CHK or SD??
- Thread starter WCPoke
- Start date
SD is closer. CHK at least has better assets and went through some recent refinancing that will give them quite a bit of debt/covenant flexibility. Actually, Aubrey's new venture is in a more dire position. But them and SD, HK, et al bought themselves about a year or less last year. Unless there is some sort of macro catalyst, this Spring will just exacerbate what's transpired over the second half of 2015.
Sandridge stock down to 2 and a half cents....it won't be long for them. Throw in all the earthquake business up in nw oklahoma where they are big and the fuse is really short. They are saying they will just start unloading assets...no one would buy them and take on the debt. All the hedging is over (ended in December) so anyone who hedged is now getting $35 a barrel instead of their hedge price. I bet it gets a bit uglier over the course of the year.
Liability of their SWD's is not a factor... Its the fact that 100% of their production as a company is in the area where SWD's were requested to be shut-in. Take away those and they have to truck the huge volumes of water produced in the Miss play to area's not shut-in... Which would make the play uneconomic at even $80-90/bbl. So if they shut those wells in they effectively shut down their business. I don't think anyone is worried about litigation in the form of lawsuits, etc... SWD wells are more of a survival issue for Sandridge than any liability. That play was marginal at high oil prices due to water cut when you factor in the potential for regulators to shut down SWD in that region all together, it makes the asset pretty much worthless. As far as someone buying them, nobody is going to buy that company when their only producing asset is in jeopardy of being shut down by regulators.
Top that with their recent head-scratching entry in to the North Park Basin and you have a company that is effectively just waiting on bankruptcy.
I'm talking about it in the sense that almost their entire portfolio of production is predicated on being able to use SWD's in an area that the OCC is trying to severely limit the amount of water that can be put downhole. Like you mentioned, its not feasible to truck the amount of water that these wells produce to other areas.
The whole play is damned. Luckily some companies found that out with large sums of other peoples money.
The whole play is damned. Luckily some companies found that out with large sums of other peoples money.
While I never think selling Permian assets, the vast majority Sandridge's Permian assets were CBP assets with very little growth potential. They got an okay valuation on those assets so it made sense to sell if they were looking for aggressive growth. Those CBP assets did provide a long-term, steady production base that requires very little drilling capital to maintain. That low cost production might have saved them in the current market. Hindsight is 20/20... What didn't make sense was doubling down in a marginal Miss Lime play instead of re-investing in either the Delaware or Midland basins or somewhere else... Williston/DJ.
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If he is truly doing that, then he might as well just take all of his assets, put them in a dumpster, and light it on fire.
SD is on the verge now. Fully drew down their revolver ($489MM) on Friday which either forces assistance on capital restructuring or they're jumping into chap 11
Yep. They're denying it but words out they have hired restructuring lawyers. If anyone needs to rent out some office space I know where there's plenty. That campus is a ghost town.
That's happening all over the place. With oil this cheap some wells can't even pay for the electricity to run the down hole pumps.
