OKLAHOMA CITY, Dec. 11, 2017 /PRNewswire/ -- SandRidge Energy, Inc. ("SandRidge" or the "Company") (SD) today issued a letter to shareholders highlighting the benefits of the acquisition of Bonanza Creek Energy, Inc. (BCEI). The Company also announced that it will file a registration statement on Form S-4 today, which will communicate the strategic rationale behind the proposed acquisition and contain other important details and analysis regarding the transaction.
In addition, the Company has launched a dedicated website – www.sandridgeandbonanza.com – with information regarding the transaction.
The text of the letter follows:
Dear Fellow SandRidge Shareholders:
On November 15, 2017, the SandRidge Board of Directors and management team announced the acquisition of Bonanza Creek Energy. This strategic opportunity is immediately accretive and positions us to deliver additional long-term shareholder value by adding high-return and development-ready projects to our Niobrara position. After a detailed and thorough assessment of Bonanza Creek, we determined this acquisition to be in the best long-term interests of our shareholders.
BONANZA CREEK IS A HIGHLY STRATEGIC OPPORTUNITY
The acquisition of Bonanza Creek provides immediate cash flow and high-return development opportunities that allow us to continue generating strong risk-adjusted returns while we delineate our emerging assets.
Our existing assets in the Mid-Continent and Niobrara are in different stages of the development cycle:
- Our mature Mississippi Lime assets in the Mid-continent generate significant production and material free cash flow, which help fund investment and value creation in our emerging assets. However, they are declining assets that do not offer meaningful opportunities for additional development and oil and cash flow growth.
- Our North Park Basin Niobrara assets are in the delineation phase of the development cycle and require significant investment over the next several years, including the construction of midstream and pipeline takeaway infrastructure, before full field development can be realized.
- Our NW STACK assets in the Mid-continent are also in the early phases of the development cycle and are being efficiently delineated under a development agreement that provides an initial $100 million of capital from our financial partner.
This current combination of mature Mississippi Lime assets and emerging North Park and NW STACK assets, in the absence of significant development-ready inventory, results in a higher risk profile. The expansion of our Niobrara position to include Bonanza Creek's DJ Basin assets considerably improves our risk profile by:
- Adding 30-50% rate of return, development-ready inventory within a well-known, highly delineated area
- Adding an estimated 970 total drilling locations close to existing infrastructure in a well-delineated play
- Adding an estimated 230 proved locations, a 92% increase over SandRidge's preliminary year end 2017 PUD inventory
- Increasing Niobrara production to 25% of total production, from 4%
- Reducing Mississippi Lime production to less than 60% of the Company's total production, from 80%
These assets will allow us to accelerate returns and grow cash flow while our emerging assets progress to the development phase.
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