Sandridge $SDOC Houston-based Quantum Energy Partners has partnered with Kansas-based Jonathan Freiden to pursue options to better monetize Oklahoma-based SandRidge Energy Inc. (NYSE: SD), which has struggled to pay off significant debt in a low-oil-price climate.
Freiden is acting through an acquisition vehicle he incorporated in Wisconsin known as Blue Star Energy, and Quantum Energy is the entity's financial partner, said Freiden.
Houston-based energy private equity firm Quantum Energy Partners has taken an interest in one of Oklahoma's increasingly stressed oil and gas companies.
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Houston-based energy private equity firm Quantum Energy Partners has taken an interest in… more
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Frieden works with a group led by Quantum co-founder A.V. Jones. While Quantum is in the mix, the buying group interested in SandRidge consists of multiple undisclosed parties.
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Sandridge is considering debt restructuring options that include a prepackaged bankruptcy, Reuters reported on Jan. 25. A prepackaged bankruptcy is the preferred option in Freiden's view because it's the most feasible way to take care of SandRidge's common shareholders. The thinking behind that opinion is that the shareholders would receive some portion of the newly restructured company once the restructuring is complete.
Ever since discussions began between Frieden and SandRidge in November, it was clear that SandRidge's management wanted to keep its options open, said Dallas Salazar, CEO of Austin-based Atlas Consulting , who's consulting Blue Star on SandRidge.
"It’s clear that (the buying parties are) interested in a potential ownership interest of the company, whether that comes via a capital injection or any other monetization event, which obviously could come from a transaction, capital injection or a prepackaged bankruptcy," said Salazar. "This buying group is considering all options that SandRidge has outlined."
SandRidge began to prioritize its debt issues roughly eight months ago, and did a fairly decent job at that for a part of that time, said Salazar. But the real indication of the company's readiness to evaluate options with outside investors like Quantum came when SandRidge forked over its assets in the Piñon field, plus $11 million in cash, to a subsidiary of Houston-based Occidental Petroleum Corp. (NYSE: OXY). The hand-over settled claims from a 30-year agreement for removal of CO2 produced in West Texas.
"SandRidge was released from all past, current and future claims and obligations related to the gas treating agreement, which contained minimum CO2 volume commitments until 2041, and the parties agreed to dismiss pending litigation between them related thereto," said a company statement announcing the settlement.
"The only way a firm like Quantum would be able to come into control of SandRidge is through a transaction that would restructure the debt. Once the debt is restructured, you’re left with a healthy company that would have healthy operations and a sustainable business model," said Salazar.
Quantum is interested in stressed companies, said Frieden. Houston-based Linn Energy LLC (Nasdaq: LINE) signed a definitive agreement in March with Quantum, in the latter agreed to commit up to $1 billion of equity to fund acquisitions and development of oil and gas assets.
In August, now defunct ZaZa Energy Inc. singed a purchase sale agreement with an affiliate of Quantum.
