Understanding Capital Efficiency in the Energy Sector: A Look at SandRidge Energy, Inc. and Peers

• SandRidge Energy, Inc. (NYSE:SD) showcases effective capital utilization with a ROIC of 12.86% exceeding its WACC of 8.06%.
• Range Resources Corporation (RRC) leads in capital efficiency among peers with a ROIC to WACC ratio of 1.69, despite a lower ROIC compared to SandRidge.
• Chesapeake Energy Corporation (CHK) and Southwestern Energy Company (SWN) demonstrate inefficiency in capital use, with CHK not generating sufficient returns and SWN losing value on investments.

SandRidge Energy, Inc. (NYSE:SD) is an oil and natural gas company based in the United States, focusing on the exploration and production of hydrocarbons, primarily in the Mid-Continent region. It competes with other energy firms like Range Resources Corporation, Chesapeake Energy Corporation, Southwestern Energy Company, SM Energy Company, and Northern Oil and Gas, Inc.

SandRidge Energy's Return on Invested Capital (ROIC) is 12.86%, which is higher than its Weighted Average Cost of Capital (WACC) of 8.06%. This indicates that SandRidge is effectively using its capital to generate returns that exceed its cost of capital. The ROIC to WACC ratio of 1.60 further highlights the company's efficiency in capital utilization.

In comparison, Range Resources Corporation (RRC) has a ROIC of 10.96% and a WACC of 6.47%, resulting in a ROIC to WACC ratio of 1.69. This makes RRC the leader among its peers in terms of capital efficiency. Despite having a lower ROIC than SandRidge, RRC's lower WACC contributes to its superior ratio.

Chesapeake Energy Corporation (CHK) shows a ROIC of 1.08% against a WACC of 5.74%, leading to a ROIC to WACC ratio of 0.19. This suggests that CHK is not generating sufficient returns to cover its cost of capital, indicating inefficiency in capital use.

Southwestern Energy Company (SWN) has a negative ROIC of -6.16% and a WACC of 7.27%, resulting in a ROIC to WACC ratio of -0.85. This negative ratio indicates that SWN is not only failing to cover its cost of capital but is also losing value on its investments.