Oklahoma City-based SandRidge Energy Inc. [NYSE: SD] said Dec. 19 that it has signed a definitive agreement to sell its Permian Basin properties to Sheridan Production Partners II, a privately held Houston-based oil and gas company, for $2.6 billion in cash. SandRidge previously said it was exploring the sale of the assets.
Tom Ward, SandRidge’s chairman and CEO, commented, “This is a great outcome for our shareholders. The sale of the Permian assets at this time has allowed us to capitalize on current strong valuations for mature, conventional Permian assets and generate a very strong return on our investment there.”
Noting that the Permian Basin assets were a key part of SandRidge’s planned strategic transition from a natural gas producer to an oil rich E&P company, Ward added, “With these proceeds we will have a cash balance of almost $3 billion and liquidity of over $3.5 billion, which we intend to use to reduce debt and strengthen the balance sheet. This will also allow us to fund development of our acreage position as well as future opportunities in the highly scalable, high return Mississippian Play.”
Ward continued, “We are excited about focusing our efforts on the Mississippian, which encompasses parts of northern Oklahoma and western Kansas, an area we believe generates some of the highest rates of return for horizontal drilling in the US today. With 1.85 million net acres and 11,000 possible future drilling locations, the Company is the industry leader in the region. We also have a unique advantage because of extensive investments in critical infrastructure that make our operating costs there among the lowest in the industry. With the sale of the Permian assets, we will significantly reduce our debt balances and, with our ample cash and liquidity, be very well positioned to fund our capital expenditures through 2014 and deliver significant value to stockholders.”
The Permian properties being sold were producing approximately 24,500 boe per day at the end of the third quarter (67% oil, 15% NGLs and 18% natural gas) and exclude assets associated with SandRidge Permian Trust [NYSE: PER].
The transaction is expected to close during the first quarter of 2013, subject to customary closing conditions, and will have an effective date of Jan. 1, 2013. Additionally, revised 2013 operational guidance for SandRidge will be issued upon the closing of the sale. RBC Richardson Barr and Morgan Stanley & Co. LLC acted as financial advisors to the company in connection with the transaction. The buyer of the assets, Sheridan Production Partners II, is the second series of Sheridan funds established for the management and ongoing development of mature producing oil and gas properties.
SandRidge and its subsidiaries also own and operate gas gathering and processing facilities and CO2 treating and transportation facilities and conduct marketing operations. In addition, Lariat Services, Inc., a wholly-owned subsidiary of SandRidge, owns and operates a drilling rig and related oil field services business.SandRidge focuses its exploration and production activities in the Mid-Continent, Permian Basin, Gulf of Mexico, West Texas Overthrust, and Gulf Coast.