Why SandRidge Energy Stalled in 2011
As the final days of 2011 tick off the calendar, it's a great time to dust off the old portfolio and take a look at how our favorite stocks performed this year. You've likely suffered through some lows and enjoyed some highs following these companies for 12 months, but now it's time to evaluate the whole picture and decide whether your stock is still the right investment for your portfolio.
Today we consider SandRidge Energy (NYSE: SD) . The Oklahoma-based company, run by Chesapeake Energy co-founder Tom Ward, focuses on the exploration and production of domestic oil and natural gas. The current U.S. energy boom has got a lot of investors thinking about SandRidge.
SandRidge by the numbers
|Year-to-Date Stock Return||(10.8%)|
|Market Cap||$2.68 billion|
|Revenue, Trailing 12 Months||$1.33 billion|
|CAPS Rating (out of 5)||*****|
Sources: Yahoo! Finance, YCharts, and Motley Fool CAPS.
What happened to SandRidge this year?
Early on, things were looking great for the company. In February the stock jumped on news that SandRidge had raised its production targets for the first time in two years, and was shedding underperforming assets to pay down debt.
In April, SandRidge developed a royalty trust to finance its production in the Mississippi Lime play and SandRidge Mississippian Trust I (NYSE: SDT) was born. SandRidge Permian Trust (NYSE: PER) followed later in the year.
The trusts allowed SandRidge to quickly raise funds to drill, and drill it did. By August, the company had 16 rigs operating in the Permian Basin and 14 in the Mississippi Lime. Timing is everything. SandRidge missed earnings and oil dropped to $90 a barrel. As a result, despite a vigorous production schedule, the stock plummeted and has yet to really bounce back.
The biggest problem for SandRidge is that it takes money to make money and the market is leery of its debt right now. Though it has a plan to fund capital expenditures, it seems like the company will have to prove its increase in production significantly increases profits before we see the stock pick up again.
All told, if the price of oil remains high, SandRidge will likely have a great 2012. The company isn't the only stock that wins with high oil prices -- consider three more stocks Fool analysts also expect to benefit handsomely.