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NEW YORK (
SandRidge Energy(SD) just loves to surprise investors.
In fact, you could say the independent, highly levered exploration and production company is always one step ahead. Or, you could counter with the argument that it always seems to be two steps backward for every step forward with this company.
Case in point: The announcement on Thursday from SandRidge Energy that it was dipping its exploration and production toes into the water, literally, spending just under $1.3 billion to acquire mature, shallow water production assets in the Gulf of Mexico.
For an E&P company that has strategically targeted its opportunity in the land-based shale plays, including the Mississippian basin and the Permian, the move into offshore drilling and production caught investors by surprise. SandRidge shares dropped by 9% on Thursday as more than 50 million shares changed hands -- it averages trading of 12 million and hit the 43 million share volume mark by midday.
SandRidge goes offshore: one more surprise from a company full of surprises.
SandRidge made the case on a conference call with analysts on Thursday morning -- as its shares were being punished -- that it had to act while a valuable asset was being offered for cheap. Investors won't get the full picture from SandRidge, though, so here it is, laid out in 7 facts about this deal that aren't included in the company spin.
1. The price of this deal is fair, not cheap. The privately held offshore company it acquired -- Dynamic Offshore Resources --- had filed to go public in 2011, backed by the Carlyle Group. Capital contributions to Dynamic from Carlyle and its partner Riverstone Holdings equaled roughly $200 million in the three years between 2008 and 2010, according published reports at the time of the S-1 filing.
Seems like the real cheap deal went, as usual, to the private equity players, turning a few hundred million into close to $1.3 billion payday.
Why didn't the company end up waiting to go public after it filed in late 2011? Because SandRidge ended up paying just under the targeted IPO value. So why take the risk -- during the period of time it takes to dot all the "i's" and cross all the "t's" required of an IPO filing -- of a potential fall in crude oil prices caused by a global economic slowdown, which could dampen enthusiasm for the offering?
As far as SandRidge's take that it was an offer the company couldn't refuse, analysts say SandRidge paid a value that is equal to recent deals in the Gulf of Mexico. That means it wasn't cheap, but simply in line with peer comps.