SandRidge Energy has announced that it has an agreement to sell its wells and infrastructure in Texas’ Permian Basin region to privately held Sheridan Production Partners of Houston for $2.6 billion in cash.
The deal is expected to close in the first quarter of 2013.
SandRidge has been under pressure from some frustrated investors to reduce debt and curb its heavy spending. The company’s stock price has largely been trading between $5 and $10 since late 2008.
According to the company, the money will be used to pay down debt and to finance further development in northern Oklahoma and southern and western Kansas. Oklahoma City-based SandRidge is the most aggressive of the large out-of-state oil exploration companies, with nearly 2 million acres leased. The Permian properties, where CEO Tom Ward started the company, produce about 24,500 barrels per day of oil or its equivalent energy in gas or gas liquids.
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Because two-thirds of the Permian production is in oil, which enjoys strong prices, and just 18 percent in natural gas, which is selling at relatively low prices, the sale will reduce the percentage of revenue generated by oil the company produces.
Some stock analysts reacted by lowering their buy recommendations. SandRidge’s shares had fallen 3 percent by mid-morning.
In a statement, Ward said the additional cash will allow the company to better exploit the company’s future: the Mississippian Limestone formation in Oklahoma and Kansas.
“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 U.S. today,” he wrote in the statement. “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."