compared with the previous fiscal year. Management now has production at the important 10,000 BOED which often is one of the first "signposts" to more efficiency.
Past articles covered a broken pipe and how the costs of that issued impacted a company with low production. Now with production heading past 10,000 BOED, things like that become less significant when they happen. All of last year, the company took advantages of deals to get production quickly to a level where a maximum level of cost advantages could be achieved along with significant pricing advantages.
Earnings
The earnings showed impressive changes throughout the quarterly comparison. But this was the intention of all the deals done last year.
Logan Energy First Quarter 2025, Earnings Summary (Logan Energy First Quarter 2025, Earnings Press Release)
Note that despite the greater number of shares outstanding, adjusted funds flow per share increased dramatically. Management had promised that those deals, despite the additional shares issued would prove to be accretive. So far that is the case.
Similarly, production per share likewise increased despite the shares outstanding. This is a bit easier to do from a low production base. But it also shows some management experience in producing a growth result.
More importantly, the rate of oil production growth exceeded the overall rate of production growth. This allowed the average sales prices per BOE to increase compared with the previous fiscal year.
It is also worthwhile to note that the increasing production allowed the commodity prices to remain essentially comparable with the previous fiscal year despite the fact that most companies have reported relatively weak current commodity prices.
It is also worthwhile to note the declining operating expenses per BOE. The last fiscal year featured a broken pipe repair in the second quarter. Secondly the second quarter also had a plant turnaround. The starting low costs almost "guarantee" a big positive second quarter comparison for operating expenses. Even if there was a pipe break, it would take a substantially larger break for the sizable costs that raised the operating average cost for the whole fiscal year (to happen in the current year).
Expected Growth
The Pouce Coup asset has some capital projects that will complete to enable significant production growth beginning in the second quarter.
Logan Energy Summary Of Pouce Coup Plans (Logan Energy First Quarter 2025, Corporate Presentation)
This asset will have substantial production growth in the current fiscal year. This asset will then transition to a cash flow machine with steady production in the future whereby the cash flow allows the exploration and development of other assets in the portfolio.
The fact that the second half will average more than double the current rate of production implies quite an exit rate compared to the current level of production. The plans here define as definitively as anything in the portfolio solid production growth in the current fiscal year. Much of the rest of the growth relies upon expected production results in areas that need more delineation.
A Surprise
One well drilled produced mostly liquids.
Logan Energy Summary Of Expected Growth Prospects (Logan Energy Corporate Presentation First Quarter 2025)
The North Simonette well noted above could prove to make the acreage the most profitable in the portfolio. If it gets duplicated enough it may influence the corporate growth strategy.
The original idea here through much of the acreage was to use modern ideas that enabled basically rich gas production in what was a dry gas production area. That transition opened up a more valuable production stream without increasing the well cost much, if at all from the "good old days" of dry gas production.
Now, there are some intervals that are becoming competitive to produce. That puts a lot of potential growth tracks on the plate of management.
Budget Maintained
This is a bit easier to do with production approaching the first level where there are usually significant efficiencies to be gained.
Logan Energy Fiscal Year 2025 Budget Compared To Fiscal Year 2024 Results (Logan Energy Corporate Presentation First Quarter 2025)
Now some of the first quarter costs appear high compared to the fiscal year 2025 guidance. The fast growth of the production combined with the seasonality of some costs should account for the variance that investors see.
What may change this would be another material acquisition. This management has a long history of doing deals throughout the various companies it has built, sold, or spun off. But any changes to the budget shown above will not happen unless such a deal actually happens.
Summary
Logan Energy has another year of relatively rapid growth planned. The stock price has sagged somewhat despite a lot of material per share and per BOE improvements shown above because it takes some time to get past the startup phase to generate free cash flow as well as earnings.
Mr. Market is relatively impatient. Therefore, the stock price sag is a reasonable possibility. but it is far from guaranteed.
Logan Energy Presentation Of Spartan Delta Historical Financial Results (Logan Energy Corporate Presentation First Quarter 2025)
If the history shown above is any guide, then it is possible to do better than the investors who participated in the last sale of stock. The reason is that the stock price is now lower than the last financing. The history is already in the favor of investors who participated in the financing of another deal. Now, the current stock price allows potential investors to invest at a lower price than the investors paid for the latest round of stock selling.
Individual investors often have more flexibility than large funds to buy a bargain levels. But those investors need to have the faith in their research to withstand periods of low commodity prices (and in this case a startup period) to get the gains shown.
I do not know how many times I have seen investors buy what they thought was a bargain only to get talked out of the investment idea either when the stock price went down at first or when it recovered to a small gain. They were so frightened by that price decline that they gave up any idea of the larger profits that many famous investors hang on to make over several years.
But the key remains faith in your own due diligence and what you have to do to have that faith.