SandRidge Energy Inc. is taking another step in its ongoing transformation.
The Oklahoma City-based oil and natural gas producer announced Tuesday it is selling its Gulf of Mexico business for $750 million in cash so it can focus on its onshore properties.
“Our mission here at SandRidge is to create the premier, high-return, growth-oriented resource conversion company focused in the Mid-Continent region of the United States,” CEO James Bennett said. “This sale represents a major step toward that mission by positioning SandRidge as a high-growth, liquid-rich Mid-Continent company.”
Proceeds from the sale to Fieldwood Energy LLC will be reinvested over time into SandRidge's Mid-Continent drilling projects.
SandRidge revised its 2014 production guidance as it announced the Gulf deal. The company expects to be able to boost production to about 29.3 million barrels of oil equivalent this year, pushing its year-over-year growth from 12 percent to 26 percent by adding three more drilling rigs in the Mississippian play.
“Given our status as a premier operator in the Mid-Continent, where we have established competitive advantages including infrastructure networks, subsurface knowledge and a best-in-class cost structure, we have elected to further focus our efforts into developing this area,” Bennett said. “Based on our confidence in the asset base, we will increase the pace of development in our six-county de-risked focus area where we have over a decade of drilling locations.”
He said that inventory of high-return drilling locations should allow SandRidge to post annual production growth of 20 percent or more for years to come.
SandRidge intends to maintain about 600,000 acres in its focus area in northern Oklahoma and southern Kansas.
David Lawler, the company's chief operating officer, said SandRidge has had some success in other parts of its leasehold, which covers 1.8 million acres, but declined to offer further details.
SandRidge also maintains some acreage in west Texas' Permian Basin that yields about 5,000 barrels of oil equivalent a day. The company sold the bulk of its Permian acreage for $2.6 billion in late 2012.
SandRidge's stock dipped 8 cents Tuesday to $5.74 a share after the Gulf sale was announced.
Morningstar analyst Mark Hanson said SandRidge “roughly broke even” on its Gulf dealings based on the cash flow those assets generated over the past two years. Fieldwood also will take on $370 million in abandonment liabilities.
SandRidge bought into the Gulf in February 2012 with its $1.275 billion acquisition of Houston-based Dynamic Offshore Resources LLC.
It retained a 2 percent stake in two deepwater projects as part of its deal with Fieldwood.
SandRidge likely will book a loss on its dealings in the Gulf, but the sale was hailed Tuesday by one of the company's most vocal critics.
“We think it's a terrific move and will really focus people on the fact that what's left at SandRidge is actually one of the best growth companies in the environment,” TPG-Axon Capital CEO Dinakar Singh said.
TPG-Axon, one of SandRidge's largest shareholders, criticized the company's spending habits in late 2012 before launching a proxy fight that led to the ouster of former CEO Tom Ward.