Topic: How To Invest

Q: What’s your current thinking on Surge Energy?

Article Excerpt

A: Surge Energy, $0.33, symbol SGY on Toronto (Shares outstanding: 335.1 million; Market cap: $110.6 million;, produces oil and gas in central and northwestern Alberta and southwestern Saskatchewan. Its output is 86% oil and 14% gas. How soon oil and gas prices will recover is uncertain—especially with the combination of rapidly falling demand as the global economy is slowed by COVID-19. While Surge’s cash flow in the quarter ended March 31, 2020, fell sharply, to $0.09 a share from $0.14, it nonetheless remained positive. The drop reflects lower natural gas and oil prices as well as a 5.9% decline in output. The company’s long-term debt stands at $375.1 million, or a high 3.4 times its currently depressed market cap. To conserve cash until market conditions improve, Surge suspended its dividend in April 2020. It will also sharply cut its capital spending this year. Meanwhile, the company will realize higher-than-market prices for its oil and gas this year. That’s because it hedged about 60% of…

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