Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Contrarian Oil & Gas Play That Could Spell Profits for Investors

Companies / Oil Companies Feb 15, 2012 - 08:57 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleJack Barnes writes: SandRidge Energy Inc. (NYSE: SD) is a company that I'm very familiar with - and yet it's an enigma even to me.

I mean that quite literally.

You see, I recently paid a visit to the SandRidge building during a trip to Oklahoma City. After getting my security badge, I began to make my way to the 12th floor.


There was just one problem: When I got into the elevator there were no buttons below 16.
What do you do when you go to see someone and their floor isn't on the list? I decided to ride the lift all the way to the top floor.

Fortunately, the staff that met me at the top floor was kind enough to point me in the right direction - but not before I looked around a little bit.

I just couldn't help but be entranced by the amount of activity up there. The top floor of the SandRidge building was absolutely humming.

Well, what I didn't know at the time was that Sand Ridge was about to shock everyone. The company was about to go where nobody expected.

Tom Ward - SandRidge's CEO and a man best known as the co-founder of Chesapeake Energy Corp. (NYSE: CHK) - was taking his new company to the dreaded Gulf of Mexico resource basin.

It would soon be revealed that SandRidge had agreed to buy Dynamic Offshore Resources LLC - an offshore energy producer - at a time when most oil and gas companies are moving operations onshore.

Basically, Ward is taking a real contrarian approach to asset-gathering. He saw flowing oil assets being sold cheap and decided he wanted the whole company before it could be priced to the market.

Tom Ward is one of the true wildcat businessmen of the oil and gas sector. He left Chesapeake Energy when it was at a peak in 2006. He saw the transition in shale and adjusted early at SandRidge. Now he's buying up offshore production.

As investors we should take note. It's often a good idea to pay attention to what the true visionaries are doing.

So it's time to "Buy" SandRidge Energy Inc. (**) and watch what Tom Ward does with the underpriced assets.

SandRidge Energy's Gusher in the Gulf
Let's take a quick look at the deal itself. It has a nameplate value of $1.275 billion, which is made up of 74 million shares at $8.02 a piece and $680 million in cash.

I like that the assets purchased came at a discount to their SEC PV-10 value. I like that the company was able to pay for half of it with equity. These assets are in shallow waters and will help pay for the onshore developments.

Ward said in a statement that the assets, which were valued at more than $50,000 per flowing barrel, will contribute free cash flow in excess of $200 million.

SandRidge drilled 970 wells in 2011. Oil production increased by 70%, while overall production was up 16%. The company plans on drilling more than 1,100 new wells in 2012.

"As larger and larger companies want to come onshore and compete, service costs are rising and they're moving away from a traditional place that was the cheapest and that's the Gulf of Mexico," said Ward. "We look at this as a very large opportunity to be contrarian but also for value."

Investors should look at it the same way.

SandRidge currently trades with a market cap of $3 billion. Taking net cash and debt levels into consideration, the company has a $5.5 billion enterprise value.

SandRidge is headquartered in Oklahoma City. The company has over 2,000 full-time equivalent employees. As of December 31, 2010, its estimated proved reserves were 545.9 million barrels of oil equivalent, of which approximately 46% were oil. The company also had interests in 5,323 gross producing wells, as well as in approximately 1,982,000 gross acres under lease.

Action to Take: "Buy" SandRidge Energy Inc. (NYSE: SD) (**). The company has seen the future and taken the necessary steps to position itself for it.

CEO Tom Ward is one of the best market-timers in history, and when everyone is trying to sell assets for a discount, he is the type to step forward and purchase the discounted assets.

So let's pick up 50% of our position now at these prices. We can put in a limit order 10% below our first fill to finish off the position during the next weak cycle in the sector.

(**) Special Note of Disclosure: Jack Barnes has no interest in SandRidge Energy Inc. (NYSE: SD).

About the Writer: Columnist Jack Barnes started his career at Franklin Templeton in 1997. He started out in the company's fund-information department - just as the Asian contagion infected the Asian tiger countries.

Barnes launched his own shop, RIA, in 2003, just as the second Gulf War was breaking out. In early 2006, after logging a one-year return of nearly 83%, Forbes named Barnes the top stock picker in its "Armchair Investors Who Beat the Pros" competition. His two audited hedge funds generated double-digit returns in 2008.

Barnes retired to the beach in the summer of 2009, and continues to write from there. He's now the author of the popular blog, "Confessions of a Macro Contrarian," and his "Buy, Sell or Hold" column appears in Money Morning on Mondays. In his BSH column last week, Barnes analyzed Facebook Inc.

Source http://moneymorning.com/2012/02/15/sandridge-energy-inc-nyse-sd-ceo-tom-ward-has-done-it-again/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in