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SandRidge (SD) Nixes Merger Plan With Midstates Petroleum
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SandRidge Energy, Inc. (SD - Free Report) , an oil and gas player, recently aborted plans to merge with Tulsa-based rival Midstates Petroleum Company, in an all-stock deal. Last month, Midstates Petroleum had made the proposal to merge with SandRidge after the latter dropped its plan to acquire Colorado-based Bonanza, Creek Energy, Inc. following intense opposition from its shareholders.
However, after comprehensive technical and financial review, along with careful evaluation of all other strategic alternatives, SandRidge also canceled plans to merge with Midstates Petroleum.
Had the deal been finalized, it surely would have improved the scale and value for both the players by creating one of the largest entities in the Mississippian Lime shale formation, as both the companies have a strong presence in the region. However, the merger would entail a significant risk as Mississippi Lime requires much higher commodity prices to prove highly productive.
The company is skeptical about Midstates’ reserves, and the economic feasibility of drilling locations at current oil and gas prices. Further, SandRidge believes that the merger is not likely to unlock substantial synergies unless the company employs Midstates’ assets with high operational efficiency. As such, SandRidge does not support Midstates’ estimate that the merger would result in free cash flows of $320-$400 million over the next four years. The company thus views the collaboration as highly dilutive and not in the best interests of shareholders.
Meanwhile, SandRidge is exploring other strategic alternatives that will help increase significant shareholders’ value. The company is likely to examine divestment and joint venture opportunities at its North Park Basin assets, along with other potential mergers that stand to fit best in the company’s long-term growth. In fact, SandRidge is open to reconsider merger offer from Midstates’ as well albeit with certain changes in the terms and conditions, so as make it an appealing investment that would yield superior risk-adjusted returns in the coming years. Notably, Midstates, which still believes in the efficacy of the deal, is thus considering options related to the transaction.
Zacks Rank and Key Picks
SandRidge is engaged in the development and production of oil and gas. The company mainly focuses on promoting high return, growth-oriented projects in the U.S. Mid-Continent and Niobrara Shale. SandRidge is headquartered in Oklahoma City, OK.
SandRidge recovered from bankruptcy in October 2016 after reorganizing $4.1 billion in debt. The company is undertaking strategic initiatives to make the company more efficient and reduce costs in order to reap higher investment returns. In the 2018 guidance, the company announced its intention to lower general and administrative expenses in the range of $36-$39 million per annum.
The company carries a Zacks Rank #5 (Strong Sell).
Pioneer Natural surpassed earnings estimates in each of the trailing four quarters, with an average of 66.92%.
Continental Resources delivered an average positive earnings surprise of 64.93% in the preceding four quarters.
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SandRidge (SD) Nixes Merger Plan With Midstates Petroleum
SandRidge Energy, Inc. (SD - Free Report) , an oil and gas player, recently aborted plans to merge with Tulsa-based rival Midstates Petroleum Company, in an all-stock deal. Last month, Midstates Petroleum had made the proposal to merge with SandRidge after the latter dropped its plan to acquire Colorado-based Bonanza, Creek Energy, Inc. following intense opposition from its shareholders.
However, after comprehensive technical and financial review, along with careful evaluation of all other strategic alternatives, SandRidge also canceled plans to merge with Midstates Petroleum.
Had the deal been finalized, it surely would have improved the scale and value for both the players by creating one of the largest entities in the Mississippian Lime shale formation, as both the companies have a strong presence in the region. However, the merger would entail a significant risk as Mississippi Lime requires much higher commodity prices to prove highly productive.
The company is skeptical about Midstates’ reserves, and the economic feasibility of drilling locations at current oil and gas prices. Further, SandRidge believes that the merger is not likely to unlock substantial synergies unless the company employs Midstates’ assets with high operational efficiency. As such, SandRidge does not support Midstates’ estimate that the merger would result in free cash flows of $320-$400 million over the next four years. The company thus views the collaboration as highly dilutive and not in the best interests of shareholders.
Meanwhile, SandRidge is exploring other strategic alternatives that will help increase significant shareholders’ value. The company is likely to examine divestment and joint venture opportunities at its North Park Basin assets, along with other potential mergers that stand to fit best in the company’s long-term growth. In fact, SandRidge is open to reconsider merger offer from Midstates’ as well albeit with certain changes in the terms and conditions, so as make it an appealing investment that would yield superior risk-adjusted returns in the coming years. Notably, Midstates, which still believes in the efficacy of the deal, is thus considering options related to the transaction.
Zacks Rank and Key Picks
SandRidge is engaged in the development and production of oil and gas. The company mainly focuses on promoting high return, growth-oriented projects in the U.S. Mid-Continent and Niobrara Shale. SandRidge is headquartered in Oklahoma City, OK.
SandRidge recovered from bankruptcy in October 2016 after reorganizing $4.1 billion in debt. The company is undertaking strategic initiatives to make the company more efficient and reduce costs in order to reap higher investment returns. In the 2018 guidance, the company announced its intention to lower general and administrative expenses in the range of $36-$39 million per annum.
The company carries a Zacks Rank #5 (Strong Sell).
SandRidge Energy, Inc. Price
SandRidge Energy, Inc. Price | SandRidge Energy, Inc. Quote
A few better-ranked players in the energy space include Pioneer Natural Resources Company (PXD - Free Report) and Continental Resources, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Pioneer Natural surpassed earnings estimates in each of the trailing four quarters, with an average of 66.92%.
Continental Resources delivered an average positive earnings surprise of 64.93% in the preceding four quarters.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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