Logan Energy - A closer look
June 30, 2023 reports clear up a lot of questions
Logan Energy (LGN.TO) was listed for trading on the TSX Venture Exchange on July 18, 2023, and yesterday filed its financial statements for the first half of 2023. The data are useful even if incomplete to the extent that there is little operating history.
In addition to statements, Logan published a corporate presentation on its website which incorporated guidance for the second hald of 2023.
Growth is expected to be brisk, with production reaching 7,000 BOE/day by year end. Operating expenses at $17.50 are higher than I imagined but falling to about $15.00 per BOE by year end. Royalties of 11% are not a surprise and transportation expenses of $3.95 per BOE reflect gas intot he NGTL system and condensate through Pembina’s network. Capital expenses of $75 million for the second half ($57 million Drill, Complete, Equip, Tie in or “DCET”) are funded entirely with cash on hand. The presentation says organic growth should reach 20,000 BOE/day within five years and production appears to be about 80% natural gas and 20% liquids.
A lot of stock was issued to fund the company with a fully diluted share count now about 550 million shares. Growth in six months to 7,000 BOE/day from 5,000 BOE/day at June 30, 2023 after spending $57 million on DCET implies a capital efficiency of about $11,000 per flowing barrel assuming a decline rate in the 20% range.
Fast growth, debt free, and efficient use of capital make Logan an attractive long term bet. Short term, a lot of the growth is already discounted in the price (remember the spinoff a few weeks ago was at $0.35 per share, as were the subsequent financings which tripled the share count). This is an exciting small capitalization E&P but suitable only for those with the patience to stick with it as it grows into its valuation. At CAD$1.00 to CAD$1.20 a share, the stock is fully valued at present in my opinion.
Royalties should lower in the coming quarters as the new scheme allows for a reduced royalty during initial stages, until all capex is recovered