SD - SandRidge Energy

[Zorrofan]

I am much less enthused with the idea of selling the Permian than some. On page 24 of the February 28 2012 Investor Day presentation SD shows the total NPV of this asset as $7.2 billion. There is very little probability of it being sold for this much in any outright asset sale, but it does show the potential long-term value there,. Then there is the issue of the increasingly gassy production from the Mississipian play - do we want to put all of the SD eggs in the one play? (GOM assets are not major at this point). Further the potential sale seems a rather knee-jerk reaction to the TPG letter instead of a well thought out plan. The plan outlined in February, including the rationale for the DOR acquisition, actually made a great deal of sense.

 

I have what I feel is a better idea, one which allows SD to raise cash while retaining control of the Permian. In order to maximize the value of both the Permian and Mississipian assets, while improving the balance sheet and providing funds for the 2013/2014 cap-ex plan, I think SD should create two MLP's. Create an MLP for each play and we get top price from retail investors, we can keep a significant portion of each play, plus pick up fees for operating the MLPs. SD received better pricing for the royalty trusts than it did for the JVs. Just put all of the remaining acerage of each play into the two MLPs, sell off a bit of each...the market will like this better than TWs current plan if the market reaction on Friday is any indicator. To me it makes more sense.....thoughts?

 

cheers

Zorro

[alertmeipp]

I am much less enthused with the idea of selling the Permian than some. On page 24 of the February 28 2012 Investor Day presentation SD shows the total NPV of this asset as $7.2 billion. There is very little probability of it being sold for this much in any outright asset sale, but it does show the potential long-term value there,. Then there is the issue of the increasingly gassy production from the Mississipian play - do we want to put all of the SD eggs in the one play? (GOM assets are not major at this point). Further the potential sale seems a rather knee-jerk reaction to the TPG letter instead of a well thought out plan. The plan outlined in February, including the rationale for the DOR acquisition, actually made a great deal of sense.

 

I have what I feel is a better idea, one which allows SD to raise cash while retaining control of the Permian. In order to maximize the value of both the Permian and Mississipian assets, while improving the balance sheet and providing funds for the 2013/2014 cap-ex plan, I think SD should create two MLP's. Create an MLP for each play and we get top price from retail investors, we can keep a significant portion of each play, plus pick up fees for operating the MLPs. SD received better pricing for the royalty trusts than it did for the JVs. Just put all of the remaining acerage of each play into the two MLPs, sell off a bit of each...the market will like this better than TWs current plan if the market reaction on Friday is any indicator. To me it makes more sense.....thoughts?

 

cheers

Zorro

 

how does MLP differ from Trusts that they did?

[Zorrofan]

I am much less enthused with the idea of selling the Permian than some. On page 24 of the February 28 2012 Investor Day presentation SD shows the total NPV of this asset as $7.2 billion. There is very little probability of it being sold for this much in any outright asset sale, but it does show the potential long-term value there,. Then there is the issue of the increasingly gassy production from the Mississipian play - do we want to put all of the SD eggs in the one play? (GOM assets are not major at this point). Further the potential sale seems a rather knee-jerk reaction to the TPG letter instead of a well thought out plan. The plan outlined in February, including the rationale for the DOR acquisition, actually made a great deal of sense.

 

I have what I feel is a better idea, one which allows SD to raise cash while retaining control of the Permian. In order to maximize the value of both the Permian and Mississipian assets, while improving the balance sheet and providing funds for the 2013/2014 cap-ex plan, I think SD should create two MLP's. Create an MLP for each play and we get top price from retail investors, we can keep a significant portion of each play, plus pick up fees for operating the MLPs. SD received better pricing for the royalty trusts than it did for the JVs. Just put all of the remaining acerage of each play into the two MLPs, sell off a bit of each...the market will like this better than TWs current plan if the market reaction on Friday is any indicator. To me it makes more sense.....thoughts?

 

cheers

Zorro

 

how does MLP differ from Trusts that they did?

 

It is my understanding - and i could be wrong - is that a royalty trust has an interest in the production from a particular asset or set of assets and typically has a finite life, while the MLP can buy new assets and has no finite life. I am sure others can better explain it than i can but those are two key diferences.

 

cheers

Zorro

[ourkid8]

Thanks for putting that in perspective as I have been burned on ATP Oil and Gas...

 

S

 

The stock is down just under 12% today and selling for $5.41.  This is a unbelivable price!!! Debating if I should add SD or continue to add BAC warrents!!!

 

Fortress Paper

ATP Oil and Gas

SandRidge

 

Be careful.

[alertmeipp]

I am much less enthused with the idea of selling the Permian than some. On page 24 of the February 28 2012 Investor Day presentation SD shows the total NPV of this asset as $7.2 billion. There is very little probability of it being sold for this much in any outright asset sale, but it does show the potential long-term value there,. Then there is the issue of the increasingly gassy production from the Mississipian play - do we want to put all of the SD eggs in the one play? (GOM assets are not major at this point). Further the potential sale seems a rather knee-jerk reaction to the TPG letter instead of a well thought out plan. The plan outlined in February, including the rationale for the DOR acquisition, actually made a great deal of sense.

 

I have what I feel is a better idea, one which allows SD to raise cash while retaining control of the Permian. In order to maximize the value of both the Permian and Mississipian assets, while improving the balance sheet and providing funds for the 2013/2014 cap-ex plan, I think SD should create two MLP's. Create an MLP for each play and we get top price from retail investors, we can keep a significant portion of each play, plus pick up fees for operating the MLPs. SD received better pricing for the royalty trusts than it did for the JVs. Just put all of the remaining acerage of each play into the two MLPs, sell off a bit of each...the market will like this better than TWs current plan if the market reaction on Friday is any indicator. To me it makes more sense.....thoughts?

 

cheers

Zorro

 

how does MLP differ from Trusts that they did?

 

It is my understanding - and i could be wrong - is that a royalty trust has an interest in the production from a particular asset or set of assets and typically has a finite life, while the MLP can buy new assets and has no finite life. I am sure others can better explain it than i can but those are two key diferences.

 

cheers

Zorro

 

 

Thanks. The market probably just hated the uncertainty because TW changes courses so often.

Miss gets better ROR than Permian so it makes sense to focus on Miss... and show the growth.

 

But the fact that Miss is showing more gas makes ppl wonder.

[rijk]

this article indicates that selling the permian will only bring short term debt/liquidity relief but that post 2014 debt/liquidity will continue to be an issue due to lower oil composition combined with ongoing miss capital requirement exceeding cash flow....

 

how solid/real are the $12-14/share intrinsic value estimates?

 

http://amp2012.com/2012/11/12/sandridge-energy-update-reduce/

 

 

regards

rijk

[fareastwarriors]

http://www.bloomberg.com/video/sandridge-management-is-not-trusted-singh-says-xacJJMnnSBCEylg2oXcMbA.html

 

Dinakar Singh, CEO of TPG-Axon Capital Management LP, on Bloomberg

 

12 min video

[txlaw]

Interesting.

 

http://www.bizjournals.com/prnewswire/press_releases/2012/11/15/NE13858

 

Mount Kellett is the same firm who went activist on CLWR a couple of weeks ago.

[Myth465]

Exciting stuff. Now is likely the time to buy but I have all I need...

I always said Ward would get it right or risk a take over. Its weird watching it all go down. He doesn't really have any real defenses from an argument perspective.

 

Whats sad is he does care about LT value, but runs SD it like its his fief.

[alertmeipp]

Interesting.

 

http://www.bizjournals.com/prnewswire/press_releases/2012/11/15/NE13858

 

Mount Kellett is the same firm who went activist on CLWR a couple of weeks ago.

 

One of the member in this board?

[PlanMaestro]

Dinakar Singh, CEO of hedge fund TPG-Axon Capital

http://www.bloomberg.com/video/sandridge-management-is-not-trusted-singh-says-xacJJMnnSBCEylg2oXcMbA.html

[zippy1]

Prem is back in with 54m shares. or did I read that right

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001193125%2D12%2D474276%2Etxt&FilePath=%5C2012%5C11%5C16%5C&CoName=SANDRIDGE+ENERGY+INC&FormType=SC+13G%2FA&RcvdDate=11%2F16%2F2012&pdf=

[Grenville]

Prem is back in with 54m shares. or did I read that right

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001193125%2D12%2D474276%2Etxt&FilePath=%5C2012%5C11%5C16%5C&CoName=SANDRIDGE+ENERGY+INC&FormType=SC+13G%2FA&RcvdDate=11%2F16%2F2012&pdf=

 

10.5%! should make things interesting with TPG/AXON!

 

Some of that 8bln in cash is going to work.

[Zorrofan]

Prem is back in with 54m shares. or did I read that right

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001193125%2D12%2D474276%2Etxt&FilePath=%5C2012%5C11%5C16%5C&CoName=SANDRIDGE+ENERGY+INC&FormType=SC+13G%2FA&RcvdDate=11%2F16%2F2012&pdf=

 

10.5%! should make things interesting with TPG/AXON!

 

Some of that 8bln in cash is going to work.

 

 

Is Prem going to support a change in management (i.e. support TPG & Mount Kellet) or will he back TW? With TPG, Mount Kellet and FFH against him I don't think TW could stay.....should be very very interesting.

 

cheers

Zorro

[Myth465]

Not sure how close Prem and Ward are but Ward has been to the last 2 annual meetings. I cant see Prem voting against him, sort of goes against Fair and Friendly. With that said I think they will all come up with a solution that makes money for everyone.

 

You also have Riverstone, and other groups. Not sure where they will go given the situation.  There are a few GS funds on one side, Prem and probably Management on the other, and T Boone, Riverstone, and most other shareholders in the middle.

 

This will get interesting, but will probably play out similar to CHK did...

[Redskin212]

If I am not mistaken Tom Ward has been to the past 3 FFH annual meetings.  I think Prem is in his court and I would not be surprised to see Sam Mitchell appointed to SD's Board before for too long.  He seems to be Prem's lieutenant when it comes to getting management back on the straight and narrow - past examples ICO and OSTK.  Also another player we may join the SD party is Wilbur Ross, who is also very persuasive.  From everything I am reading - SD has great assets it is just the TW is all over the map and somewhat greedy.  With big reputable players like this I have a feeling Tom may be listening a little more.

[txlaw]

Been buying LEAPS on this one.  Nice to see the FFH filing.

[alertmeipp]

Interesting, I am all for selling it at the right price.

Look like people have lost patience on TW. Can't blame them, the gas to oil transformation is done and SD still trades at 5. This partly is because TW is having new direction every 6 months. He is building value, too bad no one is willing to pay for it because they are scared of what's next.

[Grenville]

If I am not mistaken Tom Ward has been to the past 3 FFH annual meetings.  I think Prem is in his court and I would not be surprised to see Sam Mitchell appointed to SD's Board before for too long.  He seems to be Prem's lieutenant when it comes to getting management back on the straight and narrow - past examples ICO and OSTK.  Also another player we may join the SD party is Wilbur Ross, who is also very persuasive.  From everything I am reading - SD has great assets it is just the TW is all over the map and somewhat greedy.  With big reputable players like this I have a feeling Tom may be listening a little more.

 

I assumed Sam was on the board. I hope Fairfax gets him on the board. He answers plenty of the gas/oil questions at the shareholder dinner if I remember correctly.

[zippy1]

I don't think Sam Mitchell is on the board according to the corporate site.

http://www.sandridgeenergy.com/about/board-of-directors/

Does anyone has comments about these members?

[alertmeipp]

Prem is back in with 54m shares. or did I read that right

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001193125%2D12%2D474276%2Etxt&FilePath=%5C2012%5C11%5C16%5C&CoName=SANDRIDGE+ENERGY+INC&FormType=SC+13G%2FA&RcvdDate=11%2F16%2F2012&pdf=

 

10.5%! should make things interesting with TPG/AXON!

 

Some of that 8bln in cash is going to work.

 

Not sure how to read this, it is showing multiple entities.. and they hold preferred too ... i guess they can't pull a FBK type forced buyout as SD has poison pill in place if I remember correctly.

 

 

[alertmeipp]

if u compare the May and the latest presentation, ROR in MISS drops like ~20+%  even with the assumed gas price increased to 4.25 from $2.5. Probably get dragged down by the extension.. now up to 1.85 net acres!

 

At today strip, probably about 45% ROR, still better than Bakken!

 

I think TW is betting NG price will firm up and oil price will tend flat or down in few years - that's why they sell Permian?

 

They are paying 8%.. which isn't bad for its metrics. I don't think they can lower that by much even with a new CEO.

[alertmeipp]

Is it possible that sd wants to buy out Chk miss interest? That makes sense from scale perspective.

[Zorrofan]

if u compare the May and the latest presentation, ROR in MISS drops like ~20+%  even with the assumed gas price increased to 4.25 from $2.5. Probably get dragged down by the extension.. now up to 1.85 net acres!

 

At today strip, probably about 45% ROR, still better than Bakken!

 

I think TW is betting NG price will firm up and oil price will tend flat or down in few years - that's why they sell Permian?

 

They are paying 8%.. which isn't bad for its metrics. I don't think they can lower that by much even with a new CEO.

 

 

It seems to me that the market has lost what little confidence they had in TW and something has to be done. The announcement of SD selling the Permian basin gives the impression that TW has no clear strategy and is floundering around, thus the sell off.

 

The are going to have to be some hard decisions made, and made soon. You can install an new board, with representation from major shareholders similar to what happened at CHK, and try to "fix things" or you can try to break up SD and sell off the assets. Assets that I think are worth far more than the $14 per share TPG was talking about.

 

My question is will Prem simply back TW or will he support the idea a new board. TW may be a good "land man" but he doesn't seem to be so good on the execution side of things. I like the idea of Sam Mitchell being on the board, don't like the idea of selling the Permian, but will have to wait and see what happens. Anyone adding at this point??

 

cheers

Zorro

[Zorrofan]

Here is an interesting article by Devon Shire, who posts on this board, but under a different name (that I can't remember  :( )

 

http://seekingalpha.com/article/1015741-sandridge-shareholders-don-t-owe-ceo-ward-any-favors

 

Here is an interesting point that I wasn't aware of....

 

 

One fact summarizes the appalling corporate governance practices of SandRidge - despite the single worst stock performance of any energy company, and among the worst stock performances in the entire US market, and massive discounts applied to the company because of management…payments to Mr. Ward from the company have totaled approximately $150 million over the past five years (astonishing, given the $3 billion market capitalization of the company).

 

- The most disturbing example has been the Executive Well Participation Plan, (similar to the founder well participation policy at Chesapeake Energy that caused enormous outrage earlier this year). When concerns regarding Mr. Ward's ties to Chesapeake Energy arose this spring, Mr. Ward repeatedly asserted to us, other shareholders, and the media that SandRidge was different, and that over time he and the company recognized the inappropriateness of this practice, and eliminated it to avoid any appearance of impropriety. We investigated his claims, and were appalled by what we found. It is true that SandRidge has eliminated their Executive Well Participation Plan. However, they did so immediately after the market collapse in October 2008, by then paying over $67 million to Mr. Ward, even as 1) markets were collapsing, and 2) the company had less than $1 million in cash and was facing real risk of bankruptcy.

 

cheers

Zorro