alertmeipp Posted January 1, 2013 Share Posted January 1, 2013 I think the question to ask is why FFH was able to buy such last amount without pushing up the pps. Some heavy holders are selling out. I dont see how this matters, you have dumb money selling to smart money. At the end of the day Prem knows 100% how this will play out. He is the one to watch, the one with all the cards. It does. If TPG or any of it supporters are selling out... they will mean no quick fix. Fairfax isn't exactly minor shareholder friendly. Link to comment Share on other sites More sharing options...
bmichaud Posted January 2, 2013 Share Posted January 2, 2013 Cooperman owns "a lot" of SD. http://www.reuters.com/article/2013/01/02/us-funds-cooperman-cnbc-idUSBRE9010NA20130102 Link to comment Share on other sites More sharing options...
Myth465 Posted January 2, 2013 Share Posted January 2, 2013 I bet he bought in time for the vote Link to comment Share on other sites More sharing options...
ourkid8 Posted January 3, 2013 Share Posted January 3, 2013 This is a wonderful thread and as a Fairfax shareholder, I would like to further understand the $23B in cash and investments Fairfax has available. I have heard Prem mention on the CC that he has $23B in cash and investments. (I am assuming it is majority with the insurance float + $1B in cash at the holdco level) Is Fairfax allowed to put 20% of the cash and investments to work to take companies private or does a percentage of the float required to be in safe investments ie. Bonds. Would you please shed some light on this topic? Thanks, S Would you please help me understand how the Market Cap for SD is peanuts? You have a company with an enterprise value of $6.6B (Once you subtract the permian assets - $2.6B) you are looking at a company with an enterprise value of $4.5-5B. The market cap is peanuts for Fairfax. Certainly would explain recent share purchases.... FFH owns approximately 10% of shares out and TW owns 5%. If they did a joint going private transaction at $10 per share, FFH would pay $4.19B to the remaining 85%. FFH had ~$23B of cash and investments as of the latest quarter end - a SD takeout would be less than 20% of that total. Throw in some stock and debt issuance, I think the takeout would be peanuts, especially considering FFH likely sees SD worth over $20 in five years with a world-class operator such as Ward. Link to comment Share on other sites More sharing options...
bmichaud Posted January 3, 2013 Share Posted January 3, 2013 This is a wonderful thread and as a Fairfax shareholder, I would like to further understand the $23B in cash and investments Fairfax has available. I have heard Prem mention on the CC that he has $23B in cash and investments. (I am assuming it is majority with the insurance float + $1B in cash at the holdco level) Is Fairfax allowed to put 20% of the cash and investments to work to take companies private or does a percentage of the float required to be in safe investments ie. Bonds. Would you please shed some light on this topic? Thanks, S Would you please help me understand how the Market Cap for SD is peanuts? You have a company with an enterprise value of $6.6B (Once you subtract the permian assets - $2.6B) you are looking at a company with an enterprise value of $4.5-5B. The market cap is peanuts for Fairfax. Certainly would explain recent share purchases.... FFH owns approximately 10% of shares out and TW owns 5%. If they did a joint going private transaction at $10 per share, FFH would pay $4.19B to the remaining 85%. FFH had ~$23B of cash and investments as of the latest quarter end - a SD takeout would be less than 20% of that total. Throw in some stock and debt issuance, I think the takeout would be peanuts, especially considering FFH likely sees SD worth over $20 in five years with a world-class operator such as Ward. That's a good question - perhaps a more insurance-oriented investor could answer.... Off the top of my head however, BRK is able to purchase whole companies through its insurance subs - though I do not know what the regulatory requirements are surrounding those purchases. Link to comment Share on other sites More sharing options...
biaggio Posted January 3, 2013 Share Posted January 3, 2013 I am no expert at all but it is my understanding that an insurance company has to hold a certain amount of capital, "statutory capital", to cover potential losses. Credit rating/ratings by regulators, financial strength is determined by amount and quality of this capital- may have x amount of capital but rating would be different if capital is US t bills vs stock in SAndbridge Link to comment Share on other sites More sharing options...
Myth465 Posted January 3, 2013 Share Posted January 3, 2013 I think FFH buying SD whole is pure speculation. Its more likely that they sell to a third party, or purchase a piece of it in a going private transaction. Link to comment Share on other sites More sharing options...
bmichaud Posted January 4, 2013 Share Posted January 4, 2013 Speculation, but reasoned speculation. If you are truly a long term investor and have the resources, why not allow the best O&G operator on the planet to operate under a private umbrella with a lower cost of capital? Link to comment Share on other sites More sharing options...
Myth465 Posted January 4, 2013 Share Posted January 4, 2013 FFH gets paid that cost of capital. So I dont know if its in there best interest unless the buyout happens at a decent premium by a third party. Also I cant believe they are happy with the related party transactions / high G&A spending as well. When you look into the comment it was on the fence. It wasnt firm support, but Ward wasnt thrown under the bush. It will be interesting to see where the votes come in. Link to comment Share on other sites More sharing options...
rogermunibond Posted January 4, 2013 Share Posted January 4, 2013 why not allow the best O&G operator on the planet to operate under a private umbrella with a lower cost of capital? Really? I think I'd put Mark Papa's record up against Ward. Or Bob Simpson of XTO for that matter. Link to comment Share on other sites More sharing options...
bmichaud Posted January 4, 2013 Share Posted January 4, 2013 I'd put myself up against Ward. I'm just paraphrasing FFH's feelings toward Ward :) Link to comment Share on other sites More sharing options...
Myth465 Posted January 4, 2013 Share Posted January 4, 2013 I'd put myself up against Ward. I'm just paraphrasing FFH's feelings toward Ward :) Ya he was giving a nod to Prems show of support for Ward. As bmichaud said I would put myself up against Ward, and I have little confidence in myself as an oil and gas operator, so that says alot about what I think about Ward. With FFH earning the high cost of capital which is double what others make, it will be interesting to see how this plays out. They have to have concerns though about permanent impairment. All 3 TPG letters were very convincing and FFH runs quite lean from what I can tell. Link to comment Share on other sites More sharing options...
gordoffh Posted January 4, 2013 Share Posted January 4, 2013 Curious as to whether anyone has added or started a postition in SD since the TPG letters came out and Fairfax started there buying. Hard to see where Fairfax would be buying just to support Ward and not see significant upside to there investment. I remember when they unloaded shares in the mid 11's and how appropriate there timing was. Would be nice if they nailed it this time also. Long. SD Link to comment Share on other sites More sharing options...
txlaw Posted January 4, 2013 Share Posted January 4, 2013 Curious as to whether anyone has added or started a postition in SD since the TPG letters came out and Fairfax started there buying. Hard to see where Fairfax would be buying just to support Ward and not see significant upside to there investment. I remember when they unloaded shares in the mid 11's and how appropriate there timing was. Would be nice if they nailed it this time also. Long. SD I started buying SD LEAPS after the first TPG letter came out and have added since then. Link to comment Share on other sites More sharing options...
rogermunibond Posted January 4, 2013 Share Posted January 4, 2013 I'd put myself up against Ward. I'm just paraphrasing FFH's feelings toward Ward :) Gotcha! Sorry I misunderstood. Link to comment Share on other sites More sharing options...
zippy1 Posted January 7, 2013 Share Posted January 7, 2013 TPG and management both filed updated form 14s. http://investors.sandridgeenergy.com/phoenix.zhtml?c=196066&p=IROL-sec Anytbody want to guess we see another form 4 from Fairfax today? Link to comment Share on other sites More sharing options...
bmichaud Posted January 7, 2013 Share Posted January 7, 2013 Page 7 of TPG's 14A says SD would be required to repurchase its senior notes upon a change in control, or ~$4.3B. TPG says this won't materially impact the Company....perhaps they have banks lined up in the event a default takes place? Link to comment Share on other sites More sharing options...
Myth465 Posted January 7, 2013 Share Posted January 7, 2013 SD will have quite a bit of cash by the end of Jan. All of this debt is fairly high yield and it being called is probably a good thing. SD should be able to get low yield debt / credit lines to replace whatever debt remains. Link to comment Share on other sites More sharing options...
zippy1 Posted January 9, 2013 Share Posted January 9, 2013 There is a new investor presentation up in company website. http://phx.corporate-ir.net/phoenix.zhtml?c=196066&p=irol-presentations Link to comment Share on other sites More sharing options...
gordoffh Posted January 14, 2013 Share Posted January 14, 2013 good article from reuters http://finance.yahoo.com/news/insight-sandridge-energys-ceo-adapted-100332747.html Link to comment Share on other sites More sharing options...
bmichaud Posted January 14, 2013 Share Posted January 14, 2013 So I'm trying to get my arms around what exactly the economics of a well look like over its entire life versus the 50 to 100% IRR numbers thrown out by the Company and the Street. The Company recently guided me to the following: 1. Average life of a well approximately 50 years 2. Ten year decline rates go from ~60% in year 1 down to 5% terminally in year 11. In other words, the average 30d IP rate of 275 BOEPD in the Miss declines 60% by month 13. I'm attaching a three-scenario valuation model for SD's undeveloped Miss acreage using this and other info from various sources. Would love feedback from any of the O&G experts on the board. There are so many assumptions in modeling these guys it's not even funny - so this is by no means a final piece of valuation work...just trying to getsomething out there that is reasonably constructed in order to generate discussion. For modeling purposes, I assume the decline rate declines in a straight line from 60% in year 1 to 5% in year 11, for an annual "decline factor" of roughly 78% (i.e. the Year 2 decline rate is 78% of the Year 1 rate of 60%, or 47%). Annual average BOEPD is simply the average of the beginning and ending 30d BOEPD rate - so the 30d IP is 275, declining to 110 by end of Year 1, so Year 1 average BOEPD is 192.50. Feel free to hammer away at anything and everything. SD_VALUATION.xls Link to comment Share on other sites More sharing options...
Myth465 Posted January 14, 2013 Share Posted January 14, 2013 Very comprehensive. I have nothing to add, but like the way you have approached it. Was of my mistakes was to leave this work to the auditors / O&G independent analyst. There are just too many assumptions though and Management can usually justify what ever number they arrive at. Link to comment Share on other sites More sharing options...
bmichaud Posted January 15, 2013 Share Posted January 15, 2013 My primary concern is that current well economics are not indicative of long run economics - is SD drilling all of its best wells right now, or will they continue to get better with experience and improved technology? One offset to this concern however, is that wells tend to produce more than expected over a long period of time, especially when new technology is applied. And if SD mgmt is to be believed, D&C cost should decline over time to the $3.25mm as the salt water disposal assets are completed. We'll see - the JV transactions in the Miss support an $8B plus valuation, but perhaps those JVs are bubble-like valuations. MOS at these levels appears reasonable though. Lastly - if Longleaf's nat gas thesis ever materializes, this play could have HUGE upside with a ~65% weighting. Link to comment Share on other sites More sharing options...
Myth465 Posted January 15, 2013 Share Posted January 15, 2013 Honestly I just want the company sold. So many ways to be misled with 1.5 million acres. No way to answer any of these questions. Link to comment Share on other sites More sharing options...
abcd Posted January 17, 2013 Share Posted January 17, 2013 Mount Kellett Sends Second Letter to the Board of SandRidge Energy Mount Kellett and funds and accounts under common control collectively have beneficial ownership in SandRidge Energy Inc. of 22.2 million shares, or approximately 4.5%, of the Company's outstanding common stock. http://finance.yahoo.com/news/mount-kellett-sends-second-letter-140000012.html Link to comment Share on other sites More sharing options...
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