Take a good look at the 8K reports for Sandridge MII on Edgar (the government corporate reporting site). Even though these reports are brief, they tell a story that is troubling. I did a pretty extensive analysis of the production rates for oil and gas since the start-up of the trust. The decrease in production over this time is amazing. Either Sandridge is sandbagging or the wells that they have drilled stink. Either way it is bad news. I have lost money on this stock, but I set up a June put spread and sold some of my shares so that I am currently about delta (Price Movement) neutral. IF YOU HAVEN'T DONE SO, EITHER SELL YOUR SHARES OR HEDGE YOUR POSITION. Longer term these shares will probably drop to around $5-6. A short position is probably the right play here.
The following data are disturbing, and you have to ask the question about what Sandridge is up to. Is the oil and gas contained in these wells really this bad!!!!???
Oil production rates by quarter: (Bbls of oil per well per day) (most recent qtrs first)
13.5, 15.9, 23.3, 22.8, 26.8, 44.9, 68.4
Gas production rates by quarter: (Mcf gas per well per day) (most recent qtrs first)
105.9, 121.8, 157.9, 165.4, 207.3, 284.2, 460.1
Either Sandridge is "sandbagging" or these wells are DOGS!! The negative article in SA is right!
If this is such a stellar idea, why don't you see ATT buying stock in Verizon, or Dell buying Hewlett Packard. It does not look good, especially since the marginal potential return between buying competitor's shares and buying back your own shares is probably minimal. IMO, the better decision would have been to buy back more of your own shares.
In today's conference call, Kain disclosed that the Company bought shares in other REITS for investment purposes. Exactly what stocks were purchased, he would not disclose. One particular analyst took issue with the decision to buy other stocks. Quite honestly, the analyst has a good point.
If the future is so bright for AGNC, why not buy back more AGNC shares vs. a competitor's shares. How would Dell shareholders feel if Michael Dell bought shares in Apple? This was a bone-headed decision, something that was not well thought out. It is an insult to the current shareholders of AGNC, especially after the year that we have experienced (-24%).
Apple is top heavy...the law of large numbers plays against this stock...the company needs to figure out how to create more value for the stock and the shareholders. Unfortunately, the corporate culture is not focused in that direction. I think that there will be an opportunity to buy this stock in the $390 - $430 range