U.S. Markets open in 17 mins

SandRidge Cancels Plan to Acquire Bonanza Creek: Here's Why

Zacks Equity Research

Oil and natural gas company, SandRidge Energy, Inc. SD recently announced that it has dropped its plan to acquire Colorado-based Bonanza Creek Energy, Inc. BCEI, following intense opposition from its shareholders. SandRidge has agreed to reimburse Bonanza Creek with up to $3.7 million for terminating the agreement.

Last month SandRidge had announced its plan to acquire Bonanza Creek Energy for a total consideration of $746 million including cash and stock. The plan was primarily opposed by New York-based Fir Tree Partners and activist Carl Icahn, the two largest shareholders of SandRidge. While Icahn holds 13.5% of SandRidge shares, Fir Tree holds owns 8.3%. Following the decision, both the companies mutually dismissed the acquisition plan.

Although SandRidge – which emerged out of bankruptcy in 2016 – initially believed that the acquisition will help it to increase its DJ Basin hold and raise oil production, the majority of its shareholders felt it should better focus on the proportion of management compensation and company size and scale. The shareholders expect the company with a market cap of $654.184 million to mend its internal disparities before increasing its asset holdings.

The shareholders also questioned the economies of scale and cost synergies assumed in the transaction. They felt the company will be affected by the cash drainage due to the acquisition plan. Notably, SandRidge had $136 million in cash and equivalents as of Sep 30, 2017.

About SandRidge

SandRidge is engaged in development and production of oil and gas. The company's operating segments consist of Exploration and Production, Drilling and Oil Field Services and Midstream Gas Services. SandRidge is headquartered in Oklahoma City, OK. SandRidge has lost 4.1% year to date compared with 1.2% fall of its industry.

Zacks Rank and Stocks to Consider

SandRidge has a Zacks Rank #2 (Buy).

Some other stocks worth considering in the oil and energy sector are Northern Oil and Gas, Inc. NOG and Holly Energy Partners, L.P. HEP.  Both these companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Minnetonka, MN-based Northern Oil and Gas is an independent energy company. Its sales for the fourth quarter of 2017 are expected to grow 54.5% year over year. The company pulled off an average positive earnings surprise of 175% in the last four quarters.

Dallas, TX-based Holly Energy is a production pipeline company. Its sales for 2017 are expected to improve 10.4% year over year. The company came up with a positive earnings surprise of 57.1% in the third quarter of 2017.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Holly Energy Partners, L.P. (HEP) : Free Stock Analysis Report
Bonanza Creek Energy, Inc. (BCEI) : Free Stock Analysis Report
SandRidge Energy, Inc. (SD) : Free Stock Analysis Report
Northern Oil and Gas, Inc. (NOG) : Free Stock Analysis Report
To read this article on Zacks.com click here.