Shares of SandRidge Energy Inc. climbed on Monday as an analyst raised his rating for the independent oil and natural gas company, citing its discounted share price.
Sandridge shares rose 31 cents, or 3 percent, to $10.47 in midday trading.
Goldman Sachs analyst Brian Singer upgraded SandRidge to "Neutral" from "Sell," as its stock value has tumbled 18 percent since Goldman added it to the "Americas Sell List" on Sept. 24. Singer removed SandRidge from the sell list and held his 6-month price target at $13.
"Shares now appropriately discount concerns about expected negative free cash flow in 2010 and less favorable catalysts in the near term for resource expansion in a low gas price environment," he said.
Natural gas prices have struggled to recover, ranging $2.50 and $5 per 1,000 cubic feet in the third quarter. In the same period last year prices nearly reached $14 per 1,000 cubic feet.
Looking ahead, Singer sees favorable drilling economic conditions at the company's Warwick Thrust in the Texas Pinon field. However, because of low natural gas prices, the company's drilling has been constrained. Singer expects this to continue for another two months, but notes that the company is preparing to start drilling six of 20 identified structures in early 2010.
Singer listed SandRidge's key risks as commodity price volatility, drilling results, costs and government mandates.