SandRidge Energy, Inc. (NYSE: SD) is trying its hand again at getting its asset focus better for return of shareholder value. The company has announced that has filed its paperwork with the SEC for an initial public offering of its interests in SandRidge Mississippian Trust I. The filing terms are not completely defined but it did state that it would sell up to $250 million in common units to the public. The sale notes 12.5 million common units, which implies a $20.00 per unit price if you consider the “up to” in the preliminary prospectus.
SandRidge Mississippian Trust I is a newly formed Delaware trust and will trade on the New York Stock Exchange under the ticker “SDT.” The trust will be treated as a partnership for U.S. federal income tax purposes.
Raymond James and Morgan Stanley are listed as the underwriters in the syndicate. The underwriters will have an option to purchase an additional $37.5 million in common units within 30 days of closing to cover over allotments. Application will be made to list the common units of SandRidge Mississippian Trust I on the New York Stock Exchange under the symbol “SDT.” The total sale as is today would come to $287,500,000.00 if the initial terms are set and if the overallotment option is exercised.
After the completion of this offering, SandRidge will own 6,475,000 common units and 6,325,000 subordinated units, together representing 51% of all outstanding trust units. If the underwriters exercise their over-allotment option in full, SandRidge will own 4,600,000 common units and 6,325,000 subordinated units, together representing 43% of trust units.
The trust will own term and perpetual royalty interests in oil and natural gas properties leased by SandRidge in the Mississippian formation in Alfalfa, Garfield, Grant, Major and Woods counties in Oklahoma which allow the trust to receive the following:
- A) 90% of the proceeds attributable to SandRidge’s net revenue interest in the sale of production from 37 horizontal producing wells, and
- B) 50% of the proceeds attributable to SandRidge’s net revenue interest in the sale of production from 123 horizontal development wells to be drilled on drilling locations included within an Area of Mutual Interest consisting of approximately 63,500 gross acres (42,600 net acres) held by SandRidge.
The filing shows that the number of wells required to be drilled may increase or decrease in proportion to SandRidge’s actual net revenue interest in each well.
SandRidge will convey certain royalty interests to the trust in exchange for the net proceeds from the offering and units representing approximately 50% of the beneficial interest in the trust. The royalty interests will entitle the trust to a percentage of the proceeds received by SandRidge from the production of hydrocarbons from currently producing wells and development wells to be drilled by SandRidge on approximately 42,600 net acres in the Mississippian formation in northern Oklahoma. SandRidge intends to use the net proceeds from the offering to repay borrowings under its bank credit facility and for general corporate purposes.
SandRidge Energy, Inc. (NYSE: SD) closed up 2.6% at $7.54 on more than 9 million shares. The company’s market cap is now $2.73 billion and shares have traded in a range of $3.95 to $11.08 over the last 52-weeks.
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JON C. OGG
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