Surge Energy (SGY.TO) - Nov 18

[dan_s]

Paul Colborne, the CEO and Murray Bye, Chief Operating Officer of Surge Energy made a good presentation today at our Houston luncheon.

My takes from today's presentation:

> They continue to get very good well results from the new wells within Hope Valley. From the bottom of the vertical wells they are drilling 12 one-mile laterals. At current oil prices the wells reach payout in 8-9 months and double payout in ~2 years.

> Q2 and Q3 actual production beat my forecast and I now expect Q4 production to the same.

> They expect to drill 31 new wells in 2026, all funded by operating cash flow.

> They are very close to reaching the Company's final debt reduction target. Paul will not be in a hurry to raise dividends because he believes the share price is at a deep discount to fair, trading at more than $2 below PV10 value based only on proved reserves. So, more free cash flow will go to the stock buybacks. Paying off debt and buying back stock will increase my valuation.

> Surge's realized oil price has been $79.50Cdn/bbl during the first three quarters of 2025. If the Canadian oil price averages over $75Cdn/bbl in 1H 2026, I expect Surge to accelerate their drilling program and go back into "Growth Mode" and increase dividends.

Bottomline: My current valuation of SGY.TO is $9.60Cdn, which now looks too conservative to me.

[dan_s]

TipRanks: "In a report released yesterday, Luke Davis from Raymond James maintained a Buy rating on Surge Energy, with a price target of C$9.00."

[dan_s]

My updated forecast/valuation model for SGY.TO has been posted to the EPG website.