Why SandRidge Is a Great Buy Right Nowhttp://www.fool.com/investing/general/2012/07/23/why-sandridge-is-a-great-buy-right-now-.aspx Arjun Sreekumar
July 23, 2012
SandRidge Energy (NYSE: SD ) is a relatively young company with not much operating history. But in a short period of time, it's made some really smart moves that have created tremendous value for the company and its shareholders. This is definitely one oil and gas producer that should be on every energy investor's radar.
From natural gas to oil
At a time when other companies were still searching for natural gas properties, SandRidge acquired assets in the Permian Basin, an oil-rich play in western Texas. It made two acquisitions in 2009 and in 2010 for a total of $2 billion. The company then sold off a portion of those assets so it could fund its future projects in the Mississippian Lime, the most important part of the SandRidge growth story.
Banking on the Mississippian Lime
While Chesapeake Energy (NYSE: CHK ) is the biggest leasehold owner in the Mississippian, with around 2 million net acres, SandRidge isn't too far behind, with a 1.5 million net acreage position. Devon Energy (NYSE: DVN ) is next in line, holding 230,000 acres in the expansive play.
SandRidge has reported 7,000 potential net drilling locations in the Mississippian and expects the average well to cost about $3.2 million, significantly cheaper than Bakken or Eagle Ford wells. The expected internal rate of return for Mississippian wells is 91% and some 380 horizontal wells are planned for 2012.
An aggressive, yet feasible, three-year plan