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Oklahoma Preparing to Force SandRidge to Close Disposal Wells

The Oklahoma Corporation Commission (OCC) is preparing to take legal action, within its own court system, to compel SandRidge Energy Inc. to shut down four wastewater disposal wells and curtail operations at 40 others, in response to a series of earthquakes in recent weeks.

OCC spokesman Matt Skinner confirmed to NGI's Shale Daily on Monday that the agency's Oil and Gas Conservation Division is "preparing court action, in the OCC courts, to have the permits for the wells in question changed to what is in the OCC plan." Skinner declined to comment further because the matter was a pending legal action.

Earlier this month, the OCC issued a directive ordering seven wastewater disposal wells shut in, and another 66 wells to curtail their disposal volumes by 25-50% (see Shale DailyDec. 4). The agency also told operators of another 67 disposal wells, all within 10-15 miles of two strong earthquakes to hit the state, that they could be ordered to change their operations in the future.

Both of the earthquakes in question registered 4.7-magnitude on the Richter scale and tied for third-strongest in the state's history. The first struck on Nov. 19, with an epicenter eight miles southwest of Cherokee, OK, while the second hit Nov. 30 about three miles west of Medford, OK (see Shale Daily, Dec. 2Nov. 20Nov. 19).

In response to the Cherokee quake, the OCC ordered four disposal wells within a three-mile radius of the epicenter shut in either on or before Dec. 9. All four of the wells are owned by SandRidge Exploration and Production LLC -- Diamondback SWD 2710 #2-5 and #1-5; Lidia SWD 2710 #1-7, and Tatum Rose SWD 2710 #1-17.

The commission ordered SandRidge to reduce daily volumes at 40 wells within at least a 10-mile radius of the epicenter of the Cherokee quake. Volumes were to be reduced by 50% at 16 wells and by 25% at another 24 wells.

Meanwhile, three wells within a three-mile radius of the Medford quake -- including two owned by SandRidge: Harley SWD #1-11 and #2-11 -- were also ordered shut in by the OCC. Ten additional SandRidge wells within at least 10 miles of  Medford were ordered to curtail their intake volumes -- seven wells by 50%, and three wells by 25%.

Skinner said SandRidge was the only company which had declined to comply with the OCC's directives.

A spokesman for SandRidge did not return calls seeking comment.

Last November, SandRidge told the U.S. Securities and Exchange Commission in a 10-Q filing that it was concerned Oklahoma -- as well as neighboring Kansas and Texas -- could adopt laws restricting wastewater disposal, and require the shutdown of certain wells. The company said such laws "could require [us] to shut in a substantial number of [our] oil and natural gas wells or otherwise have a material adverse effect on [our] ability to produce oil and gas economically...

"Accordingly, [this] could materially and adversely affect [our] business, financial condition and results of operations."

SandRidge is mostly focused on the Midcontinent, but it also has operations in the Permian Basin in West Texas. Total daily production averaged 79,900 boe/d in 3Q2015, a 10.2% decline from 2Q2015 (89,000 boe/d), but a 0.2% increase from 3Q2014 (79,700 boe/d). Meanwhile, Midcontinent production fell 11%, from 79,300 boe/d in 2Q2015 to 70,600 boe/d in 3Q2015.

The company reported that it ended 3Q2015 with $1.3 billion in liquidity, including $790 million in cash.

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