Asset manager Third Avenue Management bought a stake in Midcontinent producer SandRidge Energy, which has large acreage position in Oklahoma (pictured). (Source: Shutterstock.com)
Asset manager Third Avenue believes Midcontinent producer SandRidge Energy is set for additional M&A.
The firm announced establishing a new position in Oklahoma City-based SandRidge through its Third Avenue Small-Cap Value Fund—the company’s only fund holding that bears direct revenue exposure to oil and gas prices.
Third Avenue said it was able to purchase its SandRidge position at an attractive discount to PV-10 valuation. SandRidge shares were trading at $11.48 per share near midday on Oct. 22, near their 52-week low of $11.40 per share.
SandRidge’s neglect in the public markets “appears to stem from several sources,” including a Chapter 11 bankruptcy process in 2016, Third Avenue said in a third-quarter commentary. It’s also a small-cap name with a market value of less than $500 million.
But SandRidge does have several “very attractive things going for it,” the firm noted.
SandRidge has a large net cash balance sheet. The company also has a large federal and state net operating loss carryforward—which can be used to shelter cash flows from taxes—stemming from the bankruptcy process.
That combination puts SandRidge in a position to potentially acquire more acreage in the Midcontinent.
RELATED
Midcon Momentum: SCOOP/STACK Plays, New Zones Draw Interest
“SandRidge has pushed this plan forward with its recent acquisition of Upland Exploration for $144 million,” Third Avenue said.
The $144 million deal included 42 wells, four DUCs and net production of around 6,000 boe/d (~40% oil) in Ellis and Roger Mills counties, Oklahoma.
The acreage is in the prospective Cherokee play, a liquids-rich Midcontinent play attracting more capital and horizontal drilling activity.
Upland Exploration was one of the leading developers in the Cherokee play, along with family-owned Mewbourne Oil.
Third Avenue believes the conversion of SandRidge’s net balance sheet into a larger producing asset portfolio, and the usage of its tax assets, “puts the company in a strong position to further enhance shareholder returns.”
SandRidge is open to evaluating new M&A opportunities “with consideration of our balance sheet and commitment to our planned return of capital program,” President and CEO Grayson Pranin said in the company’s second-quarter earnings call in August.
M&A experts say the Midcontinent plays, particularly the SCOOP/STACK plays, will attract more dealmaking as natural gas prices increase and other shale basins mature.
In September, privately held producer Validus Energy reportedly struck a deal to acquire Midcontinent E&P Citizen Energy for more than $2 billion, including debt.
Mach Natural Resources, and MLP led by former Chesapeake and SandRidge executive Tom Ward, has also been a buyer in the Midcontinent.
RELATED
Recommended Reading
Enchanted Rock’s Microgrids Pull Double Duty with Both Backup, Grid Support
2025-02-21 - Enchanted Rock’s natural gas-fired generators can start up with just a few seconds of notice to easily provide support for a stressed ERCOT grid.
ADNOC Contracts Flowserve to Supply Tech for CCS, EOR Project
2025-01-14 - Abu Dhabi National Oil Co. has contracted Flowserve Corp. for the supply of dry gas seal systems for EOR and a carbon capture project at its Habshan facility in the Middle East.
Equinor’s Norwegian Troll Gas Field Breaks Production Record
2025-01-06 - Equinor says its 2024 North Sea production hit a new high thanks to equipment upgrades and little downtime.
Tethys Oil Suspends Kunooz-1 Well in Oman
2024-12-13 - The decision to suspend its Kunooz-1 exploration well comes after flow testing failed to confirm the presence of commercially-viable hydrocarbons, Tethys said.
ProPetro Agrees to Provide Electric Fracking Services to Permian Operator
2024-12-19 - ProPetro Holding Corp. now has four electric fleets on contract.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.