SandRidge makes move to buy DJ Basin, Mid-con assets for $746M

By Luke Geiver | November 20, 2017

SandRidge Energy, an exploration and production company focused on the Midcontinent and Niobrara shale, has agreed to acquire Bonanza Creek Energy. The deal would give SandRidge 67,000 contiguous net acres in the oil window of the DJ Basin.

James Bennett, president and CEO of SandRidge, said the move would allow the company to sequence its activity in the DJ Basin and that Bonanza’s assets that it would gain are complimentary and strategic. Most of the assets are outside of any populated areas and would provide 40 percent initial rates or return at current strip oil prices. In total, the move would give SandRidge another 1,000-high-return Niobrara shale locations. Following the deal, Bennett said the company could achieve economies of scale and also save around $20 million in annual savings.

The company is currently running two rigs in the Niobrara and doesn’t expect to add any rigs. In its Midcontinent acreage, the company will continue to run two drilling rigs next year as the drilling program there involves a drilling program funding partner.

The purchase price of the transaction—which includes stock and cash—is roughly $746 million.

Fir Tree Partners, a manager of roughly 8.3 percent of SandRidge funds, is not in favor of the acquisition. According to Fir Tree Partners, SandRidge’s current assets in Colorado are too far from Bonanza’s (100 miles away), and that the Midcontinent acreage to be acquired from Bonanza is only Tier II acreage.

Both SandRidge and Bonanza have emerged from bankruptcy in the past two years. Fir Tree’s team said SandRidge management had indicated it would protect its balance sheet and not perform such a transaction.

The deal could be completed in 2018.