SandRidge Energy Defends Bid for Atinum Midcon's Drilling Portfolio
October 28 2016 - 2:22PM
Dow Jones News
By Katy Stech
SandRidge Energy Inc. defended its move to purchase Atinum
Midcon I LLC's oil and gas drilling investments out of bankruptcy,
urging a federal judge to disregard protest from Wells Fargo Bank
N.A. officials who said the bank's proposal to forgive $75 million
is a better offer.
In court papers, SandRidge lawyers said the offer from Wells
Fargo, which handles Atinum's loan of more than $265 million,
wasn't valid because it covered only a subset of Atinum's roughly
1,600 oil and gas wells in northern Oklahoma and southern
Kansas.
Under its offer, Wells Fargo offered to forgive $75 million in
debt owed by Atinum, a Houston energy investor. SandRidge's bid is
valued about $67 million, made up of $47 million in cash and about
$19 million in forgiven debt.
Earlier this week, Wells Fargo officials argued that lawyers who
put Atinum into bankruptcy in U.S. Bankruptcy Court in Houston on
July 22 wrongly declared SandRidge's offer as superior.
They argued in court filings that Atinum officials were
motivated to placate SandRidge and sell the company's portfolio
quickly for insurance reasons: Equity owners could get roughly $240
million on account of their lost investment if the case is
converted to chapter 7 before the end of 2016.
More broadly, Wells Fargo lawyers also said SandRidge was to
blame for many of Atinum's financial problems, pressuring it to
invest in a "series of disastrous wells" SandRidge drilled and
completed in late 2015 and early 2016.
In response, SandRidge said in court papers that Wells Fargo's
"claims are without merit."
Judge Marvin Isgur agreed to hear arguments on the dispute at a
hearing Friday.
Founded in 2011 with the purchase of some ownership interests in
roughly 860,000 gross acres of oil and gas interests located in the
Mississippian Lime formation, Atinum made a deal with SandRidge to
find underground oil and gas deposits and build wells to pull the
resource out.
SandRidge itself recently emerged from bankruptcy, using the
process to cut $3.7 billion in debt and transfer ownership to a
group of bondholders. The Oklahoma City company emerged from
protection Oct. 4.
The proposed purchase by SandRidge would take Atinum's ownership
out of the hands of private-equity funds managed by JB Asset
Management Co., a South Korean asset-management company, according
to court papers.
Atinum blamed its bankruptcy on the drop in oil and gas prices.
The price drop, caused by an oversupply, led Atinum's revenue from
oil and gas sales to fall to $76 million last year from roughly
$176 million in 2014.
Write to Katy Stech at katherine.stech@wsj.com
(END) Dow Jones Newswires
October 28, 2016 14:07 ET (18:07 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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