SandRidge Energy Inc. agreed to pay Forest Oil Corp. $800 million to acquire some Permian Basin natural gas and oil assets, the Oklahoma City-based producer said Monday.

About $720 million of the purchase price is attributable to reserves and $80 million to undeveloped acreage, equipment and other assets, according to SandRidge. The 90,000 net acres hold an estimated 80 million boe (482 Bcfe) of proved reserves, weighted 65% to oil and natural gas liquids (NGL).

“This acquisition of conventional Permian Basin assets significantly increases our ability to develop and produce oil and natural gas from our core West Texas properties,” said CEO Tom Ward. “It is a rare situation to acquire legacy operated Permian assets.” The play “currently generates the company’s highest returns on invested capital thanks to strong oil prices and low drilling costs.”

The company plans to increase the number of rigs drilling in its Clear Fork development program to six in 2010, said the CEO.

“SandRidge will have an enviable base to develop gas in the Pinon Field, develop oil in the Central Basin Platform and explore for new gas fields in the West Texas Overthrust,” said Ward.

The properties, which are 98% operated, currently produce 7,600 boe/d (46 MMcfe/d), said SandRidge. Estimated probable and possible reserves total more than 90 million boe, or 540 Bcfe.

The transaction would increase SandRidge’s leasehold in the Permian Basin to more than 130,000 net acres. The leasehold is concentrated in six operated areas with an estimated 1,200 drilling locations.

With the transaction, oil and NGL production is expected to increase to around 26% of SandRidge’s total output in 2010 from 17% this year. Additional oil hedges have been placed covering a cumulative 11 million boe (67 Bcfe) through 2012, locking in $975 million of oil revenue, said the company. About 70-75% of 2010 equivalent production is hedged at a price of $8.79/Mcfe.

The transaction is expected to close by the end of the year and is to be financed under SandRidge’s existing credit facility, $200 million of proceeds from the placement of new shares of mandatory convertible preferred stock, and the proceeds of a planned public offering of the company’s common stock.

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