SandRidge Energy, Inc. (SD: Quote) Thursday said it entered into a Joint Venture with a subsidiary of Repsol YPF SA (REPYY.PK), with the sale of 363,636 net acres in the Mississippian oil play for an aggregate transaction value of $1 billion. Repsol will pay $250 million in cash at closing and the remainder in the form of a drilling carry.
Under the agreement, Oklahoma City, Oklahoma-headquartered SandRidge will sell an approximate 25 percent non-operated working interest, or 250,000 net acres, in the Extension Mississippian play located in Western Kansas and an approximate 16 percent non-operated working interest, or 113,636 net acres, in its Original Mississippian play.
In addition to paying for its working interest share of development costs, Madrid, Spain-based Repsol will pay an amount equal to 200 percent of its working interest to fund a portion of SandRidge's cost of development until the additional $750 million drilling carry obligation is satisfied.
Based on current drilling expectations, SandRidge anticipates the drilling carry obligation to be satisfied within three years.
The JV will exclude all wells and acreage within the associated spacing units spudded prior to January 1, 2012 and all wells and acreage associated with SandRidge Mississippian Trust I.
The transaction is expected to close in the first quarter and is subject to certain closing conditions.
SandRidge compared the vast Mississippian oil play to the Bakken and believes the play would be transformational for the Mid-Continent region of the United States. The company has drilled more than 195 horizontal wells, representing nearly half of all the horizontal wells drilled in the play to date. As a result of the drilling carry and its lower working interest, SandRidge's 2012 capital expenditure is expected to decline to $1.6 billion from a previous budget of $1.8 billion.
Tom Ward, chairman and CEO, said," This JV with Repsol puts us on a clear path to bridge the 2012 funding gap with non-debt capital and to execute our three year plan to triple EBITDA and double oil production while lowering our debt to EBITDA ratio."
SandRidge was advised by Tudor, Pickering, Holt & Co. and Vinson & Elkins, LLP.
SD is currently trading at $8.05, up $1.38 or 20.61%, on a volume of 17.1 million shares, on the NYSE. Over the past year, the stock traded in a range of $4.55 - $13.34, with three-month average volume of 12 million shares.
by RTT Staff Writer
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