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SandRidge (SD) Inks Merger Deal with Midstates Petroleum
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SandRidge Energy, Inc. (SD - Free Report) recently landed a merger deal with its rival Midstates Petroleum Company in an all-stock deal. The move is likely to create one of the largest oil players in the Mississippian Lime shale formation. Both Tulsa-based Midstates Petroleum and Oklahoma-based SandRidge have prominent presence in Mississippian Lime and the merger is likely to unlock substantial synergies for both companies.
Following the news of the merger, SandRidge shares rose more than 2.2% to eventually close at $16.87 on Feb 6. On the other hand, Midstates Petroleum stock dipped around 1% to eventually close at $15.30 post the announcement.
The announcement comes almost after a month SandRidge cancelled its plan to acquire Colorado-based Bonanza Creek Energy amid shareholders’ strong opposition.
Details of the Deal
SandRidge shareholders is expected to receive 1.068 shares of Midstates Petroleum’s for each share held, per its closing price as on Feb 5. Per the deal, SandRidge shareholders will own 60% stake in the combined company, with the remaining interest held by Midstates Petroleum. The combined entity is likely to be valued at nearly $1 billion.
Per the deal, Midstates’ CEO David J. Sambrooks will serve as the chief controller of new entity. The proposal also supports the prolonged efforts of Fir Tree Partners and Carl Icahn — two of the biggest shareholders in both SandRidge and Midstates Petroleum — who have long criticized SandRidge’s managerial decisions and wanted a change in the company’s leadership position.
The new entity will own more than 450,000 net acres in the core of the Mississippian Lime play with the production capacity of over 53,000 barrels of oil equivalent per day. In addition, the combined company will also hold 75,000 net acres in the Northwest STACK play.
Benefits of the Deal
The merger will benefit from complementary assets which will likely lead to various financial, commercial and operational synergies. It will lead to cost synergies of around $70 million annually, generating a free cash flow of over $100 million. The deal will lead to significant value addition for both companies.
Both companies have emerged from Chapter 11 bankruptcy after successfully completing their debt restructuring.SandRidge recovered from bankruptcy in October 2016 after reorganizing $4.1 billion in debt, while MIdstates Petroleum came out of the same in December 2016 after writing off $2-billion debt.
The combined company is thus does not have any debt and will display strong liquidity metrics with a forecasted free cash flow of up to $480 million in the next five years. The acquisition will help the combined entity to yield superior risk-adjusted returns in the coming years.
Zacks Rank and Other Stock to Consider
SandRidge is engaged in the development and production activities of oil and gas. The company's operating segment consists of Exploration and Production, Drilling and Oil Field Services and Midstream Gas Services.The company carries a Zacks Rank #2 (Buy).
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SandRidge (SD) Inks Merger Deal with Midstates Petroleum
SandRidge Energy, Inc. (SD - Free Report) recently landed a merger deal with its rival Midstates Petroleum Company in an all-stock deal. The move is likely to create one of the largest oil players in the Mississippian Lime shale formation. Both Tulsa-based Midstates Petroleum and Oklahoma-based SandRidge have prominent presence in Mississippian Lime and the merger is likely to unlock substantial synergies for both companies.
Following the news of the merger, SandRidge shares rose more than 2.2% to eventually close at $16.87 on Feb 6. On the other hand, Midstates Petroleum stock dipped around 1% to eventually close at $15.30 post the announcement.
The announcement comes almost after a month SandRidge cancelled its plan to acquire Colorado-based Bonanza Creek Energy amid shareholders’ strong opposition.
Details of the Deal
SandRidge shareholders is expected to receive 1.068 shares of Midstates Petroleum’s for each share held, per its closing price as on Feb 5. Per the deal, SandRidge shareholders will own 60% stake in the combined company, with the remaining interest held by Midstates Petroleum. The combined entity is likely to be valued at nearly $1 billion.
Per the deal, Midstates’ CEO David J. Sambrooks will serve as the chief controller of new entity. The proposal also supports the prolonged efforts of Fir Tree Partners and Carl Icahn — two of the biggest shareholders in both SandRidge and Midstates Petroleum — who have long criticized SandRidge’s managerial decisions and wanted a change in the company’s leadership position.
The new entity will own more than 450,000 net acres in the core of the Mississippian Lime play with the production capacity of over 53,000 barrels of oil equivalent per day. In addition, the combined company will also hold 75,000 net acres in the Northwest STACK play.
Benefits of the Deal
The merger will benefit from complementary assets which will likely lead to various financial, commercial and operational synergies. It will lead to cost synergies of around $70 million annually, generating a free cash flow of over $100 million. The deal will lead to significant value addition for both companies.
Both companies have emerged from Chapter 11 bankruptcy after successfully completing their debt restructuring.SandRidge recovered from bankruptcy in October 2016 after reorganizing $4.1 billion in debt, while MIdstates Petroleum came out of the same in December 2016 after writing off $2-billion debt.
The combined company is thus does not have any debt and will display strong liquidity metrics with a forecasted free cash flow of up to $480 million in the next five years. The acquisition will help the combined entity to yield superior risk-adjusted returns in the coming years.
Zacks Rank and Other Stock to Consider
SandRidge is engaged in the development and production activities of oil and gas. The company's operating segment consists of Exploration and Production, Drilling and Oil Field Services and Midstream Gas Services.The company carries a Zacks Rank #2 (Buy).
SandRidge Energy, Inc. Price | SandRidge Energy, Inc. Quote
Investors interested in the space can also consider Occidental Petroleum (OXY - Free Report) , sporting a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>