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A Houston private equity big shot is considering options to salvage the beleaguered Oklahoma-based SandRidge Energy Inc.
Blue Star Energy, a Kansas-based entity created solely for the purpose of acquisitions, is pursuing multiple investment options for SandRidge, and discussing said options with A.V. Jones, co-founder and senior adviser to Houston-based Quantum Energy Partners.
In recent weeks, SandRidge Energy(OTCMKTS: SDOC ) has faced a falling stock price, delisting by the New York Stock Exchange, closure of several of its wells in northern Oklahoma and layoffs.
Leading Blue Star are partners Jonathan Frieden and Jim Hake. "Quantum is our financial partner", said Frieden.
The buying group interested in SandRidge consists of multiple other undisclosed parties, said Frieden.
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.
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Global Oil News
Oil futures briefly pared gains, falling in tandem with stock markets after the Federal Reserve left interest rates unchanged on Wednesday, but recovered heading into U.S. crude's settle.
The Fed's policymaking committee said it was monitoring heightened market volatility, but noted that labor
conditions are improving, asserted inflation will tick up, and reiterated its belief that the energy price plunge is "transitory."
Brent crude rose $1.34 to $33.14 a barrel by 2:36 p.m. ET, having hit a session high of $33.49.
U.S. crude futures settled up 85 cents at $32.30 a barrel, off a session peak of $32.84.
Russia's energy ministry said possible coordination with the Organization of the Petroleum Exporting Countries (OPEC) was discussed at a meeting with Russian oil companies on Wednesday.
Top non-OPEC producer, Russia has in the past been unwilling to cut oil output, as it battles for market share with OPEC king-pin Saudi Arabia.
"I remain skeptical, at the end of the day, about that happening as the oil producers are looking at the other guy to cut production while maintaining their own levels," Andrew Lipow of Lipow Oil Associates said.
"I think the geopolitical factors in the Middle East are playing a bigger part in the actual oil production than the statements from energy ministers who'd like to see higher prices."
Hints of a possible deal between OPEC members and rival producers had already helped oil rally 4 percent on Tuesday.
Crude was looking firm before the Russia news on the back of a U.S. Energy Department report showing a surprise spike in demand for refined products like heating oil last week, when a massive blizzard hit the U.S. Northeast.
Heating oil futures rose 6 percent, boosted in part by forecasts for more cold weather later this week.
Data from the U.S. Energy Information Administration showed inventories of distillates such as heating oil fell by more than 4 million barrels, trumping expectations for a rise of nearly 2 million.
"The draw in distillate stocks is bullish, but we know there was cold weather in the United States in the last week, so I would say the reason behind the draw has something to do with the cold winter weather and, as such, the impact should be short-lived," Tamas Varga of PVM Oil Associates said.
A statement from Russia's energy ministry left the door open to talks with OPEC, moments after the head of Russia's pipeline monopoly said officials have decided they should talk to Saudi Arabia and other OPEC members about output cuts.
The top non-OPEC producer, Russia has in the past been unwilling to cut oil output, as it battles for market share with OPEC output leader Saudi Arabia.
"I remain sceptical, at the end of the day, about that happening as the oil producers are looking at the other guy to cut production while maintaining their own levels," Andrew Lipow of Lipow Oil Associates said.
"I think the geopolitical factors in the Middle East are playing a bigger part in the actual oil production than the statements from energy ministers who'd like to see higher prices."
Hints of a possible deal between OPEC members and rival producers had already helped oil rally 4 percent on Tuesday.
Brent crude LCOc1 rose $1.30, or 4.1 percent, to settle at $33.10 a barrel, after touching a session high of $33.49.
U.S. crude CLc1 settled up 85 cents at $32.30 per barrel, a 2.7 percent gain, having topped out at $32.84.
Oil prices barely budged after the Federal Reserve right before the close left U.S. interest rates where they were and said it still expected downward inflationary pressure from lower energy prices to prove temporary.
U.S. prices have risen 6.4 percent and Brent is up 8.5 percent over the last two sessions. They were looking firm even before the Russia news, on the back of a morning U.S. Energy Department report showing a surprise spike in demand for refined products like heating oil last week, when a massive blizzard hit the U.S. Northeast.
Heating oil futures HOc1 rose over 6 percent but gave up some gains after updated weather forecasts tempered the outlook for cold temperatures over the next two weeks.
The U.S. Energy Information Administration said inventories of distillates, fell more than 4 million barrels, trumping expectations for a rise of about 2 million. [EIA/S]
"The draw in distillate stocks is bullish, but we know there was cold weather in the United States in the last week, so I would say the reason behind the draw has something to do with the cold winter weather and, as such, the impact should be short-lived," Tamas Varga of PVM Oil Associates said.
The data also showed U.S. crude oil stocks hit their highest on record in the week to Jan. 22, due largely to increases on the U.S. Gulf Coast, a major oil hub.
That inventory surge helped fuel the rally instead of fanning worries about excess supply, amid relief it fell short of an 11.5 million-barrel build reported by the American Petroleum Institute late Tuesday. [API/S]
"I think we're in this mode where little things can set the market off into a reversal," Energy Management Institute analyst Dominick Chirichella said. "We're heading into a choppy trading period right now"
Still, after three U.S. energy companies said Tuesday they were slashing spending, the market is looking for additional U.S. production cuts to rebalance the oversupplied market
