Spartan Delta does not disappoint
Q1 2022 points to higher share prices
Spartan Delta (SDE.TO) reported Q1 last night with CAD$160 million cash flow after hedging losses of ~CAD$40 million. Company says hedges are rolling off and will be unhedged for oil after Q2 2022 and for gas by year end. Looking through the hedges, EBITDA of ~CAD$800 million annual rate with ~10% ongoing growth should be valued at 6 X for an enterprise value of CAD$4.8 billion. Subtract debt of ~CAD$400 million and stock price of CAD$29 is indicated.
Debt should be gone by year end and if commodity prices remain firm, 2023 EBITA around CAD$1.2 billion likely with year end 2023 cash balance ~CAD$1 billion. At 6X multiple of EBITDA, stock price in CAD$50 range may be in the cards. I published my SDE.TO model in my last article on the name.
Barring a major collapse in North American commodity prices, it is hard to see a scenario where this stock does not do well. Company says it will consider a shareholder return plan by year end as it budgets next year’s capital program. I expect that to be more buyback and less dividend unless stock price rises materially.
I like my 96,000 share holding and may add today.
Spartan Delta does not disappoint
Any comments on returning capital to shareholders? They haven't mentioned much and i think the markets wants to know this.