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Richard Zeits  

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  • SandRidge Energy: What Happens Once The Cash Pile Runs Out? [View article]
    YoungBull, Malfield, Wojiparu,

    Please let me clarify. I am solely referring to the cash on hand that the company has been using to fund its outspending relative to the internally generated operating cash flow. I estimate that the "cash pile" that a year ago was very large and has been the company's major source of financial flexibility will have been essentially spent by the end of Q1 2015. Nowhere in the article am I suggesting that the company is running out of liquidity (moreover, I highlight the company's liquidity situation at least in four different places in the article).

    However, the fact that the cash resource on the balance sheet will be gone very soon will have major implications for the company's ability to maintain its spending at the intended level of $1.55 billion per year.
    Mar 4, 2015. 10:19 AM | 2 Likes Like |Link to Comment
  • SandRidge Energy: What Happens Once The Cash Pile Runs Out? [View article]
    Richard,

    "I read the headline and first bullet point of your article and didn't bother to read the rest of it."

    It's a long article, I certainly understand. :)
    Mar 4, 2015. 08:15 AM | 11 Likes Like |Link to Comment
  • SandRidge Energy: What Happens Once The Cash Pile Runs Out? [View article]
    Richard,

    I don't think I have suggested anywhere that the company "is going to have a near term cash crisis." Moreover, in the article I explicityly state:

    "SandRidge closed 2014 with $181 million of cash on hand and the availability of approximately $900 million under its reserve-based credit facility, fully undrawn. The company's senior debt outstanding remained at $3.2 billion."

    There is also a whole section in the article, which you may have also overlooked, which is titled "Is liquidity sufficient?" that talks about this topic.
    Mar 4, 2015. 08:04 AM | 3 Likes Like |Link to Comment
  • SandRidge Energy: What Happens Once The Cash Pile Runs Out? [View article]
    Richard,

    By running out of cash, I literally mean spending the cash balance - that used to provide the company with a lot of flexibility and even some strategic options - down to zero. This may occur by the end of Q1.

    As I wtore, the company does have ample liquidity at the moment. However, liquidity and intrinsic value are two separate issues.
    Mar 4, 2015. 07:53 AM | 4 Likes Like |Link to Comment
  • Sandridge Energy Preferred Convertible: A 17.2% Yield With The Potential For A 60% Capital Gain [View article]
    Tack,

    That makes sense. If it comes down to a restructuring, by that time the company may have already added some senior debt, which will make a dent in what remains available to the unsecured bonds. Plus unavoidable dissipations in a restructuring.

    There is always a possibility that restructuring will not be necessary.
    Mar 3, 2015. 11:54 AM | 1 Like Like |Link to Comment
  • Sandridge Energy Preferred Convertible: A 17.2% Yield With The Potential For A 60% Capital Gain [View article]
    Tack,

    I am not sure I understand your point: "The recovery values for bonds, for companies like these, is immaterial, i.e., likely to be minimal."

    What do you mean by "companies like this?"

    At this point, SD does not have any senior debt and is asset rich, aren't they? And they work hard to invest new money at the best possible return they can.

    Immaterial recovery?
    Mar 3, 2015. 11:17 AM | 1 Like Like |Link to Comment
  • Sandridge Energy Preferred Convertible: A 17.2% Yield With The Potential For A 60% Capital Gain [View article]
    Richard,

    I understand, thank you. I guess my point was that a more relevant comparison (or, I should say, contrast) would be in the context of the following: what should the relationship between SD bond coupon yield and SD preferred div yield be in light of the structural subordination, intrinsic value per nominal amount and the conversion feature.

    Given that all these metrics vary from issuer to issuer, comparisons to other issuers are more difficult to rationalize (and therefore are less relevant) than the comparison across the capital structure of SD.

    This is really a convertible arb valuation exercise, isn't it.
    Mar 3, 2015. 11:10 AM | 1 Like Like |Link to Comment
  • Sandridge Energy Preferred Convertible: A 17.2% Yield With The Potential For A 60% Capital Gain [View article]
    Brandon,

    Just a minor note: in the quote, "We could pick them..." should be "We could PIK them..."
    Mar 3, 2015. 10:41 AM | Likes Like |Link to Comment
  • Sandridge Energy Preferred Convertible: A 17.2% Yield With The Potential For A 60% Capital Gain [View article]
    Richard,

    You are comparing a preferred to bonds. Is it structurally correct, particularly in this specific case? Aren't bonds senior to preferred structurally? Isn't the outcome potentially vastly different for bonds and preferreds in liquidation?

    Also, why use other companies' bonds as benchmarks when SD's bonds are quite liquid?

    Also, are you aware of the PIK feature and the recent SD management's comments?

    Also, have you noticed a $500 million carve-out under the amended credit facility for a potential second lien issue that was recently announced?

    You also suggest that the conversion feature is a benefit. What is the value of that option and what does it translate into in terms of effective yield reduction? It is quantifiable.

    Finally, what is the intrinsic value that you think is available to the preferreds?

    Personally, I would find it impossible to take a view on the upside (or downside) without understanding all these elements.
    Mar 3, 2015. 09:48 AM | 3 Likes Like |Link to Comment
  • Halcón Resources: Bakken Wells Impress [View article]
    Dr. Z.,

    I don't. But it's a commodity.
    Mar 1, 2015. 12:41 PM | Likes Like |Link to Comment
  • EXCO Resources: Weathering The Storm [View article]
    CachoR,

    I guess it depends on how optimistic is your view on the price of natural gas (and service costs).
    Feb 28, 2015. 09:46 AM | 1 Like Like |Link to Comment
  • EXCO Resources: Weathering The Storm [View article]
    CachoR,

    How do you define "a good margin of safety?"
    Feb 27, 2015. 11:48 PM | 2 Likes Like |Link to Comment
  • Halcón Resources: Bakken Wells Impress [View article]
    Kruk,

    I thought EIA reported a huge build this week and refinery utilization was over 87%. Am I wrong?

    http://seekingalpha.co...
    Feb 27, 2015. 05:30 PM | Likes Like |Link to Comment
  • Antero Resources: Hedges Will Protect Operating Margins In 2015 [View article]
    Stag15,

    I am sure you noticed, there is a whole camp of "hold-outs," such as Cabot for example, who have been reluctant to sing up for expensive 20-year FT deals. Once takeaway gets overbuild (and it would not be surprising, given the hype and the economic incentive to build), operators who are capacity-short will enjoy much stronger economics than those operators that will have to re-sell their spare capacity for very little.
    Feb 27, 2015. 08:38 AM | Likes Like |Link to Comment
  • Antero Resources: Hedges Will Protect Operating Margins In 2015 [View article]
    Stag15,

    Great observation. Very often, spare FT can be re-sold. If not, it's a significant extra cost.
    Feb 26, 2015. 09:39 PM | Likes Like |Link to Comment
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