SandRidge Energy (SD) Stock Surges as Oil Prices Rebound From Five-Year Low

NEW YORK (TheStreet) -- Shares of SandRidge Energy  (SD) surged 10.48% to $2.32 in morning trading Tuesday as oil prices recovered slightly after touching a new five-year low.

Brent crude for January delivery dipped as low as $65.29, the lowest point since September 2009, according to Reuters. Brent recovered to $65.98 at 10:05 a.m., according to CNBC.

The rebound occurred as some oil buyers returned in the hopes that prices had bottomed after a 40% plunge since June, according to Reuters.

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Brent crude fell more than 4% to a session low of $65.93 a barrel on Monday, its lowest point since October 2009. WTI Crude also dropped below $63 for the first time since July 2009.

The price drop occurred after Morgan Stanley reduced its 2015 forecast for Brent crude in a research note issued late Friday. The firm said Brent could drop to as low as $53 a barrel next year, although it forecast a base case scenario of $70. Morgan Stanley had previously expected $98 a barrel.

"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015. Prices are set up to fall in the first half of 2015," the firm wrote.

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 6.3%. 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 against the S&P 500 and did not exceed that of 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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