After deciding to shift the company's focus away from natural gas production, SandRidge Energy (NYSE: SD) stated that its three-year plan was to use its Permian Basin assets to generate cash flows that would be used to fund the exploration and production of the Mississippian Lime. But the company decided instead to sell off its Permian assets, and use the proceeds to pay down debt and expedite its production schedule in the Mississippian. In this video, Motley Fool energy analyst Joel South tells us why he doesn't like the move. It leaves the company concentrated solely in the Mississippian, where SandRidge has been striking more natural gas than oil, which is something investors don't like to see at the moment. In addition, he looks at Chesapeake Energy (CHKA.Q), which is taking a more cautious approach to the Mississippian, one that will employ capital more efficiently.
Why concentrating in its Mississippian assets alone may be a risky move for SandRidge.
Joel South owns shares of SandRidge Energy. The Motley Fool owns shares of SandRidge Mississippian Trust II and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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