The deal includes $680 million in cash and 74 million shares of stock valued at $8.02 per share.
Houston-based Dynamic Offshore, backed by Riverstone Holdings LLC and the Carlyle Group, didn't price its initial public offering this week, citing market conditions. The price range was set at $17 to $19 apiece for a 16.7 million share offering, or a total raise of about $300 million.
Riverstone and Carlyle committed $450 million to Dynamic from a joint fund in 2008, while the founders and management team at Dynamic pledged up to an additional $50 million.
Since then the company has been one of the more aggressive acquirers and operators on the Gulf of Mexico shelf. Last year it bought nearly all of the Gulf of Mexico properties of Exxon Mobil Corp.-owned XTO Offshore Inc. and related assets for $182.5 million, and Beryl Oil & Gas LP in 2009 for around $200 million. It was in the running to buy Devon Energy Corp.'s assets in the area in 2010, but Apache Corp. picked them up for $1 billion.
SandRidge said Dynamic Offshore's oil-rich assets will add reserves, production and cash flow at an attractive valuation that is consistent with its three-year plan to triple Ebitda and double oil production while lowering its debt-to-Ebitda ratio.
Dynamic Offshore operates primarily in water depths of less than 300 feet, and its production is 25,000 barrels of oil equivalent per day. Its year-end proved reserves were 62.5 million barrels of oil equivalent per day and are valued at $1.9 billion using Securities and Exchange Commission net present value discounted at 10%, or what's known as PV-10. Of these reserves, 80% of the value and the quantity are proved developed and about 50% of Dynamic's production and proved reserves consist of oil.
SandRidge expects the acquisition to be accretive to its earnings and cash flow per share and improve its leverage metrics.
"The value of this acquisition will be evident immediately in our results," Sand-Ridge CEO Tom Ward said in a statement, noting the company is picking up the assets for less than PV-10 of the proved developed reserves and at just over $50,000 per flowing barrel.
Ward said SandRidge expects the operations to contribute significant free cash flow in excess of the anticipated annual drilling and recompletion capital budget of $200 million.
SandRidge said it has secured $725 million in committed financing from Bank of America Merrill Lynch, SunTrust Robinson Humphrey Inc. and Royal Bank of Scotland Group plc that the company may use to fund the cash portion of the purchase price.
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