Spartan Delta - a $50 stock in waiting?
Watch the Q2 guidance and project the next few years
Spartan Delta (SDE.TO) got a boost to its operating metrics when the company purchased the Bellatrix assets out of the bankruptcy of that company, paying by my estimate about 5 cents on the dollar of value. Since that time, production and cash flows have been on a tear.
At CAD$12 a share, the market values this stock at about CAD$1.8 billion. I model the company’s operations as having a value of CAD$24 a share based on 2022 projections (my projections, no one else to blame) growing to over CAD$50 a share by the end of 2024 based on commodity prices of CAD$100 for oil and condensate, CAD$8 a gigajoule for natural gas and CAD$40 a barrel for natural gas liquids. You can use your own guesses for commodity prices and copy this model to see whether your projections differ.
I have assumed management of Spartan Delta is smart enough to curtail any more hedging and in no hurry to squander the company’s growing cash hoard, as operations turn in outstanding free cash flow. I have assumed no acquisitions, no dividends and no major increase in capital spending, although all are within the bounds of reason. In my opinion, the global shortage of natural gas caused by the inane obsession of governments with the specious climate change theory will see natural gas supplies remain tight for years to come. CO2 is demonstrably harmless but now has so much political capital after years of brainwashing citizens to believe this nonsensical theory that leaders are loathe to abandon the pretend crisis they promote to keep power.
I am all for them doing so. It is making me millions of dollars each year and if the population doesn’t like the outcome, they can deal with it at the ballot box and toss the current flock of climate nutters into the trash bin of history which is where they belong. Biden and Trudeau should be among the first to go, but cutting off the toxic World Economic Forum, the communist United Nations and the left wing governments of Europe would be a good start on the road back to globaly sanity. In the meantime, I have to satisfy myself with the enormous profits these despicable leaders are creating for me. As an old retired person whose only externally provided pension income is less than CAD$1,000 a month of Canada Pension Plan, these millions allow me to maintain my modest lifestyle, drive a late model Mercedes and live in a modern log cabin I built as a ski chalet. It isn’t all bad
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Great analysis Michael! Do you think Spartan is better valuation right now than BIR.TO ?
I'm trying to compose your model in google sheets :-) For the model price for oil, is $100 CAD price the WCS price vs WTI? I'm trying to map what you have with the base case assumptions in the RBC Capital markets models. Thanks!