SandRidge Targets Shift to Oil From Gas in Acquisition of Arena Resources

Arena Resources Inc.’s oil reserves were the main target of SandRidge Energy Inc.’s $1.55 billion acquisition of the company as the buyer turns its focus to crude from natural gas production. “Our oil reserves were the real attraction to SandRidge,” Arena Resources Chairman Tim Rochford said in an interview. Reserves stood at 69 million barrels of oil equivalent as of Dec. 31, he said. Oklahoma City-based SandRidge will pay $2.50 in cash and 4.78 SandRidge shares for each Arena Resource share, a 17 percent premium to Arena’s April 1 close of $34.26, the companies said yesterday.

The purchase is SandRidge’s second in West Texas since November, when it bought properties from Forest Oil Corp. for about $800 million. By buying Arena Resources, SandRidge becomes one of the largest producers of West Texas conventional oil and gas. SandRidge said it will primarily drill shallow, low-risk reservoirs in the so called central basis platform, a part of the Permian Basin in West Texas. SandRidge is shifting its focus to oil as crude rises and gas futures fall. The company explores for both, though SandRidge Chief Executive Officer Tom Ward said last month at the Howard Weil Energy Conference that drillers can make “10 times more money” producing oil rather than gas.

Transformation to Oil

“We’ve been transforming from strictly a gas company to an oil company over the last couple of years,” Ward said in an April 4 telephone interview