SandRidge pays $398 million cash in $746 million merger with Bonanza

By Devika Patel

Knoxville, Tenn., Nov. 15 – SandRidge Energy, Inc. will remain well capitalized after paying $398 million in cash and issuing 18.89 million common shares in its planned merger with Bonanza Creek Energy in a transaction valued at approximately $746 million.

The consideration consists of $19.20 in cash and $16.80 of SandRidge shares for each Bonanza Creek share.

“Our balance sheet, by combining two unlevered companies and including the debt incurred in the transaction, will remain well capitalized with 1x leverage and $350 million of pro forma liquidity,” president and chief executive officer James D. Bennett said on the company’s conference call announcing the acquisition on Wednesday.

The company is still talking to the banks about determining the borrowing base of the combined companies.

“Right now, we have a borrowing base of $425 million and obviously Bonanza has their borrowing base, which I think is $192 million,” executive vice president and chief financial officer Julian Bott said on the call.

“We would expect that as we move towards close, we will actually put a new facility in place that will be some combination of those.

“We’ll be talking to the banks,” Bott said.

The company intends to keep its liquidity levels high and expects to stay below 2x debt to EBITDA.

“Leverage and liquidity are top of mind for us,” Bennett said.

“Generally, we’ve been pretty consistent saying that we’d like to stay below 2.5x debt to EBITDA.

“That’s kind of a nice target for us.

“In terms of liquidity, I’m a big believer that in this business you want at least 24 months of liquidity if not more,” Bennett said.

By keeping leverage down, the company will maintain financial flexibility after the merger closes.

“On the balance sheet, we’ve been very deliberate in the way we discuss our capitalization, which is we will protect our balance sheet and liquidity,” Bennett said.

“Pro forma for the transaction, we will have 1x debt to EBITDA, strong liquidity and financial flexibility,” Bennett said.

The merger is expected to close in the first quarter of 2018.

SandRidge is an oil and natural gas company based in Oklahoma City.

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