SandRidge Energy Inc. (OTCMKTS:SDOC) has been moving up steadily in recent days since the stock spiked down last Wednesday after the Company warned of a possible bankruptcy filing. SDOC said it was working with investment bank Houlihan Lokey, and law firm Kirkland & Ellis, on restructuring debt. For the quarter ended Dec. 31, Sandridge posted a net loss of $653.7 million, or $1.13 a share, compared with a profit of $265.2 million, or 48 cents a share, a year earlier. Revenue fell 59% to $143.6 million. Two weeks ago Sandridge made interest payments to bondholders totaling about $50 million rather than default on the debt after exhausting a 30-day grace period.
SDOC was delisted from the NYSE on January 8 due to “abnormally low” trading price levels and failing to meet the exchange’s minimum $1 bid requirement. The stock has been a big mover on the OTC regularly placing among the most traded tickers on the exchange. SDOC has tons of catalysts at play including recovering oil prices, a way oversold stock, significant funds including Canada’s richest man buying into the stock, big short covering as well as big media exposure.
SandRidge Energy Inc. (OTCMKTS:SDOC) is an oil and natural gas exploration and production company headquartered in Oklahoma City, Oklahoma with its principal focus on developing high-return, growth-oriented projects in the Mid-Continent region of the United States. In addition, SandRidge owns and operates a saltwater gathering and disposal system and a drilling rig and related oil field services
SandRidge is the largest producer in the water-rich Mississippi Lime formation in northwestern Oklahoma and accounted for about one-third of all the produced saltwater disposed into Arbuckle zones in 2014, according to an analysis of volume data from the Oklahoma Corporation Commission.
SDOC made its initial public offering on November 5, 2007, offering over 28 million common stocks at roughly $26.00 US a share. The Company was founded in 2006 by Tom Ward by virtue of buying approximately 50% of Riata Energy of Amarillo, TX. SandRidge’s drilling activities are focused on its oil properties in the Mid-Continent and Permian Basin. The Company also maintains production in West Texas. The company owns and operates drilling rigs under the brand name Lariat Services, Inc.
In the past SDOC was using hedges on its oil and natural gas production about 3 to 4 years into the future. This program was wisely instituted by ex CEO Tom Ward who left the Company in 2013 and will be mostly gone by 2016.
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SDOC like many small oil and gas producers had been in steep decline over the past year seeing its share price drop over 95% as oil and natural gas prices have continued to fall.
Oil prices surged this morning ending a 2 day slide after the US Federal Reserve announced its latest monetary policy decision that revealed it expects a much shallower path of increasing interest rates this year. Helping the climb in oil was the news that the UK is easing taxes on the North Sea industry to help producers.
The Wall Street Journal said this morning it expects a deal to be signed to freeze global oil supplies at January levels. Qatari minister Mohammed bin Saleh al-Sada said the initiative now had the support of 15 OPEC and non-OPEC producers.
On March 16 SDOC issued an 8k that stated ”On March 15, 2016, within the 30-day interest payment grace period provided for in the indentures governing the 2023 Notes, the Company made payments of approximately $21.7 million in satisfaction of its obligations under the 2023 Notes. Further, on March 16, 2016, the Company made approximately $28.4 million in interest payments then due with respect to its 7.5% senior notes due 2021.”
Sandridge is among a large group of oil and gas explorers to experience turmoil as a result of the decline in both oil and natural gas prices. SDOC drills for oil and gas in Oklahoma, Kansas and Texas, where it has 4,411 gross producing wells and more than 2 million gross acres under lease. As of Dec. 31, it had four rigs drilling.
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Currently trading at a $46 million market valuation SDOC has $790 million in the treasury and significant long term debt. The stock arrived on the OTC with a bang and there is little surprise why; SDOC has a ton going for it; besides the obvious incredible $790 million in cash the Company is actually healthy recently announcing it is delivering 300 per cent greater oil production and 200 per cent higher natural gas production compared to the previous artificial lift solution. They have also made all the right moves in this oil price downturn; efficiencies and costs are cut dramatically, risks have been decreased and Company is now very well positioned as oil priced increase. SDOC management injected a huge vote of confidence into SDOC by making the $50.1 million interest payment however much of that confidence has been wiped out by the Company’s recent revelation that it could be forced to seek bankruptcy protection as it struggles to address its high debt load. Shareholders are waiting for more news from the Company concerning their restructuring efforts in a manner that supports its loyal common equity base. We will be updating on SDOC on a daily basis so make sure you are subscribed to microcapdaily.com so you know what is going on with SDOC.
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Disclosure: we hold no position in SDOC either long or short and we have not been compensated for this article.