Business Context and Reporting Period
This Form 8-K Current Report was filed by SandRidge Energy, Inc. on December 15, 2009, covering events occurring on December 9 and December 14, 2009. The filing details the entry into a material definitive agreement for the issuance of senior notes and an amendment to the company's senior credit facility.
Key Financial Metrics and Capital Structure
- Debt Issuance: The Company agreed to issue $450,000,000 in aggregate principal amount of 8.750% Senior Notes due 2020.
- Pricing and Yield: The Notes were priced at 98.349% of par, resulting in a yield to maturity of 9.000%.
- Expected Proceeds: Gross proceeds from the sale are expected to be $442,570,500.
- Closing Date: The sale of the Notes is expected to close on December 16, 2009.
- Liquidity and Leverage Adjustments: An amendment to the Credit Agreement permits the subtraction of cash and cash equivalents as of December 31, 2009, from funded indebtedness for leverage ratio calculations if the Permian Basin Acquisition has not closed by that date.
Material Changes and Agreements
The filing reports two primary material changes:
- Senior Notes Offering: Execution of a Purchase Agreement with representatives including Banc of America Securities LLC, Deutsche Bank Securities Inc., and J.P. Morgan Securities Inc. The Notes are being sold to qualified institutional buyers under Rule 144A and to persons outside the U.S. under Regulation S.
- Credit Facility Amendment: Execution of Amendment No. 8 to the Credit Agreement dated November 21, 2006. This amendment modifies the definition of "Indebtedness" and "Restricted Payments" to exclude dividend payments on 6% Convertible Perpetual Preferred Stock to be issued in connection with the Permian Basin Acquisition.
Outlook, Risks, and Contingencies
The filing contains forward-looking statements regarding the closing of the Notes offering and the Permian Basin Acquisition. Management notes that actual results may differ materially due to risks and uncertainties, including the risk that the transactions may not be completed. The Company undertakes no obligation to update these forward-looking statements. The filing explicitly states that the press release does not constitute an offer to sell securities in any state where such an offer would be unlawful prior to registration.
Investor Verification Checklist
- Confirm the closing of the $450 million Senior Notes offering on or about December 16, 2009.
- Verify the status of the Permian Basin Acquisition from Forest Oil Corporation, as it impacts leverage ratio calculations and preferred stock issuance.
- Review the full text of Amendment No. 8 to the Credit Agreement (Exhibit 10.2) for specific covenants regarding the preferred stock dividends.
- Monitor the company's periodic filings for updates on the risks associated with the completion of these transactions.