Leon Cooperman’s Invest For Kids 2013 presentation, pitches SandRidge Energy Inc. (NYSE:SD), Sprint Corporation (NYSE:S), Monitise Plc (LON:MONI) (OTCMKTS:MONIF) and Atlas Energy LP (NYSE:ATLS).

Leon Cooperman on SandRidge Energy

Leon Cooperman on SandRidge Energy

Leon Cooperman: Why SandRidge Energy is Special

Underlying quality of the Mississippian is fundamentally misunderstood by the Street

  • Simply put, the Street thinks the asset is getting worse when it’s actually getting better Special…
  • Production rates on new wells have increased 15% quarter over quarter
  • Wells are performing above the company’s stated type-curve

Undergoing large-scale , fundamental change…production is up and costs are down

  • Overhead reductions of $50-75 million per year
  • Management change – out with the old (growth for growth’s sake), in with the new (capital efficiency)
  • Refocused on drilling known, good acreage

Hidden asset value is currently being ignored…we think that will change soon

  • Additional Woodford and other Mississippian objectives – $1-2/share of upside
  • Gulf of Mexico sub-salt prospects – $1/share of upside
  • Salt Water Disposal system – drives industry-low opex in the Mississippian and provides competitive advantage in the basin, as other operators are saddled with onerous water disposal costs

Large acreage position makes it a strategic target

  • ~1 million “good” acres make it a meaningful potential resource base to a larger E&P
  • Repsol SA (ADR) (OTCMKTS:REPYY) (BME:REP) is SandRidge Energy Inc. (NYSE:SD)’s partner in the Mississippian; Repsol is expected to have $15-20Bn of cash on their balance sheet by early next year

Leon Cooperman: SandRidge Energy’s near Catalysts expect changes

Estimates need to increase

  • Company has guided to 2014 production growth of 10-11%, the Street is still at 3%
  • Given recent well performance, we expect an upward shift in the Mississippian type curve Near-Term – a lot before year end
  • The Street has mis-modeled SandRidge Energy Inc. (NYSE:SD)’s royalty interest payments going forward
  • Simmons & Co commentary (10/7/2013):
    • “We now estimate Q3 production of 90.2kb/day versus Bloomberg consensus of 88.7kb/day”
    • “SD should be able to support their previous indications of low double digit FY’14 production growth and show an early path toward closing their cash flow gap going forward”
    • “NAV could be biased higher”

Woodford and other Mississippian objectives

  • Will get results from SD’s first Woodford wells on Q3 call (November 5)
  • DVN comments from their Q2 results:
    • “In addition to delivering an excellent quarter, we achieved some exciting results in a new light-oil resource play. We have now identified 400,000 net acres in the Mississippian Trend with Woodford Oil Shale potential.”

GOM sub-salt JV/sale could happen before year end; industry chatter is bullish and activity is ramping up

  • SandRidge Energy Inc. (NYSE:SD) owns two large sub-salt prospects that could hold 100MM+ BOE of resource
  • Energy XXI (Bermuda) Limited (NASDAQ:EXXI) – partnered with XOM and APA in four similar prospects
  • Apache Corporation (NYSE:APA) – sold their GOM Shelf assets to Fieldwood, but retained a 50% interest in the sub-salt prospects
  • Capital One sub-salt commentary (9/27/2013):
    • “A developing E&P theme over the past several months has been the reemergence of the potential for drilling deeper horizons in the GOM shallow waters that is being primarily driven by less expensive and improved technology”
    • IRRs range from 35-55%; $/BOE valuations of $8-10/bbl

2014 guidance – will start to get Street comfortable with their stated growth of 10% next year

Leon Cooperman: SandRidge Energy’s Operating Summary Mississippian results will drive value

Mississippian

  • Conventional oil/gas drilling in Oklahoma and Kansas
  • SD own 1.9mm net acres in the play; 1mm of which we deem to be “good”
  • 2013 production: 46kbbl/day
  • 2014 production: 60kbbl/day (30% growth)
  • Currently focused on 6 core areas

Gulf of Mexico

  • Conventional GOM shelf prospects
  • 2013 production: 28kbbl/day
  • Future production profile: flat to down, based on future capex spending

Other

  • Permian oil and West Texas Overthrust gas

[ARCHIVES] Leon Cooperman's  2013 Invest For Kids Presentation

Leon Cooperman: SandRidge Ownership – strong core of long term, fundamental shareholders

Riverstone

  • Owns 52 million shares
  • Sold Dynamic Offshore (GOM) to SD and received shares as consideration

TPG

  • Owns 36 million shares
  • Led the Proxy contest that resulted in a new CEO, lower overhead, and more focus on capital efficiency
  • Have publically stated they think the stock is worth $11-12/share

Mount Kellett

  • Owns 25 million shares
  • Have publically stated they think the stock is worth $15+/share, based on higher future gas prices

Other large shareholders

  • Fairfax: 32 million shares
  • Highfields: 13 million shares
  • Litespeed: 13 million shares

See full presentation here.