SandRidge Energy Inc. ended its strategic review by rejecting multiple offers and deciding to instead focus on developing its assets in the northwest STACK play of Oklahoma and the North Park Basin of Colorado.
SandRidge, in a late Sept. 10 statement, said it received a number of offers that "significantly undervalue" the company. Based on the highest cash bids received, SandRidge's implied liquidation value was about $12 per share to $13 per share.
According to SandRidge's board, several factors impaired its value, including voter initiatives that could stifle oil and gas development in Colorado, the lack of a pipeline connection near its North Park acreage in northern Colorado and low market interest in the Mississippian Lime play of Oklahoma.
The highest bid SandRidge received was $305 million for its Mississippian Lime and other Oklahoma properties, $70 million for the northwest STACK assets and $100 million for the North Park Basin assets, all of which did not match their proved reserves and estimated cash flows, the company said. "What we found through our comprehensive and thorough process was a significant disconnect between the intrinsic value of SandRidge and the bidders' perception of the company," said Bill Griffin, president and CEO of SandRidge.
SandRidge is open to asset sales or a full buyout of the company "at the right price," according to Chairman Jonathan Frates. To unlock its value, SandRidge plans to further develop its northwest STACK and North Park Basin assets and pursue opportunities in the Mississippian Lime, as well as acquire assets that would be a strategic fit. At the same time, SandRidge will continue to work on reducing costs and selling non-core assets.
SandRidge began its strategic review in May, before the activist investor Carl Icahn won the majority of seats on its board. RBC Capital Markets LLC assisted with the strategic review by contacting 662 entities for potential sales or mergers, after which SandRidge received eight offers. One of the offers was from the Oklahoma-based oil and liquids producer Midstates Petroleum Co. Inc.