SandRidge Energy Inc. (SD): 1 Energy Stock I’m Buying This June

Page 1 of 2

A few days ago I participated in the Motley Fool’s analyst roundtable and selected the one stock that I thought would be a great buy this month. That stock, SandRidge Energy Inc. (NYSE:SD) is one that I’ve been following closely over the past year. Based on what I’ve seen in the company over that time, I’ve decided to take my own advice this month and will be adding it to my portfolio as soon as trading rules allow.

SandRidge Energy Inc. (NYSE:SD)

I’ve boiled my SandRidge Energy Inc. (NYSE:SD) thesis down to three key points which when taken together lead me to believe thatSandRidge is a special opportunity and that the time to buy is now.

The focused opportunity
SandRidge Energy Inc. (NYSE:SD)’s asset portfolio has undergone several changes over the past few years. Today, the bulk of its portfolio consists of its core Mississippi Lime acreage and some shallow Gulf of Mexico operations. While the play isn’t as oily as the company had hoped, the potential is there for it to be developed into an exceptional asset generating outstanding rates of return.

What I like here is that SandRidge Energy Inc. (NYSE:SD) is getting better at finding the oily parts of the play. Last quarter its Mississippian oil production rose from a mix of 45% oil and natural gas liquids to 46%, which might not sound like much. However, when 80% of the company’s Mississippian cash flow comes from oil any improvement in its production mix hits the bottom line. Overall, as the industry develops the play, it’s finding the oilier sweet spot.

Looking at last quarter’s numbers Devon Energy Corp (NYSE:DVN) and Chesapeake Energy Corporation (NYSE:CHK) both reported solid numbers from the play. Devon was able to bring on 24 wells, and several had initial 30-day production rates between 600 and 1,000 barrels of oil equivalent per day. Meanwhile, Chesapeake’s top well in the play achieved a peak rate of 1,485 barrels of oil per day. These numbers, as well as those reported by SandRidge, show the play’s potential.

Source: SandRidge Energy

The improved fundamentals
When you combine the potential of the Mississippian with SandRidge’s own improving fundamentals it speaks to a compelling opportunity. In almost every metric SandRidge Energy Inc. (NYSE:SD) is improving. For example, oil as a percentage of its production is increasing, its well costs are declining, and the leverage ratio has been cut substantially. The company has shifted from growth at all costs, to a more measurable and prudent growth rate. That being said, growth is still exceptional with double-digit production growth overall, which is being driven by 60% growth from the Mississippi Lime.

SandRidge still has a long way to go, but I like the direction it is heading. I also like the fact that the company’s capital plans are fully funded through then end of next year. It has several options at its disposal to extend its funding through 2015. Compare this to Chesapeake Energy which still has a billion-dollar gap to bridge this year. SandRidge Energy Inc. (NYSE:SD) is in its best financial position in years which removes a big risk as it invests to grow production.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!