SandRidge Energy filed for Chapter 11 bankruptcy Monday morning. The Bankruptcy would allow them to continue operating as usual but restructure their debt.
For months the headlines have pointed to trouble at SandRidge.
“Those of us who knowledge of the oil and gas industry could see this coming,” said Steve Agee, Dean of the Meinder’s School of Business at Oklahoma City University.
Agee points to SandRidge's debt that the company lists near $4 billion in the court filing. In addition, he says SandRidge is in a play in Northern Oklahoma and Southern Kansas that is expensive in terms of operational expenses, mainly wastewater disposal.
“They were a little bit out of balance with their debt,” he explains. “They were in a high expense area of operations and because the revenue was cut due to the oil price collapse, the revenue wouldn’t support both the expense and production and the debt load that they had.”
SandRidge's CEO says the downturn in oil prices has forced them to improve their balance sheet so the company has worked out a deal with their three creditor groups that would exchange debt for equity in the company. "With over $600 million of cash on hand, ongoing operations and capital programs are unaffected," said CEO James Bennett.
"We are pleased that our creditors recognize the long-term value SandRidge and its employees can create with an improved balance sheet. The new capital structure will allow the Company to concentrate on oil and gas exploration and development in our active Oklahoma and Colorado project areas," said Bennett. "We look forward to completing this next phase of the process quickly with minimal disruption to our business."
According to SandRidge officials, as part of the Chapter 11, SandRidge has filed "first day" motions that, when granted, will enable the Company's day-to-day operations to continue as usual. Specifically, the Company requested authority to pay operating expenses associated with production activities, joint interest billings for non-operated properties, royalty and working interest owners, and lienholders, as well as employee wages and benefits without change or interruption. Additionally, the Company will pay all suppliers and vendors in full under normal terms for goods and services provided during the Chapter 11 cases.