SandRidge Energy Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: It was a busy day for SandRidge Energy (NYSE: SD  ) , which announced a major acquisition last night. The market and analysts gave the move a big thumbs-down, which pushed down the stock as much as 14% in trading today.

So what: After the close yesterday, SandRidge announced it was buying Dynamic Offshore Resources for $1.27 billion in a cash and stock deal. The company will pay $680 million in cash and 74 million shares of stock valued at $8.02 per share. That price is already generous with shares trading closer to $7 today.

Now what: The market obviously didn't see this as good news and neither did analysts. Tudor Pickering and Howard Weil both downgraded the stock before trading began today. Management argues that Dynamic's $1.9 billion in proven reserves in oil-rich assets will be a great addition for the company. That may be true long term, but today the seller wins and the buyer loses, a common occurrence when acquisitions take place.

Interested in more info on SandRidge Energy? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (2) | Recommend This Article (5)

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  • Report this Comment On February 02, 2012, at 3:43 PM, chublake wrote:

    Considering that the analysts have been completely wrong about TWs moves in the last year. The current reaction is not surprising. It is a good thing that experienced oil men are running the company and not wet behind the ears analysts who run like Bison chased by the Dakota.

  • Report this Comment On February 02, 2012, at 11:38 PM, DerrickPetroleum wrote:

    Dynamic’s assets include low operating cost, mature fields (R/P~7 years, 80% developed).

    SandRidge will pay $51,000/Daily BOE which is inline with some of the larger deals in the region, viz. Energy XXI-ExxonMobil valued at $44,720/Daily BOE and Apache-Devon valued at $36,696/Daily BOE. The oil percentage in these deals ranged between 50-60%, similar to the SandRidge-Dynamic deal. Also, the two deals were struck when the WTI price was in its 80′s and happened in the wake of the Macondo oil spill, when the overall GoM assets were traded at a discount.

    The $/daily BOE is high for deals which have a high oil content (>90%).

    Derrick has observed historic deal values in the range of 60,000-90,000/Daily BOE for GoM deals and $100,000-120,000/Daily BOE for US onshore deals.

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