Oklahoma City’s SandRidge Energy leadership has decided to reject numerous purchase offers and instead move ahead with an expansion of the company.
In an announcement late Monday, the company said its board of directors rejected 8 offers as well as 28 non-disclosure agreements. The board felt the potential transactions significantly undervalued either the company or its resources.
“What we found through our comprehensive and thorough process was a significant disconnect between the intrinsic value of SandRidge and the bidders’ perception of the Company,” said Bill Griffin, President and CEO. “The highest cash bids received for the Company’s properties included $305 million for a combination of the Mississippian Lime and additional other Oklahoma properties, $70 million for the Northwest STACK properties and only $100 million for the North Park Basin assets, which are simply not consistent with the current proven reserves and expected cash flows of these properties,”
He and other SandRidge leaders indicated they felt several things affected the value of their holdings including Colorado’s ballot initiative 97. That’s the proposed 2,500 foot mandatory setback which voters will decide on in November. SandRidge feels it would significant restrict drilling in the North Park property. It also said the current lack of a pipeline connection in Jackson County, Colorado affected the value of its holdings.
Jonathan Frates, Chairman of the board indicated that the company would be interested in a sale if the price were right.
“The value of the Company’s current reserve development plan exceeds recent trading values and certainly these offers, which grossly undervalue the Company. Unfortunately, our properties are located in areas that are currently out of favor and are therefore meaningfully undervalued,” he added. “Further, the merger proposals received were unattractive primarily because the offers entailed asking SandRidge to take meaningfully
overvalued properties in lieu of cash, to burden the balance sheet with significant debt, provided no meaningful synergies or resulted in wide valuation gaps.”
Instead, SandRidge is moving ahead with development of its inventory base in the Northwest STACK and the North Park Basin. It also intends to pursue opportunities in the Mississippian Lime.
The company announcement indicated it will continue to focus on cost reductions, margin improvements and divestment of non-core properties. It stated it will share details of a new go-forward strategy in “the very near future.”
