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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

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!