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Diversified Opportunities Report

SandRidge Energy, Inc.

Jan 19, 2023

SD:NYSE
Investment Type
Small-Cap
Risk Level
Action
Rec. Price ($)

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

SandRidge Energy, Inc. is an independent oil and gas firm focusing on acquisition, development, and production. The company's principal operating regions are in Oklahoma and Kansas on the Mid-Continent. The Company owns or has a stake in about 1,442 gross producing wells, 947 of which it operates, and over 551,000 gross total acres under lease, predominantly in Oklahoma and Kansas.

1.2 The Key Positives, Negatives, and Investment summary

1.3 Key Metrics:

With a higher profit margin than the industry average, SD is more effective at controlling costs and obtaining advantageous terms with suppliers, as well as having better efficiency at all levels of operations. Furthermore, a greater current ratio as compared to peers implies that company is having better short-term liquidity positions and firm is effectively managing its working capital.

1.4 Top 10 shareholders:

The top 10 shareholders together form ~40.45% of the total shareholding, signifying diverse shareholding. Icahn Associates Corporation and The Vanguard Group, Inc. are the biggest shareholders, holding the maximum stake in the company at ~13.07% and ~4.43%, respectively.

1.5 Natural gas and oil prices analysis:

In support of expectations of a resurgence in global demand, WTI oil futures increased more than 2% to above USD 82 per barrel, a level not seen since early December. The International Energy Agency stated in its assessment of the oil market that China's shift away from its rigorous COVID-19 controls will likely cause demand for petroleum to reach a new record high this year, while price cap penalties on Russia might reduce supply. In its monthly report, which was issued yesterday, OPEC expressed a similar outlook, predicting that demand for petroleum will increase by 2.2%, or 2.22 million barrels per day (bpd), thanks to stronger crude consumption in China and a rebound in advanced nations' economic growth. Despite the cartel's commitment to reduce production to support the market, OPEC crude production increased in December, driven mostly by greater Nigerian output.

As surging domestic production and high storage levels undercut promises of a recovery in demand amid forecasts of a cold snap, US natural gas futures were trading below USD 3.4/MMBtu, approaching their lowest level since June 2021. According to the Energy Information Administration, US natural gas output will probably increase by more than 2% this year, reaching a record daily average of 100.3 billion cubic feet. Utility companies unexpectedly pumped 11 bcf into storage last week, according to EIA data. The Freeport LNG export plant in Texas, which was shut down in June due to a fire, postponed startup again until the second half of January, adding to the local market's supply. However, arctic weather will pour into the country the following week, bringing with it below-average temperatures that should increase demand for heating and drive-up costs.

Section 2: Business Updates and Financial Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

2.2 Insights of Q3FY22:

Section 3: Key Risks and Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: Price/ Earnings Multiple-Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance. 

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 18, 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

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