I hold both RFE and SEA but have held SEA longer and in bigger quantities.
The reasons to hold Sundance are multiple. They have acreage in three different quality resource plays in the US and appear to be on the verge of a big upsurge in production. Mgmt has demonstrated excellent judgement in where to buy land early and how to minimize risk early and now stepping up to operatorship in the newer Niobrara and Mississippian plays.
Red Fork is a pure play on the Mississippian. They have quickly assembled a 75,000 acre package in the original Mississippian field and are on the verge of producing significant amounts of oil from their several new wells. Red Fork has a higher market cap and higher total acreage than Sundance. Sundance has the advantage of Bakken drilling that is on autopilot from bigger partners as well as diversification of risk amongst their various plays.
I would rate Red Fork as higher risk because of less production and a concentration in the one play. But their bigger acreage will lead to a higher valuation as they derisk their acreage and the Mississippian valuations rise.
Sundance has already gathered 24,000 acres in the Mississippian and says their goal is 40,000 by 12/12 and 80,000 by 12/13.
Bottomline, I think there are legitimate reasons to hold both. Sundance is safer due to multiple plays, big JV partners AND oil hedges for 24% of current production that will protect revs from the current fall in oil prices.
Red Fork should recover from the selloff by the two institutional holders and rise as their production shows up in their P&L's.
If you believe that oil prices will continue to fall, you should sell both. If you think the world economy survives, I think both are good candidates to go back to previous highs and beyond.
SEA Price at posting:
52.5¢ Sentiment: Hold Disclosure: Held
