SandRidge Energy Inc. is reaping the dividends of its decision to eschew natural gas in favor of crude oil.
The Oklahoma City-based company has completed its transformation to oil producer, a move CEO Tom Ward believes has put SandRidge in position to nearly double its annual earnings on the way to tripling its stock price.
“I think the future is very bright for us,” Ward said.
SandRidge's potential is clear from this year's Oklahoma Inc. rankings. SandRidge was the state's seventh-best publicly traded company in 2011-2012, according to the rankings, but its 2,000 percent increase in earnings per share were by far the best in Oklahoma.
Ward maintains the company's success is due to its move to drill more oil wells, beginning in 2008.
That was about the time natural gas prices to drop, increasing the disparity in its value compared with crude oil.
“With oil prices at 30 to 1 (over) natural gas, where historically we've been 6 to 1, that just drives the bottom line, which ultimately is earnings,” Ward said.
He said SandRidge is well positioned to continue boosting its oil production.
The company began its move away from natural gas by buying acreage in west Texas' Permian Basin.
Ward said the Permian remains an important asset for SandRidge, but its holdings in the emerging Mississippian oil play are the key to its future.
“We think that will be the hallmark of the company over the next couple of decades,” he said. “That will be our growth area.”
SandRidge established the play in northern Oklahoma and extended it up into Kansas.
Other companies have secured Mississippian leasehold in Nebraska, as well, but SandRidge is the clear leader.
Ward said SandRidge has drilled 500 horizontal wells in the Mississippian, nearly half of the new wells drilled in the play.
SandRidge has 32 rigs at work in the play, which covers about 17 million acres, according to historical data studied by the company's geological teams.
Ward said SandRidge still is working on a relatively small area between Noble County in Oklahoma and Finney County in Kansas.
“We have thousands of locations left to drill,” he said.
“In fact we're long on opportunity, (which is) why we've brought in two partners so far.”
SandRidge inked deals last year worth $1.5 billion with Spain's Repsol YPF and South Korea's Atinum Partners Co. Limited.
“We were able to sell some of our acreage to help us fund our drilling program through 2014,” Ward said.
He said those investments helped SandRidge grow by about 40 percent over the past year.
“We see tremendous growth continuing through the play, depending on how much capital we spend,” Ward said. “We think we can grow double digits for many years to come.”