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    Stock Alert for SandRidge Energy Inc. ($SD)

    SandRidge Energy Inc. (NYSE: $SD)

    SandRidge Energy Inc. (SD) is an independent natural gas and oil company concentrating on exploration, development and production activities. The Company is focused on the exploration and exploitation of its holdings in the West Texas Overthrust (WTO), a natural gas prone geological region. The Company owns related gas gathering and treating facilities, a gas marketing business and an oil field services business, including its drilling rig business, Lariat Services Inc. The Company’s Drilling and Oil Field Services segment drills wells for other oil and natural gas companies, primarily in the West Texas region. This segment’s oil field services include providing drilling rigs, pulling units, mud logging, trucking, rental tools, location and road construction, and roustabout services to third parties. Its Midstream Gas Services segment provides gathering, compression, processing and treating services of natural gas in West Texas. The Company also captures and transports CO2 to the Permian Basin for use in tertiary oil recovery operations, as well as operates interests in the Mid-Continent, the Cotton Valley Trend in East Texas, the Gulf Coast, and the Gulf of Mexico. As of December 31, 2008, it had estimated proved reserves of 2,158.6 Bcfe, of which 88% were natural gas. The Company also had 2,059 gross producing wells, as well as had oil interests in 1,655,956 gross leased acres. In addition, it had 29 rigs drilling in the WTO, five rigs drilling in East Texas, three rigs drilling in the Mid-Continent, and three rigs drilling in other areas.

    SandRidge Energy Inc. was formerly known as Riata Energy Inc. and changed its name to SandRidge Energy Inc. in December 2006. SandRidge Energy Inc. was founded in 1984 and is headquartered in Oklahoma City, Oklahoma.

    Share Statistics (27-April-10) FY

    2007

    FY

    2008

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol SD Revenue, $Mn 677.5M 1.18B 42.6% 200.7M 163.1M 18.7%
    Current price $7.71 Gross marg. 59.9% 65.4% 8.4% 96.0% 55.3% 42.4%
    52wk Range: $15.00-6.92 Oper. margin 27.6% -113.2% 510.1% -829.5% -238.2% 71.3%
    Avg Vol (3m): 9,546,310 Net margin 7.4% -122.0% 1748% -794.6% -262.5% 67.0%
    Market Cap. 1.62B
    Dil. Shares Outst. 210.4M EPS, $ 0.09 -9.37 10511% -9.78 -2.36 75.9%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    Financial Highlights

    Fourth Quarter

    • Adjusted net income available to common stockholders (which excludes non-cash asset impairments, unrealized gains or losses on derivative contracts and gains or losses on the sale of assets) of $26.3 million, or $0.14 per share, in fourth quarter 2009 compared to adjusted net income available to common stockholders of $10.2 million, or $0.06 per share, in fourth quarter 2008

    • Adjusted EBITDA of $150.2 million compared to $157.9 million in fourth quarter 2008

    • Operating cash flow of $112.8 million compared to $114.7 million in fourth quarter 2008

    • Net loss applicable to common stockholders of $434.2 million (including $388.9 million non-cash full cost ceiling impairment), or $2.36 per share fully diluted, attributable to lower natural gas and oil pricing levels during 2009 compared to net loss applicable to common stockholders of $1.59 billion (including $1.86 billion non-cash full cost ceiling impairment), or $9.78 per share fully diluted, in fourth quarter 2008

    • No borrowings outstanding under credit facility at December 31, 2009

    Full Year

    • Adjusted net income available to common stockholders (which excludes non-cash asset impairments, unrealized gains or losses on derivative contracts and gains or losses on the sale of assets) of $139.8 million, or $0.80 per share, in 2009 compared to adjusted net income available to common stockholders of $142.5 million, or $0.92 per share, in 2008

    • Adjusted EBITDA of $584.0 million compared to $678.2 million in 2008

    • Operating cash flow of $417.6 million compared to $540.3 million in 2008

    • Net loss applicable to common stockholders of $1.78 billion (including $1.69 billion non-cash full cost ceiling impairment), or $10.20 per share fully diluted, attributable to lower natural gas and oil pricing levels during 2009 compared to net loss applicable to common stockholders of $1.46 billion (including $1.86 billion non-cash full cost ceiling impairment), or $9.36 per share fully diluted, in 2008 .

    2009 Financial Results

    The Company reported a net loss applicable to common stockholders for 2009 of $1.78 billion due to non-cash full cost ceiling impairments on its natural gas and oil properties totaling $1.7 billion during 2009 ($1.3 billion at March 31, 2009, and $0.4 billion at December 31, 2009) and price-related declines in natural gas and oil revenues.

    Ceiling Test Impairment

    The Company utilizes the full cost method of accounting for its natural gas and oil properties. As required by SEC rules effective December 31, 2009, proved reserve volumes at December 31, 2009, were calculated using the average price for the 12-month period, using the first-day-of-the-month price for each month, compared to a one-day period end pricing method used in previous years. The use of these calculated averages resulted in a non-cash impairment charge of approximately $388.9 million against the carrying value of the Company’s natural gas and oil properties for the fourth quarter of 2009.

    The calculated 12-month average per unit prices used in the estimation of proved reserves and future net revenues at December 31, 2009, were $3.87 per Mcf for natural gas and $57.65 per barrel for oil compared to the one-day period end prices of $5.71 per Mcf for natural gas and $41.00 per barrel of oil at December 31, 2008. This decline in natural gas prices caused some of the Company’s proved undeveloped reserves to be removed from its total proved reserves as those quantities could not be economically developed at the calculated price used to estimate proved reserves at December 31, 2009. Additionally, the decline in natural gas prices caused a shortening of the productive lives of certain proved properties as these properties became uneconomic earlier in their lives with the use of lower natural gas prices compared to prices used in the estimation of reserves in the previous periods. The PV-10, based upon 12-month average prices as required under the new SEC pricing rules, was $1.56 billion at December 31, 2009, compared to PV-10 of $2.26 billion at December 31, 2008, that was calculated using period end pricing.

    Natural Gas and Oil Pricing

    The average price received, excluding the impact of derivative contract settlements, for natural gas decreased 57.7% in the full year 2009 to $3.36 per Mcf compared to $7.95 per Mcf in 2008. The average price received, excluding the impact of derivative contract settlements, for natural gas in the fourth quarter of 2009 decreased 24.2% to $3.80 per Mcf compared to $5.01 per Mcf in the fourth quarter of 2008. Similarly, average prices received, excluding the impact of derivative contract settlements, for oil production in the full year 2009 decreased 39.2% to $55.62 per barrel. However, average prices received, excluding the impact of derivative contract settlements, for oil production in the fourth quarter of 2009 increased 33.3% to $69.22 per barrel from fourth quarter 2008.

    Natural gas and oil production increased by 3.4% to 104.8 Bcfe for 2009 from 101.4 Bcfe for 2008. This increase in total production for 2009 was offset by the lower average commodity prices received during the period, resulting in decreased natural gas and oil revenues of $454.7 million for 2009 compared to $908.7 million in 2008. Increased fourth quarter 2009 oil production and the higher associated prices received for that production were offset by lower natural gas production and average natural gas prices received resulting in decreased natural gas and oil revenues of $126.1 million compared to $151.9 million for the same period in 2008.

    Gain (Loss) on Derivative Contracts

    The Company enters into natural gas and oil swaps and basis swaps for a portion of its production in order to stabilize future cash inflows for planning purposes. In that regard, 2009 results benefited by a net gain of $147.5 million ($200.5 million unrealized loss and $348.0 million realized gain) on derivative commodity contracts. This compares to a $211.4 million net gain ($224.4 million unrealized gain and $13.0 million realized loss) for 2008. The net gain on derivative commodity contracts for fourth quarter 2009 was $7.8 million ($64.0 million unrealized loss and $71.8 million realized gain) compared to a net 6 gain of $215.5 million ($150.5 million unrealized gain and $65.0 million realized gain) for the same period in 2008.

    Financial Strength (27-Apr-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.12 3.19 0.97 0.75
    Current Ratio (MRQ) 1.13 3.31 1.33 0.89
    Long-Term Debt to Equity (MRQ) 14.89 50.12 145.67
    Total Debt to Equity (MRQ) 17.06 66.11 209.05

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Buy Outperform Hold Underperform Sell No Opinion

    This is the consensus forecast amongst 17 polled investment analysts. Against the SandRidge Energy Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 5 4 8 0 0 0
    4 weeks ago 5 3 8 0 0 0
    2 months ago 5 3 7 0 0 0
    3 months ago 5 3 7 0 0 0
    Last year 3 2 6 0 0 2

    The 10 analysts offering 12-month price targets for SD have a median target of 10.50, with a high estimate of 12.00 and a low estimate of 8.50. The median estimate represents a 34.96% increase from the last price of 7.78.

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jun-10 7 245.59 295.00 205.20 251.77
    Quarter Ending Sep-10 7 293.32 368.40 240.10 293.20
    Year Ending Dec-10 11 1,148.51 1,356.30 977.30 1,051.39
    Year Ending Dec-11 11 1,426.20 1,825.80 1,202.60 1,182.20
    EARNINGS (per share)
    Quarter Ending Jun-10 12 0.16 0.21 0.10 -0.05
    Quarter Ending Sep-10 12 0.19 0.32 0.14 -0.04
    Year Ending Dec-10 18 0.73 1.13 0.45 -0.09
    Year Ending Dec-11 15 0.67 1.65 0.43 0.06
    LT Growth Rate (%) 1 10.00 10.00 10.00 33.00

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=SD

    Investment Highlights

    SD recently announced that it has extended the maturity of its credit facility as part of the Company’s 2010 financial plan. The amendment and restatement of the $1.75 billion senior credit facility extends the maturity date to April 15, 2014, from November 21, 2011, and affirms the borrowing base at $850 million. Bank of America, N.A. acts as the Administrative Agent and is joined on the lead bank level by: Barclays Bank PLC, The Royal Bank of Canada, The Royal Bank of Scotland plc, Union Bank of California, N.A. and Wells Fargo Bank, N.A. The facility received commitments from 27 participating lender institutions of which three are new to the bank group. The largest commitment held by any individual lender is 5.9%, which is lower than the largest commitment in the Company’s previous credit facility of 6.3%. The Company remains in compliance with all debt covenants and the next redetermination of the borrowing base is scheduled to occur in the fourth quarter of 2010.

    Drilling Activities

    At December 31, 2009, the Company had 15 rigs operating compared to eight at September 30, 2009, and 17 at December 31, 2008. The Company averaged 11 rigs operating during the fourth quarter of 2009 and drilled 46 wells. The Company drilled a total of 140 wells during 2009. A total of 44 gross (41.5 net) operated wells were completed and brought on production throughout the fourth quarter of 2009 bringing the total number of operated wells completed and brought on production during 2009 to 160 gross (148.0 net). Currently, SandRidge has 24 rigs operating, of which 12 are drilling in the Piñon Field area of the West Texas Overthrust and six are drilling in the Permian Basin.

    CO2 Treating Capacity and Century Plant

    Construction of the Century Plant, located in Pecos County, Texas, remains on schedule with anticipated start up of Phase 1 in summer 2010. Century Plant Phase 1 will add approximately 400 MMcf per day of CO2 treating capacity, giving the Company access to total CO2 treating capacity in the WTO of approximately 775 MMcf per day. Century Plant phase 2 is expected to come on line in 2011, increasing access to total CO2 treating capacity to over 1 Bcf per day.

    Source: http://www.sandridgeenergy.com/

    Technical Analysis

    Source: http://stockcharts.com

    On Thursday April 22, SD closed below its 50-day moving average. This is generally considered to be an indication of a bearish trend.

    SD is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

    SD’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Apr27-2010 symbol Share, $ $ Mn 2009 2010 2009 2010
    Arena Resources Inc. ARD 37.59 1.46B 34.63 n/a 11.57 n/a
    Legacy Reserves LP LGCY 24.52 982.52M n/a n/a 7.14 n/a
    Concho Resources Inc. CXO 56.79 5.18B n/a n/a 9.48 n/a
    Oil & Gas Operations Median 2.54B n/a n/a 9.39 n/a
    SandRidge Energy Inc. SD 7.71 1.62B n/a n/a 2.77 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases 199,800 5
    Sales 2,005,970 3
    Net Shares Purchased (Sold) (1,806,170) 8
    Total Insider Shares Held 62.6M n/a
    % Net Shares Purchased (Sold) (2.8%) n/a
    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) (20,929,900)
    % Change in Institutional Shares Held (16.6%)

    Source: Yahoo Finance

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