NEW YORK (TheStreet) -- SandRidge Energy (SD) - Get Report shares are down 6.13% to $1.84 on heavy volume Tuesday as the oil and natural gas company is preparing to cut its rig count by almost three-fourths, according to a document obtained by Reuters.

The company is planning to make the cuts in the Mississippi Lime formation in northern Oklahoma and southern Kansas, lowering the number of rigs it's using to 8 from 28.

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If the report is correct, the lowered rig count would represent one of the largest reductions an oil company has enacted since oil prices started their precipitous decline last June.

The Mississippi Lime formation is notoriously difficult to extract oil from due to the presence of large amounts of water that not only complicate drilling but is also costly to remove, according to Reuters.

The company declined to comment on the report but did say that it would provide operational details when it releases its earnings report on February 27. 

TheStreet Ratings team rates SANDRIDGE ENERGY INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SANDRIDGE ENERGY INC (SD) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, generally disappointing historical performance in the stock itself and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has decreased to $164.89 million or 21.60% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, SANDRIDGE ENERGY INC has marginally lower results.
  • SD's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 64.35%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Currently the debt-to-equity ratio of 1.80 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, SD's quick ratio is somewhat strong at 1.37, demonstrating the ability to handle short-term liquidity needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SANDRIDGE ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 21.4%. Since the same quarter one year prior, revenues fell by 20.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: SD Ratings Report