alertmeipp Posted August 14, 2013 Share Posted August 14, 2013 According to SD's most recent presentation, they have approximately 1.9MM net acres in the Mid-Con. Per the latest CC, 250K acres are expiring in 2013, of which they are extending 45% (75% of the 60% extendable), and 740K in 2014. They did not specify how much of the 80% they will extend in 2014, but assuming they extend the full amount, that leaves effectively 1.6MM net acres. Of the 1.6MM, the "core" comprises 415K after expirations, leaving "non-core" acreage of 1.2MM. Current Core acreage is 615K - if the Core is valued at $10K/acre, the loss of 200K Core acres represents a loss of fair enterprise value of approximately $3.40 per share. My work is attached, but in summary: Valuing the Core Miss acreage at $10K/acre and the Non-Core at $2K, GOM assets at the $1.2B purchase price, WTO acreage at $5K and the SWD infrastructure at mgmt-projected FYE13 book value of $650MM, I can get to a fair enterprise value of $16.11. Backing out total liabilities of $4.5B, minority interest of $1.4B and corporate expenses of $1.4B, and adding back current assets of $1.6B brings me to a fair equity value of $6.64 per share. Of note, the Mid-Con PV10 as of FYE12 was $2.3B versus my Core Mid-Con FV estimate of $4.2B..... My understanding of focus area is not necessary the best area, it is just the area they are focus on and comfortable that consistence can be achieved, so in theory, even if they let some of the current focus area expired, they can add to it. It's not a clear cut. Link to comment Share on other sites More sharing options...
CorpRaider Posted August 14, 2013 Share Posted August 14, 2013 Also, its the area with the highest cash IRRs because of the infrastructure, right? To my mind they're basically saying, instead of expending additional cash drilling some exploration wells way off in BF Kansas, we can take that cash and get a better return drilling in the focus area, of course they're eating the sunk costs to acquire the lease in BF Kansas...no use crying over spilled ward? Link to comment Share on other sites More sharing options...
oldye Posted August 15, 2013 Share Posted August 15, 2013 Just going by the number of wells being brought online in the next 6 months by between DVN- Sinopec, SD and others, I have a feeling more majors are going to want to come in and do all kinds of deals. We will know if the woodford shale is as oily as DVN says in the next 6 months, if the IP oil/liquids stay at 80%, the IRR's will have to look pretty damn good. Reading the transcript of the call, it sounded like infrastructure was the major bottle neck for DVN, which tells me that TPG's valuation of 1 billion for Sd's infrastructure is not out of this world. Add the Royalty trusts and GOM, you're not paying much for 1.9 million acres in what may turn out to be some of the best rock in the U.S. They've been able to add thousands of acres in the core at about $700/acre and the renewals don't sound very expensive. At these prices I wish they'd sell some more preferred, create another trust and increase the capital spend by a lot. Oil is not going to be at these prices forever. Link to comment Share on other sites More sharing options...
alertmeipp Posted August 18, 2013 Share Posted August 18, 2013 Just going by the number of wells being brought online in the next 6 months by between DVN- Sinopec, SD and others, I have a feeling more majors are going to want to come in and do all kinds of deals. We will know if the woodford shale is as oily as DVN says in the next 6 months, if the IP oil/liquids stay at 80%, the IRR's will have to look pretty damn good. Reading the transcript of the call, it sounded like infrastructure was the major bottle neck for DVN, which tells me that TPG's valuation of 1 billion for Sd's infrastructure is not out of this world. Add the Royalty trusts and GOM, you're not paying much for 1.9 million acres in what may turn out to be some of the best rock in the U.S. They've been able to add thousands of acres in the core at about $700/acre and the renewals don't sound very expensive. At these prices I wish they'd sell some more preferred, create another trust and increase the capital spend by a lot. Oil is not going to be at these prices forever. I think many agree with the above, valuation is severely point to undervalued stock yet YTD SD is down over 20%. The 2 year run way is not enough to clam the market. Link to comment Share on other sites More sharing options...
fareastwarriors Posted August 19, 2013 Share Posted August 19, 2013 http://www.bloomberg.com/news/2013-08-18/shale-grab-in-u-s-stalls-as-falling-values-repel-buyers.html Shale Grab in U.S. Stalls as Falling Values Repel Buyers Link to comment Share on other sites More sharing options...
alertmeipp Posted August 19, 2013 Share Posted August 19, 2013 SD probably needs to change its name to Oilking or something to cut its link to natural gas. Only another note, NG is holding rather strong given how cool this summer has been Link to comment Share on other sites More sharing options...
plato1976 Posted August 20, 2013 Share Posted August 20, 2013 It has nothing to do with NG I guess CHK is doing well I think SD 's problem is 1) forced selling (arb hedge fund now selling due to no short term sale prospect and tw) 2) I guess ppl still have no idea how well other parts of MISS will fare eventually, and to a lesser degree how SD will solve its 2015/2016 funding - I am not an oil expert and cannot estimate this part with any confidence. SD probably needs to change its name to Oilking or something to cut its link to natural gas. Only another note, NG is holding rather strong given how cool this summer has been Link to comment Share on other sites More sharing options...
alertmeipp Posted August 20, 2013 Share Posted August 20, 2013 It has nothing to do with NG I guess CHK is doing well I think SD 's problem is 1) forced selling (arb hedge fund now selling due to no short term sale prospect and tw) 2) I guess ppl still have no idea how well other parts of MISS will fare eventually, and to a lesser degree how SD will solve its 2015/2016 funding - I am not an oil expert and cannot estimate this part with any confidence. SD probably needs to change its name to Oilking or something to cut its link to natural gas. Only another note, NG is holding rather strong given how cool this summer has been My comments were on the bloomberg article. Link to comment Share on other sites More sharing options...
alertmeipp Posted August 23, 2013 Share Posted August 23, 2013 Is it just me, or do you guys think SD is trading very controlled? Link to comment Share on other sites More sharing options...
LC Posted August 23, 2013 Share Posted August 23, 2013 Does Ward still control a large number of shares? He could be slowly liquidating. Link to comment Share on other sites More sharing options...
oldye Posted August 23, 2013 Share Posted August 23, 2013 http://media.oilandgas360.com/2013-sandridge-energy-james-bennett/ 6-8 wells planned in the woodford this year, 'several hundred thousand acres' Devon was able to derisk 1000 locations on 100k acres by drilling 30 wells, this implies that Sandridge could potentially 'derisks" about 200-300 locations by the end of this year and can have 2000+ additional drilling targets @ ~ 3 million each. This is in addition to the middle Mississippian which is also showing very solid initial production. Link to comment Share on other sites More sharing options...
cemadh Posted September 4, 2013 Share Posted September 4, 2013 24033 contracts of Sep strike $5 calls were traded today. News? Speculation about a deal? Link to comment Share on other sites More sharing options...
CorpRaider Posted September 6, 2013 Share Posted September 6, 2013 24033 contracts of Sep strike $5 calls were traded today. News? Speculation about a deal? Which one of you felons put plunked down that million bucks on those options? haha. Link to comment Share on other sites More sharing options...
cogitator99 Posted September 9, 2013 Share Posted September 9, 2013 24033 contracts of Sep strike $5 calls were traded today. News? Speculation about a deal? Which one of you felons put plunked down that million bucks on those options? haha. well I just couldn't resist... Link to comment Share on other sites More sharing options...
alertmeipp Posted September 11, 2013 Share Posted September 11, 2013 24033 contracts of Sep strike $5 calls were traded today. News? Speculation about a deal? Which one of you felons put plunked down that million bucks on those options? haha. well I just couldn't resist... Remember every trade has 2 or more sides. Link to comment Share on other sites More sharing options...
Sunrider Posted September 11, 2013 Share Posted September 11, 2013 It does - but the options are created by the exchange/market maker if there's demand at the quoted price. So it's not as though someone sold a pre-existing option to someone else necessarily. As far as I know the market makers go off and then seek to hedge their exposure. So xk options being sold means someone thought (more complex strategies not withstanding) that someone was sufficiently bullish (and/or in a gambling mood) to shell out the dough (without necessarily someone thinking the opposite). C. 24033 contracts of Sep strike $5 calls were traded today. News? Speculation about a deal? Which one of you felons put plunked down that million bucks on those options? haha. well I just couldn't resist... Remember every trade has 2 or more sides. Link to comment Share on other sites More sharing options...
cogitator99 Posted September 11, 2013 Share Posted September 11, 2013 24033 contracts of Sep strike $5 calls were traded today. News? Speculation about a deal? Which one of you felons put plunked down that million bucks on those options? haha. well I just couldn't resist... Remember every trade has 2 or more sides. That was a joke alert. We have a vanilla long position and some puts, but not calls. ;) Link to comment Share on other sites More sharing options...
alertmeipp Posted September 11, 2013 Share Posted September 11, 2013 24033 contracts of Sep strike $5 calls were traded today. News? Speculation about a deal? Which one of you felons put plunked down that million bucks on those options? haha. well I just couldn't resist... Remember every trade has 2 or more sides. That was a joke alert. We have a vanilla long position and some puts, but not calls. ;) Mine was a joke as well. Trying to imply I was the seller. Failed! :-\ Link to comment Share on other sites More sharing options...
BG2008 Posted September 11, 2013 Share Posted September 11, 2013 Recently, I spoke with someone at a large investment shop who had followed and invested in Sandridge for years. His feedback is that: 1. They had send a team of geologist at one point to look at Sandridge's assets 2. SD is not extracting the crude using the most efficient method. He believes that more seismic should be use. The way SD is currently going about extracting the crude will not yield the highest IRR due to the nature of the rock. 3. Long Story Short - He sees SD with a value of $1-$6 at most, he can't see a valuation of $20-30 per Prem Watsa. Given the smart money nature of my contact and his years of coverage, I would say I'm giving up my pursue of SD as an investment. There are too many unknown unknowns. It's more complicated and existing well data probably are not representative of future well data. I put this into my "too hard" bucket and move on. Not that I had a position at any given time. Never got comfortable enough with this name. I've followed a lot of mining, E&P bankruptcies this year, trying to sell mining and E&P assets in a distressed liquidation is very painful for the common and preferred. Link to comment Share on other sites More sharing options...
cemadh Posted September 11, 2013 Share Posted September 11, 2013 About 10 months back I went to Kansas. Our business plan was to build man-camps for oil and oil service workers in Harper County. We talked to companies that provide water and other services to the drillers like Sandridge and Shell. One of the managers told me that Sandridge was the best out there in terms of completion. Start to finish at one drill location in 29 days. The same process took Shell about 90 days. This was corroborated by others in the field. And the latest Sandridge presentation has spud-spud cycle time per well listed as 21 days!! That is very efficient. Just my two cents...... ___________________________________________________________________ Also - here is something posted on the Yahoo MB about a seismic shoot done by Sandridge in the WTO. Not connected to the seismic discussion for the Missippi Lime but I thought this was interesting ( I believe this really happened) ".... All of the production in the WTO is currently from the Pinon field which encompasses roughly 50,000 to 75,000 acres. SD leased up and shot seismic on another 750,000 acres and located another 10 to 15 Pinon type structures or different fields. There were discovery or appraisal wells drilled in 3 of these fields that confirmed they were good. OXY just wants the CO2 that is associated with the Pinon field. Lease prices were cheap in the WTO - around $150/acre or less. The 3D seismic probably cost the company another $150/acre. So the company spent around $225,000,000 to figure out the WTO. Additionally SD purchased a 35,000 acre ranch outright for another $70,000,000 to the east of the Pinon. I know a few of the ranchers in the WTO and was out there when they were shooting the seismic. The 750,000 acre shoot was the largest ever contiguous 3D seismic shoot in the USA and likely the world. SD would basically set up drilling pads and move in Helicopters, Trucks, ATV vehicles and a trailer. It's pretty rough terrain out there. The Helicopters and Trucks would drop off the seismic lines to the ATV guys who would crisscross them thru out the acreage. There are few roads in this area and lots of cactus, it was a tough job, but SD got it done. SD has the seismic and knows where the sweet spots are located in the WTO. Most of their leases have expired, but should the company decide to ramp up operations in the WTO, they would likely concentrate on just 150,000 to 200,000 acres. I think they could pick up most of this acreage for $500/acre or less. The WTO outside of the Pinon is an asset. The Pinon is a liability. Sell, give away the Pinon, or pay OXY a penalty to get it off the books. Keep the rest of the WTO for future development ..." Link to comment Share on other sites More sharing options...
CorpRaider Posted September 12, 2013 Share Posted September 12, 2013 Slide show and webcast from the Barclays energy conference is up in IR section of website. CEO discussion of the funding gap was interesting to me. Basically implying it will go away as they grow production and wind down trust commitments. Link to comment Share on other sites More sharing options...
alertmeipp Posted September 12, 2013 Share Posted September 12, 2013 Really... would you give me color? Will listen to the call tonight. Link to comment Share on other sites More sharing options...
CorpRaider Posted September 12, 2013 Share Posted September 12, 2013 He just said, I get a lot of questions about our funding gap beyond 2015 and every company at this conference has a funding gap (energy conference), we're not worried about it but we're definitely aware of it and analyze it frequently. We expect to gap to shrink as production grows and what a lot or people don't factor in is that as we wind down out commitments to the legacy trust we can redeploy that capital and 100% of that growth flows to the SD bottom line as opposed to whatever split is under the trust. Link to comment Share on other sites More sharing options...
Cardboard Posted September 16, 2013 Share Posted September 16, 2013 http://uk.reuters.com/article/2013/09/16/repsol-idUKL5N0HC13020130916?feedType=RSS&feedName=rbssEnergyNews "In January 2012, the Company capitalized on its acreage position in the Mississippian play and monetized certain non-operated working interests and associated salt water disposal facilities by selling such assets to Repsol E&P USA Inc. for approximately $250 million in cash and a drilling and development carry of $750 million. " Cardboard Link to comment Share on other sites More sharing options...
CorpRaider Posted September 16, 2013 Share Posted September 16, 2013 Hmm, thanks for posting, interesting prior relationship. Link to comment Share on other sites More sharing options...
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