From Okalhoma-based SandRidge Energy:
OKLAHOMA CITY, Jan. 7, 2014 /PRNewswire/ -- Prompted by ongoing drilling success in its onshore operations and a more focused Mid-Continent strategy, SandRidge Energy, Inc. (NYSE: SD) ("SandRidge") today announced the sale of its Gulf of Mexico business, which comprises all of SandRidge's Gulf of Mexico and Gulf Coast properties, to Fieldwood Energy LLC, for $750 million of cash and the assumption of $370 million of abandonment liabilities and subject to customary purchase price adjustments. SandRidge will also retain a 2.0% overriding royalty interest in certain exploration prospects. The proceeds are expected to be reinvested over time in the company's Mid-Continent drilling projects. SandRidge also announced revised guidance for 2014, including production growth of 26% in 2014, an increase from the previous guidance of 12% growth.
"Given our status as a premier operator in the Mid-Continent, where we have established competitive advantages including infrastructure networks, sub-surface knowledge and a best-in-class cost structure, we have elected to further focus our efforts into developing this area. 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," commented James Bennett, SandRidge's President and CEO.
Mr. Bennett further commented, "This transaction provides us with pro-forma liquidity of over $2.0 billion, while maintaining a leverage ratio under 3.0x. Our growing cash flow plus the availability of additional reserves based borrowings are envisioned to fund our growth strategy. SandRidge is now a high growth, Mid-Continent focused company."
In 2014, the company will redeploy the capital expenditures that were previously allocated to Gulf of Mexico development into its Mid-Continent assets. SandRidge plans to add three additional rigs during the second quarter of the year, resulting in the drilling of approximately 30 additional gross wells compared to the previous budget. The company now expects to exit 2014 with 29 rigs operating in its Mid-Continent acreage, where it continues to discover, delineate and develop new, high rate-of-return opportunities.
The company is updating 2014 guidance provided on November 5, 2013 to adjust for the impact of the divestiture. The company expects to produce 29.3 MMBoe in 2014, which includes 1.0 MMBoe of production from Gulf of Mexico assets prior to the closing of the transaction. This compares to pro-forma 2013 estimated production of 22.4 MMBoe, after adjusting for divested Gulf of Mexico and Permian properties, and results in 26% organic year-over-year production growth. The company anticipates capital expenditures of $1.475 billion in 2014. The redeployment of offshore capital expenditures is expected to result in 2014 production of 23.2 MMBoe in the Mid-Continent, representing production growth of 37% over estimated 2013 levels.
The assets divested had proved reserves at December 1, 2013 of 29 MMBbls of liquids and 168 Bcf of natural gas, as determined by Netherland, Sewell & Associates, and daily production of approximately 23.5 MBoe/d over the past month, of which approximately 48% was natural gas. The 2.0% overriding interest SandRidge will retain in exploration projects encompasses the deep Miocene prospects in Green Canyon 65 (Bullwinkle area) and South Pass 60 blocks. The transaction is expected to close during the first quarter of 2014, subject to customary closing conditions and will have an effective date of December 1, 2013. RBC Richardson Barr acted as financial advisor to the company in connection with the transaction.