SandRidge Taps Unconventional Nat Gas Plays with Crusader Buy

Last Updated Sep 23, 2009 8:10 PM EDT

SandRidge Energy's deal to buy bankrupt Crusader Energy Group for $230 million will give the independent oil and gas company access to a number of unconventional gas plays and boost its positionin the Anadarko basin of Western Oklahoma and Permian basin in West Texas.

The Oklahoma City, Oklahoma-based company announced it would pay up to $85 million in cash and issue common shares valued at $13.45 per share. Crusader filed for Chapter 11 bankruptcy in March -- and listed assets of about $750 million and debts of $325.8 million as of Sept. 30, 2008.

SandRidge Chairman and CEO Tom Ward declined to discuss details of the purchase during a conference call with investors Wednesday because of pending approval of the transaction in bankruptcy court.

But here's what we know. If approved, SandRidge's purchase of Crusader will beef up its existing holdings in the Anadarko and Permian basins. It will also add unconventional gas plays to the mix, most notably, the Bakken shale in Williston Basin of Montana and North Dakota and the Barnett shale in the Fort Worth Basin in Texas.

SandRidge's speciality is in more traditional conventional gas plays in the West Texas Overthrust that includes the Piñon field. The field holds more than 5.7 trillion cubic feet of natural gas equivalent of potential reserves, according to the company's 2008 annual report.

It's worth noting who is steering the ship over at SandRidge. Ward co-founded Chesapeake Energy, one of the largest natural gas companies in the U.S., and was the company's president and chief operating officer and until he left in 2006. In May 2006, he bought a controlling interest in Riata Energy, which had an interest in the Piñon field. Riata changed its name to SandRidge in September 2006 and became a publicly traded company soon after.

Technological breakthroughs in hydraulic fracturing and the use of horizontal drilling has allowed companies to access hard-to-reach shale gas. Some of the larger shale gas plays in North America include Haynesville Shale in Louisiana, Barnett Shale in Texas and the Marcellus shale in West Virginia, Pennsylvania and New York.

But SandRidge has kept its focus -- until now -- on conventional plays in the West Texas Overthrust, where it holds leases on about 640,000 acres. SandRidge has a 97 percent working interest in the 70 square-mile Piñon field located within the WTO, said SandRidge Senior Vice President Kevin White, in a phone interview Wednesday.

Most of the company's plays involve shallower vertical drilling a more conventional method, he added.

During Wednesday's conference call, Ward did not rule future acquisitions. Although, he cautioned, the company would be "very price sensitive" to any purchases.