U.S. unconventional producers SandRidge Energy Inc. and Bonanza Creek Energy Inc. have agreed to merge, building their Rocky Mountain and Midcontinent fortunes in a cash-and-stock transaction valued at close to $750 million.
Once combined, Oklahoma City-based SandRidge operations would total more than 630,000 net acres, mostly across the Rockies and Midcontinent that now are producing around 55,000 boe/d.
SandRidge’s existing portfolio includes assets in Colorado’s North Park, the Mississippian Lime and Oklahoma’s STACK, aka the Sooner Trend of Anadarko Basin, mostly in Canadian and Kingfisher counties. Bonanza Creek primarily works in Colorado’s Wattenberg field, focused on the Niobrara and Codell formations, and in southern Arkansas within the Cotton Valley Sands. "This acquisition greatly enhances our existing portfolio by adding a deep inventory of drill-ready locations in the DJ Basin of Colorado,” said SandRidge CEO James Bennett.
“The geological and operational characteristics of Bonanza's Niobrara and Codell locations are analogous to our existing Colorado North Park assets, and we expect to benefit from the expertise of their teams,” Bennett said.
After the commodity price crash in 2014, SandRidge and Bonanza Creek each filed for voluntary bankruptcy protection. SandRidge emerged as a restructured company in late 2016. Bonanza Creek exited Chapter 11 earlier this year.
Under terms of the agreement, Bonanza Creek shareholders would receive $36.00/share, comprised of $19.20/share in cash and $16.80/share in SandRidge stock, representing a 17.4% premium to Bonanza Creek's closing price on Tuesday. The purchase price implies a total transaction value of about $746 million, comprised of $398 million in cash and 18.89 million shares of SandRidge stock, based on its stock price Tuesday. Once completed Bonanza Creek shareholders would own 31.4-35.8% of SandRidge.
"This transaction represents an attractive opportunity for our shareholders to monetize a portion of their holdings through the cash consideration as well as to participate in the continued upside of the combined company,” said Bonanza Creek Chairman Jack Vaughn. “We believe our Niobrara and Codell assets and expertise will provide a strong complement to the SandRidge story and are excited to partner with SandRidge in growing the combined company."
Major Bonanza Creek shareholder Mangrove Partners is supporting the tie up, said partner Brian Steck. Bonanza Creek's “high-return inventory in the DJ Basin provides an excellent complement to SandRidge's attractive development opportunities in the Northwest STACK and North Park Basin. We believe that the sequenced development of these three assets provide an attractive path to create oil-weighted growth for the combined company."
Each board has approved the merger; shareholders still have to vote. Completion of the agreement is expected by the end of March.