Is SandRidge Finally Poised to Rebound?

Next Tuesday, SandRidge Energy (NYSE: SD) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Along with many of its energy peers, SandRidge has struggled from the plunge in natural gas prices since early 2008. The poor pricing environment for energy products has forced it to sell assets at an inopportune time, and concerns about the company have only risen lately. Let's take an early look at what's been happening with SandRidge Energy over the past quarter and what we're likely to see in its quarterly report.

Stats on SandRidge Energy

Source: Yahoo! Finance.

Will SandRidge Energy's earnings start turning around this quarter?
Analysts have gotten more optimistic about SandRidge and its earnings in recent months, narrowing their loss estimates for the just-completed quarter by a penny per share and making an even bigger dime-per-share reduction to their expectations for a full-year 2013 loss. Yet investors remain unconvinced, as the stock has fallen nearly 30% just since late January.

SandRidge has made a huge bet on the Mississippian Lime shale play, especially after selling off its Permian Basin assets late last year. Unfortunately, that bet hasn't paid off well for shareholders, as the company saw its spun-off royalty trusts SandRidge Mississippian Trust I (SDTTU) and SandRidge Mississippian Trust II (SDR) fail to meet their projections for distribution amounts during the first quarter. The main problem has been that wells in the Mississippian Lime have produced more natural gas than expected, and even with a slight rebound in gas prices, it still doesn't produce adequate margins compared to oil and natural-gas liquids.

Given the poor results, some investors have gotten concerned that SandRidge might have to sell more assets. Yet rival Chesapeake Energy (CHKA.Q) was only able to get $2,400 per acre when it sold off a substantial stake in the Mississippian Lime in February, boding ill for SandRidge's prospects to avoid fire-sale prices if it has to raise cash.

Meanwhile, the distraction of a potential proxy battle with hedge fund TPG-Axon Group has hung over SandRidge. The company ended up settling with TPG-Axon by increasing the size of its board of directors to 11, with the extra four members to be named by the hedge fund. Nevertheless, ongoing concerns about CEO Tom Ward have the company looking at land deals involving the executive's family, and it's highly uncertain whether he'll remain as the company's leader much longer.

In SandRidge's quarterly report, watch for the latest information about whether the company has had more success finding oil and gas-liquids from its Mississippian wells. If it can improve its mix, then SandRidge shares could represent a true bargain at current prices.

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