SandRidge Energy (SD) Stock Hits One-Year Low on Potential Quarterly Earnings Restatement

NEW YORK (TheStreet) -- Shares of SandRidge Energy  (SD) fell more than 6.5% to a 52-week low of $3.50 on Tuesday after the company announced the SEC has asked SandRidge to reassess how it accounts for penalties paid under a deal with Occidental Petroleum  (OXY) .

This review could lead SandRidge to restate almost two years' worth of quarterly results.

The company also said it would postpone the announcement of its third-quarter earnings until it reviews the situation and comes to a resolution with the SEC.

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SandRidge must pay a penalty fee under its 30-year agreement with Occidental Petroleum whenever SandRidge comes up short of minimum required carbon-delivery volume targets. 

SandRidge said it has factored in the penalty on an annual basis, but the SEC has asked the company to determine if it should be accounted for quarterly. This review could lead SandRidge to restate its quarterly earnings results from the period ended December 2012 through the period ended June 30, 2014.

Separately, TheStreet Ratings team rates SANDRIDGE ENERGY INC as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SANDRIDGE ENERGY INC (SD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and generally higher debt management risk."

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

  • The gross profit margin for SANDRIDGE ENERGY INC is currently very high, coming in at 74.91%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -6.52% is in-line with the industry average.
  • SD, with its decline in revenue, underperformed when compared the industry average of 1.9%. Since the same quarter one year prior, revenues fell by 26.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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.
  • Net operating cash flow has decreased to $140.34 million or 46.68% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has decreased by 19.6% when compared to the same quarter one year ago, dropping from -$20.44 million to -$24.44 million.
  • You can view the full analysis from the report here: SD Ratings Report

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