SandRidge Energy Inc. has inked a deal to sell the bulk of its holdings in west Texas' oil-rich Permian Basin for $2.6 billion, the company announced Wednesday.
SandRidge amassed its Permian acreage in 2009 and 2010 as it shifted its focus to oil production, but the Oklahoma City-based company now is concentrating on the emerging Mississippian oil play in northern Oklahoma and southern Kansas.
CEO Tom Ward said the sale of about 212,000 acres to Houston-based Sheridan Production Partners II is a “great outcome” for the company's 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,” he said in a statement issued by the company.
Ward said the sale will give SandRidge a cash balance of nearly $3 billion to reduce debt and strengthen the company's 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,” he said.
SandRidge, which first raised the possibility of selling its Permian holdings during a Nov. 8 earnings call, is being pressured by two of its largest shareholders to shake up its management team.
Investment firm TPG-Axon has identified the “sudden” move to sell the company's Permian assets as one of the key reasons for its push.
“If these sales represented a newfound commitment to realizing and delivering value for shareholders, we would not be having this dialogue,” CEO Dinakar Singh wrote in a Nov. 30 letter to the SandRidge board. “Instead, they are yet another symptom of a management team that has had reckless disregard for transparency, for prudence, and for the shareholders.”
Analyst Neal Dingmann said the deal is a good one for SandRidge, if the company uses proceeds to deleverage the company a bit.
Second lawsuit filed in a month
A Florida man filed a securities lawsuit Wednesday against SandRidge Energy Inc.'s board of directors, accusing the Oklahoma City oil company's leaders of engaging in reckless business practices.
SandRidge shareholder Arthur I. Levine accuses the directors of approving transactions that benefitted them, not the company.
Levine's 30-page lawsuit echoes many of the complaints leveled by investment firm TPG-Axon Capital, one of SandRidge's largest shareholders.
It is the second such lawsuit involving SandRidge filed this month in federal court in Oklahoma City.