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SD 4Q 2010 results


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On Cramer, Ward mentioned that he plans to use the capital markets to help fund 1.2 billion for cap ex this year. 

 

Are they financing all of this through Royality Trust for the Missippi play? Thought the first Trust was for 250 million. 

 

Didn't actually watch the show, hope somone can put this in more context.

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On Cramer, Ward mentioned that he plans to use the capital markets to help fund 1.2 billion for cap ex this year. 

 

Are they financing all of this through Royality Trust for the Missippi play? Thought the first Trust was for 250 million. 

 

Didn't actually watch the show, hope somone can put this in more context.

 

Nice release. I wonder whats in PV10 and if it includes all miss or only booked reserves. Ward will probably do a few more trusts and then will do a JV to drill the miss. They have to do something big to hold the whole thing by production. The leases are only 5 years and we can only drill 250k on our own. Its a nice problem to have. I cant wait for the call. This is my largest holding.

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On Cramer, Ward mentioned that he plans to use the capital markets to help fund 1.2 billion for cap ex this year. 

 

Are they financing all of this through Royality Trust for the Missippi play? Thought the first Trust was for 250 million. 

 

Didn't actually watch the show, hope somone can put this in more context.

 

Nice release. I wonder whats in PV10 and if it includes all miss or only booked reserves. Ward will probably do a few more trusts and then will do a JV to drill the miss. They have to do something big to hold the whole thing by production. The leases are only 5 years and we can only drill 250k on our own. Its a nice problem to have. I cant wait for the call. This is my largest holding.

 

How is your SD position compared to FBK?

 

Mine is 1SD:1.3FBK.. hope it's the other way around!

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I hold deep in the money SD leaps $5 2012 and 2013 purchased when SD was at $4 - $5. The 2013s were pushed out from 2012s which I sold (roth account) and are now in the money. Positions were 1 to 1 originally but SD leaps are up 200% prior to this release. FBK is up 34%. ATPG leaps are up 50% and ESV leaps are up 115%.

 

Its why I could understand why people sold FBK. They keep disappointing and the sell talk is purely speculative. Its not something I want to own based on FCF becasuse I have no idea where pulp is going or how to predict that cycle. I know oil could crash, but believe long term its up up and away. With that said, I am always disappointed on earnings (was on SD last Q), I will likely have cup of tea, read your post, update my thoughts, and hold everything for better or worse  ;D.

 

The guys at ATPG need to call Tom Ward. He knows how to handle WS and is making all the right moves lol (I hate quoting Cramer).

 

 

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Good call on the LEAPs. I used to have some $5 12 LEAP...sold and move to commons. The SD run happens so fast - sold too much too early.  I think I must have 4x the current # of shares at one point. :P Well, can't complain about profit.  :-\

 

SD will continue to do well, they hedged more in the recent spike.

 

ATPG got news too. They lower the rate on fist lien from 11 to 9% and increase the limit.

 

FBK will do fine but I see the chance of buyout low.

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On Cramer, Ward mentioned that he plans to use the capital markets to help fund 1.2 billion for cap ex this year. 

 

Are they financing all of this through Royality Trust for the Missippi play? Thought the first Trust was for 250 million. 

 

Didn't actually watch the show, hope somone can put this in more context.

 

Nice release. I wonder whats in PV10 and if it includes all miss or only booked reserves. Ward will probably do a few more trusts and then will do a JV to drill the miss. They have to do something big to hold the whole thing by production. The leases are only 5 years and we can only drill 250k on our own. Its a nice problem to have. I cant wait for the call. This is my largest holding.

Wish he would just uncover the lid to his black box on how he plans to do all this.  While I do expect more trusts to be created wondering how they are going to drill all this acreage.  Are they going to take some of the capital they plan to raise to buy more drills? JV?  Hopefully something will be said during the CC tomorrow.

 

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Anyone care to offer a suggestion as to a conservative value of Sandridge given the $4.5 billion in present value of reserves as of 12/31/10, and given that recent events have sent oil prices much higher than the $66.93 per barrel they used as the weighted average wellhead price used to value the reserves?  I'll admit straight up that I haven't a clue. 

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Anyone care to offer a suggestion as to a conservative value of Sandridge given the $4.5 billion in present value of reserves as of 12/31/10, and given that recent events have sent oil prices much higher than the $66.93 per barrel they used as the weighted average wellhead price used to value the reserves?  I'll admit straight up that I haven't a clue.  

 

Huge move today, I am sitting pretty and FFH is doing great with converts at $7 or so. This is going to be a major source of gains for them.

 

CONesal - I dont think Ward knows. They havent finished the first Trust, and he has stated its his preferred vehicle. The problem is the trust needs proved producing reserves as well as yet to be producing reserves, due to the fact that Income has to be provided from day 1. I glanced through the filing and it looks like he is 1. selling most of the proved up producing land to the trust. 2. selling raw unproducing land to the trust. 3. contracting out 4-5 additional rigs to get that land to producing over 3-4 years. The cash for the rigs and capex come now and funds this.

 

He can rinse and repeat, but will not have enough producing property to contribute to enough trusts to put the whole play in this type of structure. So that will require a JV. He has to do something those lease are only 5 years, so they cant sit on the acreage. Ward is telling you what he knows now. Trust is preferred vehicle because he gets cash in hand and can maintain control. JV is next because he has no choice, cant hold all 900k acres. I would like to see them buy more rigs. Perhaps buy LUKs rig division.

 

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I plan to spend alot of time with the 10k. I dont know whats all in the PV10. Have they written off alot of gas due to the low price (which we can put back in at $6 after 2013 or 2014), does it include all reserves in Miss and other plays, and as you have said what about the low price used. What happens to PV10 at $85, $100, and $115 dollar energy. Perhaps an email to investor relations is in order and perhaps they can give us some sort of sensitivity number such as a $1 move in oil effects PV10 by ....

 

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Just listened to the Cramer interview. Ward is a genius in terms of operations. I learn a bit more with every interview. I cant wait to listen to the call. I hope they keep hedging out to 2013 as oil moves up and they then bury loss moving hedges into the future oil trusts.

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One thing that jumped out at me during the cc is that once n gas hits $4.25 the value of n gas comes back on the table.  Not sure how much gas will come back and it wasn't mentioned I don't think.  will reread once the transcript is available.  

 

Your right, Ward mentioned that there were several ways they could go waiting to see how things played out through the year.  I'll admit I'm an bit hard on him this time around, was looking for more clarity on the Miss play.  

 

Would like to see him buy a few rigs this year if they can find a way to pay for it.  Eventually, n gas will come back and would hope they could do some drilling for n gas instead of being tied up fulfilling oil contracts.  

 

 

Edited to add the question asked about gas reserves.

 

Duane Grubert - Susquehanna Financial: Yeah. Guys, could you address your booking philosophy year-over-year? When I look at your reserves this year, you do have significant revisions on the gas side, and last year you guys were pretty vocal about pointing out the low value gas at other companies, didn't really make a lot of sense. So, could you comment about the philosophy a bit?

 

Tom L. Ward - Chairman, CEO and President: Sure. We still believe that. We still believe that a PUD is a PUD when it has PV-10, not PV-0 plus $1. So, we were very vocal last year and were the only Company to write-off all of our PUDs that didn't have PV-10. This year, also last year we were very vocal to say that at 425 gas we start to bring back on our reserves and a reserve is a reserve, is a reserve, that once it has PV-10 and so that's the one if we have gas that has PV-10 we’ll bring it back on the books.

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I am happy with Oil and happy with the guy running the company. He will likely hedge the hell out of oil going out to 2013. I would love to see over 100% of oil hedged out 2 to 3 years. Then we just focus on drilling. Ward has given us a stock tip imho. This oil boom will fissile out and its nice to know he is aware of that.

 

Look for gas.

 

I have found the catalyst I need. Once those rigs switch to oil, they will not be coming back to gas until the ratio is closer to 10 to 1 or 6 to 1. We just need decline rates to do what they do. I think 2013 to 2014 will be the year of nat gas. We will likely see prices at $6 to $8 which suck for those who paid up for $10 gas, but will be excellent for us.

 

I would like to see more hedging, reduced interest expenses, more drilling, and more land purchases provided Ward finds something he likes. I think you are right and hope he ups the anti on rigs. I like his cost control mantra and we need more rigs to go with the hedges. The holy grail in my opinion is being able to hedge, and then putting underwater hedges into the new trusts lol.

 

 

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Thanks for the updates on gas. I will have to look at the annuals year over year from 2008 till now. My guess is they have written off quite a bit of gas due to the gas being high cost. I would be interesting to know reserve numbers based on $6 gas, and PV10 value based on $6 gas and $100 oil. Especially consider they will be hedging oil out 2 years (hopefully more) for more than $100.

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Myth465, I think we can relax a bit on SD, it's still leveraged - but I feel pretty comfortable with the cash flow.

 

PV10 is all about possible future revenue on the ground. (gas price - production cost) x discount rate. What it means to me is if they have spare rigs, they can generate profit from natural gas assets. They won't with 1:22. So, it's just a number.

 

The borrowing base redetermination will be interesting. I got a feeling Tom want to hold 500k of the new play.

 

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Myth,  if you have a chance you would enjoy listening to the analyst meeting that is posted to the site. 

 

Rodney Johnson breaks down the reserves and the accounting for them.  N gas has been added back on the books and the PUD 5 year window for development was reset.

 

The benefit of doing this now is to run out what they can on oil and still have some time to drill for N gas under the 5 year window.  Rodney does alot better job explaining this that I can.

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I am excited they even have a valuation posted which includes PV10 at Feb strip plus other acreage. My plan is to just use that number in my valuation. I will discount it and will hold due to call options on rising oil prices and a recovery in nat gas. With hedges going out 3 years, we should be well protected against pull backs and rolling recessions.

 

Thanks CONeal. I am listening to the quarterly call today and hopefully the Investor day tomorrow.

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