U.S. oil and gas company SandRidge Energy Inc SD.N, which is facing calls from two top investors to replace its board and chief executive, struck a deal to sell its Permian Basin properties in west Texas to privately held oil and gas company Sheridan Production Partners for $2.6 billion.
Last month, SandRidge had said it was exploring the sale of these assets, an announcement that proved to be unpopular with some shareholders, who felt the company should keep the valuable oil producing acreage.
But investors seemed to have since warmed to the deal, sending the company's shares up more than 7 percent to $7.00 in after market trading.
The deal will allow SandRidge to focus on developing its higher return properties in the Mississippi Lime formation that spans northern Oklahoma and Kansas, said Neal Dingmann, oil analyst for Suntrust Robinson Humphrey.
The Permian acreage also fetched a good price, Dingmann said. The producing assets were purchased at $106,000 per flowing barrel, up from the basin average of about $100,000 per flowing barrel, he said.
After an expected close in the first quarter of next year, SandRidge will have a cash balance of almost $3 billion and liquidity of about $3.5 billion that it will use to strengthen its balance sheet, the company said in a statement.
SandRidge has spent heavily to acquire oil and gas properties in recent years. In the third quarter, the company had debt of $4.3 billion, more than its market capitalization of $3 billion.
Citing poor management, large investors TPG-Axon Capital and Mount Kellett Capital are pressing for the change in the company's CEO and board of directors, as well as an outright sale of SandRidge.
Investors will need to see that SandRidge uses some funds from the sale to pay down its debt, analysts said.
The deal gives SandRidge some needed cash, but probably will not appease aggrieved shareholders, Mark Hanson, oil analyst for Morningstar, said.
"That's about compensation and board composition and a lot of things that this transaction doesn't address," Hanson said. "If anything, the shareholders will probably just be pissed off that they are selling an asset that generates a good amount of free cash flow."
Sheridan Production, which is affiliated with private equity firm Warburg Pincus LLC, purchased the Permian properties that produced about 24,500 barrels oil equivalent per day at the end of the third quarter.
SandRidge has drilled about 500 wells on its 1.85 million acres in the Mississippi Lime formation as part of its quest to produce higher priced crude oil and natural gas liquids.
(Reporting by Anna Driver in Houston and Thyagaraju Adinarayan in Bangalore; Editing by Saumyadeb Chakrabarty, Jim Marshall and Leslie Gevirtz)