The Lime has hit the fan—the Mississippi Lime, that is. The play that was featured in the April issue has since made more headlines as the first market test of its valuation exceeded gross-proceeds expectations by more than 50%.

SandRidge Energy Inc.—the leading lease-owner in the play, with some 900,000 acres accumulated to date and pushing to 1 million once the last of the paperwork is signed in northern Oklahoma and southern Kansas—sold interest in less than 5% of its position via a royalty trust in early April at $21 per unit. This was the high end of the projected range of between $19 and $21.

More revealing was the appetite for the distribution-paying equity: Expectations were that 12.5 million units would be sold and possibly as many as 2.25 million more in an overallotment. Instead, 15 million were grabbed up and, with the shoe, a total 17.25 million by the time the books were closed.

At the IPAA's annual OGIS investor conference in New York, at press time, Sand­Ridge's presentation drew a capacity crowd—editorially estimated at 450 people, using PV-10 or the rough "people viewed" discounted by 10% method.

In the break-out room, investors and analysts stood two rows deep. While SandRidge also has a large oil-focused operation in the Permian, all the questions were about the Midcontinent carbonate play.

Also in New York, small-cap, Tulsa-based Ram Energy Resources Inc. benefited from the tide of interest, hosting a capacity crowd in its break-out room. It holds 56,000 acres in the western region of the play, in Osage County, Oklahoma, in a concession, which it plans to convert to a three-year lease term in 2012.

"In the western region, it's an oil play with a little bit of casinghead gas," says Larry Lee, Ram chairman, president and chief executive. "We like that. We're probably less than 100 miles from Cushing (Oklahoma, home of the storage facility upon which Nymex oil is priced), so there isn't a lot of transportation-price differential in the oil we'll make."

To convert its position to a lease, it will pay only $50 an acre to the Osage Native American tribe. "We'll get the whole 56,000 acres for $2.5 million," Lee notes.

It's less than early-mover SandRidge paid, which averaged $200 an acre, for its position. And, it's less than the current price of getting into the play: Unit-buyers paid more than $5,000 an acre to gain exposure to the play via SandRidge's royalty trust.

Fresh from the expiration of its SEC-imposed quiet period, Tom Ward, SandRidge chairman, president and CEO, shared more details on the play than were provided in past months. More than 140 horizontal wells have been drilled into the Lime now, with 52 of those made by SandRidge. Its internal estimate of rate of return is 152% per well at the current price of oil and gas liquids.

"We believe these wells are 'best in class' in all of the U.S.," Ward says.

The company expects to sell interest in more acreage in another royalty trust later this year and to enter a joint venture to further fund drilling, raising some $1 billion. With 12 rigs at work, it will hold half of its acreage within the five-year lease term. The fund-raising will double that drilling program and assure it will capture the rest.

Still, at press time, Riverstone LLC-backed Eagle Energy of Oklahoma LLC had not yet accepted a bid on its roughly 68,000-net-acre leasehold that it put on the market earlier this year.

KeyBanc Capital Markets Inc. energy-equity analyst Jack Aydin says the Eagle deal's pricing will be a better indicator of the Lime's worth, as the SandRidge royalty trust may have been oversold because of the income-producing nature of the equity. "Given that the trust units are more of a retail product, we think it is premature to estimate the depth of that market, despite the seeming success of this deal."

Ward says private-equity-backed players, such as Eagle, got into the play early, gathering leasehold. "You can't put together big blocks anymore." The next phase of activity will be exits by some of those, and development of leases by larger E&Ps, such as Sand­Ridge, who plan to stay. "You'll see a lot of sales over the coming years."

One OGIS attendee described making long-plied, U.S. conventional formations in Oklahoma and elsewhere produce all new pay: "It's like finding money in an old coat."

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