SandRidge to Acquire Dynamic Offshore Resources for $1.28B
SandRidge Energy, Inc. has entered into an agreement to acquire Dynamic Offshore Resources, LLC for aggregate consideration of $1.275 billion consisting of approximately $680 million in cash and approximately 74 million shares of SandRidge common stock valued at $8.02 per share. These oil rich assets will add reserves, production and cash flow at an attractive valuation that is consistent with the achievement of SandRidge's three year plan to triple EBITDA and double oil production while lowering its debt to EBITDA ratio. Dynamic Offshore Resources operates primarily in water depths of less than 300 feet and their current production is approximately 25 Mboed. Dynamic's year-end 2011 proved reserves are 62.5 MMboe and are valued at approximately $1.9 billion using SEC net present value discounted at 10 percent (PV-10). Of these reserves, 80 percent of the value and the quantity are proved developed. Approximately 50 percent of Dynamic's current production and proved reserves consists of oil. The acquisition will be accretive to SandRidge's earnings and cash flow per share as well as improve its leverage metrics.
Tom L. Ward, Chairman and CEO of SandRidge, commented, "The value of this acquisition will be evident immediately in our results. 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. The transaction is expected to close during the second quarter of 2012, subject to customary closing conditions.
BofA Merrill Lynch and SunTrust Robinson Humphrey served as financial advisors to SandRidge in connection with the acquisition. SandRidge is represented by Covington & Burling LLP. Dynamic is represented by Vinson & Elkins LLP.
SandRidge Energy, Inc. Announces Year-End 2011 Operations Results
- Total proved reserves, adjusted for asset sales, increased 11% to 471 MMboe
- Oil reserves, adjusted for asset sales, increased 17% to 245 MMbo
- Reserve replacement of 302%
- PV-10 (Non-GAAP) of total proved reserves increased 52% to $6.9 billion
- Total production growth of 16% to 23.4 MMboe and 60% growth in oil production
- Horizontal Mississippian EUR increased 11% to 456 MMboe per well
- Current production 67 Mboed
SandRidge Energy averaged 31 rigs operating during 2011 and drilled 970 wells. A total of 943 operated wells were completed and brought on production throughout the year. Currently, the company has 38 rigs operating (including 3 drilling saltwater disposal wells). SandRidge plans to drill 1,139 wells in 2012, all targeting oil.
Permian Basin The company drilled 803 wells in the Permian Basin throughout 2011. SandRidge presently operates 13 rigs in the Permian Basin, all of which are operating on the Central Basin Platform drilling primarily Grayburg/San Andres vertical wells at depths ranging from 4,500 feet to 7,500 feet. The company plans to drill 759 wells in the Permian Basin in 2012.
Mississippian Play SandRidge drilled 167 horizontal wells in the Mississippian play in northern Oklahoma and southern Kansas during 2011. The company presently has 24 rigs operating in the play, of which 21 are drilling horizontal producer wells with 3 drilling saltwater disposal wells. SandRidge plans to increase the Mississippian rig count by one rig per month throughout 2012 and plans to drill 380 horizontal wells in the play this year.
SandRidge Energy, Inc. Announces Year-End 2011 Reserve Summary
SandRidge increased year-end 2011 proved reserves to 471 MMboe, 11 percent higher than 2010 proved reserves of 423 MMboe (which reflects the divestment of 123 MMboe during 2011) and represents a reserve replacement ratio of 302 percent. The Horizontal Mississippian play and the Central Basin Platform contributed reserve growth of 101 MMboe offset by 30 MMboe of downward revisions to gas reserves primarily in the Pinon field.
Essentially all of SandRidge's 2011 reserve additions were the result of the company's drilling program.
SandRidge's 2011 proved reserves included 2,810 gross (2,438 net) PUD locations. Approximately 86 percent of the PUDs are located in the Horizontal Mississippian play and Permian Basin.
Forty-nine percent of 2011 proved reserves were proved developed, compared with 41 percent at year-end 2010.
Approximately 96 percent of the 2011 PV-10 value is associated with the company's Horizontal Mississippian and Permian core areas.
The company's 2011 proved reserves had a PV-10 of $6.9 billion, a 52 percent increase from 2010. Third party engineers including Netherland Sewell and Lee Keeling evaluated a combined 98 percent of the total proved PV-10 value.
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