April 5, 2010
Source: SandRidge Energy, Inc.; Arena Resources, Inc.
SandRidge Energy, Inc. (SD) and Arena Resources, Inc. (ARD) jointly announced that they have entered into a definitive merger agreement under which Arena shareholders will receive stock and cash consideration valued at $40 per share of Arena common stock based on SandRidge's April 1 closing price. This represents a 17% premium for Arena shareholders.
SandRidge will issue 4.7771 shares of SandRidge common stock and pay $2.50 in cash for each share of Arena common stock, resulting in a combined enterprise value of approximately $6.2 billion. SandRidge will be the surviving company, headquartered in Oklahoma City and its management team will continue in their current roles.
Conventional oil opportunities fro SandRidge will come primarily from drilling and development of shallow, low risk reservoirs located on the Central Basin Platform (CBP), a part of the Permian Basin in West Texas. The CBP has produced over 13 billion barrels of oil since the 1930s. The combined company will have over 200,000 net acres in the Permian Basin and 5,700 identified locations to drill primarily in the shallow San Andres and the Clear Fork formations. Additional upside exists with down spacing and future secondary and tertiary potential. SandRidge also owns low risk natural gas properties in the Pinon Field, and significant exploration opportunities in the West Texas Overthrust.
Tom L. Ward, Chairman and CEO of SandRidge estimated that SandRidge has hedged over $3.0 billion of oil revenues in total after the closing of the merger.
The transaction is contingent upon the approval by the stockholders of both companies as well as other customary closing conditions. SandRidge's board of directors and management team will continue in their current roles after the close of the transaction. The transaction is expected to be completed during the second or third quarter of this year.
Deutsche Bank Securities Inc. is serving as financial advisor as well as providing a fairness opinion to SandRidge in connection with the merger. SandRidge is represented by Covington & Burling LLP. SunTrust Robinson Humphrey, Inc. is serving as financial advisor to Arena, and Tudor, Pickering, Holt & Co. Securities, Inc. is providing a fairness opinion to Arena, in connection with the merger. Arena is represented by Johnson & Jones, P.C.