Surge Energy Inc (SGY.TO)

Market cap is too small for his fund. Well run. Good wells. If you're up 50%, but you like the dividend, you can decide what you want to do with it.

See his Top Picks for a name with better inventory and just as well run.

An oil play, 88% oil with a little natural gas. Trades at a lower PE than bigger peers. They have low decline rates of 25% and has 12 years of drilling inventories. Pays around a 7-8% dividend.

We like SGY for a small cap sector income-focused stock. It is cheap, well-managed, offers a 7.43% dividend and also has some growth potential. The balance sheet is also very strong. With lower commodity prices expected, cash flow could drop in 2026, but we would still view it as a decent stock for small cap sector investors.
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Conventional oil producer in Western Canada. Despite its strong performance, symptom of there being zero care factor for Canadian small caps. For significant upside, you want to be "not too big, not too small". Unfortunately, this one is just too small. 

Not significant enough for institutions, and buying power of retail investors is not enough to get it going. Screens very well on spreadsheet math, but market dynamics mean it will struggle to attain institutional interest. Yield is just over 7%.

SGY is quite small at $510M, but the stock is very cheap. With a 10% dividend, a buyer (or privatization) could eliminate the dividend and use internal cash flow to pay for the whole company in about three years. But, that doesn't mean it will happen. Takeovers in the sector typically need to be friendly and we highly doubt management would want to sell out anywhere near the current price plus a premium. WCP, TVE might take a look. We would see a merger or a privatization as more likely than a takeover, but would not bet on this possibility.
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He sold at higher levels than current. There's no investment money flowing into the oil patch, because international investors perceive the federal government as hostile to energy. No buyers. Surge is well run, drills great wells, pays a good dividend and buys back stock.

Company too small to hit institutional radar screens. Quality company, but better options in markets. 

Well run. But it's a small cap, and that's just not where investor focus is, so sentiment is not behind it. Good exposure to heavy oil, phenomenally profitable now. Great yield of 6.9%. Strong balance sheet. Trades inexpensively.

Not a lot of interest in such a small cap. Very inexpensive, trades at significant discount. Gobs of free cashflow. A challenge to get on investors' radar screen. There needs to be a reason for investors to care. Should merge to gain economies of scale and relevance. Yield is 6.9%, very defendable. Buying back stock.

EPS missed estimates of 16c coming in at a loss of 4c. Revenue beat estimates of $157.1M coming in at $158.17M declining 2% year-over-year. Because of depletion and other charges, cash flow is a better metric than earnings for energy producers. SGY had per share cash flow of 62c, down from 64c but certainly better than what the net loss implies. The company also confirmed 2024 production guidance. We think management is fine, however the stock will need commodity prices to pick back up in efforts for a turnaround. Mr. Colborne (CEO) has built and sold several companies within the sector. We would say HOLD for income. The debt reduction is still ontrack to finish by the end of this year while it is cheap and has an attractive yield. Management also seemed positive for on oil prices. But mostly it is valuation: the stock is very cheap on all metrics. 
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Nothing to do with balance sheet or management, but it remains too small to be relevant to larger investors. Scale isn't there.

The Canadian energy space will do well over time. He isn't long SGY, but likes it.

Levered to oil price. Changed asset base toward profitability and scalability. Needs to improve drilling efficiencies and margins. Good job reducing debt. Probably by early 2024, can move return of free cashflow to shareholders from 25% to 50%. Yields just over 5%. He's focused on bigger players with more consistent dividend payments.

Trading at discount to NAV. Out of favor small cap name. TMX completion will benefit company. Benefiting from fish bone drilling technique. New wells paying out in months. At $80 oil, company trading at 3x cash flow yield. Expecting a 40% upside from current share price.