Surge Energy Inc reports 81.9 pp EBITDA Margin growth from -37.7% to 44.2% in 2016 while 38.1% Revenue decline
15.03.2017 • About Surge Energy Inc (
$SGY) • By InTwits
Surge Energy Inc reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Surge Energy Inc doesn't have a profitable business model yet: 2016 ROIC is -1.9%
- EBITDA Margin is quite volatile: 44.2% in 2016, -37.7% in 2015, 13.0% in 2014, 46.1% in 2013, 0.0% in 2012
- Surge Energy Inc has high CAPEX intensity: 5 year average CAPEX/Revenue was 58.1%. At the same time it's a lot of higher than industry average of 45.3%.
- CAPEX is quite volatile: 74.0 in 2016, 76.7 in 2015, 150 in 2014, 126 in 2013, 181 in 2012
- The company has unprofitable business model: ROIC is at -1.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Surge Energy Inc ($SGY) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 157.5 | 222.3 | 389.2 | 242.9 | 150.3 | -38.1% |
| Gross Profit | 112.5 | 164.3 | 275.5 | 143.1 | 85.4 | -40.3% |
| SG&A | 10.8 | 12.2 | 12.9 | 11.0 | 8.7 | -20.8% |
| EBITDA | 0.1 | 102.4 | 50.6 | -91.6 | 66.4 | |
| Net Income | -53.2 | -9.9 | -33.2 | -213.9 | -30.4 | |
Balance Sheet
|
|---|
| Cash | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Short Term Debt | 0.0 | 1.9 | 3.0 | 1.7 | 1.4 | -17.7% |
| Long Term Debt | 194.5 | 279.6 | 564.3 | 149.0 | 160.7 | 7.8% |
Cash flow
|
|---|
| Capex | 180.7 | 125.5 | 149.6 | 76.7 | 74.0 | -3.6% |
Ratios
|
|---|
| Revenue growth | 38.3% | 41.1% | 75.1% | -37.6% | -38.1% | |
| EBITDA growth | -99.9% | 148,260.9% | -50.6% | -280.9% | -172.5% | |
| Gross Margin | 71.4% | 73.9% | 70.8% | 58.9% | 56.8% | -2.1% |
| EBITDA Margin | 0.0% | 46.1% | 13.0% | -37.7% | 44.2% | 81.9% |
| Net Income Margin | -33.8% | -4.4% | -8.5% | -88.0% | -20.2% | 67.8% |
| SG&A, % of revenue | 6.9% | 5.5% | 3.3% | 4.5% | 5.8% | 1.3% |
| CAPEX, % of revenue | 114.7% | 56.5% | 38.4% | 31.6% | 49.2% | 17.6% |
| ROIC | -13.8% | 2.2% | -7.7% | -16.5% | -1.9% | 14.6% |
| ROE | -15.8% | -1.6% | -3.4% | -22.7% | -3.8% | 18.8% |
| Net Debt/EBITDA | 2,819.2x | 2.8x | 11.2x | | 2.4x | 2.4x |
Surge Energy Inc ($SGY) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 29 | 41 | 38 | 42 | -69.5% | -40.6% | -5.0% | 11.4% |
| EBITDA | 12 | 20 | 19 | 15 | | -42.0% | | |
| Net Income | -4 | -8 | -4 | -15 | | | | |
Balance Sheet
|
|---|
| Cash | 0 | 0 | 0 | 0 | | | | |
| Short Term Debt | 2 | 2 | 2 | 1 | -15.2% | -17.0% | -18.3% | -17.7% |
| Long Term Debt | 125 | 132 | 140 | 161 | -76.7% | 25.3% | 6.8% | 7.8% |
Ratios
|
|---|
| Gross Margin | 39.2% | 62.7% | 60.0% | 60.5% | -23.8% | 1.2% | 7.6% | 10.0% |
| EBITDA Margin | 41.6% | 49.6% | 49.2% | 36.2% | 98.0% | -1.2% | 106.6% | 167.6% |
| Net Income Margin | -12.6% | -19.7% | -10.1% | -35.2% | 96.4% | -5.5% | 77.2% | 135.8% |
Revenue and profitability
Surge Energy Inc's Revenue dropped on 38.1%. Annual revenue decline showed slowdown in 16Q4 - revenue jumped on 11.4%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 81.9 pp from -37.7% to 44.2% in 2016.
Gross Margin decreased on 2.1 pp from 58.9% to 56.8% in 2016. SG&A as a % of Revenue increased slightly on 1.3 pp from 4.5% to 5.8% in 2016.
Net Income marign surged on 67.8 pp from -88.0% to -20.2% in 2016.
Capital expenditures (CAPEX) and working capital investments
Surge Energy Inc's CAPEX/Revenue was 49.2% in 2016. The company's CAPEX/Revenue decreased on 7.3 pp from 56.5% in 2013 to 49.2% in 2016. Average CAPEX/Revenue for the last three years was 39.7%.The company has spent a lot to CAPEX (111% of EBITDA) which didn't stop revenue from falling.
Return on investment
The company operates at negative ROIC (-1.90%) and ROE (-3.82%). ROIC surged on 14.6 pp from -16.5% to -1.9% in 2016. ROE jumped on 18.8 pp from -22.7% to -3.8% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.4x and Debt / EBITDA is 2.4x. Net Debt / EBITDA surged2.4x from to 2.4x in 2016. Debt increased on 7.5% while cash didn't change in 2016.
Management team
Paul Colborne is a the company's CEO. Paul Colborne is a founder and has spent 5 years at the company. Paul Ferguson is a The company's CFO. Paul Ferguson has spent 3 years at the company.
Appendix 1: Peers in Energy
Below you can find Surge Energy Inc benchmarking vs. other companies in Energy industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Oryx Petroleum Corp Ltd ($OXC) | | | | -18.4% | 141.2% |
| Seven Generations Energy Ltd ($VII) | | 115.7% | 340.2% | 39.0% | 94.4% |
| Athabasca Oil Corp ($ATH) | | 342.7% | 5.5% | -22.9% | 73.1% |
| Painted Pony Petroleum Ltd ($PPY) | | 41.3% | 56.0% | -42.5% | 60.7% |
| ONEnergy Inc ($OEG) | | | 6,002.6% | 231.5% | 57.4% |
| |
|---|
| Median (116 companies) | | 15.4% | 16.9% | -27.7% | -18.0% |
|---|
| Surge Energy Inc ($SGY) | | 41.1% | 75.1% | -37.6% | -38.1% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Americas Petrogas Inc ($BOE) | 77.1% | 43.3% | -34.3% | 121.1% | |
| TransAlta Renewables Inc ($RNW) | | 94.4% | 94.5% | 94.5% | 91.1% |
| Serinus Energy Inc ($SEN) | 80.5% | 76.5% | 86.8% | 88.5% | |
| Advantage Oil & Gas Ltd ($AAV) | 62.0% | 84.5% | 92.5% | 88.5% | 90.3% |
| Polaris Infrastructure Inc ($PIF) | 39.9% | 33.6% | 32.0% | 86.7% | 88.6% |
| |
|---|
| Median (114 companies) | 32.0% | 32.1% | 32.2% | 33.6% | 31.5% |
|---|
| Surge Energy Inc ($SGY) | 71.4% | 73.9% | 70.8% | 58.9% | 56.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Granite Oil Corp ($GXO) | 59.4% | 64.5% | 70.8% | 201.9% | |
| Perpetual Energy Inc ($PMT) | 35.5% | 70.7% | 58.0% | 110.3% | |
| Petro Rio SA ($PRJ) | -4,809.7% | -6,899.7% | 28.2% | 90.7% | |
| Peyto Exploration & Development Corp ($PEY) | 86.1% | 83.2% | 86.3% | 84.6% | 80.7% |
| Innergex Renewable Energy Inc ($INE) | 111.8% | 110.0% | 82.9% | 83.4% | 83.5% |
| |
|---|
| Median (128 companies) | 25.9% | 34.1% | 28.9% | 9.0% | 27.3% |
|---|
| Surge Energy Inc ($SGY) | 0.0% | 46.1% | 13.0% | -37.7% | 44.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Oryx Petroleum Corp Ltd ($OXC) | | | 1,997.8% | 712.8% | |
| WesternZagros Resources Ltd ($WZR) | | | | 385.6% | |
| Athabasca Oil Corp ($ATH) | 2,426.4% | 596.6% | 504.7% | 315.2% | 83.7% |
| TORC Oil & Gas Ltd ($TOG) | 453.8% | 466.9% | 104.5% | 229.4% | 76.3% |
| Seven Generations Energy Ltd ($VII) | 452.8% | 513.1% | 227.4% | 191.2% | 73.5% |
| |
|---|
| Median (129 companies) | 42.3% | 39.0% | 45.6% | 27.6% | 22.9% |
|---|
| Surge Energy Inc ($SGY) | 114.7% | 56.5% | 38.4% | 31.6% | 49.2% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Enerplus Corp ($ERF) | -17.3% | 10.2% | 11.5% | -55.5% | 16.3% |
| Whitecap Resources Inc ($WCP) | 7.1% | 8.1% | 9.6% | -10.6% | 10.1% |
| Ecopetrol SA ($ECP) | 29.3% | 24.4% | 16.5% | 3.0% | 9.6% |
| Parkland Fuel Corp ($PKI) | 22.3% | 23.3% | 9.9% | 7.8% | 8.6% |
| Inter Pipeline Ltd ($IPL) | 9.5% | 8.0% | 7.5% | 9.6% | 8.5% |
| |
|---|
| Median (128 companies) | 3.9% | 5.8% | 5.7% | -8.2% | -1.9% |
|---|
| Surge Energy Inc ($SGY) | -13.8% | 2.2% | -7.7% | -16.5% | -1.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| BlackPearl Resources Inc ($PXX) | -0.2x | -0.1x | 0.2x | 3,726.1x | -0.2x |
| Paramount Resources Ltd ($POU) | 14.6x | 23.9x | 8.9x | 421.5x | -5.8x |
| Precision Drilling Corp ($PD) | 2.2x | 1.9x | 2.0x | 68.4x | 7.6x |
| Trican Well Service Ltd ($TCW) | 2.5x | 3.4x | 2.9x | 31.4x | |
| Trilogy Energy Corp ($TET) | 2.6x | 1.8x | 2.3x | 25.5x | 7.3x |
| |
|---|
| Median (79 companies) | 1.5x | 1.4x | 1.4x | 2.6x | 2.7x |
|---|
