SandRidge Energy Inc., in a tussle with activist hedge fund billionaire and majority shareholder Carl Icahn, on Monday urged shareholders to stay focused on the benefits of its planned merger with Bonanza Creek Energy Inc.
“A vocal minority of shareholders have attempted to criticize the acquisition by distorting the facts and misleading the investing public,” said a letter addressed to shareholders by Chairman John V. Genova and CEO James D. Bennett. “Their assertions are false and reckless and we believe it is imperative to set the record straight for our investors.”
Icahn recently became SandRidge’s majority shareholder and said last month he would vote against the planned takeover. SandRidge in turn adopted a shareholder rights plan, aka a poison pill, to prevent or discourage a hostile takeover.
The merger with Bonanza Creek is a “strategic opportunity” that would provide immediate cash flow and development opportunities, the letter stated. SandRidge’s existing portfolio includes assets in Colorado’s North Park, the Mississippian Lime and in Oklahoma’s stacked reservoirs. Bonanza Creek primarily works in Colorado’s Wattenberg field, including the Niobrara and Codell formations, and in southern Arkansas within the Cotton Valley Sands.
“Our mature Mississippi Lime assets in the Midcontinent generate significant production and material free cash flow, which help fund investment and value creation in our emerging assets,” Genova and Bennett said. “However, they are declining assets that do not offer meaningful opportunities for additional development and oil and cash flow growth.
“Our North Park Basin Niobrara assets are in the delineation phase of the development cycle and require significant investment over the next several years, including the construction of midstream and pipeline takeaway infrastructure, before full field development can be realized.”
The Oklahoma assets, within the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties, or STACK, also are in the early phases of development.
“The acquisition is expected to generate meaningful operational, technical and financial synergies,” the executive said.
Once the merger is completed, Genova and Bennett promised to take the steps necessary to achieve “at least” $20 million/year in general and administrative savings.
The Oklahoma City-based independent also plans to file a Form S-4 with the Securities and Exchange Commission to “communicate the strategic rationale” behind the proposed acquisition. SandRidge also has launched a dedicated website to provide additional information.