SandRidge Energy Inc., Oklahoma City, (NYSE: SD) plans to acquire privately held, Houston-based Dynamic Offshore Resources LLC for $1.275 billion in cash and stock.
The deal consists of approximately $680 million in cash and approximately 74 million SandRidge shares valued at $8.02 per share.
Dynamic Offshore’s assets include multiple operated and nonoperated properties in the shallow Gulf of Mexico offshore Texas, Louisiana and Alabama. The company operates primarily in water depths of less than 300 feet.
Production is 25,000 barrels of oil equivalent per day (50% oil). Proved reserves as of year-end 2011 were 62.5 million barrels equivalent (50% oil). Of these reserves, 80% of the value and the quantity are proved developed.
SandRidge chairman and chief executive Tom L. Ward says, “We are acquiring these assets for less than PV-10 of the proved developed reserves and at just over $50,000 per flowing barrel. Additionally, we expect these operations to contribute significant free cash flow in excess of the anticipated annual drilling and recompletion capital budget of $200 million.”
SandRidge has secured $725 million in committed financing from BofA Merrill Lynch, SunTrust Robinson Humphrey and The Royal Bank of Scotland Plc that the company may use to fund the cash portion of the consideration. In addition, the company's $790-million borrowing base facility remains undrawn.
BofA Merrill Lynch and SunTrust Robinson Humphrey are financial advisors to SandRidge. Covington & Burling LLP is legal advisor to SandRidge. Vinson & Elkins LLP is legal advisor to Dynamic Offshore.
The transaction is expected to close during the second quarter of 2012.