– Adds 67,000 contiguous net acres in the oil window of DJ Basin
– Significantly increases inventory of high return, oil-weighted drill-ready projects
– Expected to be accretive to cash flow beginning in 2018
– Maintains low pro forma leverage and strong balance sheet
OKLAHOMA CITY and DENVER, Nov. 15, 2017 /PRNewswire/ — SandRidge Energy (NYSE: SD) and Bonanza Creek Energy(NYSE: BCEI) jointly announced today that the two companies have entered into a definitive merger agreement under which SandRidge will acquire all of the outstanding shares of common stock of Bonanza Creek in a cash-and-stock transaction valued at $36.00 per share. The consideration consists of $19.20 in cash and $16.80 of SandRidge shares for each Bonanza Creek share, subject to the collar mechanism described below.
James Bennett, SandRidge’s CEO, said “This acquisition greatly enhances our existing portfolio by adding a deep inventory of drill-ready locations in the DJ Basin of Colorado and is highly complementary to our existing North Park, Northwest STACK and Mississippian assets. 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. Overall, we believe this will drive strong risk-adjusted returns in both areas. Likewise, SandRidge will benefit from the greatly increased scale and substantial cost and operational synergies as a result of the transaction. Lastly, the acquisition will be accretive to cash flow per share and will enhance our ability over time to increase cash flow generation of the business.”
Jack Vaughn, Bonanza Creek’s Chairman of the Board, stated “We are pleased to be able to accomplish this combination with 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. 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.”
Brian Steck, a Director of Bonanza Creek and Partner of Mangrove Partners, one of Bonanza Creek’s largest shareholders, said “Mangrove is happy to support this transaction and believes that Bonanza Creek’s high-return inventory in the DJ Basinprovides an excellent complement to SandRidge’s attractive development opportunities in the NW 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.”
The combined SandRidge-Bonanza Creek will operate over 630,000 net acres focused in the Rockies and Mid-Continent, producing approximately 55,000 Boepd, as of September 30, 2017.
SandRidge is acquiring all of Bonanza Creek’s assets included here with other related highlights:
- Third quarter 2017 production of 15.8 MBoepd, 52% oil
- Year-end 2016 proved reserves of 91 MMBoe, 55% oil
- 67,000 highly delineated net acres in the rural oil window of the DJ Basin
- ~970 2P Niobrara and Codell locations driving future oil development opportunities
- Stacked pay DJ Basin assets targeting Niobrara and Codell formations
- Company owned midstream infrastructure enhancing E&P operations
- Mature, cash generating Cotton Valley production
- Significant cost, technical and operational synergies
- Zero debt and $31 million of cash on hand as of September 30, 2017
Bonanza Creek shareholders will receive $36.00 per share under the terms of the agreement, comprised of $19.20 per share in cash and $16.80 per share in common shares of SandRidge stock, subject to the collar mechanism. This represents a 17.4% premium to Bonanza Creek’s closing price as of November 14.
This purchase price implies a total transaction value of approximately $746 million, comprised of $398 million in cash and 18.89 million shares of SandRidge stock, based on SandRidge’s stock price as of November 14.
Following the transaction, shareholders of Bonanza Creek are expected to own between approximately 31.4% and 35.8% of the outstanding shares of SandRidge based upon the Average Parent Stock Price (as defined below). One of the independent directors of Bonanza Creek will be joining the Board of Directors of SandRidge.
The stock portion will be subject to a collar based on the volume weighted average price of SandRidge common shares over the 20 business days ending on the third business day prior to closing (the “Average Parent Stock Price”). If the Average Parent Stock Price is greater than or equal to $17.50 but less than or equal to $21.38, Bonanza Creek shareholders will receive a number of SandRidge shares between 0.7858 and 0.9600 equal to $16.80 in value per Bonanza Creek share. Bonanza Creek shareholders will receive 0.9600 SandRidge common shares if the Average Parent Stock Price is below $17.50 and 0.7858 SandRidge common shares if the Average Parent Stock Price is above $21.38.
The Boards of Directors of both companies have unanimously approved the terms of the agreement, and have recommended that both shareholder groups approve the transaction. The completion of the transaction is subject to the approval of each company’s shareholders, certain regulatory approvals and customary closing conditions. The transaction is expected to close in the first quarter of 2018.
Morgan Stanley & Co. LLC and Vinson & Elkins L.L.P. acted as financial and legal advisors, respectively, to SandRidge. Evercoreand Kirkland & Ellis LLP acted as financial and legal advisors, respectively, to Bonanza Creek.