Barclays Says SandRidge Will Lose More Money This Year; Stock Tumbles

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Shares of SandRidge Energy Inc.
SD
are tumbling on Thursday morning after Barclays reiterated an Underweight rating. In a report rolled out Thursday morning, the research firm set a $0.50 price target and moved its EPS estimate from a loss of ($0.15) to a loss of ($0.30) for the current fiscal year. For the next fiscal year, the analysts expect wider loss -- of ($0.45). According to the report, Barclays is worried about the significant reduction in the capital budget for 2015. "In an effort to better manage liquidity and rising leverage ratios," total spending will be trimmed to less than half of 2014's figure as the company slashes its rig count in the Mississippi Lime from 32 at the beginning of 2015 to 7 by mid-year. The plan is to concentrate on its focus area in the Mississippi Lime "where it plans to employ a greater use of multilateral development to drive down costs." Despite the "potential improvement in capital efficiency, lower activity levels are expected to result in a declining production profile through 2015," the report states. The firm expects a mid-teens percentage decrease in production from the fourth quarter of 2014 to the fourth quarter of 2015. Moreover, in spite of the reduced capital spending, Barclays still expects SandRidge to incur a cash flow deficit of approximately $450 million this year. The analysts "note the vast majority of SD's operating cash flow this year will be supported by higher priced oil and gas hedges that roll off next year." They project "lower hedging gains coupled with lower production in 2016 could result in higher leverage ratios, which could further restrict the company's ability to invest sufficient capital to arrest declining production."
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Posted In: Analyst ColorNewsPrice TargetReiterationAnalyst RatingsBarclaysMississippi Lime
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