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SandRidge Energy Management Discusses Q2 2012 Results - Earnings Call Transcript

The Gulf of Mexico properties we acquired this year have gotten off to a good start. The integration of DOR has been smooth and production has been in line with our expectations through the second quarter. We do not plan to risk capital exploring for large, new fields but exploit existing properties and generate higher rates of return through recompletions and infill drilling to help us fulfill our 3-year goals. We were able to capitalize on a region of cheap oil with this acquisition, and it gave us a platform with a great operating team to further exploit inexpensive oil at a time of dislocation in the marketplace. Not only did we buy inexpensive oil, we are now able to sell expensive oil.

As of August 1, the LLS mark was positive $18.75 per barrel over WTI, plus the acquisition of the Gulf of Mexico properties lowered our debt ratio a full turn and gives us more debt capacity to stay within our goal of approximately 3x leverage. We continue to feel comparable we can maintain our 25,000 barrel of oil equivalent per day production rate by spending $200 million of CapEx on drilling and recompletions.

The Mississippian continues to be our growth engine. Last quarter, we drilled 91 horizontal wells and our production continues to meet or beat our expectations. This play also is a shallow, low-risk carbonate reservoir, where our production per well on a 30-day rate has continued to improve over time. The value driver of the horizontal Mississippian play is the ability to consistently drill thousands of high rate of return oil wells over hundreds of miles. It's a story of scale. Our team has assembled 1.7 million net acres with room to drill more than 8,000 horizontal wells. And now nearly 50% of that acreage has been proven by the 872 horizontal wells that have been drilled. Each quarter, we become more convinced in the size and scope of the play. SandRidge has now drilled 382 producing wells across the original acreage we put together from 2007 to 2011. And we are seeing consistent results from Comanche County, Kansas through Grant County, Oklahoma. This covers an area of more than 150 miles and area where we have nearly 850,000 net acres for a 10-year inventory at today's rig count at only 3 wells per section.

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