SandRidge Energy, Inc. (the “Company”) (SD) has priced its previously announced private offering of $1 billion in aggregate principal amount of senior secured notes due 2020 (the “Notes”). The offering size was increased to $1.25 billion from $1.0 billion. The Notes will bear interest at a rate of 8.75% per annum and will be issued at par. The Notes will be secured on a second lien priority basis and guaranteed by each of the Company’s subsidiaries that guarantee the Company’s revolving credit facility. The issuance of the Notes and the effectiveness of the Company’s revised fully-committed $500 million borrowing base first-lien revolving credit facility, which are mutually conditioned on each other, are expected to close on June 10, 2015, subject to customary closing conditions.
The Company intends to use a portion of the net proceeds from this offering to repay all borrowings under its existing revolving credit facility and for general corporate purposes.
The Notes and related guarantees are being offered by the Company only to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons in transactions outside the United States under Regulation S of the Securities Act. The Notes will not be registered under the Securities Act, or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Notes, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
SandRidge Energy, Inc. (the “Company”) (SD) announced that it is entering into transactions which will increase current liquidity to approximately $1.4 billion, including a revised revolving bank credit facility containing leverage covenants that are less restrictive than under its current credit facility and a private offering of $1.25 billion of senior secured second lien notes (“Second Lien Notes”). Pricing detail of the $1.25 billion private offering of Second-Lien Notes has been previously disclosed by the Company.
The Company will, concurrently with the issuance of its Second Lien Notes, revise its first lien credit facility, lowering its initial borrowing base availability from its current $900 million to $500 million, subject to maintenance of a first lien leverage ratio of not more than 2.0 times (senior first lien secured debt/ LTM pro forma EBITDA) and a minimum current ratio (including available borrowing capacity) of at least 1.0 times.
James Bennett, Chief Executive Officer and President commented, “Given our strategic goal of improving capital efficiency in our project portfolio to counter ongoing commodity price weakness, we have actively explored opportunities to enhance the financial strength of the Company. We are very pleased to announce the pricing of our Second Lien Notes offering and the revision of our revolving bank credit facility, which we believe will provide us the flexibility and liquidity that lets us continue to develop and produce our attractive asset base and create shareholder value. We have also recently exchanged $50 million principal of our unsecured senior notes for common equity at a material discount to the face value of the debt, and will continue to pursue other deleveraging transactions.”
“We continue to target improvements in our operational efficiencies, with the goal of further driving down costs, increasing the use of multilateral drilling and assessing our Chester acreage. Additionally, our cost reduction efforts are moving forward rapidly. Current well costs are significantly lower than costs incurred in 2014 and we continue to expect to achieve our 2015 cost reduction goal in the second half of the year,” continued Bennett. “These operational efficiencies are intended to ensure that the cash generating abilities of our assets continue to grow, and with the new funding transaction, provide the flexibility to expand activity on our higher-returning projects in our Mid-Continent development program, and continue long term value creation for shareholders.”
The effectiveness of the revised revolving credit facility and issuance of the Senior Lien Notes, which are mutually conditioned on each other, are expected to occur on June 10, 2015, subject to satisfaction of customary closing conditions.
Except for the historical information contained herein, the statements in this release are forward-looking. Forward-looking statements are based on assumptions and beliefs that we believe to be reasonable based on the facts known at the date of this release and our current view of future oil and natural gas prices and drilling and completion costs; however, assumed facts and assumptions, including those regarding future oil and gas prices and drilling and completion costs, almost always vary from actual results and the differences between assumed facts and actual results can be material depending upon the circumstances. Our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany those statements. The forward-looking statements involve risks and uncertainties that affect our asset value, operations, financial condition and performance as discussed in our filings with the Securities and Exchange Commission (SEC). Among the factors that could cause future results to differ materially are those risks discussed in the periodic reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2014. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” In addition, we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this release.
About SandRidge Energy, Inc.
SandRidge Energy, Inc. (SD) is an oil and natural gas exploration and production company headquartered in Oklahoma City, Oklahoma with its principal focus on developing high-return, growth-oriented projects in the Mid-Continent region of the United States. In addition, SandRidge also owns and operates a saltwater gathering and disposal system and a drilling rig and related oil field services business.