SD - SandRidge Energy

[bmichaud]

The run-up in SD based on the possibility of a Repsol deal makes no sense assuming the following is correct:

 

The Madrid-based company has told investment bankers in recent months that it is ready to spend $5 billion to $10 billion for a U.S. or Canadian exploration and production company, preferably one that produces much more oil than natural gas, these people said.

 

http://online.wsj.com/article/SB10001424127887323527004579077290810607968.html

[cemadh]

24033 contracts of Sep 2013 strike $5 calls were bought on Sep 3, 2013 - BEFORE the Repsol rumor (for about 20 cents)

Those calls are handsomely profitable now.

 

There was a "rumor" of a new SD well in Alfalfa or Grant county, a "gusher" as they say, between 4500 and 5000 bbl of oil per day. bopd not boepd.

 

That rumor surfaced on the Yahoo MB two days after the calls were traded and SD has been trending up ever since.

 

One thing is certain. SD is reporting higher bopd and boepd averages. They are expected to revise the type curve upward in jan 2014 when they release the new type curve. The SD presentations at various conferences are already reflecting the higher IPs.

[CorpRaider]

Yeah, to me the repsol story is just indicative of a step change in perceived value of north american E&P assets given the regional sectarian proxy wars going on in the sandbox.  Hopefully, we see a wave of consolidation and you have to like SD's chances to get taken out in that environment, given the composition of the s/h base and management.  But, who knows really, its not like it hasn't run up to $7 a few times before and most of the people in the name would still be underwater at that price.

 

P.S.  Oops, I suppose maybe you were responding to the Susquehanna report saying SD is good fit for repsol reported intentions and $9 per share fits with stated size.

[Cardboard]

I think that once a Repsol or any other large player makes a decent size deal in NA to purchase heavily discounted oil & gas assets that we will see a sea change in interest for the sector and a rapid revaluation.

 

I posted a thread a while ago about heavily discounted Canadian light oil producers and I received zero response. I am talking about perfectly healthy producers with 10+ year reserve life, producing primarily light oil and trading at 2 to 3 times cash flow. This oil also trades at a premium to WTI because of a special situation occurring in Canada due to the oil sands. Keystone XL pipeline or not means nothing to them.

 

So if I can't get a single response from this board on such mouth watering bargains while many are invested in Sandridge, then it tells me that the interest from the general investment community for independent energy producers is nil at the moment. It will take a deal to wake-up the robots and whomever is left doing traditional analysis and trading to jump on the bandwagon.

 

Cardboard

[Myth465]

I own a few Candian O&G companies at 2-4 times earnings, but I can see some risks of take unders. A few acquisitions have gone through at low prices.

[wachtwoord]

I think that once a Repsol or any other large player makes a decent size deal in NA to purchase heavily discounted oil & gas assets that we will see a sea change in interest for the sector and a rapid revaluation.

 

I posted a thread a while ago about heavily discounted Canadian light oil producers and I received zero response. I am talking about perfectly healthy producers with 10+ year reserve life, producing primarily light oil and trading at 2 to 3 times cash flow. This oil also trades at a premium to WTI because of a special situation occurring in Canada due to the oil sands. Keystone XL pipeline or not means nothing to them.

 

So if I can't get a single response from this board on such mouth watering bargains while many are invested in Sandridge, then it tells me that the interest from the general investment community for independent energy producers is nil at the moment. It will take a deal to wake-up the robots and whomever is left doing traditional analysis and trading to jump on the bandwagon.

 

Cardboard

 

Could you give me a link? You got me curious :)

[brker_guy]

Don't know if you guys saw this today:

 

http://www.bloomberg.com/news/2013-09-17/what-happens-when-the-u-s-isn-t-the-biggest-gas-guzzler-.html

 

 

[crackspread]

I own a few Candian O&G companies at 2-4 times earnings, but I can see some risks of take unders. A few acquisitions have gone through at low prices.

 

care to elaborate on which co's?

[Sunrider]

I think that once a Repsol or any other large player makes a decent size deal in NA to purchase heavily discounted oil & gas assets that we will see a sea change in interest for the sector and a rapid revaluation.

 

I posted a thread a while ago about heavily discounted Canadian light oil producers and I received zero response. I am talking about perfectly healthy producers with 10+ year reserve life, producing primarily light oil and trading at 2 to 3 times cash flow. This oil also trades at a premium to WTI because of a special situation occurring in Canada due to the oil sands. Keystone XL pipeline or not means nothing to them.

 

So if I can't get a single response from this board on such mouth watering bargains while many are invested in Sandridge, then it tells me that the interest from the general investment community for independent energy producers is nil at the moment. It will take a deal to wake-up the robots and whomever is left doing traditional analysis and trading to jump on the bandwagon.

 

Cardboard

 

Could you give me a link? You got me curious :)

 

yes - could you please link the old thread

[oldye]

http://www.kansas.com/2013/09/19/3008861/shell-oil-pulling-out-of-kansas.html

 

In case anyone was still worried about lease expiration....

 

"There’s a lot of acreage up for sale from multiple companies, and Woolsey sees lease prices falling from $300 to $500 an acre and higher, down to $50 to $150 an acre."

 

[cemadh]

Less than 4 million shares had traded till 1.30 pm today (Sep 26, 2013) and the share price (SP) was steady around $5.82. Then the SP started moving up steadily and the trading volume also jumped.  Almost 12 million shares had changed hands by the close and the SP had climbed to $5.99. This is an unusual trading pattern for SD and I wonder if the Shell's decision to exit Kansas had anything to do with it.  But the Shell decision had been known for a few days at least - certainly it was not announced at 1.30 pm.

 

What gives? Does a Motley Fool piece (discussing Shell's exit) have this much "power"?

 

Will Shell's exit enable Sandridge to acquire additional acres around its current operations at a low(er) price?  If Sandridge already has significant electrical and water disposal infrastructure in place close to these Shell locations, this would enable Sandridge to tack on additional production at a comparatively low cost.  It would also lower Sandridge's future lease acquisition costs in Kansas. Yes?  Perhaps a better "package" can be assembled for Repsol to acquire  :)

 

[Myth465]

They either have a gusher well -A, pending good news / well results (perhaps the different pay zones are working out extremely well, or DOR was sold at a good price) -B, are being acquired -C, or whats most likely its hype -D.

 

Shell leaving is irrelvant, as another article said there are tons of acres available for cheap.

SD is also cash poor and cant really afford to buy / drill more acres. I am enjoying the rise though, and hope its A, B, or C. Also know its quite possibly D.

[CorpRaider]

I was trying to figure it out but it seemed to me like the entire NA E&P complex moved up yesterday, probably some sector call from Goldman or something...although the other ones (for example WLL, KOG) kind of gapped up on the open and didn't exhibit the odd pattern of SD.

[cemadh]

Not all NA E&P names moved up.

CHK was DOWN on below average volume, APA was DOWN on average volume.

 

Here is another interesting trade. Somebody sold 96,686 contracts of SD Mar 2014 Strike $6 puts for $0.90 cents yesterday.

 

That is $8.7MM "profit" from the put premium if SD closes above $6 in March or $49MM cash that has to be produced to buy those SD shares at $6 ($58MM minus the put premium received)

 

 

Maybe the put trade caused the hype. Who knows?

[oldye]

They either have a gusher well -A, pending good news / well results (perhaps the different pay zones are working out extremely well, or DOR was sold at a good price) -B, are being acquired -C, or whats most likely its hype -D.

 

Shell leaving is irrelvant, as another article said there are tons of acres available for cheap.

SD is also cash poor and cant really afford to buy / drill more acres. I am enjoying the rise though, and hope its A, B, or C. Also know its quite possibly D.

 

Man I wish I was as cash poor as them, what was it almost 1.1 billion as of July?  Life must be tough.

 

They've been slowly adding 30,000, 50,000 acres in their core as land became available and Shell pulling out of 3 counties where SD has infrastructure certainly opens up the possibility of doing more at reasonable prices.  I really don't give 2 expletives about what drives the price on a day to day basis, the Shell pull out is material. 

 

As Ken Peak liked to say " It all starts with our fundamental belief about this industry and that is that all the value in this business is created when somebody turns a drill bit to the right. In order to turn a drill bit to the right you need two things: you need someone ' hopefully someone who is very competent ' draw an X Y Z on a map. And you need to own the land, of course; there is no point in finding prospects on someone else's land. Then you need to be able to write a check that doesn't bounce. That has really been the modus operandi of Contango is to try to grow through the drill bit and be somewhat opportunistic on acquisitions."

 

 

[CorpRaider]

Well, to my mind, Shell's exit is another feather in the cap of this management team as far as shifting from the strategy of running rigs just to hold acreage.  They basically stated they have a competitive advantage in the play with their infrastructure and they expected to be able to lease whatever they need, where they want at lower prices.  Seems like that is playing out as they predicted.

[ourkid8]

±1, very well said.  Anyone that says Sandridge does not have a competitive advantage is crazy.  They are proving it!!!

 

S

 

Well, to my mind, Shell's exit is another feather in the cap of this management team as far as shifting from the strategy of running rigs just to hold acreage.  They basically stated they have a competitive advantage in the play with their infrastructure and they expected to be able to lease whatever they need, where they want at lower prices.  Seems like that is playing out as they predicted.

[BargainValueHunter]

Hmmm...interesting:

 

http://finance.yahoo.com/news/enormous-put-sale-sandridge-091417952.html

 

More than 119,000 options changed hands in the natural-gas and oil company, compared to a daily average of 9,584. Most of that was in a single print.

 

An enormous block of 91,643 March 6 puts was sold for $0.90, below the listed bid price at the time. The previous open interest had been just 1,338 contracts, so this is clearly a new position.

[Myth465]

They either have a gusher well -A, pending good news / well results (perhaps the different pay zones are working out extremely well, or DOR was sold at a good price) -B, are being acquired -C, or whats most likely its hype -D.

 

Shell leaving is irrelvant, as another article said there are tons of acres available for cheap.

SD is also cash poor and cant really afford to buy / drill more acres. I am enjoying the rise though, and hope its A, B, or C. Also know its quite possibly D.

 

Man I wish I was as cash poor as them, what was it almost 1.1 billion as of July?  Life must be tough.

 

They've been slowly adding 30,000, 50,000 acres in their core as land became available and Shell pulling out of 3 counties where SD has infrastructure certainly opens up the possibility of doing more at reasonable prices.  I really don't give 2 expletives about what drives the price on a day to day basis, the Shell pull out is material. 

 

As Ken Peak liked to say " It all starts with our fundamental belief about this industry and that is that all the value in this business is created when somebody turns a drill bit to the right. In order to turn a drill bit to the right you need two things: you need someone ' hopefully someone who is very competent ' draw an X Y Z on a map. And you need to own the land, of course; there is no point in finding prospects on someone else's land. Then you need to be able to write a check that doesn't bounce. That has really been the modus operandi of Contango is to try to grow through the drill bit and be somewhat opportunistic on acquisitions."

 

Capex still exceeds cash flow by quite a bit for the next 2-3 years, and SD has a ton of debt. They sold key assets and have cash on hand, but inmo SD is cash poor and outside of a few acres in core areas with infrastructures wont be leasing much land going forward.

[xtreeq]

Hmmm...interesting:

 

http://finance.yahoo.com/news/enormous-put-sale-sandridge-091417952.html

 

More than 119,000 options changed hands in the natural-gas and oil company, compared to a daily average of 9,584. Most of that was in a single print.

 

An enormous block of 91,643 March 6 puts was sold for $0.90, below the listed bid price at the time. The previous open interest had been just 1,338 contracts, so this is clearly a new position.

 

This was done by TPG-Axon

 

http://www.sec.gov/Archives/edgar/data/1349436/000090266413003321/p13-1791sc13da.htm

 

"On September 26, 2013, certain of the Reporting Persons entered into option contracts on an aggregate of 10,000,000 shares of Common Stock giving the counterparties to such contracts the right to sell such shares of Common Stock at a price of $6.00 with an expiration date of March 22, 2014.

 

If such option contacts are exercised by the counterparties, such Reporting Persons will purchase 10,000,000 shares of Common Stock at a price of $6.00 per share, increasing the Reporting Persons' beneficial ownership to 9.4% of the outstanding Common Stock."

[Zorrofan]

Hmmm...interesting:

 

http://finance.yahoo.com/news/enormous-put-sale-sandridge-091417952.html

 

More than 119,000 options changed hands in the natural-gas and oil company, compared to a daily average of 9,584. Most of that was in a single print.

 

An enormous block of 91,643 March 6 puts was sold for $0.90, below the listed bid price at the time. The previous open interest had been just 1,338 contracts, so this is clearly a new position.

 

This was done by TPG-Axon

 

http://www.sec.gov/Archives/edgar/data/1349436/000090266413003321/p13-1791sc13da.htm

 

"On September 26, 2013, certain of the Reporting Persons entered into option contracts on an aggregate of 10,000,000 shares of Common Stock giving the counterparties to such contracts the right to sell such shares of Common Stock at a price of $6.00 with an expiration date of March 22, 2014.

 

If such option contacts are exercised by the counterparties, such Reporting Persons will purchase 10,000,000 shares of Common Stock at a price of $6.00 per share, increasing the Reporting Persons' beneficial ownership to 9.4% of the outstanding Common Stock."

 

 

So is TPG buying out TW? If yes, this would seem to indicate TPG has confidence going forward........

 

cheers

Zorro

[alertmeipp]

so why they want to pay 6.9 for the shares when the share is going for under 6?

[cemadh]

They are not paying $6.9 per share. They sold the puts and collected 90 cents. If the shares are put to them (on/before March 21, 2014), they would have acquired an additional 10 million shares for $5.1 per share.

[alertmeipp]

LOL.. not sure what was I thinking.

[cogitator99]

 

So is TPG buying out TW? If yes, this would seem to indicate TPG has confidence going forward........

 

cheers

Zorro

 

Well TW had 13.55 mn shares midway through July, so assuming he's been selling some on the open market the numbers can fit.