SandRidge Energy entered into an agreement with a private investment fund to develop wells in the NW STACK. SandRidge disclosed the news in its second quarter 2017 financial and operational report.
The wellbore-only drilling program will target the Meramec formation, primarily within Major and Woodward Counties, Oklahoma. The undisclosed investment fund will fund $100 million in the initial tranche with an option for a second $100 million tranche (subject to mutual agreement). The investment fund will cover 90% of the drilling costs and will receive an 80% working interest in each wellbore. SandRidge will serve as the operator.
NW STACK update
In the report, SandRidge offered details regarding the company's capital allocation plans for 2017 as it pertains to the area. James Bennett, SandRidge Energy's president and CEO, commented: "In the NW STACK, due to the carry structure of the drilling agreement, we are reducing our NW STACK D&C capex while simultaneously increasing the number of laterals drilled by 55%. In total, we are increasing our capital program from a midpoint of $215 million to $255 million. It’s important to note that even with this increase in capital spending, we will maintain the same level of outspend as with our original budget as our improvements in LOE, increase in production guidance and approximately $15 million in asset sale proceeds will offset the increase in capex."
SandRidge has actively developed the Anadarko Basin with over 1,600 horizontal wells drilled in Oklahoma and Kansas. Current drilling activity is concentrated within the company’s 70,000 net acres in the NW STACK encompassing Major, Woodward, and Garfield Counties. This area contains an extension of the oil-weighted Meramec and Osage targeting opportunities present in the STACK (Canadian and Kingfisher Counties). During the second quarter, SandRidge drilled eight laterals in the NW STACK and brought six laterals to sales. The Drilling Participation Agreement allows SandRidge to accelerate delineation of its NW STACK footprint, increasing drilled laterals to 34 from 22 while simultaneously reducing capital expenditures by 7%, the report detailed.
Prior to declaring the transaction effective, SandRidge has sought preclearance of certain accounting matters related to the transaction from the SEC. Kirkland & Ellis LLP advised the undisclosed global investment fund in its agreement with SandRidge Energy.