In her quest to turn purchases into profits, Lisa Stewart, chief executive of Houston-based Sheridan Production Partners, focuses on making what’s old new again.

"Our strategy is simple: We like old assets. We like mature and declining assets for mature and declining people," she quipped at Hart Energy's A&D Strategies And Opportunities conference on Aug. 30 in Dallas.

"It's about the predictability, and so our strategy is pretty simple: We take the equity from our institutional investors and match it with a little bit of debt. We hedge as much of the commodity risk as we can. You're not going to buy anything in this market unless you're willing to use the forward strip. I’m not comfortable in taking a risk with my investors' money without hedging it sufficiently enough that I'm going to get the money back," she said.

For Sheridan, an independent company formed in 2007, Stewart and her three business partners place priority on its reinvestment/redevelopment program. "This year we’ll reinvest about $200 million into our assets. That's a long way from where we started four years ago," she said.

Also making the company's priority list is an emphasis on operations. "I do like to go into the field, as do my partners. I’m not sure that our field employees appreciate it, but we put a lot of focus on efficiency -- all those things it takes to run a fundamental oil and gas company. And all of that is so we deliver the promised returns to our investors," she said.

According to Stewart, the company's employees, from top to bottom, are "aligned with exactly the rate of return promise that we have given our investors. And we have found that focus has really helped us."

Because Sheridan does not have a big A&D team -- everyone in the company contributes to the acquisition process -- it has to be careful about what deals it considers. Along with standard of predictability, the company is looking for investments with "decline curves that are stable," Stewart said. "So despite all of the shale activity that's going in, we're not participating in it. We think it's too early life for us."

Another key element in choosing a deal is matching employees' skills with a prospective project. For example, Stewart said, "We don't have anyone on our team today who knows anything about Alaska, so I would have a hard time saying, 'Hey guys, let's go buy some assets in Alaska.'"

Another consideration: "We also look for the unloved asset -- things that have been underinvested in," she said. "At the end of the day, we're looking for fields that require hard work. We want to be challenged with harder waterflood properties that require a little more technical expertise. And all of that, if you roll it together, is really about the opportunity to add value for our investors."

Stewart talked about three acquisitions that the company has been involved with in the past four years.

The first, a waterflood property in Oklahoma, was discovered in the 1930s and abandoned in the 1940s. Sheridan now operates 67 infield wells and has kicked up production from 1,700 barrels a day to more than 4,000 a day.

The second is a Texas waterflood property. Sheridan has drilled 92 wells, about half of which are injectors. "When you're private, you can drill injectors because you can have the patience for the injector to have an impact on the producer. In my past, in a public company, people weren't real excited about an injector that didn't make production on Day One." On the Texas property, production went from 800 barrels and day to 1,200 barrels, she said.

The third is a deep-gas area of Oklahoma. The previous operator, according to Stewart, would complete the lower zones of stacked pays and wait three or four years before beginning work on the next zone. "We started with a few recompletions to prove that those zones would really work. We drilled a monobore wellbore, which helped us complete all of the zones at one time and thereby accelerating the rate of return of our partners," she said, adding that those wells "have come in anywhere between 500 to 600 barrels a day to 3- to 5-million cubic feet a day."

In conclusion, Stewart said, "Even without commodity-price improvement, our reinvestment program has really added value. In our way of thinking about it, when you acquire an asset you're buying it at a pretty competitive rate of return. If you're re-investing, you should be generating a much higher rate of return."

Contact the author, Mike Madere, at mmadere@hartenergy.com.