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SandRidge Energy Inc. SD has signed a deal to purchase Piñon Gathering Company LLC – a natural gas gathering player – for a total consideration of $126 million. Following the agreement, SandRidge Energy surged over 40% on NYSE.
The transaction includes a cash amount of $48 million. The remaining $78 million will be from 8.75% senior secured notes, due to mature by 2020. It is to be noted that the target company is the owner of gathering lines – spreading over 370 miles – which primarily assists the production of SandRidge Energy’s natural gas and carbon dioxide in the Piñon field in West Texas.
Will the deal benefit SandRidge Energy in the long run? Off course yes, and this is reflected in the skyrocketing share price of the company.
In details, without the purchase, SandRidge Energy needs to spend roughly $40 million every year until 2021 as payment to Piñon Gathering Company for the commitment of supplying a steady flow of gas through the pipeline assets of the latter.
Definitely following the acquisition of Piñon Gathering Company, SandRidge Energy will no longer have to pay the commitment fee, and will thereby lower its lease operating and gathering expense. Most importantly, SandRidge Energy has projected that the takeover will boost its yearly earnings before interest, taxes, depreciation and amortization by roughly $40 million.
In fact, most of the analysts are also in favor of the acquisition. This is because weak natural gas prices have made it uneconomical for SandRidge Energy to produce the commodity from the Piñon field and hampers total output. In such a scenario, SandRidge Energy needs to pay up for the difference between minimum committed volume and the actual output. Hence, with the completion of purchase of the strategic midstream asset in West Texas, which is anticipated by the fourth quarter of 2015, SandRidge Energy should be able to overcome all its cost challenges.
Headquartered in Oklahoma City, SandRidge Energy is an oil and natural gas exploration and production firm. The company’s portfolio also comprises a saltwater gathering and disposal system, a drilling rig and associated oil field services business.
Currently, SandRidge Energy carries a Zacks Rank #2 (Buy). One can also consider other players in the energy sector like Tesoro Corporation TSO, Cobalt International Energy Inc. CIE and Matrix Service Company MTRX. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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SandRidge Energy
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CODE : SD |
ISIN : US80007P3073 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
SandRidge is a exploration company based in United states of america. SandRidge is listed in United States of America. Its market capitalisation is US$ 523.1 millions as of today (€ 488.6 millions). Its stock quote reached its lowest recent point on January 06, 2016 at US$ 0.15, and its highest recent level on April 24, 2024 at US$ 14.59. SandRidge has 35 850 000 shares outstanding. |