Hot on the heels of last week's huge oil sands IPO, two significant deals in the U.S. oil patch made headlines this morning.
First, SandRidge Energy
SandRidge, on the other hand, has had a disastrous run as a publicly traded company. The firm used to be heavily natural-gas-weighted, but has more recently begun seeking to refashion itself as a balanced oil and gas player. Today's acquisition follows the $800 million purchase of Permian properties from Forest Oil
Based on the $1.6 billion transaction price tag, SandRidge valued Arena at around $188,000 per flowing barrel (all oil), which is well into nosebleed territory. The reserve-based metric of $23 and change per proved barrel is less severe, but certainly no bargain considering that 62% of Arena's reserves were undeveloped at year's end. Even with the recently knocked-down price on Arena, SandRidge's transformation isn't coming cheap.
But I have warmed up to the bigger, badder Denbury Resources
The reserves associated with these discarded properties are 64% natural gas. Converting the 54 million barrels of reserves to a natural gas equivalent 324 billion cubic feet, we see that Denbury sold these non-core assets for $2.78 per thousand cubic feet equivalent (Mcfe). That's a very strong result, and much improved from the sale prices Denbury agreed to on its Barnett shale properties.
Both of today's deals show what a huge premium oil reserves and production are getting in the marketplace today. Investors might want to think about taking profits on hot names like Brigham Exploration