SandRidge Energy, Inc. announced plans to reduce its 2009 capital expenditure budget to $1.0 billion from previous guidance of $2.0 billion. The $1.0 billion reduction in the 2009 capital expenditure program is a direct response to recent declines in natural gas prices.
The 2008 production guidance remains unchanged. The production guidance for 2009 is lowered to 120 Bcfe from 135 Bcfe as a result of the planned reduction in capital expenditures. The reduced 2009 production reflects a 20% growth over expected 2008 production of 100 Bcfe.
SandRidge has opened the data room to evaluate the potential sale of its East Texas and North Louisiana Cotton Valley and Haynesville assets. A decision will be made in the 4th Quarter on the sale. If the company chooses not to sell these assets, it plans to fund its 2009 capital expenditure program with internally generated cash flow and its existing $1.1 billion revolving credit facility.
Full Year 2008 and Third Quarter Guidance
SandRidge continues to maintain its production guidance of 100 Bcfe for 2008 due to strong drilling performance in the West Texas Overthrust. The company entered the third quarter with 25 MMcfepd shut in because of the Grey Ranch Plant fire and well work in the Gulf Coast. During the quarter the company was also impacted by hurricanes Gustav and Ike. Overall, the company experienced about 3.5 Bcfe of shut-ins during the third quarter and production in the quarter is expected to be flat to second quarter 2008. Additionally, SandRidge expects to have its Grey Ranch Plant back in service November 1, 2008.
Tom L. Ward, SandRidge CEO and Chairman of the Board, commented, "The WTO continues to outperform our expectations delivering healthy metrics in the areas of production growth, reserve growth, and finding costs. Due to strong drilling results in the WTO, we will be able to meet our 2008 production target after tremendous adversities in Q3. Identification of the three major thrust faults from the Pinon 3D seismic data continues to play a significant role in our company's future growth. The ability to pick locations and drill shallow Caballos wells from 3D in the different thrust faults enabled us to significantly cut back our 2009 capex budget by $1.0 billion and continue with production growth guidance of 20%. As we move into 2010 and 2011 with the start-up of Phase 1 and Phase 2 of the Century Plant, we will be able to grow at a rate of 30% or more in those years."
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