Surge Energy Inc

SGY-T

Analysis and Opinions about SGY-T

Signal
Opinion
Expert
DON'T BUY
DON'T BUY
October 25, 2016

(Market Call Minute.) Destroyed their balance sheet by paying out dividends for a long time when they couldn’t afford it. Stuck in the mud.

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Surge Energy Inc (SGY-T)
October 25, 2016

(Market Call Minute.) Destroyed their balance sheet by paying out dividends for a long time when they couldn’t afford it. Stuck in the mud.

DON'T BUY
DON'T BUY
October 7, 2016

A name he would not own. You need to have confidence in the direction of the company and the management team. It has been a history where there has been some slight over promotion of certain assets. It does offer high product leverage to an increase in the oil price, because a degree of their oil production has medium gravity, so it would get extra juice from an increasing oil prices. Looking at some of its peers, he would rather pay a little bit more and be a little more comfortable in what he is owning.

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Surge Energy Inc (SGY-T)
October 7, 2016

A name he would not own. You need to have confidence in the direction of the company and the management team. It has been a history where there has been some slight over promotion of certain assets. It does offer high product leverage to an increase in the oil price, because a degree of their oil production has medium gravity, so it would get extra juice from an increasing oil prices. Looking at some of its peers, he would rather pay a little bit more and be a little more comfortable in what he is owning.

COMMENT
COMMENT
September 16, 2016

She has other companies she prefers right now. However, they have done pretty well. Their drilling efficiencies have improved quite dramatically, so they have been able to put together a very sustainable model, and there is lots of upside to rising oil prices.

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Surge Energy Inc (SGY-T)
September 16, 2016

She has other companies she prefers right now. However, they have done pretty well. Their drilling efficiencies have improved quite dramatically, so they have been able to put together a very sustainable model, and there is lots of upside to rising oil prices.

TOP PICK
TOP PICK
September 6, 2016

This has the Shaunavon play in Saskatchewan, and the Valhalla water flooding play in Alberta. The new royalty regime in Alberta is coming in, where companies pay 5% royalties for 9 years. They get a real benefit from water flooding, starting January 2017. He has a $3.70 target for Q4, 2017. If this came down below $2, it would be a fabulous Buy.

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Surge Energy Inc (SGY-T)
September 6, 2016

This has the Shaunavon play in Saskatchewan, and the Valhalla water flooding play in Alberta. The new royalty regime in Alberta is coming in, where companies pay 5% royalties for 9 years. They get a real benefit from water flooding, starting January 2017. He has a $3.70 target for Q4, 2017. If this came down below $2, it would be a fabulous Buy.

HOLD
HOLD
September 6, 2016

(Market Call Minute.) This would be a Hold, warming up potentially to be a Buy. Things are moving the right way for oil/gas, but he is a little bit cautious in the next month on oil.

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Surge Energy Inc (SGY-T)
September 6, 2016

(Market Call Minute.) This would be a Hold, warming up potentially to be a Buy. Things are moving the right way for oil/gas, but he is a little bit cautious in the next month on oil.

COMMENT
COMMENT
July 21, 2016

Thinks they have not met expectations. There was a bit of a management change a couple of years ago. They went through a process of increasing the dividend every couple of months, and then the dividend kind of went the other way. They were very acquisitive and doing a deal every couple of months, and then selling the same assets months later. The payout ratio is still too high.

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Thinks they have not met expectations. There was a bit of a management change a couple of years ago. They went through a process of increasing the dividend every couple of months, and then the dividend kind of went the other way. They were very acquisitive and doing a deal every couple of months, and then selling the same assets months later. The payout ratio is still too high.

COMMENT
COMMENT
May 31, 2016

This has gone through some tough times. Management has not changed, but there has been a bit of flip flopping in terms of market perceptions of what management has been saying. Thinks they have reached a level of sustainability around spot prices today, where they can match their dividend and maintain CapX so that they can maintain production. Even if oil were to go up another 10%, they have started to talk about introducing growth back into the equation. He has been in and out of this. There are a few other juniors he prefers. (See Top Picks.)

Show full opinionHide full opinion

This has gone through some tough times. Management has not changed, but there has been a bit of flip flopping in terms of market perceptions of what management has been saying. Thinks they have reached a level of sustainability around spot prices today, where they can match their dividend and maintain CapX so that they can maintain production. Even if oil were to go up another 10%, they have started to talk about introducing growth back into the equation. He has been in and out of this. There are a few other juniors he prefers. (See Top Picks.)

COMMENT
COMMENT
April 21, 2016

A nice little oil/gas producer. Before investing in any commodity stock, make sure you have a view of where the commodity is going. The energy area has been a particularly brutal area in the last 1 ½ years. Right now you really have to pay attention to 1) where you think the oil prices are going and 2) look at the balance sheet and make sure it is at under 2X debt to EBITDA or cash flow. Hasn’t looked at their balance sheet recently.

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A nice little oil/gas producer. Before investing in any commodity stock, make sure you have a view of where the commodity is going. The energy area has been a particularly brutal area in the last 1 ½ years. Right now you really have to pay attention to 1) where you think the oil prices are going and 2) look at the balance sheet and make sure it is at under 2X debt to EBITDA or cash flow. Hasn’t looked at their balance sheet recently.

COMMENT
COMMENT
April 1, 2016

You need a positive outlook on energy. Looking at the pricing curve, he is seeing $50 out in a year or 2. Some people are predicting production will have dropped enough that inventories will be down by the end of this year, leading to higher oil prices. Companies like this are already reflecting $50-$60 prices for oil. His concern is whether these companies will be around long enough. This company has more debt than he would like, so he is avoiding these companies. Too risky for him.

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You need a positive outlook on energy. Looking at the pricing curve, he is seeing $50 out in a year or 2. Some people are predicting production will have dropped enough that inventories will be down by the end of this year, leading to higher oil prices. Companies like this are already reflecting $50-$60 prices for oil. His concern is whether these companies will be around long enough. This company has more debt than he would like, so he is avoiding these companies. Too risky for him.

DON'T BUY
DON'T BUY
February 23, 2016

Chances of survival are very good, but thinks the stock is wildly overvalued. Expects a dividend cut next month of probably 50%. Blowing through their very best inventory in the very worst oil price environment. Trading at the same multiple as Raging River (RRX-T) which has the highest netback, pedigreed management team, strong balance sheet. For him to have an interest in the stock, it would have to get down to $1.50 or lower.

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Surge Energy Inc (SGY-T)
February 23, 2016

Chances of survival are very good, but thinks the stock is wildly overvalued. Expects a dividend cut next month of probably 50%. Blowing through their very best inventory in the very worst oil price environment. Trading at the same multiple as Raging River (RRX-T) which has the highest netback, pedigreed management team, strong balance sheet. For him to have an interest in the stock, it would have to get down to $1.50 or lower.

DON'T BUY
DON'T BUY
February 10, 2016

This is doing quite well right now. Had to cut the dividend and rationalize their CapX, but have been able to high grade their portfolio, which helps them in terms of their operations. You own this for a torque in oil prices, because in this environment they are not making any money. Sees better options elsewhere.

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Surge Energy Inc (SGY-T)
February 10, 2016

This is doing quite well right now. Had to cut the dividend and rationalize their CapX, but have been able to high grade their portfolio, which helps them in terms of their operations. You own this for a torque in oil prices, because in this environment they are not making any money. Sees better options elsewhere.

WAIT
WAIT
February 2, 2016

This should make it through the energy situation, but they have some debt on the balance sheet and they are a small company, relatively levered. Sit back, wait and watch for 6 months, before jumping in.

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Surge Energy Inc (SGY-T)
February 2, 2016

This should make it through the energy situation, but they have some debt on the balance sheet and they are a small company, relatively levered. Sit back, wait and watch for 6 months, before jumping in.

COMMENT
COMMENT
January 25, 2016

Surge Energy (SGY-T) or Whitecap (WCP-T)? Both are decent names, but Whitecap is the higher-quality of the 2, so that is the one he would pick, but with the caveat that they are both smaller energy companies in a very brutal tape for energy.

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Surge Energy Inc (SGY-T)
January 25, 2016

Surge Energy (SGY-T) or Whitecap (WCP-T)? Both are decent names, but Whitecap is the higher-quality of the 2, so that is the one he would pick, but with the caveat that they are both smaller energy companies in a very brutal tape for energy.

COMMENT
COMMENT
November 5, 2015

One of the few energy names that is cheap relative to its 5 year average. Trading at 6.2X EV discounted adjusted cash flow on a 2015 level versus 10.5X its five-year average. That is kind of impressive. Their balance sheet is good for 2015. It does start to get a little bit more impaired in 2016 at 2.7X, which is still good relative to the group. If you are constructive on $48 oil going forward, then this is a name that you can buy, but you have to be constructive on oil.

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Surge Energy Inc (SGY-T)
November 5, 2015

One of the few energy names that is cheap relative to its 5 year average. Trading at 6.2X EV discounted adjusted cash flow on a 2015 level versus 10.5X its five-year average. That is kind of impressive. Their balance sheet is good for 2015. It does start to get a little bit more impaired in 2016 at 2.7X, which is still good relative to the group. If you are constructive on $48 oil going forward, then this is a name that you can buy, but you have to be constructive on oil.

COMMENT
COMMENT
October 22, 2015

Along with many companies, they cut their dividends. Not a business model he is personally comfortable in. Finds valuation very stretched. In his math, it would be trading 8.8-8.9 times next year’s cash flow and that is using $55 oil. In next year’s analysis he is trying to be conservative with oil rallying to $60, but with an average of around $55. On that basis it is trading at a 2 point multiple premium to other names where he feels the business model is slightly better. Potentially at risk of another dividend cut if oil doesn’t rally to $55 next year. Dividend yield of 9.8%.

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Surge Energy Inc (SGY-T)
October 22, 2015

Along with many companies, they cut their dividends. Not a business model he is personally comfortable in. Finds valuation very stretched. In his math, it would be trading 8.8-8.9 times next year’s cash flow and that is using $55 oil. In next year’s analysis he is trying to be conservative with oil rallying to $60, but with an average of around $55. On that basis it is trading at a 2 point multiple premium to other names where he feels the business model is slightly better. Potentially at risk of another dividend cut if oil doesn’t rally to $55 next year. Dividend yield of 9.8%.

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