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Sandridge Energy Poll


Zorrofan
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Do you support current management or does TPG point of view have merit?  

106 members have voted

  1. 1. Do you support current management or does TPG point of view have merit?

    • I support current SD management totally
    • TPG is right - its time for change, including TW leaving, but don't sell the company
    • SD should just put itself up for sale


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I am curious about the board's level of support for TW and the current board. There have been some interesting revelations about TW's compensation package and a lot of confusion over the strategy at SD. I would love to hear Prem comment on this whole matter.....

 

cheers

Zorro

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Prem's comment here in a recent interview....

 

We believe Tom Ward is one of the best operators in the business and that the company he has built, SandRidge Energy, is poised to do well in the long term,” Watsa said in an interview.

 

.....is interesting given Fairfax dramatically reduced its position above $10. In other words, Fairfax has no basis for rejecting a sale above $10.

 

And again, assuming TPG is not lying, there does not appear to be much evidence supporting the claim TW is one of the best operators in the business.

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I had posted this on the SD thread. I am not sure why Prem is supporting TW.

 

Here is an interesting article by Devon Shire, who posts on this board, but under a different name (that I can't remember    )

 

http://seekingalpha.com/article/1015741-sandridge-shareholders-don-t-owe-ceo-ward-any-favors

 

Here is an interesting point that I wasn't aware of....

 

 

One fact summarizes the appalling corporate governance practices of SandRidge - despite the single worst stock performance of any energy company, and among the worst stock performances in the entire US market, and massive discounts applied to the company because of management…payments to Mr. Ward from the company have totaled approximately $150 million over the past five years (astonishing, given the $3 billion market capitalization of the company).

 

- The most disturbing example has been the Executive Well Participation Plan, (similar to the founder well participation policy at Chesapeake Energy that caused enormous outrage earlier this year). When concerns regarding Mr. Ward's ties to Chesapeake Energy arose this spring, Mr. Ward repeatedly asserted to us, other shareholders, and the media that SandRidge was different, and that over time he and the company recognized the inappropriateness of this practice, and eliminated it to avoid any appearance of impropriety. We investigated his claims, and were appalled by what we found. It is true that SandRidge has eliminated their Executive Well Participation Plan. However, they did so immediately after the market collapse in October 2008, by then paying over $67 million to Mr. Ward, even as 1) markets were collapsing, and 2) the company had less than $1 million in cash and was facing real risk of bankruptcy.

 

 

Would love to hear more from Prem on this whole issue. At the very least lets put some new members on the SD board like Longleaf and Carl Ichan did with CHK.....

 

cheers

Zorro

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Ok so in fairness to TW and SD, I believe TPG is being unfair looking at SD's G&A relative to its market cap versus other peers. To rectify this, I looked at SD relative to the TPG-derived peer group (excluding Shell) of Apache, Chesapeake, Devon, EnCana and Range Resources using TPG-derived G&A (Friday closing market cap x TPG letter G&A % of mkt cap) versus total assets (Capital IQ data):

 

Company              Total Assets                G&A                    G&A % of TA

SD                            9,844                    224                          2.3%

APA                          58,810                    694                        1.2%

CHK                          45,671                    577                          1.3%

DVN                          43,548                    649                          1.5%

ECA                          18,909                    417                          2.2%

RRC                          6,658                      187                          2.8%

 

This appears to be a much more reasonable comp set. Interesting, looks like Range has an even larger G&A problem. Giving TPG the benefit of the doubt though, let's say SD should be at CHK's level....

 

1.3% x 9,844 = $128MM of pro forma G&A, or a $98MM reduction from current levels. Taxed at 35% and divided by 600MM shares equals $.10 of additional EPS.

 

 

SUM-OF-THE-PARTS

 

Sources: Company Presentations, Company Filings and Capital IQ, unless otherwise noted

Shares out: 600MM (assumes preferreds fully converted)

FVPS = Fair Value Per Share

 

Continuing Ops:

2013E production            39.2 MMBOE

2013E EBITDA                  $1,323 million

Maintenance CAPEX          $588                (I assume maintenance F&D costs are $15/BOE to maintain production of 39.2 MMBOE)

EBIT                                $735

Net Income                      $478                (Tax rate = 35%)

EPS                                  $.80               

Continuing Ops FVPS    $6.67        (Cost of equity = 12%)

 

Excess Reserves:

Proved Undeveloped          251 MMBOE    (47% of proved reserves are undeveloped, according to page 3 of SD's 11/13 presentation)

Valuation $/BOE                $5.00              (FYE 2011 PV10 was ~$11/BOE....as such, $5/BOE appears reasonable for PUD reserves)

PUD FVPS                      $2.09

 

Unproved Resources          3,867 MMBOE

Valuation $/BOE                $1 to $2

UPR FVPS                    $9.67

 

Excess Reserves FVPS $11.76

 

Net Liabilities:

Total Liabilities                  $5,639

+Minority Interest            $1,547

-Current Assets                $1,229

Net Liab. Per Share      $9.93

 

TOTAL FVPS                $8.50          (Continuing Ops + Excess Reserves - Net Liabilities)

 

If SD can cut G&A by $.10 per share after tax, that's an additional $.83 of value per share ($.10 / 12% cost of equity).

 

The way I look at it, likely at worst net liabilities are fully covered by excess reserves, which leaves investors with EPS of $.80 before G&A reductions. In a perfect world, SD would sell off non-core reserves and pay down all net liabilities, cut G&A per TPG's suggestion, and leave investors with clean EPS of $.90 per share and no net liabilities. Under this scenario, likely the market would pay 10X earnings, valuing SD at $9 per share. Obviously we're not in a perfect world....but the MOS appears robust and a catalyst is finally in place. 

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Record date for the proposed consent solicitation set:

 

http://www.sacbee.com/2012/12/03/5026814/sandridge-energy-inc-sets-record.html

 

I don't have time to delve into consent solicitations at the moment, but will later today - preliminarily, the attached doc somewhat explains what purpose a consent soliciation serves. Curious what others thoughts are on them....

Consent_Solicitation_Doc.pdf

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Zorrofan whats your opinion, you have been in the oil patch for a while.

 

My thoughts are here

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/sd-sandridge-energy/msg94138/#msg94138

 

I would prefer to SD to be sold at $9 - $10 a share. That would give me an adequate return for the time invested, would stick it to the BOD and Ward to a degree, would enhance governance at other firms, and would allow me to take a massive chunk of capital and invest in something else.

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Hi Myth,

 

Always good to get your thoughts.....

 

The TPG letter raised some rather good points. Recent revelations about the amount of compensation TW has received in the past few years and the five corporate jets have among other things shaken my confidence in management. The sudden decision to sell the Permian Basin doesn't inspire confidence in management either. Part of me would like to see SD put up for sale, and frankly IMHO it will be. Rumors abound the either Devon or Repsol are interested in a buyout.  However I want more than a fire sale price.

 

I think that if new management is installed we would see better returns over the next 3 or 4 years than a quick sale would bring. The best option would be to install a new board, remove TW, and have a new management team start working on maximizing asset values by laying out a new, coherent strategy and sticking to it. Reduce expenses to the bone - sell off the new HQ, cut head office staff (really do we need hundreds of people at head office?) and sell the jets. Maybe look at funding development of the assets through a joint venture with someone like Repsol. SD is likely worth $30/share and I would like to see around $20 of that if possible so I advocate a slower process to maximize value and not a quick sale.

 

Prem is the wild card. He can help TPG and move the process along or he can support TW. However IMHO it is only a matter of time before something happens as most shareholders at this point are not going to back TW.  IMHO of course.....

 

cheers

Zorro

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Ok so in fairness to TW and SD, I believe TPG is being unfair looking at SD's G&A relative to its market cap versus other peers. To rectify this, I looked at SD relative to the TPG-derived peer group (excluding Shell) of Apache, Chesapeake, Devon, EnCana and Range Resources using TPG-derived G&A (Friday closing market cap x TPG letter G&A % of mkt cap) versus total assets (Capital IQ data):

 

Company              Total Assets                G&A                    G&A % of TA

SD                            9,844                    224                          2.3%

APA                          58,810                    694                        1.2%

CHK                          45,671                    577                          1.3%

DVN                          43,548                    649                          1.5%

ECA                          18,909                    417                          2.2%

RRC                          6,658                      187                          2.8%

 

This appears to be a much more reasonable comp set. Interesting, looks like Range has an even larger G&A problem. Giving TPG the benefit of the doubt though, let's say SD should be at CHK's level....

 

1.3% x 9,844 = $128MM of pro forma G&A, or a $98MM reduction from current levels. Taxed at 35% and divided by 600MM shares equals $.10 of additional EPS.

 

 

SUM-OF-THE-PARTS

 

Sources: Company Presentations, Company Filings and Capital IQ, unless otherwise noted

Shares out: 600MM (assumes preferreds fully converted)

FVPS = Fair Value Per Share

 

Continuing Ops:

2013E production            39.2 MMBOE

2013E EBITDA                  $1,323 million

Maintenance CAPEX          $588                (I assume maintenance F&D costs are $15/BOE to maintain production of 39.2 MMBOE)

EBIT                                $735

Net Income                      $478                (Tax rate = 35%)

EPS                                  $.80               

Continuing Ops FVPS    $6.67        (Cost of equity = 12%)

 

Excess Reserves:

Proved Undeveloped          251 MMBOE    (47% of proved reserves are undeveloped, according to page 3 of SD's 11/13 presentation)

Valuation $/BOE                $5.00              (FYE 2011 PV10 was ~$11/BOE....as such, $5/BOE appears reasonable for PUD reserves)

PUD FVPS                      $2.09

 

Unproved Resources          3,867 MMBOE

Valuation $/BOE                $1 to $2

UPR FVPS                    $9.67

 

Excess Reserves FVPS $11.76

 

Net Liabilities:

Total Liabilities                  $5,639

+Minority Interest            $1,547

-Current Assets                $1,229

Net Liab. Per Share      $9.93

 

TOTAL FVPS                $8.50          (Continuing Ops + Excess Reserves - Net Liabilities)

 

If SD can cut G&A by $.10 per share after tax, that's an additional $.83 of value per share ($.10 / 12% cost of equity).

 

The way I look at it, likely at worst net liabilities are fully covered by excess reserves, which leaves investors with EPS of $.80 before G&A reductions. In a perfect world, SD would sell off non-core reserves and pay down all net liabilities, cut G&A per TPG's suggestion, and leave investors with clean EPS of $.90 per share and no net liabilities. Under this scenario, likely the market would pay 10X earnings, valuing SD at $9 per share. Obviously we're not in a perfect world....but the MOS appears robust and a catalyst is finally in place.

 

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH.  Are these solid or are these mostly leases that have to be drilled in five years or less?  If so, could not the owners repossess the rights and lease those rights to someone else?

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Ok so in fairness to TW and SD, I believe TPG is being unfair looking at SD's G&A relative to its market cap versus other peers. To rectify this, I looked at SD relative to the TPG-derived peer group (excluding Shell) of Apache, Chesapeake, Devon, EnCana and Range Resources using TPG-derived G&A (Friday closing market cap x TPG letter G&A % of mkt cap) versus total assets (Capital IQ data):

 

Company              Total Assets                G&A                    G&A % of TA

SD                            9,844                    224                          2.3%

APA                          58,810                    694                        1.2%

CHK                          45,671                    577                          1.3%

DVN                          43,548                    649                          1.5%

ECA                          18,909                    417                          2.2%

RRC                          6,658                      187                          2.8%

 

This appears to be a much more reasonable comp set. Interesting, looks like Range has an even larger G&A problem. Giving TPG the benefit of the doubt though, let's say SD should be at CHK's level....

 

1.3% x 9,844 = $128MM of pro forma G&A, or a $98MM reduction from current levels. Taxed at 35% and divided by 600MM shares equals $.10 of additional EPS.

 

 

SUM-OF-THE-PARTS

 

Sources: Company Presentations, Company Filings and Capital IQ, unless otherwise noted

Shares out: 600MM (assumes preferreds fully converted)

FVPS = Fair Value Per Share

 

Continuing Ops:

2013E production            39.2 MMBOE

2013E EBITDA                  $1,323 million

Maintenance CAPEX          $588                (I assume maintenance F&D costs are $15/BOE to maintain production of 39.2 MMBOE)

EBIT                                $735

Net Income                      $478                (Tax rate = 35%)

EPS                                  $.80               

Continuing Ops FVPS    $6.67        (Cost of equity = 12%)

 

Excess Reserves:

Proved Undeveloped          251 MMBOE    (47% of proved reserves are undeveloped, according to page 3 of SD's 11/13 presentation)

Valuation $/BOE                $5.00              (FYE 2011 PV10 was ~$11/BOE....as such, $5/BOE appears reasonable for PUD reserves)

PUD FVPS                      $2.09

 

Unproved Resources          3,867 MMBOE

Valuation $/BOE                $1 to $2

UPR FVPS                    $9.67

 

Excess Reserves FVPS $11.76

 

Net Liabilities:

Total Liabilities                  $5,639

+Minority Interest            $1,547

-Current Assets                $1,229

Net Liab. Per Share      $9.93

 

TOTAL FVPS                $8.50          (Continuing Ops + Excess Reserves - Net Liabilities)

 

If SD can cut G&A by $.10 per share after tax, that's an additional $.83 of value per share ($.10 / 12% cost of equity).

 

The way I look at it, likely at worst net liabilities are fully covered by excess reserves, which leaves investors with EPS of $.80 before G&A reductions. In a perfect world, SD would sell off non-core reserves and pay down all net liabilities, cut G&A per TPG's suggestion, and leave investors with clean EPS of $.90 per share and no net liabilities. Under this scenario, likely the market would pay 10X earnings, valuing SD at $9 per share. Obviously we're not in a perfect world....but the MOS appears robust and a catalyst is finally in place.

 

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH.  Are these solid or are these mostly leases that have to be drilled in five years or less?  If so, could not the owners repossess the rights and lease those rights to someone else?

 

Likely some portion is HPB - regardless, SD would likely receive something around that per BOE in the event of a sale. It is messy for sure, but roughly tracks most NAV estimates for SD - most Street analysts break out each property and risk them....this way just aggregates it all and applies a rough estimate of per BOE value.

 

If in fact HPB requirements are a problem, this is all the more reason for a sale....

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Hi Myth,

 

Always good to get your thoughts.....

 

The TPG letter raised some rather good points. Recent revelations about the amount of compensation TW has received in the past few years and the five corporate jets have among other things shaken my confidence in management. The sudden decision to sell the Permian Basin doesn't inspire confidence in management either. Part of me would like to see SD put up for sale, and frankly IMHO it will be. Rumors abound the either Devon or Repsol are interested in a buyout.  However I want more than a fire sale price.

 

I think that if new management is installed we would see better returns over the next 3 or 4 years than a quick sale would bring. The best option would be to install a new board, remove TW, and have a new management team start working on maximizing asset values by laying out a new, coherent strategy and sticking to it. Reduce expenses to the bone - sell off the new HQ, cut head office staff (really do we need hundreds of people at head office?) and sell the jets. Maybe look at funding development of the assets through a joint venture with someone like Repsol. SD is likely worth $30/share and I would like to see around $20 of that if possible so I advocate a slower process to maximize value and not a quick sale.

 

Prem is the wild card. He can help TPG and move the process along or he can support TW. However IMHO it is only a matter of time before something happens as most shareholders at this point are not going to back TW.  IMHO of course.....

 

cheers

Zorro

 

Zorro - a sale at $10 then putting the proceeds into BAC at $10 may yield just as good if not higher results than holding SD til $25 in four years  8)

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I agree Zorro. Prem can inmo only slow this process down. I cant see any other major share holder backing Ward and without TPG we would have a $4 share price.

 

I like the Permian sale, myself and many analyst have recommended it as potential funding solution. A sale with another Miss JV, and a new focus on undervalued GOM assets at 2x cash flow in small bits and pieces and the Miss Lime with natural gas assets in the back pocket would have been very sensible from 2011 to 2012. I can even understand the drop in ROR but had how it was glossed over and handled, they have gone out of there way to point out 88% returns, and vaguely mention the fact that those return projects have been cut in half.

 

Ward is a value investor, and should be a consultant for oil and gas strategy. But he has no busy running a public company. SD should have been private, he has shown that he wants to make money off of shareholders instead of with them...

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Ok so in fairness to TW and SD, I believe TPG is being unfair looking at SD's G&A relative to its market cap versus other peers. To rectify this, I looked at SD relative to the TPG-derived peer group (excluding Shell) of Apache, Chesapeake, Devon, EnCana and Range Resources using TPG-derived G&A (Friday closing market cap x TPG letter G&A % of mkt cap) versus total assets (Capital IQ data):

 

Company              Total Assets                G&A                    G&A % of TA

SD                            9,844                    224                          2.3%

APA                          58,810                    694                        1.2%

CHK                          45,671                    577                          1.3%

DVN                          43,548                    649                          1.5%

ECA                          18,909                    417                          2.2%

RRC                          6,658                      187                          2.8%

 

This appears to be a much more reasonable comp set. Interesting, looks like Range has an even larger G&A problem. Giving TPG the benefit of the doubt though, let's say SD should be at CHK's level....

 

1.3% x 9,844 = $128MM of pro forma G&A, or a $98MM reduction from current levels. Taxed at 35% and divided by 600MM shares equals $.10 of additional EPS.

 

 

SUM-OF-THE-PARTS

 

Sources: Company Presentations, Company Filings and Capital IQ, unless otherwise noted

Shares out: 600MM (assumes preferreds fully converted)

FVPS = Fair Value Per Share

 

Continuing Ops:

2013E production            39.2 MMBOE

2013E EBITDA                  $1,323 million

Maintenance CAPEX          $588                (I assume maintenance F&D costs are $15/BOE to maintain production of 39.2 MMBOE)

EBIT                                $735

Net Income                      $478                (Tax rate = 35%)

EPS                                  $.80               

Continuing Ops FVPS    $6.67        (Cost of equity = 12%)

 

Excess Reserves:

Proved Undeveloped          251 MMBOE    (47% of proved reserves are undeveloped, according to page 3 of SD's 11/13 presentation)

Valuation $/BOE                $5.00              (FYE 2011 PV10 was ~$11/BOE....as such, $5/BOE appears reasonable for PUD reserves)

PUD FVPS                      $2.09

 

Unproved Resources          3,867 MMBOE

Valuation $/BOE                $1 to $2

UPR FVPS                    $9.67

 

Excess Reserves FVPS $11.76

 

Net Liabilities:

Total Liabilities                  $5,639

+Minority Interest            $1,547

-Current Assets                $1,229

Net Liab. Per Share      $9.93

 

TOTAL FVPS                $8.50          (Continuing Ops + Excess Reserves - Net Liabilities)

 

If SD can cut G&A by $.10 per share after tax, that's an additional $.83 of value per share ($.10 / 12% cost of equity).

 

The way I look at it, likely at worst net liabilities are fully covered by excess reserves, which leaves investors with EPS of $.80 before G&A reductions. In a perfect world, SD would sell off non-core reserves and pay down all net liabilities, cut G&A per TPG's suggestion, and leave investors with clean EPS of $.90 per share and no net liabilities. Under this scenario, likely the market would pay 10X earnings, valuing SD at $9 per share. Obviously we're not in a perfect world....but the MOS appears robust and a catalyst is finally in place.

 

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH.  Are these solid or are these mostly leases that have to be drilled in five years or less?  If so, could not the owners repossess the rights and lease those rights to someone else?

 

 

So the acreage is as follows:

 

Developed: 375,090 - the "Continuing Ops" valuation of $4 billion works out to be $10,669 per developed acre

Undeveloped: 1,672,328 - the "Excess Reserves" valuation of $7.056 billion works out to be $1,288 per undeveloped acre

 

Likely, a buyer with scale would pay more than $1,300 per acre, as demonstrated by JV transactions over the past several years between $5 and $15K an acrea.

 

Your question regarding HPB is a good one though - this is how the Company breaks down its undeveloped acreage expiry:

 

12/31/2012:                208,368

12/31/2013:                603,372

12/31/2014:                635,004

12/31/2015 or later:  153,685

Other:                          71,899

 

So about 87% of its undeveloped acreage expires by FYE 2014. All the more reason for a sale, or to put in place a credible development plan.

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Ok so in fairness to TW and SD, I believe TPG is being unfair looking at SD's G&A relative to its market cap versus other peers. To rectify this, I looked at SD relative to the TPG-derived peer group (excluding Shell) of Apache, Chesapeake, Devon, EnCana and Range Resources using TPG-derived G&A (Friday closing market cap x TPG letter G&A % of mkt cap) versus total assets (Capital IQ data):

 

Company              Total Assets                G&A                    G&A % of TA

SD                            9,844                    224                          2.3%

APA                          58,810                    694                        1.2%

CHK                          45,671                    577                          1.3%

DVN                          43,548                    649                          1.5%

ECA                          18,909                    417                          2.2%

RRC                          6,658                      187                          2.8%

 

This appears to be a much more reasonable comp set. Interesting, looks like Range has an even larger G&A problem. Giving TPG the benefit of the doubt though, let's say SD should be at CHK's level....

 

1.3% x 9,844 = $128MM of pro forma G&A, or a $98MM reduction from current levels. Taxed at 35% and divided by 600MM shares equals $.10 of additional EPS.

 

 

SUM-OF-THE-PARTS

 

Sources: Company Presentations, Company Filings and Capital IQ, unless otherwise noted

Shares out: 600MM (assumes preferreds fully converted)

FVPS = Fair Value Per Share

 

Continuing Ops:

2013E production            39.2 MMBOE

2013E EBITDA                  $1,323 million

Maintenance CAPEX          $588                (I assume maintenance F&D costs are $15/BOE to maintain production of 39.2 MMBOE)

EBIT                                $735

Net Income                      $478                (Tax rate = 35%)

EPS                                  $.80               

Continuing Ops FVPS    $6.67        (Cost of equity = 12%)

 

Excess Reserves:

Proved Undeveloped          251 MMBOE    (47% of proved reserves are undeveloped, according to page 3 of SD's 11/13 presentation)

Valuation $/BOE                $5.00              (FYE 2011 PV10 was ~$11/BOE....as such, $5/BOE appears reasonable for PUD reserves)

PUD FVPS                      $2.09

 

Unproved Resources          3,867 MMBOE

Valuation $/BOE                $1 to $2

UPR FVPS                    $9.67

 

Excess Reserves FVPS $11.76

 

Net Liabilities:

Total Liabilities                  $5,639

+Minority Interest            $1,547

-Current Assets                $1,229

Net Liab. Per Share      $9.93

 

TOTAL FVPS                $8.50          (Continuing Ops + Excess Reserves - Net Liabilities)

 

If SD can cut G&A by $.10 per share after tax, that's an additional $.83 of value per share ($.10 / 12% cost of equity).

 

The way I look at it, likely at worst net liabilities are fully covered by excess reserves, which leaves investors with EPS of $.80 before G&A reductions. In a perfect world, SD would sell off non-core reserves and pay down all net liabilities, cut G&A per TPG's suggestion, and leave investors with clean EPS of $.90 per share and no net liabilities. Under this scenario, likely the market would pay 10X earnings, valuing SD at $9 per share. Obviously we're not in a perfect world....but the MOS appears robust and a catalyst is finally in place.

 

Please help me understand the basis for the valuation of their unproved resources of more than$9.00/SH.  Are these solid or are these mostly leases that have to be drilled in five years or less?  If so, could not the owners repossess the rights and lease those rights to someone else?

 

 

So the acreage is as follows:

 

Developed: 375,090 - the "Continuing Ops" valuation of $4 billion works out to be $10,669 per developed acre

Undeveloped: 1,672,328 - the "Excess Reserves" valuation of $7.056 billion works out to be $1,288 per undeveloped acre

 

Likely, a buyer with scale would pay more than $1,300 per acre, as demonstrated by JV transactions over the past several years between $5 and $15K an acrea.

 

Your question regarding HPB is a good one though - this is how the Company breaks down its undeveloped acreage expiry:

 

12/31/2012:                208,368

12/31/2013:                603,372

12/31/2014:                635,004

12/31/2015 or later:  153,685

Other:                          71,899

 

So about 87% of its undeveloped acreage expires by FYE 2014. All the more reason for a sale, or to put in place a credible development plan.

 

Thank you very much, bmichaud.  :)

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FCX's acquisition of PXP provides an interesting comp for SD (MMR is messier, so I stuck with PXP for now)...

 

Deal Details:

Equity                                $6,900MM

BP GOM purchase price        6,100

Net Debt @ 3Q12                  4,563                      Long-term debt + current liabilities - current assets - BP GOM deposit

Deal EV                          $17,563

2013E EBITDA                    $3,349                      Capital IQ consensus estimates

 

Reserves Analysis

Proved Reserves                537 MMBOE              Pg. 3 of October 2012 Company presentation

Unproved Reserves            2,364 MMBOE            Total resource potential of 2,901 on pg. 18 of October 2012 Company presentation - proved reserves

FYE 2011 PV10 $/BOE          $12.54                      Capital IQ

Pro Forma PV10                  $6,735                      $12.54 x 537

UPR FV @ $1.50/BOE          $3,546                     

 

Deal Multiples

Implied UPR $/BOE              $4.58                        (Deal EV - pro forma PV10) / UPR

Implied PV10 multiple          2.1X                          (Deal EV - UPR FV) / pro forma PV10

Implied EBITDA multiple      4.2X                            (Deal EV - UPR FV) / 2013E EBITDA

 

SD Data  

FYE 2011 PV10 $/BOE        $10.90                        Capital IQ

Proved Reserves                533 MMBOE                Pg. 3 of November 13, 2012 Company presentation

Pro Forma PV10                $5,811

UPR                                    3,867                        Pg. 3 of November 13, 2012 Company presentation

UPR FV @ $1.50/BOE        $5,801

2013E EBITDA                    $1,323                        Capital IQ consensus estimates

Net Liabilities                    $5,957                        Total liabilities + minority interest - current assets

FD Shares Out                    600MM

 

Implied SD FVPS Based on PXP Metrics

UPR $/BOE                        $29.28                        ((Implied UPR $/BOE x UPR) + PV10 - Net Liabilities) / FD Shares Out

PV10 Multiple                    $19.90                        ((Implied PV10 multiple x PV10) + UPR FV - Net Liabilities) / FD Shares Out

EBITDA Multiple                $8.97                        ((Implied EBITDA multiple x 2013E EBITDA) + UPR FV - Net Liabilities) / FD Shares Out

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