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Uncertainty around SandRidge’s well-water treatment and disposal business is dispelled

SandRidge Energy (ticker: SD) announced that the Internal Revenue Service decided to grant it a positive private letter ruling (PLR) in an 8-K filed by the company Monday. A decision on SandRidge’s well-water treatment and disposal business was snared for more than a year when the IRS decided to initiate a pause on PLRs following a spike in 2013.

The IRS has since released its proposed ruling on qualifying income for MLPs, but uncertainty remained if companies like SD, which filed before the pause, would receive positive PLRs following the end of the pause.

The company hopes to unlock additional value in the face of lower commodity prices. During the company’s first quarter conference call, SandRidge President and CEO James Bennett said that the company is also considering forming an MLP around oily assets in the future.

“[Forming an MLP is] one option that we’ve looked at,” he said. “Once you get a big base of low decline assets that are producing many, many thousands of barrels of oil a day, I think that opens up a lot of options for other forms of capital that are a lower cost of capital than us. MLPs are one.”

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