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Nvidia's (NVDA) downside price action off what Olivier Blanchard considers stellar is "odd," though he understands concerns on the Big Tech CapEx narrative. Additionally, he sees a lack of energy supply serving as another major headwind for Nvidia.
Surge Energy Inc. (OTCMKTS:ZPTAF - Get Free Report)'s share price traded up 1.4% during mid-day trading on Thursday. The stock traded as high as $6.00 and last traded at $5.74. 51,887 shares traded hands during trading, a decline of 9% from the average session volume of 56,839 shares. The stock had previously closed at
Surge Energy Inc. (OTCMKTS:ZPTAF - Get Free Report) traded up 1.6% on Wednesday. The stock traded as high as $4.85 and last traded at $4.8360. 43,045 shares were traded during mid-day trading, a decline of 25% from the average session volume of 57,409 shares. The stock had previously closed at $4.76. Wall Street Analyst
Surge Energy's Q2 results exceeded expectations, with strong production, reduced costs, and a 7% dividend yield covered at $58 WTI. Cost reductions, especially in transportation and capex, have improved my fair value estimates, but ongoing monitoring is needed for sustainability. The company offers double-digit free cash flow yields at current oil prices, with significant upside if WTI rises above $70, but risk increases below $58.
Surge Energy offers a compelling setup with a clean balance sheet, high FCF yield, and no cash taxes expected until 2030. The company remains solid with high-quality assets trading at a depressed valuation. At US$65 WTI, Surge generates a strong 16% FCF yield and a dividend yield of over 8%.
Surge Energy is a conventional operator. Surge Energy has a debt ratio below 1. The wells are smaller and cheap to drill. This allows for quick adjustment to changing industry conditions.
Surge Energy has reached its second phase of the capital allocation scheme, resulting in a higher dividend yield of 7.6%. With US$75-WTI, Surge should be making ~C$100M in yearly FCF. (14.5% yield to MC). Despite lower production volume in Q2, financials have improved with operating costs lower, enhancing profitability and reducing breakeven prices.
Surge Energy's Q4 results showed a capex-heavy quarter but remained free cash flow positive. The company anticipates generating C$295M in operating cash flow in 2024, resulting in a net free cash flow of C$105M. Surge Energy's updated reserve calculation shows a net asset value of approximately C$1.48B or almost C$15/share, offering an attractive discount to the current share price.
Surge Energy's Q3 performance and potential dividend increases are coming. Shareholders can expect 50% of free cash flow to be returned to them in some form. The current stock price is considered attractive, but the stock has not gained much ground throughout the year.
CALGARY, Alberta, Sept. 28, 2023 (GLOBE NEWSWIRE) -- Surge Energy Inc. (“Surge” or the “Company”) (TSX: SGY) is pleased to announce a public offering (the “Offering”) on a “bought deal” basis, of $42 million principal amount of convertible unsecured subordinated debentures, at a price of $1,000 per debenture, with an interest rate of 8.50% per annum, payable semi-annually in arrears on the last day of June and December commencing on June 30, 2024 (the “Debentures”). The Debentures will mature on December 31, 2028. The completion of the Offering is subject to normal regulatory approvals, including approval of the TSX, and is expected to close on or about October 19, 2023.
Surge Energy benefits from a narrowing WCS differential, boosting cash flow results in Q2. The company plans to exit 2023 with a production rate 6% higher than Q2. Surge Energy's convertible debentures offer attractive short-term investment with little doubt of repayment.
Surge Energy recently closed a C$202M acquisition which boosted its production rate by about 20%. The company was free cash flow positive in Q1 but has been 'overspending' on its dividend based on its own capital allocation framework.
Surge is currently yielding out at 5%, but is it enough? Surge jumped at the opportunity to buy Enerplus's Canadian assets for $245 million, setting the net debt target back.
Surge Energy reported strong cash flow results despite a realized loss on the hedge book. The company repaid one of the debentures early, the 6.75% 2024 convertible debenture remains outstanding.
Surge Energy is a Canadian oil and gas producer with an output of 21,000 barrels of oil equivalent per day. The Q2 performance was overshadowed by hedging losses. Despite that, Surge remained firmly free cash flow positive.
Debt needs to be repaid. The company issued a lot of shares for acquisitions and operating money. This indicates a level of financial stress in the past.
Surge Energy is on the right track to post an excellent free cash flow result this year, despite some residual hedges. This makes me feel very comfortable about the repayment of the 2022 debentures which I picked up a year ago at a 14% YTM.