SD - SandRidge Energy

[Cardboard]

It could be an analyst downgrade that we have not heard about yet. It could be something that was said in the conference call. It could be some form of manipulation at the open: algos, market makers.

 

The reaction is as you said unbelievable. It was up the entire before hour trading period, opens up and now it went below $6. It has recovered a bit but, the damage is still made.

 

I have not had time to dig into the release yet and to listen to the CC but, at first glance it seems like a beat to me. Certainly heading in the right direction.

 

Cardboard

[Mikenhe]

yet again I fail to understand the market.

 

the reports out there on the quarter results are , well,  weakly written....

 

If thats what people are basing their investing on.......

 

I suspect that some people wanted better results and/or a takeover bid. As neither arrived then they are taking out profit..

 

 

carry on like this and it might become a buy :D

[ourkid8]

I added @ $6/share earlier today.  This is crazy, the earnings report was superb...

 

Tks,

S

[brker_guy]

yet again I fail to understand the market.

 

the reports out there on the quarter results are , well,  weakly written....

 

I second that sentiment...  Btw CHK and SD, I am losing lots of paper profits today...  Thank you, Mr. Market!

 

[alertmeipp]

wonder if someone are liquidating, remember the recent 200k contract sale?

[CorpRaider]

I added @ $6/share earlier today.  This is crazy, the earnings report was superb...

 

Tks,

S

 

Yeah, there's an article on seekingalpha that is pretty negative but really just rehashes the existence of the funding gap with no discussion of the changes therein.  It did note three failed exploratory wells in woodford.  Someone is selling it, for sure. 

[txlaw]

DVN is down a lot today as well.

 

Perhaps it's just the whole sector selling off?

[txlaw]

Here's an interesting observation about the Woodford from DVN's CC:

 

Seismic has played a key part in the early success for our Woodford drilling. Of the 27 Woodford wells brought online this year on our joint venture acreage, we have seen more than a 100% increase in 30-day IP rates in our wells drilled with the benefit of 3D seismic as compared to those wells drilled without.

 

And then Bennett on seismic in the Woodford:

 

In order to test the Woodford, SandRidge is drilling a total of nine wells in five different counties in 2013.

 

To date we have completed three wells with one well still in flow back. Of the three wells, we have achieved test rates of 68 barrels of oil per day and 37 barrels of oil per day. One well has produced only water. We have captured key learnings from the early wells and we are putting together large 3-D seismic shoot that we expect to launch in 2014. We are confident that our wells will improve as we increase our knowledge of the play.

 

Let's hope that SD really does start to find some real pay dirt in the Woodford.

[CorpRaider]

Just going over the transcript now.  CEO really lays out the cash flow/funding gap issue on a fifth grader level for the analysts, eh?  Visibility of 20% operating cash flow growth for several years.

[oldye]

I thought this was a very interesting quarter because it shows roughly how much they spend/ and how many rigs in the Miss and GOM to keep production flat ie maintenance capex. 

 

  Also sounds like even this quarters lower well IP's were 14% higher than currently calculated in the PV 10, and that is not counting the 12 high production wells that are only brought online in the 4thQ and probably would bring this number up by more than 10%.  Not to mention the 180k boe that was held up in the GOM.  I am very interested in seeing what the new PV 10 number looks like after q4.

 

Overall this sounds pretty straight forward, spend 1.45 billion, grow the Mississippian by 35%, grow overall ebitda by 20%, hedge oil above 90, explore for new prospects and expand the target area.

 

Hopefully they find a good partner to drill for them in the Gulf, they mentioned that the old Shell estimate was 200 million barrels in place, this should meaningfully increase the value of GOM. 

 

3d seismic sounds very promising for Devon in the Woodford, which Sd is now testing for in 5 counties. I am confident that they will figure this out.

 

Good Q and I hope it goes below my cost basis again. 

 

[CorpRaider]

Yeah, many years of 20% CF growth for many years always perks up the ears.  Wonder if we'll see a filing on who was selling today.  Volume was huge.

[bmichaud]

SD, CHK and DVN all down big today. Was wondering if the recent decline in WTI had anything to do with it, but would have thought the decline would have come before today. Very odd.

[CorpRaider]

Yeah, I wondered that too, but none of the bigger boys I track sold off.  Did repsol blow up or something?  hah.  Could Repsol drill those GOM assets?

[bmichaud]

Ya the big guys are doing well. XOM of all stocks is on the move :)

[CorpRaider]

I know man, I've been trying to talk myself into getting into some XOM on a "they will all drill themselves into oblivion and when WTI is at $55 and NG is at $2, XOM will come in and pick through the bankrupt carcasses."  But I'm just not impulsive enough.  I do sort of worry about a bust cycle like some of the old timers probably remember; for all the benefits; capitalism seems to be pretty messy on matters like this.  It is much easier to have a king to moderate the supply.  haha

[bmichaud]

XOM is phenomenal. I read a great piece on their corporate history the other day, which talked about XOM having declining production since the mid 1970s!!! The Street berates them for missing a one year production target. XOM doesn't even care - as long the ROC through the cycle is top notch, they will continue to invest. The culture is superb.

 

I bet if one were to dismantle the XOM empire via asset sales, the untangled web of assets is probably worth multiples of the current price. So easy for value to be obscured by a giant conglomerate - but all the better, as XOM can continue buying back cheap stock :)

[alertmeipp]

SD back down to $5.8, a 15%+ move down. The market seems to hate energy co with domestic production these days. Same for CHK.

 

Anyone know what's going on other than ppl not happy because production is going slightly down Q4?

 

[cemadh]

Two quick reasons come to mind - Century plant and poor early results from WoodFord.

Of course, many O&G companies seem to be selling off, so no real reason is needed to explain the SD sell off.

 

Century plant penalties - $33 million this year. It may hit all at once in the December quarter.

Goes up every year for a few more years to something like $50MM or so.

Two ways this could be resolved -

a) OXY and SD do a deal.

b) NG prices climb above $5.5 and SD starts drilling as contractually required and actually MAKES money on this - along with OXY- -instead of paying them penalties.

 

 

[nkp007]

I've been seeing people paying less attention to underlying valuations (Chesapeake, AIG, Bank of America) and more attention to growth rates.

 

Currently, for whatever reason, the market demands topline growth. Good capital allocation isn't impressing the voters, but one day it will.

[alertmeipp]

Two quick reasons come to mind - Century plant and poor early results from WoodFord.

Of course, many O&G companies seem to be selling off, so no real reason is needed to explain the SD sell off.

 

Century plant penalties - $33 million this year. It may hit all at once in the December quarter.

Goes up every year for a few more years to something like $50MM or so.

Two ways this could be resolved -

a) OXY and SD do a deal.

b) NG prices climb above $5.5 and SD starts drilling as contractually required and actually MAKES money on this - along with OXY- -instead of paying them penalties.

 

 

 

OYX is well-known. The Woodford is disappointing, was kind of a -ve surprise.

[alertmeipp]

the multi-zone and stack pay looks very promising.

 

[Myth465]

I think the market is being fair for SD, CHK, and PWE.

If your balance sheet sucks, and you are throwing out serious capex, then you have to be growing production.

 

These stocks all have growth like balance sheets, capex, ect; but struggle to grow production for various reasons. SD is growing production, but not as fast as people had hoped. I think this plus the lack of 1k plus wells, (I believe by design due to takeaway issues), the lack of a trans-formative big announcement,  and the lack of success yet with the stacked play is the reason for the stock trading down. I was hoping we would continue to see Average 30 IP continue to go out, but I suspect it has gone down due to the lack of monster wells. Its understandable, but kills  what was a good trend, over the last few quarters.

 

The balance sheet and cash flow ratios scare away value investors, the lack of growth scares away growth investors. Which leaves a lack of a shareholder base for these companies. They are all in various stages of restructuring so I guess its to be expected. Lots of potential, but I used to tell my teachers potential was overrated when they said I had some.

 

Will continue to hold the converts, the nice thing about them is you get paid a decent rate to wait. Same with Lightstream...

Still need to listen to the call.

[alertmeipp]

I think the market is being fair for SD, CHK, and PWE.

If your balance sheet sucks, and you are throwing out serious capex, then you have to be growing production.

 

These stocks all have growth like balance sheets, capex, ect; but struggle to grow production for various reasons. SD is growing production, but not as fast as people had hoped. I think this plus the lack of 1k plus wells, (I believe by design due to takeaway issues), the lack of a trans-formative big announcement,  and the lack of success yet with the stacked play is the reason for the stock trading down. I was hoping we would continue to see Average 30 IP continue to go out, but I suspect it has gone down due to the lack of monster wells. Its understandable, but kills  what was a good trend, over the last few quarters.

 

The balance sheet and cash flow ratios scare away value investors, the lack of growth scares away growth investors. Which leaves a lack of a shareholder base for these companies. They are all in various stages of restructuring so I guess its to be expected. Lots of potential, but I used to tell my teachers potential was overrated when they said I had some.

 

Will continue to hold the converts, the nice thing about them is you get paid a decent rate to wait. Same with Lightstream...

Still need to listen to the call.

 

LTS result is out, will be doing 10% buyback.

 

SD is growing 15-20% in EBITA, I suspect this number is low-balled.

 

SD and CHK get nice assets but lacking the balance sheet to develop those. Are you guys still think SD will be sold soon?

[nkp007]

For Chesapeake's drop, could also be the departure of speculators who thought the company was going to be sold soon.

[Packer16]

Just a question about SD drilling without 3D seismic.  Is this common practice or just a quicker more speculative way to drill?  (i.e.  did SD roll the dice and get snakes eyes) 

 

Packer