SandRidge Energy News

[Teo9969]

Wow, they cut their rig count by 80% and are selling off their buildings...

This looks very dire.

They spent half of their 2015 CAPEX in the 1st quarter when oil prices were amid their downward spiral. Couple that with their selling off of real estate and pulling their costs down heavily makes it look like they're looking for cash. The question is for what?

They're certainly not operating under "business as usual" type behavior. So something major is about to happen in some direction.

Somebody who is familiar with the industry know @ what stock-price a buyout starts becoming likely?

[blangtang]

This is part of the 2012 gripe filed by that activist investor TPG.

They had some keen foresight, unfortunately they may have been been correct in their diagnosis, but their investment went the opposite direction.
●

Management and Director Perks: Even from the few details disclosed by the company, it is clear that the perks for management and directors are truly extraordinary by any standard. The company pays almost $1 million year to provide personal accounting services to Mr Ward. The company spends millions of dollars each year sponsoring the Oklahoma City Thunder (of which Mr. Ward is a co-owner), and pays for luxury suites for the basketball team. One of the largest perks is private jet usage. Many companies provide some degree of private jet usage for work travel for senior executives, but few have the ‘air force’ that SandRidge does. Prior to the IPO in 2007 (when expenses were actually borne by Mr Ward), the company owned one old and small jet and two old propeller airplanes to transport executives and workers. Once shareholders were bearing the cost, Mr Ward decided to upgrade – now the company has four jets (two of which are large size intercontinental jets, and one of which is one of the most expensive jets in the market), and over 15 full time employees dedicated to maintaining and flying these jets. Most companies require executives to use jets only for work, and to compensate the company for personal usage. SandRidge provides unlimited personal usage for Mr Ward – last year that included dozens of personal flights to Scottsdale (Mr Ward’s vacation home), and numerous weekend trips to Las Vegas, Los Angeles, the Bahamas, etc…all paid for by shareholders. It is extraordinary that a company that has needed to issue equity 5 times in 5 years, has the highest cost of debt of any comparable company, and has faced bankruptcy, has chosen to invest tens of millions of dollars in private aircraft ownership, and then spend many millions each year in expenses…and for personal use, not just company needs!

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‘Other’ Expenses: Despite the fact that the company does not provide details on its massive overhead spending, it is clear to us that enormous sums are being spent on wasteful or vanity expenses. The company spends many millions each year on television advertising – other than ego gratification, why does a small E&P company need to heavily advertise on TV? The company spends massive amounts of money on real estate in Oklahoma City – far in excess of what would be sensibly needed (and including many fully-owned buildings, and real estate development projects). We cannot explain the enormous number of employees the company has at headquarters (almost 700), and it is remarkable that the company has doubled the number of general employees at its Oklahoma City headquarters over the past five years. Yet, the company appears to have real estate assets and investments far in excess of what would be needed even by this number of employees. In addition, the co-mingling of business and personal matters is present in the company’s real estate expenses and investments as well – for example, SandRidge provides real estate for many of Mr Ward’s personal interests, and pays one Director over $500,000 per year in real estate lease payments.

We provide these details, not to be salacious, but to provide examples of the numerous items that aggregate into overhead that is extraordinary in any context. One might sensibly think that SandRidge would have a lean and efficient level of overhead, given its narrow and dense nature of operations. Instead, most of the $200 + million that is spent appear to be in excessive compensation, perks, and extraneous activities. These expenses are a massive drain on the company. When one combines the extraordinary cost of debt capital with the even more extraordinary level of overhead expenses, it becomes clear why the stock has performed as poorly as it has. No company, in any industry, can survive when 10 – 15% of the total market capitalization is siphoned off each year, leaving the company with a massive handicap relative to competitors.

To put these sums in another context, I suspect your shareholders would never invest in a mutual fund that charged 10 – 15% management fees and expenses, each and every year, especially if the fund had disastrous performance. After all, that would be an obvious recipe for disastrous net returns over time. Yet, that is exactly what is happening at SandRidge. And, it appears that things are getting worse, not better. In response to the immense challenges the company has faced this year (collapse in the stock price, issuing equity, significant downgrades in cashflow projections, etc.) the company response has been to spend even more money on compensation and perks. In the recent 3rd quarter conference call, management had the nerve to announce that they would be increasing corporate overhead by 10% in the coming year! And, despite the challenges this year, the company decided (this spring) that Mr Ward needed a better plane, and purchased a Falcon 900EX for his exclusive business and personal use. For reference, the Falcon 900EX is one of the most expensive private business jets made, with new list price of over $35 million, and flying range of almost 6,000 miles. Given that every employee and asset of the company is within a 500 mile radius of headquarters, it seems obvious that a $35 million plane with 6,000 flying mile range is for CEO gratification, not business necessity.

p12-1903exhibit1.htm

All said, Tom Ward is an interesting character!

[AP]

Isn't this exactly what Aubrey was doing as well at CHK? When I watched the OKC movie recently, I noticed they interviewed both TW and AM, and Larry Nichols. After seeing how they handled themselves in those interviews it was very apparent to me why DVN is performing so well and both CHK and SD have major had issues in the recent past.

[mimino]

Isn't this exactly what Aubrey was doing as well at CHK? When I watched the OKC movie recently, I noticed they interviewed both TW and AM, and Larry Nichols. After seeing how they handled themselves in those interviews it was very apparent to me why DVN is performing so well and both CHK and SD have major issues in the recent past.

Just because they are POS in their personal life, doesn't "necessarily" make them bad executives (visionaries, businessmen, etc.). The world of sports/entertainment is overflowing with these characters, yet their on-stage performance is loved by many. Money corrupts. I'm not sure I have an example ready of a person that would be a good counter-example. Everybody has skeletons.

[LakeEffect]

They spent half of their 2015 CAPEX in the 1st quarter when oil prices were amid their downward spiral. Couple that with their selling off of real estate and pulling their costs down heavily makes it look like they're looking for cash. The question is for what?

They're certainly not operating under "business as usual" type behavior. So something major is about to happen in some direction.

Somebody who is familiar with the industry know @ what stock-price a buyout starts becoming likely?

I'm not sure, but I once heard someone say that Sandridge was so leveraged, and their stock price was already so low, that no one even wanted to buy them... my assumption after that statement is that other companies will let Sandridge fail and buy any appreciable assets in the fire sale, rather than the entire company. I could be completely wrong - I'm not an oil & gas analyst.

[BillyOcean]

this could be the nail in the coffin.....

https://finance.yahoo.com/news/sandr...000632352.html

[Just the facts]

There seems to have been a fundamental misunderstanding of the differences between running a private corporation and a public corporation.

[Stickman]

Is SandRidge Imploding After Earnings? (NYSE: SD) - 24/7 Wall St.

Here is another story

[gopokes88]

McClendon was wasteful, very aggressive with debt, and had a general attitude of you can't touch me. But he did a lot of things that benefitted both this community and his employees. Does an energy company really need bees or an employee garden? No, but his employees seemed to like it.

Ward is just a thief.

SD isnt getting bought at this point. Only hope is that they can survive. A strategic filing of chapter 11 bankruptcy (allows to renegotiate debts) might be their best course of action.

[wsucougz]

Here's a good writeup on the current state of SD:

SandRidge Energy: The Cash Pile Is Gone And Options Are Few - SandRidge Energy, Inc. (NYSE:SD) | Seeking Alpha

[Pete]

You just can't find any independent info on this company that is anything but completely pessimistic.

[zookeeper]

It really comes down to one word: Greed.

[PhiAlpha]

It really comes down to one word: Greed.

Thats true if you're anti-capitalist and/or don't have any understanding of what has been going on at sandridge for the last 8 years.

It has a lot more to do with making the decision to lease 2 million acres in one play, sell the rest of their assets outside of that, and then the results in most of that play falling far below expectations. However, continuing throwing out whatever you would like as long as it fits your narrative.

[zookeeper]

Thats true if you're anti-capitalist and/or don't have any understanding of what has been going on at sandridge for the last 8 years.

It has a lot more to do with making the decision to lease 2 million acres in one play, sell the rest of their assets outside of that, and then the results in most of that play falling far below expectations. However, continuing throwing out whatever you would like as long as it fits your narrative.

And again, I could say the same thing. Frankly, I'm sure I'm not the only one who sees you as the Pro-Energy Thread Police here at OKCTalk.

All I did was state an opinion. You chose to include the slap at me - because I am an economic populist and my views aren't voiced around Oklahoma a lot. Why the personal attack?

[PhiAlpha]

And again, I could say the same thing. Frankly, I'm sure I'm not the only one who sees you as the Pro-Energy Thread Police here at OKCTalk.

All I did was state an opinion. You chose to include the slap at me - because I am an economic populist and my views aren't voiced around Oklahoma a lot. Why the personal attack?

Frankly, I'm sure I'm not the only one here that sees you as the OKCTalk anti-energy industry/anti-capitalism police. When you or anyone else posts something way offbase, I'm going to call you out on it. Sorry if you take offense to that.

You stated an opinion as if it was fact and I responded with what is actually happening at Sandridge. As a former pissed off stockholder in SD, I have a pretty good feel for what is happening there and haven't been very happy about it for awhile.

I went overboard with the personal attack and apologize for that. I was annoyed with your comments in the oil price thread and let it carry over.

[s00nr1]

SandRidge Energy stock falls with debt exchange | Watch the video - Yahoo Finance

[Swake]

SandRidge Energy stock falls with debt exchange | Watch the video - Yahoo Finance

Getting really close to sinking under $1 a share. That leads to delisting and very few companies ever survive that. It's bankruptcy time.

[bchris02]

Getting really close to sinking under $1 a share. That leads to delisting and very few companies ever survive that. It's bankruptcy time.

Do you think they will get bought out or go completely belly up?

[Swake]

Do you think they will get bought out or go completely belly up?

Looking at the SEC filings they have very little cash and a ton of debt compared to revenue. They are bleeding cash and knowing who started the company I would be afraid the balance sheet may not even tell the whole story anyway with special deals or other items that may be hidden off the balance sheet.

As cheap as the stock is, if they were going to be bought out, they already would have been. They just have too much debt compared to their assets to be bought out.

Samson Resources in Tulsa is in much the same boat. KKR bought it in 2011 for $7.2 billion and now the company is just too leveraged to survive with current energy prices.

[LakeEffect]

Looking at the SEC filings they have very little cash and a ton of debt compared to revenue. They are bleeding cash and knowing who started the company I would be afraid the balance sheet may not even tell the whole story anyway with special deals or other items that may be hidden off the balance sheet.

As cheap as the stock is, if they were going to be bought out, they already would have been. They just have too much debt compared to their assets to be bought out.

Samson Resources in Tulsa is in much the same boat. KKR bought it in 2011 for $7.2 billion and now the company is just too leveraged to survive with current energy prices.

Yeah. Why buy it and assume debt when you can watch them go bankrupt and buy their assets at auction or via a receiver w/out the liability?

[adaniel]

I'm not one for scare mongering, but SD is in a lot of trouble. I'm privy to some of their internal issues through my job.

Their hedges start expiring this summer. If prices aren't up at least to $70/bbl I imagine they'll fall into BK. I think the only question at this point is will they be able to restructure their debts and be viable or will the shareholders just pull the plug and liquidate the company.

Samson is an interesting case. That's pretty much a dead company walking. They are not even running any rigs right now. IMO I think the only reason they are not in BK is the Shustermann family is trying to untangle the handful of assets they still have with them. Once they do, it will probably be a matter of time,

[gopokes88]

Exactly why take on their debt when you can buy their assets for pennies on the dollar.

[Swake]

Samson is an interesting case. That's pretty much a dead company walking. They are not even running any rigs right now. IMO I think the only reason they are not in BK is the Shustermann family is trying to untangle the handful of assets they still have with them. Once they do, it will probably be a matter of time,

I thought Samson Energy (Stacy Schusterman) was completely separated from Samson Resources years ago? Resources kept the domestic stuff and Energy got foreign and offshore?

Stacy made out like a bandit on this, she definitely "sold high". I wonder if she would buy Samson Resources out of bankruptcy for pennies on the dollars that she pocketed?

[Just the facts]

Just curious, but if Sandridge sells their downtown property what other assest do they have? When you lease land to an oil company do they own all the oil or only what they recover?

[adaniel]

I thought Samson Energy (Stacy Schusterman) was completely separated from Samson Resources years ago? Resources kept the domestic stuff and Energy got foreign and offshore?

For the most part yes, but Samson still internally manages a lot of their personal mineral interests. A lot of these are actually still in Samson's name as of record. I know they are furiously trying to get their own interests into their own family managed entities, probably to prevent any of their assets from being caught up in any sort of possible liquidation.