Energy Prospectus

Nice moves today by SD and PQ. SD did a JV with Repsol. Does anyone have any ideas on PQ?

Bob

One of our SMU interns has been assigned PQ. He should have a company profile done in January. I haven't spent much time on it lately but it looked good enough last summer for me to put it on the Watch List.

EPG members can see how the earnings and cash flows per share of all of our Watch List companies stack up against their peers by looking at our Watch List. Matt Denegre, one of our SMU interns, updates the Watch List each weekend. He has also added a nice feature to the spreadsheet (which EPG members can download to Excel). If we have a profile on the company, it will be highlighted on the Watch List spreadsheet and all you need to do is click on the company name to bring up the profile (which includes our forecast model).

We do have a profile for SD and it is high on my list for promotion up to the Sweet 16.

SandRidge Energy Inc. (SD), which said yesterday it would sell a stake in a Kansas and Oklahoma oil and natural-gas prospect to Repsol YPF SA (REP), wants to divest another 500,000 acres that may be worth $1.83 billion.

Holdings in the Mississippian deposit may be put in a royalty trust or sold to a joint-venture partner, Tom Ward, chairman and chief executive officer of the Oklahoma City-based company, said during a conference call today.

The company has gotten about $1.83 billion from selling 500,000 net acres in the Mississippian, Ward said. That includes 364,000 net acres that Madrid-based Repsol agreed to buy for $250 million in cash and another $750 million in drilling costs.

The Mississippian prospect covers 17 million acres in Kansas and Oklahoma. SandRidge has 195 horizontal wells in the area, 92 percent of the industry’s total, according to a company presentation. It estimates wells that use the sideways-boring technique will yield 300,000 barrels to 500,000 barrels of oil and gas.

SandRidge spent about $350 million for drilling rights on 2 million acres in the area during the last two years. It now holds 1.5 million acres in the formation and is done buying leases in the area, Ward said.

“We’d feel most comfortable with owning closer to 1 million acres,” he said. The company will double production, triple earnings before taxes, depreciation and amortization and reduce debt in three years by selling assets, he said.

SandRidge Energy, Inc. ("SandRidge") (SD) announced today that it has entered into a Joint Venture ("JV") with a subsidiary of Repsol YPF, S.A. (REPYF.PK) (REPYY.PK), a leading international energy company based in Madrid, Spain. Under the agreement, SandRidge will sell an approximate 25% non-operated working interest, or 250,000 net acres, in the Extension Mississippian play located in Western Kansas and an approximate 16% non-operated working interest, or 113,636 net acres, in its Original Mississippian play.

The 363,636 net acres in total will be sold to Repsol 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. In addition to paying for its working interest share of development costs, Repsol will pay an amount equal to 200% 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.