Sandridge Energy (NYSE:SD) used 2010 to continue the company's transition from a natural gas exploration and production company to one focused on oil and other liquid hydrocarbons. The company hopes to accomplish this by developing properties in the Permian Basin and a Mississippian play in Oklahoma.

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Shift To Oil
Sandridge Energy shifted from natural gas development to oil and liquids during 2010. The company reduced its natural gas rig count by 87% during the year, and it increased the number of rigs developing oil plays by 271% over the same time frame. Sandridge was operating 23 rigs as of November 1, with only one devoted to natural gas development. This shift to oil was helped during the year by the company's acquisition of Arena Resources, which closed in July. In this deal, the company picked up tens of thousands of acres with oil and liquids exposure.

Permian Basin
Sandridge exploited the Permian Basin during 2010 to increase its oil production. The company increased its holdings here by purchasing properties from Forest Oil (NYSE:FST) at the end of 2009.

Sandridge was operating 17 rigs in the Permian Basin as of November, and it's developing various formations here. The company estimates that it has more than 8,000 locations and drilled more than 500 wells in this basin during the year. Sandridge is currently focused on the Central Basin platform, where the company has 16 of its 17 operated rigs working.

Other companies in the Permian Basin include Concho Resources (NYSE:CXO), which is operating 17 rigs here as of the end of 2010. Occidental Petroleum (NYSE:OXY) is one of the largest leaseholders in the Permian Basin and spent $440 million in capital here during the year.

Sandridge Energy's other oily area is a Mississippian play in Oklahoma, where the company has 400,000 net acres. Wells here cost $2.7 million and have an estimated ultimate recovery (EUR) between 300,000 and 500,000 barrels of oil equivalent (BOE).

The company ended 2010 operating eight rigs in this play, and during the year it was involved with 34 wells, 23 of which were producing as of November.

2010 Recap
Sandridge shifted from developing natural gas to oil in 2010, as this company moved quickly to exploit its development opportunities in the Permian Basin and other domestic areas. The company will continue this trend in 2011. (To learn more, see our Oil And Gas Industry Primer.)

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