On Wednesday, Houston-based independent producer Dynamic Offshore Resources agreed to be acquired by SandRidge Energy Inc., based in Oklahoma City. The cash-and-stock transaction, valued at $1.28 billion, came a day after Dynamic Offshore postponed its initial public offering.
The buyout consists of approximately $680 million in cash and 74 million shares of SandRidge common stock valued at $8.02 per share.
Dynamic Offshore had hoped to raise about $300 million in its IPO, expecting to sell up to 16.7 million shares at $17 to $19 apiece. Shares were scheduled to begin trading Wednesday on the New York Stock Exchange under the symbol “DOR,” but the company announced Tuesday that it was postponing the IPO.
An underwriter cited “market conditions” as the reason.
Dynamic Offshore Resources focuses on the acquisition and development of oil and natural gas properties in the Gulf of Mexico. It has the equivalent of 62.5 million barrels of crude in proved reserves and produces 25,000 barrels a day from wells in shallow waters of the Gulf of Mexico.
SandRidge reported that about half of Dynamic's production and reserves is oil and about 48 percent natural gas. SandRidge hopes to double Dynamic's oil production over three years.
Citing Deologic data, The Wall Street Journal reported that the deal with SandRidge is the largest for Gulf of Mexico oil-and-gas fields since the April 2010 Deepwater Horizon explosion.
SEC filings in connection with Dynamic Offshore’s planned IPO indicate that Lafayette businessman Mike Moreno has been a limited partner of Dynamic Offshore since its inception. In February 2008, energy private equity firm Riverstone Holdings and global private equity firm The Carlyle Group announced that they had committed $450 million for investment in the new Houston-based oil and gas company. That deal was announced about a year after Riverstone/Carlyle purchased half of Moreno Group Holdings, which includes Dynamic Industries, Arc Equipment Rental, Dii LLC, Southern Steel and Supply, and Dynamic Marine Services.
Moreno is CEO of Moreno Group, which continues to have a number of business relationships with Dynamic Offshore.
According to the SEC filings: “In the ordinary course of business, we purchase offshore services from certain companies that are owned by or affiliated with the Moreno Group. We believe that these services were negotiated on an arms’ length basis and that the terms are no less favorable than those we could obtain from unrelated third parties. During the years ended December 31, 2008, 2009 and 2010 and the nine months ended September 30, 2011, the amounts paid for these services totaled $6.2 million, $10.0 million, $6.4 million and $4.0 million, respectively.”
SandRidge's shares rose 5 cents, closing at $7.83 Wednesday. As of Thursday's close, however, the shares had fallen 8.5 percent to $7.16.