BANGALORE, Sept 23 - U.S. oil and gas exploration and production firm SandRidge Energy Inc (SD.N) has struck a deal to buy bankrupt rival, Crusader Energy Group Inc (CKGRQ.PK), for $230 million, in a cash and stock deal that would give it additional acreage in the Anadarko and Permian basins.
SandRidge said late on Tuesday that it will indirectly own Crusader and its subsidiaries after the close of the deal, adding that all the outstanding equity interests in Crusader would be cancelled.
Crusader Energy filed for Chapter 11 bankruptcy protection in March, listing assets of about $750 million and debts of about $325.8 million as of Sept. 30, 2008.
Analysts were unsure about the current valuation of Crusader's reserves, given the lack of public information during the company's bankruptcy proceedings.
Kevin White, senior vice president of SandRidge, declined to comment on the difference between Crusader's valuation of its reserves a year ago and the current bid value, citing the pending approval of the transaction in the bankruptcy court.
Additional details of the valuation methodology will be revealed once the bid is approved in the court, he said.
Analyst David Kistler of Simmons & Co expects the bridge between the valuations to be a result of the difference in the commodity environment a year ago, when oil and natural gas prices were significantly higher above current levels.
"Also, when you're buying something out of bankruptcy, it is not without risk," he added.
SandRidge said it would pay up to $85 million in cash and issue common shares valued at $13.45 per share. The company will also issue warrants to buy an additional two million shares of its common stock.
"We believe this transaction will be accretive to SandRidge in terms of reserves, production and cash flow and provide new drilling opportunities for the company," SandRidge's Chief Executive Tom Ward said in a statement.
Scott Hanold of RBC Capital Markets said Crusader also has assets in the Barnett shale and the Bakken shale, besides those in the Anadarko basin of Western Oklahoma and in the Permian Basin in West Texas, where SandRidge also has its properties.
"(The) acquisition appears to complement existing assets at an attractive price," the analyst wrote in a note to clients.
In a separate statement, Crusader said it's creditors have agreed to support the proposed transaction as part of its reorganization plan.
Crusader also said it will pay a termination fee if the deal, expected to occur during the fourth quarter, is terminated by either of the two companies as a result of the Bankruptcy Court approving an alternative transaction.
"Whether or not we complete this acquisiton, we will continue to evaluate packages, just as we have done... since 2006," SandRidge's chief financial officer said in a conference call with analysts, adding that acquisitions will be "very price-sensitive."
"This is an unusual time in the industry where instead of making acquisitions, many companies have a desire to sell assets to raise capital to draw wealth in large resource areas... Therefore this is the perfect time to make a niche acquisition," he added.
Shares of SandRidge were trading up 1 percent at $13.17 Wednesday afternoon on the New York Stock Exchange.
SandRidge said late on Tuesday that it will indirectly own Crusader and its subsidiaries after the close of the deal, adding that all the outstanding equity interests in Crusader would be cancelled.
Crusader Energy filed for Chapter 11 bankruptcy protection in March, listing assets of about $750 million and debts of about $325.8 million as of Sept. 30, 2008.
Analysts were unsure about the current valuation of Crusader's reserves, given the lack of public information during the company's bankruptcy proceedings.
Kevin White, senior vice president of SandRidge, declined to comment on the difference between Crusader's valuation of its reserves a year ago and the current bid value, citing the pending approval of the transaction in the bankruptcy court.
Additional details of the valuation methodology will be revealed once the bid is approved in the court, he said.
Analyst David Kistler of Simmons & Co expects the bridge between the valuations to be a result of the difference in the commodity environment a year ago, when oil and natural gas prices were significantly higher above current levels.
"Also, when you're buying something out of bankruptcy, it is not without risk," he added.
SandRidge said it would pay up to $85 million in cash and issue common shares valued at $13.45 per share. The company will also issue warrants to buy an additional two million shares of its common stock.
"We believe this transaction will be accretive to SandRidge in terms of reserves, production and cash flow and provide new drilling opportunities for the company," SandRidge's Chief Executive Tom Ward said in a statement.
Scott Hanold of RBC Capital Markets said Crusader also has assets in the Barnett shale and the Bakken shale, besides those in the Anadarko basin of Western Oklahoma and in the Permian Basin in West Texas, where SandRidge also has its properties.
"(The) acquisition appears to complement existing assets at an attractive price," the analyst wrote in a note to clients.
In a separate statement, Crusader said it's creditors have agreed to support the proposed transaction as part of its reorganization plan.
Crusader also said it will pay a termination fee if the deal, expected to occur during the fourth quarter, is terminated by either of the two companies as a result of the Bankruptcy Court approving an alternative transaction.
"Whether or not we complete this acquisiton, we will continue to evaluate packages, just as we have done... since 2006," SandRidge's chief financial officer said in a conference call with analysts, adding that acquisitions will be "very price-sensitive."
"This is an unusual time in the industry where instead of making acquisitions, many companies have a desire to sell assets to raise capital to draw wealth in large resource areas... Therefore this is the perfect time to make a niche acquisition," he added.
Shares of SandRidge were trading up 1 percent at $13.17 Wednesday afternoon on the New York Stock Exchange.
