SandRidge Energy, Inc. has concluded its formal strategic review process following the thorough evaluation of multiple potential transactions, all of which the Board of Directors believes significantly undervalue either the Company or its resources. The Board believes several impermanent items may have impacted bid valuations, including Colorado’s ballot initiative 97, which would significantly restrict drilling on the North Park property, the current lack of a pipeline connection in Jackson County, Colorado where our North Park acreage is located, and a lack of current market interest in the Mississippian Lime play. When the highest cash bids were totaled, the Company’s implied liquidation value was approximately $12.00-$13.00 per share, which the Board believes meaningfully undervalues the Company.
“What we found through our comprehensive and thorough process was a significant disconnect between the intrinsic value of SandRidge and the bidders’ perception of the Company. The highest cash bids received for the Company’s properties included $305 million for a combination of the Mississippian Lime and additional other Oklahoma properties, $70 million for the Northwest STACK properties and only $100 million for the North Park Basin assets, which are simply not consistent with the current proven reserves and expected cash flows of these properties,” Bill Griffin, President and CEO stated.
Jonathan Frates, Chairman of the Board, went on to say, “At the right price, notwithstanding the conclusion of this formal strategic review process, the Board is prepared to recommend a sale of the Company or certain of its assets, or the consummation of an appropriate merger opportunity. The value of the Company’s current reserve development plan exceeds recent trading values and certainly these offers, which grossly undervalue the Company. Unfortunately, our properties are located in areas that are currently out of favor and are therefore meaningfully undervalued. We will work assiduously over the next few years to realize the true value of the business.”
After several months of extensive solicitation, review of various proposals and reverse due diligence, the Board determined that the submitted cash offers were not representative of the Company’s current or potential future asset value. Further, the merger proposals received were unattractive primarily because the offers entailed asking SandRidge to take meaningfully overvalued properties in lieu of cash, to burden the balance sheet with significant debt, provided no meaningful synergies or resulted in wide valuation gaps.
The Board has concluded that the optimal course at this time is to develop the Company’s extensive inventory base in the Northwest STACK and the North Park Basin and pursue value enhancement opportunities in the Mississippian Lime. The Company will also pursue opportunistic acquisitions of strategic assets that provide complimentary, high quality production and development upside in a capital disciplined manner. The Company will continue to focus on cost reductions, margin improvements and divestment of non-core properties while moving forward with a profitable plan for organic growth. The Company looks forward to sharing the details of its new go-forward strategy in the very near future.
The strategic review process started on May 17, 2018 before the change in composition of the Board of Directors with the assistance of RBC Capital Markets LLC (“RBCCM”). The process included RBCCM contacting 662 entities to explore a complete or partial sale of the Company or its assets, or a combination of the Company with those entities, including domestic, international and financial buyers. The Company executed 28 non-disclosure agreements and received eight offers to purchase the Company or certain of its assets or to consummate some form of combination with the Company.