Surge Energy (TSE: SGY) announced Monday a 2022 capital and operating budget, a corporate update on shareholder returns business model, and an operations update.
Surge Energy is a production company focused on the acquisition and development of onshore oil and gas properties in the United States
Budget Guidance
In 2022, Surge will focus on disciplined capital allocation, with cash flow strategically allocated between capital projects, net debt repayment and the fundamental objective of restoring the company’s business model on dividends and shareholder returns.
The company’s capital budget for 2022 will see 85% of spending focused on its two major medium- and light-gravity conventional crude oil plays in Alberta and Saskatchewan, which now account for two-thirds of the Surge’s current production.
Corporate Update
On December 9, 2021, the company announced the successful closing of a five-year, C$130-million term credit facility, injecting a significant amount of long-term stable debt into the company’s capital structure, with the strategic objective to reduce Surge’s dependence on volatile, shorter-term debt.
Surge will continue to focus on delivering shareholder returns through further net debt reductions over the coming months.
Operations Update
Surge ended 2021 on a strong operating note. The company has continued to successfully develop its dominant position on the land at its core Sparky asset, with results that continue to outperform internal type curve expectations.
Wall Street’s Take
Last month, BMO Capital analyst Ray Kwan, kept a Hold rating on SGY, with a price target of C$6.50. This implies 2.1% downside potential.
The rest of the Street is cautiously optimistic on SGY with a Moderate Buy consensus rating based on one Buy and one Hold. The average Surge Energy price target of C$7 implies 5.5% upside potential to current levels.
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