The WACC of SandRidge Energy Inc (SD) is 9.1%.
Range | Selected | |
Cost of equity | 7.7% - 10.5% | 9.1% |
Tax rate | 11.3% - 25.7% | 18.5% |
Cost of debt | 4.5% - 4.5% | 4.5% |
WACC | 7.7% - 10.5% | 9.1% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.84 | 1 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.7% | 10.5% |
Tax rate | 11.3% | 25.7% |
Debt/Equity ratio | 0 | 0 |
Cost of debt | 4.5% | 4.5% |
After-tax WACC | 7.7% | 10.5% |
Selected WACC | 9.1% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
SD | SandRidge Energy Inc | 0 | 0.81 | 0.81 |
BATL | Battalion Oil Corp | 8.2 | 1.44 | 0.19 |
BNE.TO | Bonterra Energy Corp | 1.18 | 1.36 | 0.7 |
CRBO | Carbon Energy Corp | 2.9 | -0.43 | -0.13 |
GDP | Goodrich Petroleum Corp | 0.35 | 1.62 | 1.25 |
ORC.B.V | Orca Exploration Group Inc | 0.25 | 1.16 | 0.96 |
PIPE.TO | Pipestone Energy Corp | 0.39 | 1.39 | 1.05 |
PNRG | Primeenergy Resources Corp | 0.02 | 1.34 | 1.32 |
REI | Ring Energy Inc | 2.37 | 0.97 | 0.33 |
SRX.TO | Storm Resources Ltd | 0.18 | 1.44 | 1.26 |
Low | High | |
Unlevered beta | 0.76 | 1 |
Relevered beta | 0.76 | 1 |
Adjusted relevered beta | 0.84 | 1 |
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for SD:
cost_of_equity (9.10%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.84) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.