SandRidge Energy, Inc. (ticker: SD) said that its board of directors, after careful consideration and a detailed technical and financial review, has rejected Midstates Petroleum Company, Inc.’s (ticker: MPO) unsolicited public offer to combine the two companies in a stock-for-stock merger at a 60%/40% exchange ratio.
After extensive analysis, SandRidge has concluded that the relative asset values of the two companies do not support a combination effected at current stock prices. The decision was primarily based-on significantly differing opinions of Midstates’ proven oil and gas reserves, largely related to the assessment of the number of economically viable drilling locations at current oil and gas prices, the company said.
The company does not support Midstates’ estimate that the combined business plan would result in generally flat production and free cash flow of $320 million to $400 million, over the four-year period from 2019 to 2022. For these and other reasons, SandRidge has concluded that accepting Midstates’ proposal would be highly dilutive and not in the best long-term interests of SandRidge stockholders.
SandRidge President and CEO Bill Griffin said, “In light of ongoing feedback from shareholders and several expressions of interest we have recently received, we have decided to engage advisors to solicit third-party proposals and assist in evaluating all strategic options available to the company. While we evaluate strategic alternatives, we will remain focused on efficiently running our business. During the first quarter of 2018 our team has implemented a reduced capital plan to maximize asset value while minimizing cash flow outspend, and has simultaneously implemented a significant reduction in general and administrative cash expenses.”
