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By: Jon Costello
Note: Dollar amounts mentioned in this article are in Canadian dollars unless specified otherwise.
Logan Energy (LGN:CA) has evolved from a liquids-weighted spinoff from Spartan Delta (SDE:CA) to one of the most attractive growth stories among Canadian E&Ps. Since its inception in 2023, the company has been endowed with high-quality assets and outstanding management.
Over the past two years, Logan has increased production from approximately 5,800 boe/d to more than 12,000 boe/d through organic growth and, to a lesser extent, asset acquisitions. It also commissioned a new natural gas processing plant and assembled a relatively liquids-rich development runway that rivals some of its larger peers.
If we’re wrong about the oil market’s outlook and the glut we expect doesn’t materialize, Logan will be a top investment candidate amid the higher oil prices that would prevail in such a scenario.
Logan’s shares have run higher over the past few days. However, I believe purchasing the shares below $0.75 would be attractive for a three-year holding period. I expect at least a double over that timeframe. Additional gains could follow as the company transitions from its heavy capex growth phase to prioritize distributing capital to shareholders. Ultimately, a larger peer may acquire Logan, considering Spartan Delta’s history of dealmaking and management’s tendency to pursue an exit via a liquidity event.
Investment Thesis
Logan’s investment thesis rests on three pillars:
Rapid production growth. Logan is among the fastest-growing Canadian E&Ps. In the second quarter, its production has surged by 65% over the past year, and production growth is slated to continue in the second half. As production increases, enhanced capital efficiencies will drive margin expansion, boosting cash flow. Higher cash flow will facilitate greater capex and faster production growth. Logan is targeting production of 24,000 boe/d to 27,000 boe/d by 2028 from the approximately 13,500 boe/d guided in the second half of this year.
Disciplined capital allocation. Logan must be prudent in recycling its capital to execute its growth plan. Such prudence was on display earlier this year, when the company monetized assets. In January 2025, it sold a 2.5% gross overriding royalty interest for $16.6 million. Around the same time, it sold a 35% interest in its Pouce Coupe natural gas processing and compressor facility for $26 million in proceeds. The sales were made to limit leverage to less than one-time adjusted funds flow (AFF) and to fund heavy capex in the first half of 2025.
Attractive valuation. Logan shares reflect some growth but don’t fully discount its full long-term potential.
If management can execute successfully, Logan shares offer more than 100% upside over the next two to three years.