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muscleman Newbie

muscleman

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The real question is how much is the Mississippian worth?  Right now it's implied worth is less than the value of the land deals and the royalty trust.  Alot of the Mississippian acreage is in the extension with unproven amounts of oil.  See the portion of the presentation where the extension has a much lower well success rate and lower oil flow rate.  I think it is a good deal if the extension has the lower amount of oil per the presentation (2x) but is a home run if the extension has at the level of the core Mississippian (10x).

 

Packer

 

 

Are you referring to the "Kansas Mississippian: More of the Same" part for the core part? In the most recent presentation? (Link is a few posts above)

They drilled 69 wells and 46 of them are producing.

 

For the extension part,

"Extending the Horizontal Mississippian"

 

In that slide they drilled 14 wells of which only 6 are producing. Yes it is lower.

 

Their current proved reserves is like 550 MMboe. I think that along justifies the enterprise value. The key is whether their claim of 4400 MMBOE potential can be realized.

 

 

 

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gordoffh Newbie

gordoffh

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In that slide they drilled 14 wells of which only 6 are producing. Yes it is lower.

 

Now I didn,t take this that the other 8 wells were failures but just not totally complete to allow full production. Is this possible or are they actually saying they were dry wells. The fact that one well was 98% oil is positive if it were to continue.

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zippy1 Newbie

zippy1

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TPG-Axon Sends Letter to SandRidge Energy’s Board of Directors

- Calls For Board Of Directors Realignment, CEO Resignation And Potential Sale of the Company

- Estimates Fair Value of SandRidge at $12 - $14 Per Share

NEW YORK--(BUSINESS WIRE)--

 

TPG-Axon, owners of more than 4.5% of the outstanding shares of SandRidge Energy, Inc. (SD), sent a letter today to SandRidge’s Board of Directors.

 

In the letter, TPG-Axon outlines the following:

• SandRidge stock has been a disastrous performer. It has been the single worst performing energy stock in the US market, and in the bottom 1% of the broader market, since its IPO in 2007. SandRidge stock has declined 76% since its 2007 IPO, and over 91% from its peak in 2008.

• The market has lost confidence in management, which is reflected in the greatest discount to current Net Asset Value of any US energy company.

• The dramatic decline in the stock, and massive discount to Net Asset Value, has been caused by three factors: • Management strategy has been incoherent, unpredictable, and volatile, amplifying uncertainty regarding the future course of the company;

• Poor strategic planning and reckless spending have resulted in repeated ‘financial emergencies’, and caused massive dilution, soaring cost of capital, and unnecessary risks for shareholders; and,

• Corporate governance has been appalling, which has drained massive value from shareholders and completely misaligned management and shareholder interests.

• Despite management missteps, SandRidge shares offer extraordinary value. On a standalone basis, fair value for SandRidge stock is $12 to 14, with significantly greater upside possible through a strategic sale or sensible development of assets in coming years.

• As a result, in order to unlock the value of the company in the best interests of shareholders, TPG-Axon calls for: • The Board of Directors must be significantly reconfigured, with certain directors replaced by credible, independent directors, chosen after extensive consultation with large shareholders. In addition, large shareholders should be invited to join the board, if they so desire.

• The Board must then reconfigure management and leadership of the company. TPG-Axon believes CEO Tom Ward’s credibility is too damaged to continue in his role. The company must bring in new management that is viewed as credible, experienced, and highly competent.

• The Board should hire an advisor to explore all strategic alternatives. Given the difficult challenge of restoring confidence, the Board must also consider whether the value of the company’s assets will instead be maximized through a sale to another company.

• TPG-Axon hopes management will work constructively with shareholders to achieve change, but their relentless focus will be on ensuring that necessary steps are taken to build and maximize shareholder value

The full text of the letter can be found attached.

Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=50470829&lang=en

http://finance.yahoo.com/news/tpg-axon-sends-letter-sandridge-123000109.html

Does any one know who TPG-Axon are?

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Sportgamma Newbie

Sportgamma

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From the letter:

 

The Board has sanctioned compensation levels for Tom Ward that are unconscionable in light of company performance. For example, total compensation for 2011 was over $25 million - representing a full 1/2 of the company’s earnings. In fact, CEO compensation has been between $15 and $26 million in every year since the company’s IPO. This is simply astonishing, considering 1) the stock has declined 76% over this period, 2) the relative stock performance has been in the bottom 1% of all major US listed stocks, and dead last among energy companies, and 3) Book Value per Share has declined by over 60% over this period. In fact, when compensation is adjusted for market capitalization of the company, the figures become even more appalling – relative to market capitalization, Tom Ward has been the single highest compensated CEO among all energy companies, and among the highest compensated CEOs in America…despite destroying more shareholder value than 99% of other companies and CEOs.
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Parsad Newbie

Parsad

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THE RESPONSE!

 

http://finance.yahoo.com/news/sandridge-energy-inc-responds-shareholder-171000452.html

 

While our perspectives on various points made in the letter from TPG-Axon differ in many instances, we agree that SandRidge has valuable assets and that we need to focus on improving performance for shareholders. 

 

I thought that was a very, very weak response!  TPG has some merit in their argument.  Not removing Tom, since Sandridge is Tom Ward, but the compensation structure there and at Chesapeake is what has kept me from owning any of either company. 

 

I don't know...you see CEO compensation like Buffett and Watsa, or even Patrick Byrne, and then even to a degree like Brian Moynihan where he takes less and it's tied to his performance...and then the numbers relative to the size of company ARE shocking at Sandridge.  I'm also not a fan of such huge related party transactions...just a no-no in my mind...separation of state and church you know...you're CEO so there is a certain level of protocol and restraint in the size and scope of related party transactions.  Cheers! 

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Parsad Newbie

Parsad

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Incidentally, TPG did all that number crunching but did they even check to see what it would cost shareholders to terminate Tom Ward...about $100M!  They would have been better off working for change in the compensation structure with Tom and the board, than filing a 13-D.  Cheers!

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alertmeipp Newbie

alertmeipp

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Incidentally, TPG did all that number crunching but did they even check to see what it would cost shareholders to terminate Tom Ward...about $100M!  They would have been better off working for change in the compensation structure with Tom and the board, than filing a 13-D.  Cheers!

 

you don't post much on SD, but looks like u have done some work!

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Parsad Newbie

Parsad

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Incidentally, TPG did all that number crunching but did they even check to see what it would cost shareholders to terminate Tom Ward...about $100M!  They would have been better off working for change in the compensation structure with Tom and the board, than filing a 13-D.  Cheers!

 

you don't post much on SD, but looks like u have done some work!

 

I don't post much on it.  I've been following it since Fairfax started investing in it, but I can't make heads or tails of it.  Even after reading all the various posts, articles, etc, as well as the 10-Q's and 10-K's, it just seems like a very complicated way to make money.  Then you include the issues around compensation, related party transactions, debt, etc and it's a 10-foot hurdle.  Cheers!

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Poor Charlie Newbie

Poor Charlie

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Rijk

I don’t know what you were expecting in terms of “research” I posted more for your amusement (note the emoji). 

 

But all kidding aside we’re not talking about some O&G trust/partnership where the assets will be slowly liquidated and cash flows paid out to shareholders.  SDs value is highly dependent on the capital allocation skills of management, as they will almost certainly reallocate the entire market cap (in capex) over just a few years.  I ask you: do you think your capital is being wisely spent on lavish comp and fancy offices/planes? 

 

Given a choice for a partner I would much rather hitch my wagon to Contango where costs are minimized and capital allocated wisely. 

 

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Myth465 Newbie

Myth465

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TPG is right on valuation and on comp. SD is undervalued so I will wait and see. I like the report and the thoughts on selling the Permian, its something I had hoped for 2 quarters ago.

 

Management has been key to the turn around, but comp is far too high. I like the outside pressure though, it will push Ward to close the gap to get everyone off his back. Prem's SD investment has shown why he is where he is, for the last 2-3 years he has gotten his 7.5% and will see a double once that valuation gap is closed. He is getting paid to wait.....

 

More to come after a detailed review of the filling.

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Myth465 Newbie

Myth465

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I agree with just about every word of that letter. Very interesting to see how this plays out, and the call should be interesting as well. Ward has gotten the message and I believe this has pushed him to sell the Permian.

 

The asset value is there, but Ward is overly focused on long term value and perhaps empire building, not shareholders. With his comp he gets paid to wait, but take over has always been a risk. I think the trusts and structure have protected SD though.

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Myth465 Newbie

Myth465

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Much deeper then that. Selling the Permian is good, the issue from what I have heard is the drop in EUR and ROR. ROR is now at 55% right around the same point as the Permian. Great ROR but not the 90% plus we have been hearing about. That clips IV, but makes the DOR purchase look less bad because they gave up a little less than thought. A drop in ROR clips upside for sure. Tough because the Miss looked real with alot of independants and majors moving in. Its still good, but not as good.

 

We are looking at dead money while this takeover business is worked out, due to the dropped oil EUR and ROR. I knew something was up when I noticed that all prior presentations were removed. Will be interesting to see the next PPS. You win some, you lose some, and hopefully you learn something....

 

 

More to come after a detailed listen to the call.

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alertmeipp Newbie

alertmeipp

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It would be new, the hedges protect from the fall in oil. The more gas and less oil is the reason why ROR has dropped. We will know for sure with the next presentation but the fact that all the prior ones are down doesnt bode well....

 

Miss was 77% IRR with July strip, Permian was 56%.

 

 

was 45% oil now 40% but there is hope the scale will help boost the ROR.

 

So, at 5.5 Miss play

6.8 EV - 2.4 (assume Permian sale) - 1.2 DOR - 0.8 trust units = 2.4 billions for 1.8millions acres = 1.33k per acre.

 

Previous transactions done by SD average about 4.5k per acre. Wait and see.

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Myth465 Newbie

Myth465

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What was July strip. You may be right, I need to have a detailed listen to the call and more importantly review the next presidentation. My understanding was ROR was around 90% with $100 oil and $3 gas. I am not too worried about $80 oil due to hedges and increases in oil demand overtime. The next presentation is fairly soon, but a 20% drop is pretty severe. That meeting next week will be very interesting to say the least.

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