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Richard Zeits  

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  • SandRidge Energy: Debt-For-Equity Swaps Are A Trader's Paradise [View article]
    MarionPolk2000,

    The way I personally would do the analysis, I would look at how much value is available and who has the claim on that value.
    May 15, 2015. 10:42 PM | 1 Like Like |Link to Comment
  • SandRidge Energy: Debt-For-Equity Swaps Are A Trader's Paradise [View article]
    Larry700,

    Your wrote: "The SD bonds are no longer listed by Schwab as they have now been rated at C."

    SandRidge notes are not rated 'C' by the S&P - the senior unsecureds are still rated 'CCC.' There is a difference. They may end up rated "SD" but let's not misrepresent the facts about the credit rating (or about what is stated in the article, even if it is a poor one :) ).

    May 15, 2015. 09:41 PM | 4 Likes Like |Link to Comment
  • SandRidge Energy: Debt-For-Equity Swaps Are A Trader's Paradise [View article]
    Given that this note was submitted before the market's open, a quick follow-up regarding today's negative market reaction (the stock traded down 10%+ during the session) may be in order.

    The most likely explanation to the stock's weakness is the recognition that the exchange - which is meant to be a measure of last resort - does not move the needle, given the $3.3+ billion of debt on balance sheet and the expected continued cash burn.

    The natural question is: why did SandRidge pursue such a small transaction?

    Given the almost inevitable stock price impact (as the market would anticipate the stock to come back on the market, creating pressure), pursuing a sequence of small swaps would seem to make no sense at all, versus doing the entire amount in one go.

    The potential concern is that the outcome demonstrates the size limitation of this specific strategy.
    May 14, 2015. 04:41 PM | 3 Likes Like |Link to Comment
  • Rice Energy: Dry Utica - From Optimism To Confidence [View article]
    Hi Carl,

    I don't know if they are using sliding sleeves or plug-n-perf. Will need to look into it.
    May 14, 2015. 03:21 PM | Likes Like |Link to Comment
  • U.S. Oil Shales: Breakeven Oil Price Is A Tricky Concept [View article]
    Babyneedsanewpairofshoes,

    Thank you for your insight. I sorry to hear about the damage to your house.

    I guess, saltwater disposal and earth quakes may be a good topic for an article. On my to do list.
    May 14, 2015. 07:06 AM | 1 Like Like |Link to Comment
  • EXCO Resources: Can A Restructuring Succeed? [View article]
    CachoR,

    The PV-10 is another metric. Please note that the $4.35/MMBtu price that is baked into the 2014 year-end PV-10 is even higher than what you are assuming.

    As for free chash flow, it is not mandatory - production growth or asset value growth while spending within cash flow is certainly an option.
    May 13, 2015. 07:17 PM | 1 Like Like |Link to Comment
  • Noble-Rosetta Deal: A Harbinger Of The Upstream Consolidation Wave? [View article]
    Robert,

    My comment was sloppy indeed, my apologies to everyone.

    What the comment was meant to be, using the SEC pricing, the pretax PV-10 of proved developed reserves is $1.75.

    (The total proved PV-10, on the other hand, is $3.2 billion, using the SEC pricing. And you are absolutely correct, the standardized measure is $2.6 bn).

    Thank you for pointing it out.
    May 13, 2015. 05:57 PM | 2 Likes Like |Link to Comment
  • EXCO Resources: Can A Restructuring Succeed? [View article]
    CachoR,

    You are correct, one needs to look very carefully at what is happening to the portfolio.

    With regard to sales, I don't think there have been sales in the Haynesville, Eagle Ford or Marcellus. There was an acquisition in the Haynesville.

    So one useful way to look at it, in my opinion, is in terms of organic growth and cash flow from operations from those specific assets. Acquisitions are separate.
    May 13, 2015. 04:49 PM | 1 Like Like |Link to Comment
  • Carrizo Oil & Gas: Solid Execution, Growing Asset Base [View article]
    Insiders bailing out is certainly a signal - not of a weak operating story, in my opinion, but of the stock's exceptionally strong relative performance.
    May 13, 2015. 01:47 PM | 1 Like Like |Link to Comment
  • Carrizo Oil & Gas: Solid Execution, Growing Asset Base [View article]
    Sure, but my point was that one cannot retire the existing debt without paying a full price that reflects credit. The market is pretty efficient in this area.

    Just imagine an abstract example. Imagine I have $100 million of 10% debt that I want to term out. I issue $130 million of new 5% notes to pay off the existing bondholders.

    Once I do my NPV math, it will likely turn out that this was an NPV-neutral swap (plus I had to pay a little bit on top to sweeten the deal and pay all those very useful bankers of mine so that they can send their kids to the summer camp in Bridgehampton).
    May 12, 2015. 06:23 PM | 1 Like Like |Link to Comment
  • Carrizo Oil & Gas: Solid Execution, Growing Asset Base [View article]
    Pablomike,

    In reality, there is very little direct value gain in a transaction of this type.
    May 12, 2015. 06:10 PM | Likes Like |Link to Comment
  • Noble-Rosetta Deal: A Harbinger Of The Upstream Consolidation Wave? [View article]
    Darren,

    The problem with EBITDA multiples in this environment is that they are obscured by hedges (that differ strongly from company to company) and the rate of production decline.

    Moreover, Noble is clearly paying up for the Reeves County resource base where Rosetta and others have only scratched the surface.

    I would not consider Rosetta being in trouble any more than others, although even a moderate debt level becomes uncomfortable when margins contract as rapidly as they did when the unhedged revenue line dropped in half.

    The best "apples to apples" metric would be the SEC-10. For Rosetta, it was ~$1.75 bn at year-end 2014.

    Even in the context of a stock-for-stock merger of equals, one would be challenged to rationalize this valuation outside the resource context.
    May 12, 2015. 02:59 PM | 2 Likes Like |Link to Comment
  • SandRidge Energy - Downside Driven By Debt Woes [View article]
    Economics Fanatic,

    "For the first quarter of 2015, SandRidge Energy reported an EBITDA of $182 million and a cash interest expense of $90.3 million. In other words, the company's EBITDA to interest coverage is already at 2.01. With debt likely to increase in FY15, the covenant breach is entirely likely."

    - I don't think their interest is nearly that high. I think they were actually ok on their covenants in Q1.

    "In 1Q15, SandRidge Energy generated an operating cash flow of $90 million and even if the same rate of cash flows is considered for the remaining quarters, SandRidge Energy will be generating an OCF of $350 million for FY15."

    -- Shouldn't one take into account changes in the working capital?

    "To put things into perspective, SandRidge Energy had 35 operating rigs at the end of FY14, which has been reduced to 7 in 1Q 2015."

    - I believe they ran an average of 24 rigs in Q1, I don't think they exited with 7 rigs, did they?
    May 11, 2015. 06:20 PM | 2 Likes Like |Link to Comment
  • U.S. Oil Shales: Breakeven Oil Price Is A Tricky Concept [View article]
    Skaterdude,

    Let me try to clarify. One can think of a steady production growth as a proxy for "return on capital," if we assume that the commodity price environment is unchanged. If a company's debt level remains constant, but there is no production growth, under such a business model investors will never see their money back. If, however, production is growing, that means that there is a cash flow surplus that, by being reinvested in the business, increases shareholder value.
    May 11, 2015. 07:25 AM | 1 Like Like |Link to Comment
  • U.S. Oil Shales: Breakeven Oil Price Is A Tricky Concept [View article]
    Okoil,

    That is a great point. Slowing down a bit may be a good thing for an industry that has been overheated for a long time.
    May 11, 2015. 12:19 AM | 3 Likes Like |Link to Comment
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