Oil and natural gas company SandRidge Energy, Inc. (SD) agreed Wednesday to acquire Dynamic Offshore Resources, LLC for $1.275 billion in a cash and stock deal as part of its larger three-year plan to triple EBITDA and double oil production. The deal, subject to customary closing conditions, is expected to close during the second quarter of 2012.
"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 Chairman and CEO Tom Ward said in a statement.
The total consideration includes about $680 million in cash and about 74 million shares of SandRidge common stock valued at $8.02 per share. The proposed acquisition will be accretive to SandRidge's earnings and cash flow per share as well as improve its leverage metrics.
The proposed acquisition of Dynamic Offshore Resources will add reserves, production and cash flow at an attractive valuation for SandRridge.
Houston, Texas-based Dynamic Offshore Resources is an independent exploration and production company focused on the acquisition and development of producing oil and natural gas properties in the Gulf of Mexico. It operates primarily in water depths of less than 300 feet and its current production is about 25 Mboed, with year-end 2011 proved reserves of 62.5 MMboe.
Dynamic Offshore Resources, which is backed by private equity firms Riverstone Holdings LLC and the Carlyle Group, postponed its initial public offering on Tuesday, citing poor market conditions. It launched the IPO on January 17, expecting to sell up to 16.7 million shares in a estimated range of $17 to $19 per share. The initial registration statement for the IPO was filed in August 2011.
Oklahoma-based SandRidge noted that it has secured $725 million in committed financing from BofA Merrill Lynch, SunTrust Robinson Humphrey and The Royal Bank of Scotland plc for the deal, which may be used to fund the cash portion of the consideration. The company also has an undrawn $790 million borrowing base facility.
SandRidge also announced a 16 percent increase in total oil and gas production to 23.4 million barrels of oil equivalents or MMboe, for the full -year 2011, with oil production rising 60 percent.
Total proved reserves, adjusted for asset sales, increased 11 percent to 471 MMboe from 2010 proved reserves of 423 MMboe, of which 123 MMboe was divested during 2011.
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 2011. Looking ahead to 2012, SandRidge plans to drill 1,139 wells, all of them targeting oil.
SD closed Wednesday's regular trading session at $7.83, up $0.05 or 0.64% on a volume of 12.39 million shares. However, the stock dropped $0.54 or 6.90% in after-hours trading.
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