INDUSTRY BRIEFS

SANDRIDGE BEGINS BUY BACK, EXCHANGE OF $400M OF SENIOR NOTES

SandRidge Energy Inc. has entered into privately negotiated purchase and exchange agreements under which it will repurchase $100 million aggregate principal amount of its senior unsecured notes for $30 million cash and exchange $300 million of senior unsecured notes into convertible notes. The company will repurchase $2.2 million aggregate principal amount of its 8.75% senior notes due 2020, $46.6 million aggregate principal amount of its 7.5% senior notes due 2021, and $51.2 million aggregate principal amount of its 7.5% senior notes due 2023 for an aggregate of $30 million in cash. The company will exchange $6.6 million aggregate principal amount of the 2020 outstanding notes, $189.3 million aggregate principal amount of the 2021 outstanding notes, $73.5 million aggregate principal amount of the 8.125% senior notes due 2022, and $30.6 million aggregate principal amount of its 2023 outstanding notes for $269.4 million aggregate principal amount of its 8.125% convertible senior notes due 2022 and $30.6 million aggregate principal amount of its 7.5% convertible senior notes due 2023. While the company has repurchased $100 million in debt for a significant discount, "when one adds the $78 million in debt for the Pinon transaction the debt level essentially remains flat around the $4.1 billion level," noted Wunderlich Securities analysts in a note after the announcement. "The biggest move from SD, from a dollar perspective, comes in the exchange of unsecured notes for convertible notes. With its need to conserve cash, we think SD has taken a stance of using its convertible notes as a way to reduce debt under the guise that it could eventually turn to equity at over five times the current share price. As such, the company swapped $300 million of unsecured notes for $300 million of convertible notes as it continues to tinker with the balance sheet," they continued. "We think the moves make sense, but, given the ample debt level and sizeable interest payments, we feel more, and bigger, deals are necessary and the use of cash in these deals does cause some concern. These moves are incrementally helpful to the company and the balance sheet, but could dilute shareholders, and additionally they use about $80 million of cash that ultimately is a scarce resource. As such, we think SD needs to look toward bigger deals, but the cash situation could hamper this currently," the analysts concluded.

ENCANA PLANS DJ BASIN ASSET SALE

Encana Oil & Gas (USA) Inc. has reached an agreement to sell its Denver-Julesburg (DJ) Basin assets in Colorado to a new entity 95% owned by the Canada Pension Plan Investment Board (CPPIB) and 5% by The Broe Group. Total consideration to Encana is nearly $900 million. The transaction includes all of Encana's DJ Basin acreage comprising 51,000 net acres. During the first half of 2015, Encana's DJ Basin assets produced an average of 52 MMcf/d of natural gas and 14,800 b/d of crude oil and natural gas liquids. Based on Encana's development plan at year-end 2014, estimated proved reserves were 96.8 MMboe (over 40% natural gas). "We think this deal is outside of more core Niobrara acreage (SW portion of the play), thus the low multiple received (~$38.4K/flowing boe) - which we think ascribed little to no value for the undeveloped acreage - isn't an adequate read-through to our other covered DJ players. With that said, this should be supportive of BCEI's valuation which is currently hovering around the same $40K/flowing metric; we think BCEI's undeveloped acreage would receive more support in a potential deal," said Seaport Global Securities analysts in a note following the announcement. When combined with net proceeds from previously announced asset sales, cash proceeds from divestitures in 2015 will total nearly $2.7 billion. Upon closing, the new Broe Group/CPPIB enterprise will operate as a stand-alone, independent business with its own board. The Broe Group was advised by Credit Suisse and Vinson & Elkins.

AUSTRALIA'S BEACH ENERGY TO BUY DRILLSEARCH FOR US$277M

Beach Energy Ltd. has agreed to pay A$384 million (US$277 million) in stock to acquire Drillsearch Energy Ltd. The combined company will be a major operator and producer in the Cooper and Eromanga basins, with production of approximately 12.1 MMboe/d. Under the terms of the agreement, Beach has agreed to acquire all of the shares in Drillsearch that it does not already own via a Scheme of Arrangement. Drillsearch shareholders will receive 1.25 Beach shares for each Drillsearch share held.

POST OAK, CEJA MAKE $75M COMMITMENT TO RIMROCK RESOURCE PARTNERS

Post Oak Energy Capital and Ceja Corp. have made a $75 million capital commitment to Rimrock Resource Partners LLC. Rimrock's management team will co-invest alongside Post Oak and Ceja. Rimrock was formed in 2015 as a Tulsa, Oklahoma-based exploration and production company. The Rimrock team is led by Burt Williams and Mike Evans. In partnership with Post Oak and Ceja, Rimrock will focus on exploration, acquisition, and development opportunities, primarily in the US Mid-Continent region.

HASTINGS EQUITY PARTNERS ACQUIRES HYBRID TOOL SOLUTIONS

Hastings Equity Partners, a private equity firm focused on lower middle market energy services and equipment companies, has made its fourth Fund III platform investment in Hybrid Tool Solutions LLC. Headquartered in Lindsay, OK. Hybrid provides its customers with a patent pending process for conducting frac plug drill outs. Hybrid is active in the Marcellus and Utica shale plays and in the US Mid-Continent. Financing for Hybrid was provided by Cadence Bank, and advisory services were provided by ADI Analytics LLC, Sheffield, Trackwell, and Rapp LLC, and Locke Lord LLP.