OKLAHOMA CITY, Nov. 5, 2018 /PRNewswire/ — SandRidge Energy (NYSE: SD) (“SandRidge” or the “Company”) announced today it has closed two transactions that will collectively generate meaningful incremental asset value, margin improvements and operational efficiencies for the Company.
On November 1, the Company sold substantially all of its oil and gas properties, rights and related assets in the Central Basin Platform (“CBP”) region of the Permian Basin, together with 13,125,000 Common Units of the SandRidge Permian Trust (the “Trust”), to an unaffiliated party for net proceeds of $14.5 million, subject to certain post-closing adjustments. The subject oil and gas properties largely consist of shallow, low net revenue interest wells burdened by a substantial overriding royalty interest conveyed to the Trust. Lease restrictions and Trust limitations on these properties significantly constrain any additional development beyond existing wellbores. The transaction simplifies the Company’s operations with the removal of a large population of low-rate and shut-in wells, collectively averaging 1 Boepd per well and with direct lifting costs of $30.50 per bbl. The divestiture of almost 1,500 wells also eliminates approximately 32% of the Company’s total asset retirement obligations.
On November 2, the Company acquired certain oil and gas properties, rights and related assets in the Mississippi Lime and NW STACK areas of Oklahoma and Kansas (the “Mid-Continent”) for $25.1 million, subject to certain post-closing adjustments. The acquired interests in these assets are additive to existing SandRidge ownership positions. The Company operates approximately 80% of the subject wells and holds an existing working interest in most of the remaining wells operated by others. In addition to well and lease rights, the Company is acquiring an additional 13.2% interest in its produced water gathering and disposal system. As of September, these oil and gas properties had monthly net production of 3,775 Boepd and monthly net operating income of $1.5 million. The transaction is accretive to cash flow and net asset value per share, and the Company estimates an associated payback period of less than three years.
“Both transactions will have a positive impact on the Company’s operating efficiency,” said Bill Griffin, President and CEO. “The CBP properties accounted for more than 12% of our total operating expenses, while contributing only 4% of the production during the first half of 2018. The sales price of these properties represents an attractive valuation, particularly considering their minimal growth potential and royalty interest burden, which requires SandRidge to cover 100% of operating costs but only receive 34% of revenues. Exiting the Central Basin Platform simplifies the Company’s portfolio and operations, allowing SandRidge to increase our focus on executing our long-term development and growth strategy.”
“The Mid-Continent transaction consolidates working interest in acreage and properties currently held by the Company, requiring no additional staffing to operate. These assets are well known by the Company and add low risk incremental income. Pro forma for the two transactions, the Company expects a net increase in current production of 2,615 Boepd, reduced direct lease operating expenses of $0.67 per Boe and incremental proved PV-101 of approximately $38 million.”
Mr. Griffin continued, “Considered together, these transactions allow the Company to redeploy the declining residual cash flow of legacy, non-core CBP assets, together with proceeds from the previously disclosed Parkside building sale for $10.3 million, into an attractively priced, complimentary acquisition. These are small but important next steps that help demonstrate our ability to improve profitability and create shareholder value.”