SandRidge Energy Inc. announced a royalty deal on April 22, which its CEO described as a good example of a “small-ball” intended to boost shareholder returns.
The acquisition consisted of all the overriding royalty interest (ORRI) assets of SandRidge Mississippian Trust I (SDT Trust). SandRidge Energy agreed to acquire the ORRI assets for $4.85 million or net $3.55 million, the company said, given its ownership of the SDT Trust.
“Buying in the ORRIs from SDT will add to our PDP reserves and improve our netbacks and cash flow in wells that we already operate for the most part,” SandRidge President and CEO Carl Giesler said in a statement commenting on the transaction.
The SDT Trust owns royalty interests in oil and natural gas properties in the Mississippian formation in Alfalfa, Garfield, Grant and Woods counties in Oklahoma.
Last November, SDT Trust announced plans to dissolve and commence winding up the Trust. At year-end 2020, the market cap of the SDT Trust was $5.1 million, of which SandRidge owns approximately 26.9%, according to a company filing from March.
“This acquisition is a good example of the relatively low-capital, high-return, quick-payback, ‘small-ball’ investments that the board and management are making to increase shareholder value realization from its asset base,” Giesler added.
At the current strip and based on historical production trends, SandRidge estimates the acquisition of ORRI from SDT represents an attractive price-to-value, approximating PDP PV-55 and a two-year cash-on-cash payback, according to the company release.
Based in Oklahoma City, SandRidge is an independent oil and gas company operating primarily in the Midcontinent region of Oklahoma and Kansas.
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