S-4 1 d496410ds4.htm S-4 S-4
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As filed with the Securities and Exchange Commission on December 11, 2017

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

SANDRIDGE ENERGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   1311   20-8084793
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

123 Robert S. Kerr Avenue

Oklahoma City, Oklahoma 73102

(405) 429-5500

(Address, including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Philip T. Warman

Senior Vice President, General

Counsel and

Corporate Secretary

123 Robert S. Kerr Avenue

Oklahoma City, Oklahoma 73102

(405) 429-5500

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

With a copy to:

 

Stephen M. Gill

T. Mark Kelly

Vinson & Elkins LLP

1001 Fannin Street, Suite 2500

Houston, Texas 77002

(713) 758-2222

 

Cyrus D. Marter IV

Bonanza Creek Energy, Inc.

410 17th Street, Suite 1400

Denver, Colorado 80202

(720) 440-6100

 

Andrew Calder, P.C.

Matthew R. Pacey, P.C.

Kirkland & Ellis LLP

609 Main Street, 45th Floor

Houston, Texas 77002

(713) 836-3600

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective and upon completion of the merger described in the joint proxy statement/prospectus contained herein.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging Growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities to Be Registered
  Amount
to Be
Registered
  Proposed
Maximum
Offering Price
per Unit
 

Proposed

Maximum
Aggregate

Offering Price

  Amount of
Registration Fee

Common Stock, par value $0.001 per share

  20,104,907(1)   N/A   $157,069,583(2)   $19,556(3)

 

 

 

(1) Represents the estimated maximum number of shares of common stock, par value $0.001 per share, of the registrant to be issued upon completion of the merger and is based upon the product of (i) the maximum exchange ratio in the merger of 0.9600 multiplied by (ii) 20,942,611 shares of common stock, par value $0.01 per share, of Bonanza Creek Energy, Inc. (“Bonanza Creek common stock”), which is the sum of 20,453,549 shares of Bonanza Creek common stock outstanding as of December 4, 2017 and 489,062 shares associated with outstanding stock-based equity awards (including outstanding Bonanza Creek restricted stock unit awards).
(2) Pursuant to Rules 457(c), 457(f)(1) and 457(f)(3) promulgated under the Securities Act and solely for the purpose of calculating the registration fee, the proposed aggregate maximum offering price is the product of (i) $26.70 (the average of the high and low prices of Bonanza Creek common stock as reported on the New York Stock Exchange on December 7, 2017) less the cash consideration to be paid in the merger of $19.20 per share and (ii) 20,942,611 (the estimated maximum number of shares of Bonanza Creek common stock that may be exchanged for the merger consideration).
(3) Computed in accordance with Rule 457(f) under the Securities Act to be $19,556, which is equal to 0.0001245 multiplied by the proposed maximum aggregate offering price of $157,069,583.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.

 

 

 


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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This joint proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED DECEMBER 11, 2017

 

LOGO

 

LOGO

MERGER PROPOSED—YOUR VOTE IS IMPORTANT

Dear Stockholders of SandRidge Energy, Inc. and Stockholders of Bonanza Creek Energy, Inc.:

On November 14, 2017, SandRidge Energy, Inc. (“SandRidge”), Brook Merger Sub, Inc., a wholly owned subsidiary of SandRidge (“Merger Sub”), and Bonanza Creek Energy, Inc. (“Bonanza Creek”) entered into an Agreement and Plan of Merger (the “merger agreement”), providing for the merger of Merger Sub with and into Bonanza Creek, with Bonanza Creek surviving the merger as a wholly owned subsidiary of SandRidge (the “merger”).

In connection with the merger, SandRidge will issue shares of common stock of SandRidge to stockholders of Bonanza Creek (the “share issuance”). Under the rules of the New York Stock Exchange (“NYSE”), SandRidge is required to obtain stockholder approval of the share issuance. Accordingly, SandRidge will hold a special meeting of stockholders (the “SandRidge special meeting”) to vote on the share issuance (the “share issuance proposal”). The SandRidge special meeting will be held on                , 2018 at                , at                a.m., local time. The board of directors of SandRidge (the “SandRidge board”) unanimously recommends that SandRidge stockholders vote “FOR” the share issuance proposal.

In addition, Bonanza Creek will hold a special meeting of stockholders (the “Bonanza Creek special meeting”) to vote on a proposal to adopt the merger agreement (the “merger agreement proposal”) and approve related matters as described in the attached joint proxy statement/prospectus. Under the laws of the State of Delaware, the approval of Bonanza Creek’s stockholders must be obtained before the merger can be completed. Approval of the merger agreement proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Bonanza Creek common stock entitled to vote on the merger agreement proposal. At the Bonanza Creek special meeting, Bonanza Creek will also propose that its stockholders approve a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger (the “advisory compensation proposal”). Approval of the advisory compensation proposal requires the affirmative vote of the holders of a majority of the shares of Bonanza Creek common stock present in person or represented by proxy at the Bonanza Creek special meeting and entitled to vote on the advisory compensation proposal, assuming a quorum is present. The Bonanza Creek special meeting will be held on                , 2018 at                , at                 a.m., local time. Bonanza Creeks board of directors unanimously recommends that Bonanza Creek stockholders vote FOR the adoption of the merger agreement and FOR the advisory compensation proposal.

If the merger is completed, each outstanding share of Bonanza Creek common stock (other than shares of Bonanza Creek common stock held by (i) Bonanza Creek as treasury shares, (ii) SandRidge, Merger Sub or any of their direct or indirect subsidiaries, (iii) any direct or indirect subsidiary of Bonanza Creek or (iv) any holder of record who is entitled to demand and properly demands appraisal of such shares pursuant to and in compliance with the Delaware General Corporation Law) will convert into the right to receive (i) $19.20 in cash, without interest and subject to any required withholding taxes, and (ii) a number of shares of common stock, par value $0.001 per share, of SandRidge (“SandRidge common stock”), equal to the quotient (the “exchange ratio”) determined by dividing (A) $16.80 by (B) the volume-weighted average price per share of SandRidge common stock for the 20 consecutive trading days ending on the third-to-last trading day prior to the closing date of the merger (the “SandRidge average stock price”); provided, however, that (x) if the SandRidge average stock price is an amount greater than $21.38, then the exchange ratio will be 0.7858, and (y) if the SandRidge average stock price is an amount less than $17.50, then the exchange ratio will be 0.9600 (the aggregate amount of cash and number of shares of SandRidge common stock, the “merger consideration”). Based on the closing price of SandRidge’s common stock on the NYSE on November 14, 2017, the last trading day before the public announcement of the merger, the exchange ratio together with the $19.20 in cash represented approximately


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$36.00 in value for each share of Bonanza Creek common stock. Based upon the estimated number of shares of capital stock as well as the outstanding equity of the parties that will be outstanding immediately prior to the consummation of the merger, we estimate that, upon consummation of the transaction, existing SandRidge stockholders will hold between approximately 64.2% and 68.6% and former Bonanza Creek stockholders will hold between approximately 31.4% and 35.8% of the outstanding common stock of SandRidge. We urge you to obtain current market quotations for SandRidge (trading symbol SD) and Bonanza Creek (trading symbol BCEI).

The obligations of SandRidge and Bonanza Creek to complete the merger are subject to the satisfaction or waiver of a number of conditions set forth in the merger agreement, a copy of which is included as Annex A to the joint proxy statement/prospectus attached hereto. The attached joint proxy statement/prospectus describes the SandRidge special meeting, the Bonanza Creek special meeting, the merger, the documents and agreements related to the merger, the share issuance and other related matters. It also contains or references information about SandRidge and Bonanza Creek and certain related agreements and matters. Please carefully read the entire joint proxy statement/prospectus, including “Risk Factors,” beginning on page 38, for a discussion of the risks relating to the proposed merger. You also can obtain information about SandRidge and Bonanza Creek from documents that each has filed with the Securities and Exchange Commission.

 

Sincerely,

  

James D. Bennett

   Seth Bullock

President, Chief Executive Officer and Director

   Interim Chief Executive Officer

SandRidge Energy, Inc.

   Bonanza Creek Energy, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger described in this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This document is dated            and is first being mailed to stockholders of record of SandRidge and stockholders of record of Bonanza Creek on or about            .


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LOGO

SANDRIDGE ENERGY, INC.

123 Robert S. Kerr Avenue

Oklahoma City, Oklahoma 73102

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON            , 2018

This is a notice that a special meeting of stockholders (the “SandRidge special meeting”) of SandRidge Energy, Inc. (“SandRidge”) will be held on                , 2018 at                , at                a.m., local time. This special meeting will be held for the purpose of approving the issuance of shares of common stock of SandRidge, par value $0.001 per share, to stockholders of Bonanza Creek Energy, Inc. (“Bonanza Creek”) in connection with the Agreement and Plan of Merger, dated as of November 14, 2017 (as it may be amended from time to time, the “merger agreement”), by and among SandRidge, Brook Merger Sub, Inc., a wholly owned subsidiary of SandRidge, and Bonanza Creek (the “share issuance proposal”).

This joint proxy statement/prospectus describes the share issuance proposal in more detail. Please refer to the attached document, including the merger agreement and all other annexes and any documents incorporated by reference, for further information with respect to the business to be transacted at the SandRidge special meeting. You are encouraged to read the entire document carefully before voting. In particular, see the section entitled “The Merger” beginning on page 80 for a description of the transactions contemplated by the merger agreement, including the share issuance contemplated by the share issuance proposal, and the section entitled “Risk Factors” beginning on page 38 for an explanation of the risks associated with the merger and the other transactions contemplated by the merger agreement, including the share issuance.

The SandRidge board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the share issuance, are fair to, and in the best interests of, SandRidge and its stockholders and (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the share issuance. The SandRidge board recommends that SandRidge stockholders vote “FOR” the share issuance proposal.

The SandRidge board has fixed                as the record date for determination of SandRidge stockholders entitled to receive notice of, and to vote at, the SandRidge special meeting or any adjournments or postponements thereof. Only holders of record of SandRidge common stock at the close of business on the record date are entitled to receive notice of, and to vote at, the SandRidge special meeting.

A complete list of registered SandRidge stockholders entitled to vote at the SandRidge special meeting will be available for inspection at the principal place of business of SandRidge at 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102, during regular business hours for a period of no less than 10 days before the SandRidge special meeting and at the place of the SandRidge special meeting during the meeting.

YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. The merger between SandRidge and Bonanza Creek cannot be completed without the approval of the share issuance proposal by the affirmative vote of a majority of the shares of SandRidge common stock present in person or represented by proxy at the SandRidge special meeting and entitled to vote on the share issuance proposal, assuming a quorum is present.

Whether or not you expect to attend the SandRidge special meeting in person, we urge you to submit a proxy to have your shares voted as promptly as possible by either: (i) logging onto the website shown on your proxy card and following the instructions to vote online; (ii) dialing the toll-free number shown on


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your proxy card and following the instructions to vote by phone; or (iii) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the SandRidge special meeting. Even if you plan to attend the SandRidge special meeting in person, we request that you complete, sign, date and return the enclosed proxy card and thus ensure that your shares of SandRidge common stock will be represented at the SandRidge special meeting if you are unable to attend.

If your shares are held in the name of a broker, bank, trustee or other nominee, please follow the instructions on the voting instruction form furnished by such broker, bank, trustee or other nominee, as appropriate. If you have any questions concerning the share issuance proposal or the other transactions contemplated by the merger agreement or this joint proxy statement/prospectus, would like additional copies or need help voting your shares of SandRidge common stock, please contact SandRidge’s proxy solicitor:

 

 

LOGO

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

proxy@mackenziepartners.com

Stockholders May Call Toll-Free: (800) 322-2885

Banks & Brokers May Call Collect: (212) 929-5500

 

By order of the Board of Directors
Philip T. Warman
Senior Vice President, General Counsel and Corporate Secretary


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LOGO

BONANZA CREEK ENERGY, INC.

410 17th Street, Suite 1400

Denver, Colorado 80202

NOTICE OF 2017 SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON                , 2018

This is a notice that a special meeting of stockholders (the “Bonanza Creek special meeting”) of Bonanza Creek Energy, Inc. (“Bonanza Creek”) will be held on                , 2018, at                a.m., local time, at                . This special meeting will be held for the following purposes:

 

  1. to adopt the Agreement and Plan of Merger, dated as of November 14, 2017 (as it may be amended from time to time, the “merger agreement”), a copy of which is attached as Annex A to the joint proxy statement/prospectus of which this notice is a part, by and among Bonanza Creek, SandRidge Energy, Inc. (“SandRidge”), and Brook Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of SandRidge, pursuant to which Merger Sub will merge with and into Bonanza Creek (the “merger”), with Bonanza Creek surviving as a wholly owned subsidiary of SandRidge; and

 

  2. to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger.

This joint proxy statement/prospectus describes the proposals listed above in more detail, as well as other matters contemplated in connection with the proposed merger. Please refer to the attached document, including the merger agreement and all other annexes and including any documents incorporated by reference, for further information with respect to the business to be transacted at the Bonanza Creek special meeting. You are encouraged to read the entire document carefully before voting.

Bonanza Creek’s board of directors (the “Bonanza Creek board”) unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Bonanza Creek’s stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and (iii) directed that the merger agreement be submitted to Bonanza Creek’s stockholders for adoption. The Bonanza Creek board recommends that Bonanza Creek stockholders vote “FOR” the adoption of the merger agreement and “FOR” the approval on an advisory (non-binding) basis of the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger.

has been fixed as the record date for determination of Bonanza Creek stockholders entitled to receive notice of, and to vote at, the Bonanza Creek special meeting or any adjournments or postponements thereof. Only holders of record of Bonanza Creek common stock at the close of business on the record date are entitled to receive notice of, and to vote at, the Bonanza Creek special meeting.

A complete list of registered Bonanza Creek stockholders entitled to vote at the Bonanza Creek special meeting will be available for inspection at the principal place of business of Bonanza Creek at 410 17th Street, Suite 1400, Denver, Colorado 80202, during regular business hours for a period of no less than 10 days before the Bonanza Creek special meeting and at the place of the Bonanza Creek special meeting during the meeting.

YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. The merger between Bonanza Creek and SandRidge cannot be completed without the adoption of the merger agreement by the affirmative vote of the holders of a majority of the outstanding shares of Bonanza Creek common stock entitled to vote on the merger agreement proposal as of the record date for the Bonanza Creek special meeting.


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Whether or not you expect to attend the Bonanza Creek special meeting in person, we urge you to submit a proxy to have your shares voted as promptly as possible by either: (i) logging onto the website shown on your proxy card and following the instructions to vote online; (ii) dialing the toll-free number shown on your proxy card and following the instructions to vote by phone; or (iii) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the Bonanza Creek special meeting. If your shares are held in the name of a broker, bank or other nominee, please follow the instructions on the voting instruction form furnished by the plan trustee or administrator, or such broker, bank or other nominee, as appropriate.

If you have any questions concerning the merger agreement or the merger contemplated by the merger agreement or this joint proxy statement/prospectus, would like additional copies or need help voting your shares of Bonanza Creek common stock, please contact Bonanza Creek’s proxy solicitor:

 

 

 

LOGO

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders May Call Toll-Free: (877) 750-0637

Banks & Brokers May Call Collect: (212) 750-5833

By order of the Board of Directors

Cyrus D. Marter IV

Senior Vice President, General Counsel and Secretary


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ADDITIONAL INFORMATION

Both SandRidge and Bonanza Creek file annual, quarterly and current reports, proxy statements and other business and financial information with the Securities and Exchange Commission (the “SEC”). You may read and copy any materials that either SandRidge or Bonanza Creek files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at (800) 732-0330 for further information on the Public Reference Room. In addition, SandRidge and Bonanza Creek file reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at http://www.sec.gov containing this information. You can also obtain these documents, free of charge, from SandRidge at http://investors.sandridgeenergy.com or from Bonanza Creek at http://ir.bonanzacrk.com. The information contained on, or that may be accessed through, SandRidge’s and Bonanza Creek’s websites is not incorporated by reference into, and is not a part of, this joint proxy statement/prospectus.

SandRidge has filed a registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part with respect to the shares of SandRidge common stock to be issued in the merger. This joint proxy statement/prospectus constitutes the prospectus of SandRidge filed as part of the registration statement. As permitted by SEC rules, this joint proxy statement/prospectus does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits in the SEC’s reading room at the address set forth above or at the SEC’s website mentioned above. Statements contained in this joint proxy statement/prospectus as to the contents of any contract or other documents referred to in this joint proxy statement/prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable agreement or other document filed as an exhibit to the registration statement. This joint proxy statement/prospectus incorporates important business and financial information about SandRidge from documents that are not attached to this joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference into this joint proxy statement/prospectus free of charge by requesting them in writing or by telephone from SandRidge or its proxy solicitor at the following addresses and telephone numbers:

For SandRidge stockholders:

SandRidge Energy, Inc.

123 Robert S. Kerr Avenue

Oklahoma City, Oklahoma 73102

(405) 429-5515

Attention: Investor Relations

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

proxy@mackenziepartners.com

Stockholders May Call Toll-Free: (800) 322-2885

Banks & Brokers May Call Collect: (212) 929-5500

If you would like to request any documents, please do so by                 , 2018 in order to receive them before the SandRidge special meeting.

For a more detailed description of the information about SandRidge that is incorporated by reference into this joint proxy statement/prospectus and how you may obtain it, see the section entitled “Where You Can Find More Information” beginning on page 249.


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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 (Registration No. 333-                ) filed with the SEC by SandRidge, constitutes a prospectus of SandRidge under the Securities Act of 1933, as amended, with respect to the shares of SandRidge common stock to be issued to Bonanza Creek stockholders in connection with the merger. This joint proxy statement/prospectus also constitutes a joint proxy statement for both Bonanza Creek and SandRidge under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to the special meeting of SandRidge stockholders and a notice of meeting with respect to the special meeting of Bonanza Creek stockholders.

You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated                , and you should assume that the information contained in this joint proxy statement/prospectus is accurate only as of such date. You should also assume that the information incorporated by reference into this joint proxy statement/prospectus is only accurate as of the date of such information.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding SandRidge has been provided by SandRidge and information contained in this joint proxy statement/prospectus regarding Bonanza Creek has been provided by Bonanza Creek.


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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS

     1  

SUMMARY

     13  

The Parties

     13  

SandRidge’s Strategic Rationale for the Merger

     13  

SandRidge Special Meeting

     15  

Bonanza Creek Special Meeting

     15  

The Merger

     16  

Recommendation of the SandRidge Board and Reasons for the Merger

     17  

Recommendation of the Bonanza Creek Board and Reasons for the Merger

     17  

Opinion of SandRidge’s Financial Advisor

     17  

Opinion of Bonanza Creek’s Financial Advisor

     18  

Financing of the Merger

     19  

Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger

     19  

Board of Directors and Management of SandRidge Following Completion of the Merger

     19  

Material U.S. Federal Income Tax Consequences

     20  

Accounting Treatment

     20  

Regulatory Approvals Required to Complete the Merger

     20  

Treatment of Bonanza Creek Equity Awards

     20  

Treatment of Bonanza Creek Warrants

     21  

Listing of SandRidge Common Stock; Delisting of Bonanza Creek Common Stock

     21  

Appraisal Rights and Dissenters’ Rights

     21  

No Solicitation of Alternative Proposals

     21  

Conditions to Completion of the Merger

     22  

Termination of the Merger Agreement

     23  

Expenses and Termination Fees Relating to the Termination of the Merger Agreement

     24  

Specific Performance

     25  

Expected Timing of the Merger

     25  

Comparison of Rights of Common Stockholders of SandRidge and Common Stockholders of Bonanza Creek

     25  

Risk Factors

     25  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SANDRIDGE

     26  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BONANZA CREEK

     28  

SUMMARY SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF SANDRIDGE

     30  

UNAUDITED COMPARATIVE PER SHARE INFORMATION

     31  

COMPARATIVE STOCK PRICE DATA AND DIVIDENDS

     33  

Comparative Per Share Market Price Information

     33  

Comparative Stock Prices

     33  

Dividends

     35  

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

     36  

RISK FACTORS

     38  

Risks Relating to the Merger

     38  

Risks Relating to SandRidge After Completion of the Merger

     42  

Other Risk Factors Relating to SandRidge

     44  

Risk Factors Relating to Bonanza Creek

     44  

INFORMATION ABOUT THE PARTIES

     67  

SandRidge Energy, Inc.

     67  

Brook Merger Sub, Inc.

     67  

Bonanza Creek Energy, Inc.

     67  

 

i


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SANDRIDGE SPECIAL MEETING

     68  

General

     68  

Date, Time and Place of the SandRidge Special Meeting

     68  

Purposes of the SandRidge Special Meeting

     68  

Recommendation of the SandRidge Board

     68  

Attendance at the SandRidge Special Meeting

     68  

Record Date

     69  

Outstanding Shares as of Record Date

     69  

Quorum

     69  

Vote Required

     69  

How to Vote

     70  

Proxies and Revocation

     71  

Inspector of Election

     71  

Solicitation of Proxies

     71  

Adjournments

     71  

No Dissenters’ Rights

     72  

Other Matters

     72  

Householding of Special Meeting Materials

     72  

Questions and Additional Information

     72  

BONANZA CREEK SPECIAL MEETING

     73  

General

     73  

Date, Time and Place of the Bonanza Creek Special Meeting

     73  

Purposes of the Bonanza Creek Special Meeting

     73  

Recommendation of the Bonanza Creek Board

     73  

The Advisory Compensation Proposal and Interests of Directors

     73  

Attendance at the Bonanza Creek Special Meeting

     74  

Record Date

     75  

Outstanding Shares as of Record Date

     75  

Quorum

     75  

Vote Required

     76  

How to Vote

     76  

Proxies and Revocation

     77  

Inspector of Election

     77  

Solicitation of Proxies

     77  

Adjournments

     78  

Appraisal Rights

     78  

Other Matters

     78  

Householding of Special Meeting Materials

     78  

Questions and Additional Information

     79  

THE MERGER

     80  

Effects of the Merger

     80  

Background of the Merger

     80  

Recommendation of the SandRidge Board and Reasons for the Merger

     94  

Recommendation of the Bonanza Creek Board and Reasons for the Merger

     98  

Certain SandRidge Unaudited Prospective Financial and Operating Information

     100  

Opinion of SandRidge’s Financial Advisor

     104  

Certain Bonanza Creek Unaudited Prospective Financial and Operating Information

     111  

Opinion of Bonanza Creek’s Financial Advisor

     115  

Financing of the Merger

     127  

Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger

     127  

Board of Directors and Management of SandRidge Following Completion of the Merger

     135  

Material U.S. Federal Income Tax Consequences

     136  

Accounting Treatment of the Merger

     138  

 

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Regulatory Approvals

     138  

Exchange of Shares

     138  

Treatment of Bonanza Creek Long-Term Incentive Compensation

     139  

Dividend Policy

     139  

Listing of SandRidge Common Stock; Delisting of Bonanza Creek Common Stock

     140  

Appraisal Rights and Dissenters’ Rights

     140  

THE MERGER AGREEMENT

     144  

Terms of the Merger; Merger Consideration

     144  

Completion of the Merger

     145  

Exchange and Payment Procedures

     145  

Bonanza Creek Warrants

     146  

The SandRidge Board Following the Merger

     146  

Representations and Warranties

     146  

Conduct of Business

     148  

No Solicitation of Alternative Proposals

     152  

Change in Board Recommendation

     153  

Efforts to Close the Merger

     155  

Efforts to Hold the Bonanza Creek and SandRidge Special Meetings

     156  

Indemnification and Insurance

     156  

Other Covenants and Agreements

     157  

Conditions to Completion of the Merger

     157  

Termination of the Merger Agreement

     158  

Expenses and Termination Fees Relating to the Termination of the Merger Agreement

     159  

Amendments and Waivers

     160  

Specific Performance

     160  

Governing Law

     160  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     161  

DESCRIPTION OF SANDRIDGE CAPITAL STOCK

     173  

General

     173  

SandRidge Common Stock

     173  

SandRidge Preferred Stock

     174  

Anti-Takeover Effect of SandRidge’s Governing Documents, Stockholder Rights Plan and Delaware General Corporation Law

     174  

Registration Rights Agreement

     177  

COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF SANDRIDGE AND COMMON STOCKHOLDERS OF BONANZA CREEK

     178  

APPRAISAL RIGHTS AND DISSENTERS’ RIGHTS

     190  

INFORMATION ABOUT BONANZA CREEK

     191  

Overview

     191  

Emergence From Voluntary Reorganization Under Chapter 11 Proceedings

     191  

Operations

     191  

Reserves

     193  

Production, Revenues and Price History

     200  

Principal Customers

     202  

Delivery Commitments

     202  

Productive Wells

     202  

Acreage

     203  

Drilling Activity

     203  

Capital Expenditure Budget

     204  

Title to Properties

     204  

Competition

     204  

Insurance Matters

     205  

 

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Regulation of the Oil and Natural Gas Industry

     205  

Regulation of Transportation and Sales of Natural Gas

     206  

Environmental, Health and Safety Regulation

     208  

Employees

     216  

Legal Proceedings

     216  

Offices

     217  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BONANZA CREEK

     218  

Introduction

     218  

Executive Summary

     218  

Bankruptcy Proceedings Under Chapter 11

     218  

Employment Modifications

     218  

Results of Operations

     219  

Results for Discontinued Operations

     233  

Liquidity and Capital Resources

     233  

Contractual Obligations

     238  

Critical Accounting Policies and Estimates

     238  

Effects of Inflation and Pricing

     245  

Off-Balance Sheet Arrangements

     245  

LEGAL MATTERS

     246  

EXPERTS

     246  

SandRidge

     246  

Bonanza Creek

     246  

STOCKHOLDER PROPOSALS

     247  

SandRidge

     247  

Bonanza Creek

     247  

HOUSEHOLDING OF JOINT PROXY STATEMENT/PROSPECTUS

     248  

WHERE YOU CAN FIND MORE INFORMATION

     249  

GLOSSARY OF OIL AND NATURAL GAS TERMS

     251  

INDEX TO BONANZA CREEK ENERGY, INC. FINANCIAL INFORMATION

     F-1  

Annex A—Agreement and Plan of Merger, dated as of November  14, 2017

     A-1  

Annex B—Opinion of Morgan Stanley & Co. LLC

     B-1  

Annex C—Opinion of Evercore Group L.L.C.

     C-1  

Annex D—Section  262 of the General Corporation Law of the State of Delaware

     D-1  

 

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QUESTIONS AND ANSWERS

The following are some questions that you, as a stockholder of SandRidge Energy, Inc. (“SandRidge”) or a stockholder of Bonanza Creek Energy, Inc. (“Bonanza Creek”), may have regarding the merger, the issuance of shares of SandRidge common stock to Bonanza Creek stockholders in connection with the merger and other matters being considered at the special meetings of SandRidge’s stockholders and Bonanza Creek’s stockholders (the “SandRidge special meeting” and the “Bonanza Creek special meeting,” respectively) and the answers to those questions. SandRidge and Bonanza Creek urge you to carefully read the remainder of this joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger, the issuance of shares of SandRidge common stock in connection with the merger and the other matters being considered at the SandRidge special meeting and the Bonanza Creek special meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this joint proxy statement/prospectus.

 

Q: Why am I receiving this document?

 

A: SandRidge, Bonanza Creek and Brook Merger Sub, Inc., a wholly owned subsidiary of SandRidge (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as of November 14, 2017 (as it may be amended from time to time, the “merger agreement”), providing for the merger of Merger Sub with and into Bonanza Creek, with Bonanza Creek surviving the merger as a wholly owned subsidiary of SandRidge (the “merger”).

In order to complete the merger, SandRidge stockholders must approve the proposal to issue SandRidge common stock, par value $0.001 per share (the “SandRidge common stock”), to the Bonanza Creek stockholders pursuant to the merger agreement (the “share issuance proposal”) and Bonanza Creek stockholders must approve the proposal to adopt the merger agreement (the “merger agreement proposal”), and all other conditions to the merger must be satisfied or waived.

SandRidge and Bonanza Creek will hold separate special meetings to obtain these approvals and other related matters, including, in the case of Bonanza Creek, a vote to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger (the “advisory compensation proposal”).

This joint proxy statement/prospectus, which you should read carefully, contains important information about the merger, the share issuance and other matters being considered at the SandRidge special meeting and the Bonanza Creek special meeting.

 

Q: What is SandRidge’s strategic rationale for this transaction?

 

A: The acquisition of Bonanza Creek is a highly strategic transaction designed to create a higher risk-adjusted return for SandRidge stockholders by filling the gap between SandRidge’s cash flow-generating, mature producing Mississippi Lime assets and the development of its exciting and emerging North Park Basin Niobrara assets and assets in the Meramec formation in Dewey, Garfield, Major and Woodward counties in Oklahoma (the “NW STACK”), which both require additional time and capital before they progress from delineation to the development phase. The acquisition adds a deep inventory of high-return drilling opportunities ready for immediate development and close to existing midstream infrastructure in the established DJ Basin in northern Colorado. This will allow SandRidge to accelerate oil production through lower risk full-field development of DJ Basin assets while continuing SandRidge’s plan of building infrastructure and conducting further testing in the North Park Basin and ongoing delineation of its NW STACK assets. In addition, the acquisition reduces SandRidge’s reliance on its Mississippi Lime assets for production revenues. The transaction is expected to be immediately accretive to cash flow per share in 2018 while ensuring that SandRidge will continue to maintain a strong balance sheet, with an expected net debt to EBITDA leverage ratio at or below 2.0 (1.9 assuming all $20.0 million in general and administrative expense savings are realized) over the next three years and pro forma liquidity in excess of $300 million as of the completion of the merger. For additional information regarding the strategic rationale of the merger, see the sections entitled “Summary—SandRidge’s Strategic Rationale for the Merger” and “The Merger—Recommendation of the SandRidge Board and Reasons for the Merger.”

 

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Q: What will Bonanza Creek stockholders receive for their shares of Bonanza Creek common stock in the merger?

 

A: At the effective time of the merger (the “effective time,” and the date of the effective time, the “closing date of the merger”), each share of Bonanza Creek common stock, par value $0.01 per share (the “Bonanza Creek common stock”), issued and outstanding immediately prior to the effective time (other than shares of Bonanza Creek common stock held by (i) Bonanza Creek as treasury shares, (ii) SandRidge, Merger Sub or any of their direct or indirect subsidiaries, (iii) any direct or indirect subsidiary of Bonanza Creek, or (iv) any holder of record who is entitled to demand and properly demands appraisal of such shares pursuant to and in compliance with the Delaware General Corporation Law (the “DGCL”) (the shares of Bonanza Creek common stock described in clauses (i) through (iv) together, “excluded shares”)), will be cancelled and converted automatically into the right to receive (a) $19.20 in cash, without interest and subject to any required withholding taxes, and (b) a number of shares of SandRidge common stock equal to the quotient (the “exchange ratio”) determined by dividing (I) $16.80 by (II) the volume-weighted average price per share of SandRidge common stock for the 20 consecutive trading days ending on the third-to-last trading day prior to the closing date of the merger (the “SandRidge average stock price”); provided, however, that (x) if the SandRidge average stock price is an amount greater than $21.38, then the exchange ratio will be 0.7858, and (y) if the SandRidge average stock price is an amount less than $17.50, then the exchange ratio will be 0.9600 (the aggregate amount of cash and number of shares of SandRidge common stock, the “merger consideration”).

In addition, all warrants (the “Bonanza Creek warrants”) issued pursuant to the Warrant Agreement, dated as of April 28, 2017, between Bonanza Creek and Broadridge Corporate Issuer Solutions, Inc. (the “Bonanza Creek warrant agreement”) will be automatically exercised in accordance with the terms of the Bonanza Creek warrant agreement.

Furthermore, the board of directors of Bonanza Creek (the “Bonanza Creek board”) will adopt resolutions to (i) adjust the terms of outstanding Bonanza Creek stock options (“Bonanza Creek stock options”) granted pursuant to the Bonanza Creek Energy, Inc. 2017 Long Term Incentive Plan (the “Bonanza Creek 2017 LTIP”) to provide that at the effective time, such outstanding Bonanza Creek stock options will be converted into options to acquire shares of SandRidge common stock, as described in the section entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation,” (ii) adjust the terms of outstanding restricted stock units with respect to shares of Bonanza Creek common stock (other than restricted stock units granted to non-employee directors of Bonanza Creek) granted pursuant to the Bonanza Creek 2017 LTIP (“Bonanza Creek RSUs”) to provide that at the effective time, such outstanding Bonanza Creek RSUs will be converted into restricted stock unit awards with respect to shares of SandRidge common stock, as described in the section entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation,” and (iii) adjust the terms of restricted stock units with respect to shares of Bonanza Creek common stock granted to non-employee directors of Bonanza Creek pursuant to the Bonanza Creek 2017 LTIP (“Director RSUs”) to provide that immediately prior to the effective time, such outstanding Director RSUs will vest in full and be canceled and converted into the right to receive the specified merger consideration, subject to certain limitations, as described in the section entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation.” Additionally, the Bonanza Creek board will adopt resolutions to adjust the terms of outstanding Bonanza Creek stock options or Bonanza Creek RSUs (other than Director RSUs) to provide for accelerated vesting in certain circumstances, as described in the section entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation.”

For additional information regarding the consideration to be received in the merger, see the section entitled “The Merger—Effects of the Merger.”

 

Q: What is the value of the merger consideration?

 

A:

The exact value of the merger consideration that Bonanza Creek stockholders receive will depend on the price per share of SandRidge common stock at the time of the merger and the number of shares received

 

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  will depend on the average price per share at which SandRidge common stock trades during a period leading up to the merger. Those prices will not be known at the time of the Bonanza Creek special meeting and may be less than the current price or the price at the time of the Bonanza Creek special meeting.

Based on the closing stock price of SandRidge common stock on the New York Stock Exchange (“NYSE”) on                , the latest practicable date before the mailing of this joint proxy statement/prospectus, of $        , and assuming that such price was to be the SandRidge average stock price, the applicable exchange ratio would be                and the value of the merger consideration would be $                 for each share of Bonanza Creek common stock. We urge you to obtain current market quotations of SandRidge common stock and Bonanza Creek common stock. See the section entitled “Where You Can Find More Information” beginning at page 249 of this joint proxy statement/prospectus.

 

Q: What happens if I am eligible to receive a fraction of a share of SandRidge common stock as part of the merger consideration?

 

A: If the aggregate number of shares of SandRidge common stock that you are entitled to receive as part of the merger consideration includes a fraction of a share of SandRidge common stock, you will receive cash in lieu of that fractional share. See the section entitled “The Merger—Effects of the Merger” beginning on page 80 of this joint proxy statement/prospectus.

 

Q: If I am a Bonanza Creek stockholder, how will I receive the merger consideration to which I am entitled?

 

A: As soon as reasonably practicable after the effective time (but no later than the third business day after the closing date of the merger), an exchange agent will mail to each holder of record of Bonanza Creek common stock (whose shares were converted into the right to receive the merger consideration pursuant to the merger agreement) a letter of transmittal and instructions for use in effecting the surrender of certificates of Bonanza Creek common stock (“Bonanza Creek stock certificates”) and book-entry shares representing the shares of Bonanza Creek common stock (“Bonanza Creek book-entry shares”) in exchange for the merger consideration. Upon receipt by the exchange agent of (i) either the applicable Bonanza Creek stock certificates or Bonanza Creek book-entry shares and (ii) a signed letter of transmittal and such other documents as may be reasonably required pursuant to such instructions, the holder of such shares will be entitled to receive the merger consideration in exchange therefor.

 

Q: Who will own SandRidge immediately following the merger?

 

A: SandRidge and Bonanza Creek estimate that, upon completion of the merger, existing SandRidge stockholders will hold between approximately 64.2% and 68.6% and former Bonanza Creek stockholders will hold between approximately 31.4% and 35.8% of the outstanding common stock of SandRidge.

 

Q: Why are Bonanza Creek stockholders being asked to cast an advisory (non-binding) vote to approve the advisory compensation proposal?

 

A: Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), requires Bonanza Creek to provide its stockholders with the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger, as disclosed in this joint proxy statement/prospectus, including the compensation table and the related narrative for named executive officer compensation disclosures set forth in the section entitled “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger.” This vote is commonly referred to as a “golden parachute say on pay” vote. Accordingly, Bonanza Creek’s stockholders are being provided with the opportunity to cast an advisory vote on those change of control payments.

 

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Q: What will happen if Bonanza Creek’s stockholders do not approve the advisory (non-binding) vote at the Bonanza Creek special meeting?

 

A: Bonanza Creek stockholder approval of the advisory compensation proposal is not a condition to completion of the merger. The advisory compensation proposal is merely an advisory vote that will not be binding on Bonanza Creek, SandRidge or their respective boards of directors. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the merger is consummated, the eligibility of the Bonanza Creek named executive officers for such payments and benefits will not be affected by the outcome of the advisory vote.

 

Q: How important is my vote?

 

A: Your vote “FOR” each proposal presented at the SandRidge special meeting and/or the Bonanza Creek special meeting is very important, and you are encouraged to submit a proxy as soon as possible.

Approval of the share issuance proposal requires the affirmative vote of a majority of the shares of SandRidge common stock present in person or represented by proxy at the SandRidge special meeting and entitled to vote on the share issuance proposal, assuming a quorum is present. Any abstention by a SandRidge stockholder will have the same effect as a vote against the share issuance proposal. The failure of any SandRidge stockholder to submit a vote (e.g. by failing to submit a proxy or to appear in person) will not be counted in determining the votes cast in connection with this proposal and therefore will have no effect on the outcome of the share issuance proposal.

Approval of the merger agreement proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Bonanza Creek common stock entitled to vote on the merger agreement proposal. Any abstention by a Bonanza Creek stockholder and the failure of any Bonanza Creek stockholder to submit a vote (e.g. by failing to submit a proxy or to appear in person) will have the same effect as voting against the merger agreement proposal. Adoption of the advisory compensation proposal requires the affirmative vote of the holders of a majority of the shares of Bonanza Creek common stock present in person or represented by proxy at the Bonanza Creek special meeting and entitled to vote on the advisory compensation proposal, assuming a quorum is present. Abstentions are considered shares present and entitled to vote and will have the same effect as votes “against” the advisory compensation proposal. Since the advisory compensation proposal is non-binding, if the merger agreement is approved by Bonanza Creek stockholders and the merger is completed, the compensation that is the subject of the advisory compensation proposal, which includes amounts SandRidge or Bonanza Creek are contractually obligated to pay, would still be paid regardless of the outcome of the non-binding advisory vote.

 

Q: How do the SandRidge board and the Bonanza Creek board recommend that I vote?

 

A: The SandRidge board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the share issuance, are fair to, and in the best interests of, SandRidge and its stockholders, and (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the share issuance. For a detailed description of the various factors considered by the SandRidge board, see the section entitled “The Merger—Recommendation of the SandRidge Board and Reasons for the Merger.”

Accordingly, the SandRidge board unanimously recommends that SandRidge stockholders vote “FOR” the share issuance proposal.

The Bonanza Creek board, after considering the various factors described under “The Merger—Recommendation of the Bonanza Creek Board and Reasons for the Merger,” the comprehensive process conducted by the Bonanza Creek board and the alternatives to the merger (including remaining as a stand-alone company), has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Bonanza Creek’s

 

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stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and (iii) directed that the merger agreement be submitted to Bonanza Creek’s stockholders for adoption.

Accordingly, the Bonanza Creek board recommends that you vote “FOR” the merger agreement proposal and “FOR” the advisory compensation proposal.

 

Q: Will the SandRidge common stock received at the time of completion of the merger be traded on an exchange?

 

A: Yes. It is a condition to the consummation of the merger that the shares of SandRidge common stock to be issued to Bonanza Creek stockholders in connection with the merger be authorized for listing on the NYSE, subject to official notice of issuance.

 

Q: How will SandRidge stockholders be affected by the merger?

 

A: Upon completion of the merger, each SandRidge stockholder will hold the same number of shares of SandRidge common stock that such stockholder held immediately prior to completion of the merger. As a result of the merger, SandRidge stockholders will own shares in a larger company with more assets. However, because in connection with the merger, SandRidge will be issuing additional shares of SandRidge common stock to Bonanza Creek stockholders in exchange for their shares of Bonanza Creek common stock, each outstanding share of SandRidge common stock immediately prior to the merger will represent a smaller percentage of the aggregate number of shares of SandRidge common stock outstanding after the merger.

 

Q: What are the material U.S. federal income tax consequences of the merger?

 

A: The exchange of Bonanza Creek common stock for the merger consideration pursuant to the merger agreement will be a taxable transaction for U.S. federal income tax purposes for U.S. holders (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences”). A U.S. holder will generally recognize capital gain or loss on the receipt of SandRidge common stock and cash in exchange for Bonanza Creek common stock. No gain or loss will be recognized by holders of SandRidge common stock as a result of the merger. See the section entitled “The Merger—Material U.S. Federal Income Tax Consequences” for a more complete discussion of certain material U.S. federal income tax consequences of the merger.

 

Q: When do SandRidge and Bonanza Creek expect to complete the merger?

 

A: SandRidge and Bonanza Creek currently expect to complete the merger in the first quarter of 2018. However, neither SandRidge nor Bonanza Creek can predict the actual date on which the merger will be completed, nor can the parties assure that the merger will be completed, because completion is subject to conditions beyond either company’s control. See the sections entitled “The Merger—Regulatory Approvals” and “The Merger Agreement—Conditions to Completion of the Merger.”

 

Q: What are the conditions to the completion of the merger?

 

A: The obligations of Bonanza Creek and SandRidge to consummate the merger are subject to the satisfaction or waiver (to the extent permissible under applicable laws) of the following mutual conditions:

 

    adoption of the merger agreement proposal by Bonanza Creek stockholders and approval of the share issuance proposal by SandRidge stockholders;

 

    absence of any order, decree, ruling, injunction or other action that is in effect (whether temporary, preliminary or permanent) restraining, enjoining or otherwise prohibiting the consummation of the merger, and no law shall have been adopted that makes consummation of the merger illegal or otherwise prohibited;

 

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    expiration or termination of any waiting period applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (Bonanza Creek and SandRidge have determined that filings under the HSR Act are not required and therefore the merger is not subject to any such waiting period);

 

    effectiveness of the registration statement on Form S-4 filed by SandRidge in connection with the share issuance having been declared by the Securities and Exchange Commission (the “SEC”) and absence of any stop order suspending the effectiveness of such Form S-4 having been issued by the SEC and absence of any proceedings for that purpose having been initiated or threatened by the SEC; and

 

    approval of the listing on the NYSE of the SandRidge common stock to be issued in connection with the merger.

There are certain other additional customary conditions to the completion of the merger discussed further in the section entitled “The Merger Agreement—Conditions to Completion of the Merger.”

 

Q: What happens if the merger is not completed?

 

A: If the merger agreement is not adopted by Bonanza Creek’s stockholders, the share issuance is not approved by SandRidge’s stockholders or the merger is not completed for any other reason, Bonanza Creek’s stockholders will not receive any payment for shares of Bonanza Creek common stock they own. Instead, Bonanza Creek will remain an independent public company, Bonanza Creek common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and Bonanza Creek will continue to file periodic reports with the SEC on account of Bonanza Creek’s common stock.

Under specified circumstances, Bonanza Creek and/or SandRidge may be required to reimburse the other party’s expenses or pay a termination fee upon termination of the merger agreement, as described under “The Merger Agreement—Expenses and Termination Fees Relating to the Termination of the Merger Agreement.”

 

Q: Who will serve on the SandRidge board of directors following the completion of the merger?

 

A: Upon completion of the merger, the current directors and executive officers of SandRidge are expected to continue in their current positions, other than as may be publicly announced by SandRidge in the normal course.

Additionally, SandRidge is required to take all necessary corporate action (i) so that upon and after the effective time, the size of the SandRidge board is increased by one member, (ii) to appoint to the SandRidge board one individual who has been a corporate executive with financial or operating experience in the oil and gas industry in the Rocky Mountain region of the United States, as mutually agreed upon by Bonanza Creek and SandRidge (and who must have been serving as a director of the Bonanza Creek board as of the date the merger agreement was entered into) and approved by the Nominating and Governance Committee of the SandRidge board to fill the vacancy on the SandRidge board created by such increase at the effective time and (iii) to nominate the new director for election to the SandRidge board in the proxy statement relating to the first annual meeting of the stockholders of SandRidge following the completion of the merger with respect to which a definitive proxy statement has not been filed by SandRidge prior to the completion of the merger.

 

Q: When and where is the SandRidge special meeting?

 

A: The SandRidge special meeting will be held on                , 2018, at                a.m., local time, at                .

 

Q: When and where is the Bonanza Creek special meeting?

 

A: The Bonanza Creek special meeting will be held on                , 2018, at                a.m., local time, at                .

 

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Q: How many votes may I cast?

 

A: Each share of SandRidge common stock entitles its holder of record to one vote on each matter considered at the SandRidge special meeting. Only SandRidge stockholders who held shares of SandRidge common stock at the close of business on                are entitled to vote at the SandRidge special meeting and any adjournment or postponement of the SandRidge special meeting, so long as such shares remain outstanding on the date of the SandRidge special meeting.

Each outstanding share of Bonanza Creek common stock entitles its holder of record to one vote on each matter considered at the Bonanza Creek special meeting. Only Bonanza Creek stockholders who held shares of record at the close of business on                are entitled to vote at the Bonanza Creek special meeting and any adjournment or postponement of the Bonanza Creek special meeting, so long as such shares remain outstanding on the date of the Bonanza Creek special meeting.

 

Q: Who can vote at each of the SandRidge special meeting and the Bonanza Creek special meeting?

 

A: All holders of shares of SandRidge common stock who hold such shares of record at the close of business on                , the record date for the SandRidge special meeting, are entitled to receive notice of and to vote at the SandRidge special meeting.

All holders of shares of Bonanza Creek common stock who hold such shares of record at the close of business on                , the record date for the Bonanza Creek special meeting, are entitled to receive notice of and to vote at the Bonanza Creek special meeting.

 

Q: What are the record dates in connection with each of the SandRidge special meeting and the Bonanza Creek special meeting?

 

A: The record date for the determination of stockholders entitled to notice of and to vote at the SandRidge special meeting is                . The record date for the determination of stockholders entitled to notice of and to vote at the Bonanza Creek special meeting is                .

 

Q: What constitutes a quorum at each of the SandRidge special meeting and the Bonanza Creek special meeting?

 

A: In order for business to be conducted at the SandRidge and Bonanza Creek special meetings, a quorum must be present. A quorum at the SandRidge special meeting requires the presence, in person or represented by proxy, of holders of a majority of the voting power of the outstanding shares of SandRidge stock entitled to vote at the SandRidge special meeting. A quorum at the Bonanza Creek special meeting requires the presence, in person or represented by proxy, of holders of a majority of the shares of Bonanza Creek common stock entitled to vote at the Bonanza Creek special meeting.

 

Q: What do I need to do now?

 

A: After you have carefully read and considered the information contained or incorporated by reference into this joint proxy statement/prospectus, please submit your proxy via the Internet or by telephone in accordance with the instructions set forth on the enclosed proxy card, or complete, sign, date and return the enclosed proxy card in the postage-prepaid envelope provided as soon as possible so that your shares will be represented and voted at the SandRidge special meeting or the Bonanza Creek special meeting, as applicable.

Additional information on voting procedures can be found under the section entitled “SandRidge Special Meeting” and under the section entitled “Bonanza Creek Special Meeting.”

 

Q: Should I send in my stock certificates now?

 

A:

No. As soon as reasonably practicable after the effective time (but no later than the third business day after the closing date of the merger), an exchange agent will mail to each holder of record of Bonanza Creek

 

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  common stock (whose shares were converted into the right to receive the merger consideration pursuant to the merger agreement) a letter of transmittal and instructions for use in effecting the surrender of Bonanza Creek stock certificates and Bonanza Creek book-entry shares in exchange for the merger consideration. If you are a SandRidge stockholder, you should retain your certificates, as you will continue to hold the shares of SandRidge common stock you currently own.

 

Q: How will my proxy be voted?

 

A: If you submit your proxy via the Internet, by telephone or by completing, signing, dating and returning the enclosed proxy card, your proxy will be voted in accordance with your instructions.

Additional information on voting procedures can be found under the section entitled “SandRidge Special Meeting” and under the section entitled “Bonanza Creek Special Meeting.”

 

Q: Who will count the votes?

 

A: The votes at the SandRidge special meeting will be counted by an inspector of election appointed by the SandRidge board. The votes at the Bonanza Creek special meeting will be counted by an independent inspector of election appointed by the Bonanza Creek board.

 

Q: May I vote in person?

 

A: Yes. If you are a stockholder of record of SandRidge at the close of business on                or a stockholder of record of Bonanza Creek at the close of business on                , you may attend your special meeting and vote your shares in person, in lieu of submitting your proxy by Internet, telephone or by completing, signing, dating and returning the enclosed proxy card.

If you are a beneficial holder of SandRidge common stock or Bonanza Creek common stock, you are also invited to attend the SandRidge special meeting or the Bonanza Creek special meeting, as applicable. However, because you are not the stockholder of record, you may not vote your shares in person at the SandRidge special meeting or the Bonanza Creek special meeting, as applicable, unless you request and obtain a valid “legal proxy” from your bank, broker or nominee.

 

Q: What must I bring to attend my special meeting?

 

A: Only SandRidge’s stockholders of record, or Bonanza Creek’s stockholders of record, as of the close of business on the applicable record date, beneficial owners of SandRidge common stock or Bonanza Creek common stock as of the applicable record date, holders of valid proxies for the SandRidge special meeting or Bonanza Creek special meeting, and invited guests of SandRidge or Bonanza Creek may attend the applicable special meeting. All attendees should be prepared to present government-issued photo identification (such as a driver’s license or passport) for admittance. The additional items, if any, that attendees must bring depend on whether they are stockholders of record, beneficial owners or proxy holders.

Additional information on attending the SandRidge special meeting and the Bonanza Creek special meeting can be found under the section entitled “SandRidge Special Meeting” and under the section entitled “Bonanza Creek Special Meeting.”

 

Q: What should I do if I receive more than one set of voting materials for the SandRidge special meeting or the Bonanza Creek special meeting?

 

A: You may receive more than one set of voting materials for the SandRidge special meeting or the Bonanza Creek special meeting or both, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction forms. For example, if you hold your SandRidge common stock or Bonanza Creek common stock in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please submit each separate proxy or voting instruction form that you receive by following the instructions set forth in each separate proxy or voting instruction form.

 

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Q: What’s the difference between holding shares as a stockholder of record and holding shares as a beneficial owner?

 

A: If your shares of SandRidge common stock or Bonanza Creek common stock are registered directly in your name with SandRidge’s transfer agent, American Stock Transfer & Trust Company, LLC, or Bonanza Creek’s transfer agent, Broadridge Investor Communications Solutions, Inc., you are considered, with respect to those shares, to be the stockholder of record. If you are a stockholder of record, then this joint proxy statement/prospectus and your proxy card have been sent directly to you by SandRidge or Bonanza Creek, as applicable.

If your shares of SandRidge common stock or Bonanza Creek common stock are held through a bank, broker or other nominee, you are considered the beneficial owner of the shares of SandRidge common stock or Bonanza Creek common stock held in “street name.” In that case, this joint proxy statement/prospectus has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting, and you are also invited to attend the SandRidge special meeting or the Bonanza Creek special meeting, as applicable. However, because you are not the stockholder of record, you may not vote your shares in person at the SandRidge special meeting or the Bonanza Creek special meeting, as applicable, unless you request and obtain a valid “legal proxy” from your bank, broker or nominee.

 

Q: If my shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee automatically vote my shares for me?

 

A: No. If your shares are held in the name of a broker, bank or other nominee, you will receive separate instructions from your broker, bank or other nominee describing how to vote your shares. The availability of Internet or telephonic voting will depend on the nominee’s voting process. Please check with your broker, bank or other nominee and follow the voting procedures provided by your broker, bank or other nominee on your voting instruction form.

You should instruct your broker, bank or other nominee how to vote your shares. Under the rules applicable to broker-dealers, your broker, bank or other nominee does not have discretionary authority to vote your shares on any of the proposals scheduled to be voted on at the SandRidge special meeting or the Bonanza Creek special meeting. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. SandRidge does not expect any broker non-votes at the SandRidge special meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas the share issuance proposal to be presented at the SandRidge special meeting is considered non-routine. As a result, no broker will be permitted to vote your shares at the SandRidge special meeting without receiving instructions. Failure to instruct your broker on how to vote your shares will have no effect on the outcome of the share issuance proposal, but will have the same effect as a vote “against” the adoption of the merger agreement proposal.

Additional information on voting procedures can be found under the section entitled “SandRidge Special Meeting” and under the section entitled “Bonanza Creek Special Meeting.”

 

Q: What do I do if I am a SandRidge stockholder and I want to revoke my proxy?

 

A: Stockholders of record may revoke their proxies at any time before their shares are voted at the SandRidge special meeting in any of the following ways:

 

    sending a written notice of revocation to SandRidge at 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102, Attention: Corporate Secretary, which must be received before their shares are voted at the SandRidge special meeting;

 

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    properly submitting a later-dated, new proxy card, which must be received before their shares are voted at the SandRidge special meeting (in which case only the later-dated proxy is counted and the earlier proxy is revoked);

 

    submitting a proxy via the Internet or by telephone at a later date, which must be received by 11:59 p.m., Eastern Time, on                , 2018 (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or

 

    attending the SandRidge special meeting and voting in person. Attendance at the SandRidge special meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.

Beneficial owners of SandRidge common stock may change their voting instruction by submitting new voting instructions to the brokers, banks or other nominees that hold their shares of record or by requesting a “legal proxy” from such broker, bank or other nominee and voting in person at the SandRidge special meeting.

Additional information can be found under the section entitled “SandRidge Special Meeting.”

 

Q: What do I do if I am a Bonanza Creek stockholder and I want to revoke my proxy?

 

A: Stockholders of record may revoke their proxies at any time before their shares are voted at the Bonanza Creek special meeting in any of the following ways:

 

    sending a written notice of revocation to Bonanza Creek at 410 17th Street, Suite 1400, Denver, Colorado 80202, Attention: Corporate Secretary, which must be received before their shares are voted at the Bonanza Creek special meeting;

 

    properly submitting a later-dated, new proxy card, which must be received before their shares are voted at the Bonanza Creek special meeting (in which case only the later-dated proxy is counted and the earlier proxy is revoked);

 

    submitting a proxy via the Internet or by telephone at a later date, which must be received by 11:59 p.m., Eastern Time, on                , 2018 (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or

 

    attending the Bonanza Creek special meeting and voting in person. Attendance at the Bonanza Creek special meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.

Beneficial owners of Bonanza Creek common stock may change their voting instruction by submitting new voting instructions to the brokers, banks or other nominees that hold their shares of record or by requesting a “legal proxy” from such broker, bank or other nominee and voting in person at the SandRidge special meeting.

Additional information can be found under the section entitled “Bonanza Creek Special Meeting.”

 

Q: What happens if I sell or otherwise transfer my shares of SandRidge common stock before the SandRidge special meeting?

 

A: The record date for stockholders entitled to vote at the SandRidge special meeting is                , which is earlier than the date of the SandRidge special meeting. If you sell or otherwise transfer your shares after the record date but before the SandRidge special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies us in writing of such special arrangements, you will retain your right to vote such shares at the SandRidge special meeting but will otherwise transfer ownership of your shares of SandRidge common stock.

 

Q: What happens if I sell or otherwise transfer my shares of Bonanza Creek common stock before the Bonanza Creek special meeting?

 

A:

The record date for stockholders entitled to vote at the Bonanza Creek special meeting is                , which is earlier than the date of the Bonanza Creek special meeting. If you sell or otherwise transfer your shares after

 

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  the record date but before the Bonanza Creek special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies us in writing of such special arrangements, you will retain your right to vote such shares at the Bonanza Creek special meeting but will otherwise transfer ownership of your shares of Bonanza Creek common stock.

 

Q: What happens if I sell or otherwise transfer my shares of Bonanza Creek common stock before the completion of the merger?

 

A: Only holders of shares of Bonanza Creek common stock at the effective time will become entitled to receive the merger consideration. If you sell your shares of Bonanza Creek common stock prior to the completion of the merger, you will not become entitled to receive the merger consideration by virtue of the merger.

 

Q: Do any of the officers or directors of Bonanza Creek have interests in the merger that may differ from or be in addition to my interests as a Bonanza Creek stockholder?

 

A: In considering the recommendation of the Bonanza Creek board that Bonanza Creek stockholders vote to adopt the merger agreement proposal and to approve the advisory compensation proposal, Bonanza Creek stockholders should be aware that some of Bonanza Creek’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Bonanza Creek stockholders generally. The Bonanza Creek board was aware of and considered these potential interests, among other matters, in evaluating and negotiating the merger agreement and the transactions contemplated therein, in approving the merger and in recommending the adoption of the merger and the approval of the advisory compensation proposal.

For more information and quantification of these interests, please see the section entitled “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger.”

 

Q: Where can I find voting results of the SandRidge special meeting and the Bonanza Creek special meeting?

 

A: Bonanza Creek and SandRidge intend to announce their respective preliminary voting results at each of the Bonanza Creek special meeting and the SandRidge special meeting and publish the final results in Current Reports on Form 8-K that will be filed with the SEC following the Bonanza Creek special meeting and the SandRidge special meeting, respectively. All reports that Bonanza Creek and SandRidge file with the SEC are publicly available when filed. See the section entitled “Where You Can Find More Information.”

 

Q: Do SandRidge stockholders and Bonanza Creek stockholders have dissenters’ rights or appraisal rights, as applicable?

 

A: SandRidge stockholders are not entitled to dissenters’ rights in connection with the merger. Bonanza Creek stockholders are entitled to appraisal rights in connection with the merger under Section 262 of the DGCL, provided they satisfy the special criteria and conditions set forth in Section 262 of the DGCL. Bonanza Creek common stock held by stockholders that do not vote for approval of the merger and make a demand for appraisal in accordance with Delaware law will not be converted into the right to receive the merger consideration, but will become entitled to payment in accordance with Section 262 of the DGCL and such shares will be automatically cancelled. For further information relating to appraisal rights and dissenters’ rights see the sections entitled “The Merger—Appraisal Rights and Dissenters’ Rights” and “Appraisal Rights and Dissenters’ Rights.”

 

Q: Are there any risks that I should consider in deciding whether to vote for the adoption of the merger agreement or the share issuance proposal?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 38 of this joint proxy statement/prospectus. You also should read and carefully consider

 

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  the risk factors of SandRidge contained in the documents that are incorporated by reference into this joint proxy statement/prospectus.

 

Q: How can I find more information about SandRidge and Bonanza Creek?

 

A: You can find more information about SandRidge and Bonanza Creek from various sources described in the section entitled “Where You Can Find More Information.”

 

Q: Who can answer any questions I may have about the SandRidge special meeting, the Bonanza Creek special meeting, the merger, or the transactions contemplated by the merger agreement, including the share issuance?

 

A: If you have any questions about the SandRidge special meeting, the Bonanza Creek special meeting, the merger, the share issuance, or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus or documents incorporated by reference herein, the enclosed proxy card or voting instructions, you should contact:

 

For SandRidge stockholders:

 

SandRidge Energy, Inc.

123 Robert S. Kerr Avenue

Oklahoma City, Oklahoma 73102

(405) 429-5515

Attention: Investor Relations

 

For Bonanza Creek stockholders:

 

Bonanza Creek Energy, Inc.

410 17th Street, Suite 1400

Denver, Colorado 80202

(720) 440-6136

Attention: Investor Relations

MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016

proxy@mackenziepartners.com

Stockholders May Call Toll-Free: (800) 322-2885

Banks & Brokers May Call Collect: (212) 929-5500

 

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022

Stockholders May Call Toll-Free: (877) 750-0637

Banks & Brokers May Call Collect: (212) 750-5833

 

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SUMMARY

The following summary highlights selected information described in more detail elsewhere in this joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus and may not contain all the information that may be important to you. To understand the merger and the matters being voted on by Bonanza Creek stockholders and SandRidge stockholders at their respective special meetings more fully, and to obtain a more complete description of the legal terms of the merger agreement and the agreements related thereto, you should carefully read this entire document, including the annexes, and the documents to which SandRidge and Bonanza Creek refer you. Each item in this summary includes a page reference directing you to a more complete description of that topic. See the section entitled “Where You Can Find More Information.”

The Parties

SandRidge Energy, Inc.

SandRidge Energy, Inc. is an oil and natural gas company with a principal focus on exploration and production activities in the Mid-Continent and Rockies regions of the United States.

Shares of SandRidge common stock are traded on the NYSE under the symbol “SD.”

The principal executive offices of SandRidge are located at 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102 and its telephone number is (405) 429-5500. Additional information about SandRidge and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”

Brook Merger Sub, Inc.

Brook Merger Sub, Inc. is a wholly owned subsidiary of SandRidge. Merger Sub was formed by SandRidge solely in contemplation of the merger, has not conducted any business and has no assets, liabilities or other obligations of any nature other than as set forth in the merger agreement. Its principal executive offices are located at c/o SandRidge Energy, Inc., 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102 and its telephone number is (405) 429-5500.

Bonanza Creek Energy, Inc.

Bonanza Creek is an independent energy company engaged in the acquisition, exploration, development and production of onshore oil and associated liquids-rich natural gas in the United States, with assets primarily in the Wattenberg Field in Colorado and in the Dorcheat Macedonia Field in southern Arkansas. Bonanza Creek was incorporated in Delaware on December 2, 2010 and went public in December 2011.

Shares of Bonanza Creek common stock are traded on the NYSE under the symbol “BCEI.”

The principal executive offices of Bonanza Creek are located at 410 17th Street, Suite 1400, Denver, Colorado 80202 and its telephone number is (720) 440-6100. See the section entitled “Information about Bonanza Creek” for additional information about Bonanza Creek and its subsidiaries.

SandRidge’s Strategic Rationale for the Merger

SandRidge’s mission is to create resource value from its oil and natural gas development and production activities in the Mid-Continent and Rockies regions of the United States. In pursuit of its mission, SandRidge focuses on six strategies, including focusing on its complementary operating areas, preserving capital (in part by focusing drilling efforts on locations that make the most effective use of existing infrastructure), focusing on cost efficiencies and capital allocation, mitigating commodity price risk by entering into derivative contracts, maintaining flexibility (including by maintaining multi-year inventories of both oil and natural gas drilling locations) and pursuing opportunistic acquisitions.

 



 

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The acquisition of Bonanza Creek pursuant to the merger is a direct continuation of these strategies. SandRidge’s existing assets in the Mid-Continent and Niobrara. are in different stages of the development cycle:

 

    Mature Mississippi Lime assets in the Mid-Continent, which generate significant production and material free cash flow, which help fund investment and value creation in SandRidge’s emerging assets. However, they are declining assets that do not offer meaningful opportunities for additional development and oil and cash flow growth;

 

    North Park Basin Niobrara assets, which are in the delineation phase of the development cycle and require significant investment over the next several years, including the construction of midstream and pipeline takeaway infrastructure, before full-field development can be realized; and

 

    NW STACK assets in the Mid-Continent, which are also in the early phases of the development cycle and are being efficiently delineated under a development agreement that provides an initial $100 million of capital from SandRidge’s financial partner.

This current combination of mature Mississippi Lime assets and emerging North Park and NW STACK assets, in the absence of significant development-ready inventory, results in a higher risk profile. The expansion of SandRidge’s Niobrara position to include Bonanza Creek’s DJ Basin assets is expected to considerably improve SandRidge’s risk profile by:

 

    adding an estimated 30-50% rate of return, development-ready inventory within a well-known, highly delineated area;

 

    adding an estimated 970 total drilling locations close to existing infrastructure in a well-delineated play;

 

    adding an estimated 230 proved locations, a 92% increase over SandRidge’s preliminary year end 2017 PUD inventory;

 

    increasing Niobrara production to 25% of total production, from 4%; and

 

    reducing Mississippi Lime production to less than 60% of SandRidge’s total production, from 80%.

SandRidge expects that these assets will allow SandRidge to accelerate returns and grow cash flow while its emerging assets progress to the development phase. The merger is expected to be immediately accretive to SandRidge’s cash flow per share and net asset value per share, while significantly reducing SandRidge’s risk profile. In addition, SandRidge will immediately take the steps necessary to achieve at least $20 million in annual general and administrative savings and will continue to focus on reducing its cost structure. The combined company is also expected to benefit by leveraging the shared experience and expertise of each other’s operational team to enhance the technical value across the Colorado Niobrara play.

To effect the transaction, SandRidge chose to use a measured balance of cash and equity and weighed increasing accretion from funding with cash against pro forma leverage and liquidity. The balance SandRidge chose of approximately 53% cash and 47% equity results in significant accretion while maintaining a prudent level of leverage which is anticipated to remain at or below 2.0x (1.9x assuming all $20.0 million in general and administrative expense savings are realized) EBITDA over the next three years.

Following the transaction, SandRidge expects greater than $300 million of liquidity at closing through a new reserve based loan with an initial borrowing base of $700 million on more favorable terms than its existing reserve based credit facility. To support the new credit facility, SandRidge’s current agent bank has delivered a highly confident letter to SandRidge supporting these terms. The increased borrowing base of $700 million versus the expected borrowing base of the combined company of $618 million provides enhanced liquidity at closing and indicates the strength of the combined company’s proved reserves.

In addition to delivering immediate accretion to cash flow per share and net asset value per share, the transaction is attractively valued. As set forth in the section entitled “The MergerOpinion of SandRidge’s Financial Advisor,” the $36.00 per share acquisition price is well within the per share valuation ranges implied

 



 

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by Bonanza Creek’s net asset value, historical trading range since emerging from bankruptcy and comparable company EBITDA and production multiples. Moreover, SandRidge expects to generate meaningful synergies, with at least $20 million of anticipated annual general and administrative savings already identified. SandRidge further expects to capture additional cost savings through operational efficiencies and to leverage the expertise of its combined operational teams to drive operational improvements across the Niobrara play.

In short, the merger is a very strategic transaction for SandRidge that is faithful to SandRidge’s existing strategy and is designed to create long term stockholder value with lower risk.

For additional information regarding the strategic rationale of the merger, see the section entitled “The Merger—Recommendation of the SandRidge Board and Reasons for the Merger.”

SandRidge Special Meeting

Date, Time and Place. The SandRidge special meeting will be held on                    , 2018 at            , at            a.m., local time.

Purpose. The SandRidge special meeting is being held to consider and vote on approving the issuance of shares of SandRidge common stock to Bonanza Creek stockholders in connection with the merger agreement (referred to previously in this joint proxy statement/prospectus as the share issuance proposal).

Record Date; Voting Rights. The record date for the determination of stockholders entitled to notice of and to vote at the SandRidge special meeting is            . Only SandRidge stockholders who held shares of SandRidge common stock of record at the close of business on            are entitled to vote at the SandRidge special meeting and any adjournment or postponement of the SandRidge special meeting. Each share of SandRidge common stock entitles its holder of record to one vote at the SandRidge special meeting.

Quorum. In order for business to be conducted at the SandRidge special meeting, a quorum must be present. A quorum requires the presence, in person or represented by proxy, of holders of a majority of the voting power of the outstanding shares of SandRidge stock entitled to vote at the SandRidge special meeting. For purposes of determining whether there is a quorum, all shares that are present, including abstentions, will count towards the quorum.

Vote Required. Approval of the share issuance proposal requires the affirmative vote of a majority of the shares of SandRidge common stock present in person or represented by proxy at the SandRidge special meeting and entitled to vote on the share issuance proposal, assuming a quorum is present. Any abstention by a SandRidge stockholder will have the same effect as a vote against the share issuance proposal. The failure of any SandRidge stockholder to submit a vote (e.g. by failing to submit a proxy or to appear in person) will not be counted in determining the votes cast in connection with this proposal and therefore will have no effect on the outcome of the share issuance proposal.

As of the record date, there were            shares of SandRidge common stock outstanding, held by            holders of record. In addition, as of the record date, SandRidge directors and executive officers, as a group, owned and were entitled to vote            shares of SandRidge common stock, or approximately    % of the outstanding shares of SandRidge common stock.

Bonanza Creek Special Meeting

Date, Time and Place. The Bonanza Creek special meeting will be held on                    , 2018, at            at            a.m., local time.

Purpose. The Bonanza Creek special meeting is being held to consider and vote on the following proposals:

 

   

Proposal 1: to adopt the merger agreement, a copy of which is attached as Annex A hereto, pursuant to which the merger will be consummated with Bonanza Creek surviving as a wholly owned subsidiary of

 



 

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SandRidge (referred to previously in this joint proxy statement/prospectus as the merger agreement proposal); and

 

    Proposal 2: to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger (referred to previously in this joint proxy statement/prospectus as the advisory compensation proposal).

Record Date; Voting Rights. The record date for the determination of stockholders entitled to notice of and to vote at the Bonanza Creek special meeting is            . Only Bonanza Creek stockholders who held shares of Bonanza Creek common stock of record at the close of business on            are entitled to vote at the Bonanza Creek special meeting and any adjournment or postponement of the Bonanza Creek special meeting. Each share of Bonanza Creek common stock entitles its holder of record to one vote at the Bonanza Creek special meeting.

Quorum. In order for business to be conducted at the Bonanza Creek special meeting, a quorum must be present. A quorum requires the presence, in person or represented by proxy, of holders of a majority of the shares of Bonanza Creek common stock entitled to vote at the Bonanza Creek special meeting. For purposes of determining whether there is a quorum, all shares that are present, including abstentions, will count towards the quorum.

Vote Required. The votes required for each proposal are as follows:

 

    Proposal 1—the merger agreement proposal. The affirmative vote of the holders of a majority of the outstanding shares of Bonanza Creek common stock entitled to vote on the merger agreement proposal is required to adopt the merger agreement proposal. The failure of any Bonanza Creek stockholder to submit a vote (e.g., by not submitting a proxy or not voting in person) and any abstention by a Bonanza Creek stockholder will have the same effect as a vote “against” the merger agreement proposal. Because the merger agreement proposal is non-routine, brokers, banks and other nominees do not have discretionary authority to vote on the merger agreement proposal, and will not be able to vote on the merger agreement proposal absent instructions from the beneficial owner.

 

    Proposal 2—the advisory compensation proposal. The affirmative vote of the holders of a majority of the shares of Bonanza Creek common stock present in person or represented by proxy at the Bonanza Creek special meeting and entitled to vote on the advisory compensation proposal, assuming a quorum is present, is required to approve the advisory compensation proposal. Abstentions will be considered shares present and entitled to vote and will have the same effect as votes “against” the advisory compensation proposal. Brokers, banks and other nominees do not have discretionary authority to vote on the advisory compensation proposal and will not be able to vote on the advisory compensation proposal. While the Bonanza Creek board intends to consider the vote resulting from this proposal, the vote is advisory only and therefore not binding on Bonanza Creek or SandRidge, and, if the proposed merger with SandRidge is approved by Bonanza Creek stockholders and consummated, the compensation will be payable even if the advisory compensation proposal is not approved.

If shares are held in the name of a broker, bank or other nominee, the beneficial owner of such shares will receive separate instructions from his or her broker, bank or other nominee describing how to vote such shares. As of the record date, there were            shares of Bonanza Creek common stock outstanding, held by              holders of record. In addition, as of the record date, Bonanza Creek directors and executive officers, as a group, owned and were entitled to vote            shares of Bonanza Creek common stock, or approximately     % of the outstanding shares of Bonanza Creek common stock.

The Merger

Upon satisfaction or waiver of the conditions to closing in the merger agreement, on the closing date of the merger, Merger Sub, a wholly owned subsidiary of SandRidge formed for the purpose of effecting the merger,

 



 

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will merge with and into Bonanza Creek, and Bonanza Creek will be the surviving corporation in the merger. At the effective time, each share of Bonanza Creek common stock issued and outstanding immediately prior to the effective time (other than excluded shares) will be converted into the right to receive (i) $19.20 in cash, without interest and subject to any required withholding taxes, and (ii) a number of shares of SandRidge common stock, equal to the quotient (referred to previously in this joint proxy statement/prospectus as the exchange ratio) determined by dividing (a) $16.80 by (b) the volume-weighted average price per share of SandRidge common stock for the 20 consecutive trading days ending on the third-to-last trading day prior to the closing date of the merger (referred to previously in this joint proxy statement/prospectus as the SandRidge average stock price); provided, however, that (x) if the SandRidge average stock price is an amount greater than $21.38, then the exchange ratio will be 0.7858, and (y) if the SandRidge average stock price is an amount less than $17.50, then the exchange ratio will be 0.9600 (such aggregate amount of cash and number of shares of SandRidge common stock is referred to previously in this joint proxy statement/prospectus as the merger consideration). If the aggregate number of shares of SandRidge common stock that a Bonanza Creek stockholder is entitled to receive as part of the merger consideration includes a fraction of a share of SandRidge common stock, such Bonanza Creek stockholder will receive cash in lieu of that fractional share.

Additionally, all Bonanza Creek warrants issued pursuant to the Bonanza Creek warrant agreement will be automatically exercised in accordance with the terms of the Bonanza Creek warrant agreement. Furthermore, the Bonanza Creek board will take those actions necessary so that at the effective time, outstanding (i) Bonanza Creek stock options, (ii) Bonanza Creek RSUs (other than any Director RSUs), and (iii) Director RSUs will respectively be treated as described in the section entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation.”

Recommendation of the SandRidge Board and Reasons for the Merger

The SandRidge board recommends that SandRidge stockholders vote “FOR” the share issuance proposal.

In the course of reaching its decision to approve the merger agreement and the transactions contemplated by the merger agreement, including the share issuance, the SandRidge board considered a number of factors in its deliberations. For a more complete discussion of these factors, see the section entitled “The Merger—Recommendation of the SandRidge Board and Reasons for the Merger.”

Recommendation of the Bonanza Creek Board and Reasons for the Merger

The Bonanza Creek board recommends that Bonanza Creek stockholders vote “FOR” the merger agreement proposal and “FOR” the advisory compensation proposal.

In the course of reaching its decision to approve the merger agreement and the merger contemplated by the merger agreement, the Bonanza Creek board considered a number of factors in its deliberations. For a more complete discussion of these factors, see the section entitled “The Merger—Recommendation of the Bonanza Creek Board and Reasons for the Merger.”

Opinion of SandRidge’s Financial Advisor

On November 13, 2017, at a meeting of the SandRidge board, Morgan Stanley & Co. LLC (“Morgan Stanley”), rendered its oral opinion to the SandRidge board, subsequently confirmed by delivery of a written opinion, dated November 14, 2017, that, as of such date, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the consideration to be paid by SandRidge pursuant to the merger agreement was fair from a financial point of view to SandRidge.

 



 

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The full text of the written opinion of Morgan Stanley to the SandRidge board, dated as of November 14, 2017, is attached hereto as Annex B and is incorporated herein by reference in its entirety. The summary of the opinion of Morgan Stanley in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. SandRidge stockholders should read Morgan Stanley’s opinion carefully and in its entirety for a discussion of the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. Morgan Stanley’s opinion was directed to the SandRidge board, in its capacity as such, and addressed only the fairness from a financial point of view to SandRidge of the consideration to be paid by SandRidge pursuant to the merger agreement as of the date of such opinion.

Morgan Stanley’s opinion did not address any other aspects or implications of the merger. Morgan Stanley’s opinion did not in any manner address the price at which the SandRidge common stock would trade following the merger or at any time, and Morgan Stanley expressed no opinion or recommendation to any holder of shares of SandRidge common stock or Bonanza Creek common stock as to how such holder should vote at the SandRidge special meeting or the Bonanza Creek special meeting, respectively, or whether to take any other action with respect to the merger.

For further information, see the section entitled “The Merger—Opinion of SandRidge’s Financial Advisor” and Annex B.

Opinion of Bonanza Creek’s Financial Advisor

Bonanza Creek engaged Evercore Group L.L.C. (“Evercore”) to act as its financial advisor in connection with evaluating strategic and financial alternatives, including, but not limited to, a merger, acquisition, joint venture, investment, sale of all or part of the equity, business, or assets of Bonanza Creek or such other significant corporate transactions. On November 13, 2017, Evercore delivered to the Bonanza Creek board its oral opinion, confirmed by its delivery of a written opinion dated November 13, 2017, that, as of the date thereof, and based upon and subject to the assumptions, procedures, factors, qualifications, limitations and other matters set forth in Evercore’s written opinion, the merger consideration was fair, from a financial point of view, to the holders of shares of Bonanza Creek common stock issued and outstanding immediately prior to the effective time that are entitled to receive such merger consideration.

The full text of Evercore’s written opinion, dated November 13, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Evercore in delivering its opinion, is attached as Annex C hereto and is incorporated herein by reference in its entirety. Evercore’s opinion does not constitute a recommendation to the Bonanza Creek board or to any other persons in respect of the proposed merger, including as to how any holder of Bonanza Creek common stock should vote or act with respect to the merger proposal or any other matter. We encourage you to read Evercore’s opinion carefully and in its entirety.

Evercore’s opinion was provided for the information and benefit of the Bonanza Creek board and was delivered to the Bonanza Creek board in connection with its evaluation of whether the merger consideration is fair, from a financial point of view, to the holders of shares of Bonanza Creek common stock issued and outstanding immediately prior to the effective time that are entitled to receive such merger consideration, and did not address any other aspects or implications of the proposed merger. Evercore’s opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to other business or financial strategies that might be available to Bonanza Creek, nor did it address the underlying business decision of Bonanza Creek to enter into the merger agreement or to consummate the transactions contemplated by the merger agreement.

 



 

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Evercore has consented to the inclusion of this summary in this joint proxy statement/prospectus and the attachment of the full text of its opinion as Annex C. Evercore has also consented to the use of this summary and the attached full text of its opinion in connection with soliciting any stockholder votes required to approve the transactions contemplated by the merger agreement.

We encourage you to read Evercore’s opinion at Annex C and the section entitled “The Merger—Opinion of Bonanza Creek’s Financial Advisor” of this joint proxy statement/prospectus carefully and in their entirety.

Financing of the Merger

SandRidge anticipates that the total amount of funds necessary to finance the cash portion of the merger consideration and to pay transaction fees and expenses will be approximately $428 million. This amount is expected to be funded through a combination of available cash on hand and borrowings under SandRidge’s revolving credit facility. In connection with the closing, SandRidge intends to enter into a new reserve based credit facility. The administrative agent for SandRidge’s current reserve based credit facility has delivered to SandRidge a highly confident letter supporting the terms of a new credit facility with an initial borrowing base of at least $700 million and on more favorable terms than SandRidge’s current reserve based credit facility.

Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger

When considering the recommendation of the Bonanza Creek board that you vote to approve the proposal to adopt the merger agreement, you should be aware that certain members of the board of directors and executive officers of Bonanza Creek have economic interests in the merger that are different from, or in addition to, the interests of Bonanza Creek stockholders generally. The Bonanza Creek board was aware of and considered these interests to the extent that they existed at the time, among other matters, in approving the merger agreement and the merger and recommending that the merger agreement be adopted by stockholders.

Bonanza Creek’s executive officers are parties to agreements with Bonanza Creek that provide severance benefits if their employment is terminated under certain circumstances in connection with a change in control of Bonanza Creek, including the merger. Furthermore, the merger agreement provides that (i) outstanding Bonanza Creek stock options will be converted into options to acquire shares of SandRidge common stock, (ii) outstanding Bonanza Creek RSUs (other than Director RSUs) will be converted into restricted stock unit awards with respect to shares of SandRidge common stock and (iii) outstanding Director RSUs will vest in full and will be canceled and converted into the right to receive the specified merger consideration, subject to certain limitations.

For more information, see the sections entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation” and “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger” beginning on pages 139 and 127, respectively.

Board of Directors and Management of SandRidge Following Completion of the Merger

Upon completion of the merger, the current directors and executive officers of SandRidge are expected to continue in their current positions, other than as may be publicly announced by SandRidge in the normal course. None of SandRidge’s current directors or executive officers will receive any additional compensation or have any additional rights triggered or accelerated as a result of the completion of the merger.

 



 

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Pursuant to the merger agreement, SandRidge is required to take all necessary corporate action (i) so that upon and after the effective time, the size of the SandRidge board is increased by one member, (ii) to appoint to the SandRidge board one individual who has been a corporate executive with financial or operating experience in the oil and gas industry in the Rocky Mountain region of the United States, as mutually agreed upon by Bonanza Creek and SandRidge (and who must have been serving as a director of the Bonanza Creek board as of the date the merger agreement was entered into) and approved by the Nominating and Governance Committee of the SandRidge board, to fill the vacancy on the SandRidge board created by such increase at the effective time and (iii) to nominate the new director for election to the SandRidge board in the proxy statement relating to the first annual meeting of the stockholders of SandRidge following the completion of the merger with respect to which a definitive proxy statement has not been filed by SandRidge prior to the completion of the merger.

Material U.S. Federal Income Tax Consequences

The receipt of shares of SandRidge common stock and cash in exchange for Bonanza Creek common stock pursuant to the merger agreement will be a taxable transaction for U.S. federal income tax purposes to U.S. holders (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences”). A U.S. holder will recognize gain or loss in an amount equal to the difference between:

 

    the sum of the fair market value of the SandRidge shares and the amount of cash received in the merger; and

 

    such U.S. holder’s adjusted tax basis in the Bonanza Creek common stock exchanged therefor.

Gain or loss recognized by a U.S. holder generally will be taxable as capital gain or loss.

The U.S. federal income tax consequences of the merger to any holder of Bonanza Creek common stock will depend on such holder’s own personal tax situation. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

See the section entitled “The Merger—Material U.S. Federal Income Tax Consequences” for a more complete discussion of certain material U.S. federal income tax consequences of the merger

Accounting Treatment

SandRidge prepares its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The merger will be accounted for using the acquisition method of accounting with SandRidge being considered the acquirer of Bonanza Creek for accounting purposes. This means that SandRidge will allocate the purchase price to the fair value of Bonanza Creek’s tangible and intangible assets and liabilities at the acquisition date, with the excess purchase price (if any) being recorded as goodwill. Under the acquisition method of accounting, goodwill is not amortized but is tested for impairment at least annually.

Regulatory Approvals Required to Complete the Merger

SandRidge and Bonanza Creek have determined that the merger is not subject to the requirements of the HSR Act, and no other governmental consents are required.

Additionally, in connection with the share issuance proposal, SandRidge must file a registration statement with the SEC under the Exchange Act that is declared effective by the SEC.

Treatment of Bonanza Creek Equity Awards

At the effective time (i) outstanding Bonanza Creek stock options will be converted into options to acquire shares of SandRidge common stock, (ii) outstanding Bonanza Creek RSUs (other than Director RSUs) will be

 



 

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converted into restricted stock unit awards with respect to shares of SandRidge common stock, and (iii) outstanding Director RSUs will vest in full and will be canceled and converted into the right to receive the specified merger consideration, subject to certain limitations. Additionally, the Bonanza Creek board will have adopted resolutions to adjust the terms of outstanding Bonanza Creek stock options and Bonanza Creek RSUs (other than Director RSUs) to provide for accelerated vesting in certain circumstances.

See the sections entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation” and “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger” for a detailed description of the treatment of Bonanza Creek equity awards.

Treatment of Bonanza Creek Warrants

All Bonanza Creek warrants will be automatically exercised in accordance with the terms of the Bonanza Creek warrant agreement.

Listing of SandRidge Common Stock; Delisting of Bonanza Creek Common Stock

It is a condition to the consummation of the merger that the shares of SandRidge common stock to be issued to Bonanza Creek stockholders in the merger be authorized for listing on the NYSE, subject to official notice of issuance. As a result of the merger, shares of Bonanza Creek common stock currently listed on the NYSE will cease to be listed on the NYSE.

Appraisal Rights and Dissenters’ Rights

If the merger is completed, Bonanza Creek stockholders will be entitled to appraisal rights under Section 262 of the DGCL, provided they satisfy the special criteria and conditions set forth in Section 262 of the DGCL. Bonanza Creek common stock held by stockholders that do not vote for approval of the merger and make a demand for appraisal in accordance with Delaware law will not be converted into the right to receive the merger consideration, but will be converted into the right to receive a cash payment of the amount determined by the Delaware Court of Chancery to be the fair value of the stockholder’s shares of Bonanza Creek common stock at the effective time, together with interest on such amount from the effective time until paid. The fair value of a share of Bonanza Creek common stock at the effective time as determined by the Delaware Court of Chancery may be less than, equal to or more than the amount such holders would have received under the merger agreement.

Under the DGCL, as well as the governing documents of SandRidge, SandRidge stockholders are not entitled to dissenters’ rights in connection with the merger.

No Solicitation of Alternative Proposals

Pursuant to the merger agreement, each of SandRidge and Bonanza Creek have agreed that they will not, and will cause their respective subsidiaries and will use commercially reasonable efforts to cause their respective representatives not to, directly or indirectly, (i) initiate, solicit or knowingly encourage or knowingly facilitate (including by furnishing or providing information) any inquiries, proposals, or offers regarding, or the making of an alternative proposal or any offer that would reasonably be expected to lead to an alternative proposal, (ii) enter into, participate or engage in or continue any discussions or negotiations with respect to an alternative proposal or any inquiry or indication of interest that would reasonably be expected to lead to an alternative proposal, (iii) furnish any non-public information, or access to its properties, assets or employees, to any person in connection with or in response to an alternative proposal or any inquiry or indication of interest that would reasonably be expected to lead to an alternative proposal, (iv) approve or recommend to its stockholders, or

 



 

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execute or enter into any letter of intent or agreement in principle, or other agreement with any person providing for an alternative proposal (other than certain permitted confidentiality agreements) or (v) resolve, agree or publicly propose to take any of the foregoing actions.

The parties are permitted, prior to obtaining the applicable stockholder approval contemplated by the merger agreement, to engage in the activities described in clauses (ii) and (iii) above solely with and to any person who has made a written, bona fide alternative proposal that did not result from a breach of the applicable party’s non-solicitation obligations; provided, that (i) no non-public information may be furnished until the party receives an executed confidentiality agreement containing limitations on the use and disclosure of non-public information no less favorable to that party in the aggregate than the terms of the confidentiality agreement between SandRidge and Bonanza Creek and permitting any information provided thereunder to be provided to either SandRidge or Bonanza Creek, as applicable; (ii) such party provides prior written notice to the other party of the identity of such third party and of such party’s intention to take such actions and (iii) prior to taking any such actions, the party’s board of directors or any committee thereof determines in good faith, after consultation with its financial advisors and outside legal counsel, that such alternative proposal is, or would reasonably be expected to lead to, a superior proposal, and, after consultation with its outside legal counsel, that the failure to engage in such activities would be inconsistent with the board’s duties under applicable law.

See the section entitled “The Merger Agreement—No Solicitation of Alternative Proposals” for a more detailed description and a summary of other additional obligations of SandRidge and Bonanza Creek.

Conditions to Completion of the Merger

The obligations of Bonanza Creek and SandRidge to consummate the merger are subject to the satisfaction or waiver (to the extent permissible under applicable laws) of the following mutual conditions:

 

    adoption of the merger agreement proposal by Bonanza Creek stockholders and approval of the share issuance proposal by SandRidge stockholders;

 

    absence of any order, decree, ruling, injunction or other action that is in effect (whether temporary, preliminary or permanent) restraining, enjoining or otherwise prohibiting the consummation of the merger, and no law shall have been adopted that makes consummation of the merger illegal or otherwise prohibited;

 

    expiration or termination of any waiting period applicable to the merger under the HSR Act (Bonanza Creek and SandRidge have determined that filings under the HSR Act are not required and therefore the merger is not subject to any such waiting period);

 

    effectiveness of the registration statement on Form S-4 filed by SandRidge in connection with the share issuance having been declared by the SEC and absence of any stop order suspending the effectiveness of such Form S-4 having been issued by the SEC and absence of any proceedings for that purpose having been initiated or threatened by the SEC; and

 

    approval of the listing on the NYSE of the SandRidge common stock to be issued in connection with the merger.

The obligation of Bonanza Creek to effect the merger is also subject to the satisfaction or waiver by Bonanza Creek of the following additional conditions:

 

    the accuracy of the representations and warranties of SandRidge and Merger Sub set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date of the merger (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be true and correct as of such specific date only);

 



 

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    performance of, or compliance with, in all material respects, all agreements and covenants required to be performed or complied with under the merger agreement by SandRidge at or prior to the effective time; and

 

    the receipt by Bonanza Creek of an officer’s certificate from SandRidge confirming the foregoing conditions have been satisfied.

The obligations of SandRidge and Merger Sub to effect the merger are also subject to the satisfaction or waiver by SandRidge of the following additional conditions:

 

    the accuracy of the representations and warranties of Bonanza Creek set forth in the merger agreement, subject to the materiality standards set forth in the merger agreement, as of the date of the merger agreement and as of the closing date of the merger (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be true and correct as of such specific date only);

 

    performance of, or compliance with, in all material respects, all agreements and covenants required to be performed or complied with under the merger agreement by Bonanza Creek at or prior to the effective time; and

 

    the receipt by SandRidge of an officer’s certificate from Bonanza Creek confirming the foregoing conditions have been satisfied.

As further discussed under the section entitled “Risk Factors,” neither SandRidge nor Bonanza Creek can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

None of SandRidge, Bonanza Creek or Merger Sub may rely, either as a basis for not consummating the merger or for terminating the merger agreement (as described below), on the failure of any condition set forth above, as the case may be, to be satisfied if such failure was caused by such party’s breach of any provision of the merger agreement.

Termination of the Merger Agreement

Bonanza Creek and SandRidge may mutually agree, in a written instrument, to terminate the merger agreement before consummating the merger.

In addition, either SandRidge or Bonanza Creek may terminate the merger agreement if:

 

    there is in effect a final nonappealable order of a governmental entity of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement or if there is adopted any law that permanently makes consummation of the transactions contemplated thereby illegal or otherwise prohibited (provided that this right to terminate the merger agreement is not available to either party if such order or law was primarily due to the failure of such party to perform any of its obligations under the merger agreement);

 

    subject to certain exceptions, there has been a breach of the merger agreement by the other party or there has been a failure to perform any of its representations, warranties, covenants or agreements contained in the merger agreement or any of its representations or warranties becomes untrue, which breach, failure to perform or untruth if it was continuing as of the completion of the merger would result in the failure of the closing conditions being satisfied and such breach, failure to perform or untruth is incapable of being cured (or becoming true) or, if capable of being cured (or becoming true), is not cured (or does not become true) by the earlier of (i) the outside date or (ii) within 30 days following receipt by such breaching party of notice of such breach, failure or untruth from the other party (provided the party seeking to terminate the merger agreement pursuant to this provision is not then in terminable breach);

 



 

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    subject to certain exceptions, the merger is not consummated by May 14, 2018 or, at either party’s discretion, if the only conditions to closing that have not been satisfied or waived by that date are those related to the termination or expiration of any waiting period under the HSR Act or the issuance of an order, decree, ruling, injunction or other action that is in effect and is restraining, enjoining or otherwise prohibiting the consummation of the merger, July 14, 2018 (such date, including any such extension, the “outside date”) (provided that this right to terminate the merger agreement shall not be available to any party whose failure to fulfill any material covenant or agreement under the merger agreement has been the cause of or resulted in the failure of the merger to occur on or before the outside date);

 

    if the Bonanza Creek special meeting has concluded without adoption of the merger agreement proposal by Bonanza Creek stockholders or if the SandRidge special meeting has concluded without approval of SandRidge stockholders of the share issuance proposal; or

 

    prior to the adoption of the merger agreement by Bonanza Creek stockholders or approval of the share issuance by SandRidge stockholders, as applicable, the other party (i) makes a recommendation change or (ii) is in material violation of its non-solicitation obligations.

Bonanza Creek may also terminate the merger agreement in order to enter into a definitive agreement with respect to a Bonanza Creek superior proposal subject to compliance with certain procedures set forth in the merger agreement (provided that contemporaneous with such termination Bonanza Creek tenders a termination fee payment to SandRidge).

Expenses and Termination Fees Relating to the Termination of the Merger Agreement

Bonanza Creek or SandRidge, as applicable, will be obligated to pay the other party a termination fee of $26,116,219 (in certain cases, less any amounts previously paid to the other party) in the following circumstances:

 

    if such party effects an adverse recommendation change or such party commits a material breach of its non-solicitation obligations and the other party terminates the merger agreement; or

 

    (i) an alternative proposal is publicly submitted, publicly proposed, publicly disclosed or otherwise communicated to the Bonanza Creek board or the SandRidge board, as applicable, and not withdrawn at the time of the termination of the merger agreement, (ii) the merger agreement is terminated because such party’s stockholders fail to adopt the merger agreement or approve the share issuance, as applicable, or because of the occurrence of the outside date or the other party terminates due to the applicable party’s terminable breach and (iii) within twelve months of the termination of the merger agreement, such party enters into a definitive agreement with a third party with respect to or consummates a transaction that is an alternative proposal relating to 50% or more of the party’s assets or stock with a third party (provided that if the merger agreement is terminated because of the occurrence of the outside date, the termination fee shall only be $13,058,109.50).

Bonanza Creek will also be required to pay a termination fee of $26,116,219 if Bonanza Creek terminates the merger agreement in order to enter into a Bonanza Creek superior proposal.

In addition, unless otherwise entitled to the $26,116,219 termination fee, SandRidge or Bonanza Creek will be obligated to pay the other party an expense reimbursement fee of up to $3,730,888 if (i) such party’s stockholders fail to adopt the merger agreement or approve the share issuance proposal, as applicable, or (ii) such party commits a terminable breach (other than with respect to a breach of the change of recommendation and non-solicitation obligations, in which case the entire $26,116,219 termination fee will be due and payable).

 



 

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In no event shall either party be entitled to receive more than one termination fee and one expense reimbursement fee. If a party receives a termination fee, then such party will not be entitled to also receive an expense reimbursement fee, and any payment of the expense reimbursement fee shall be fully creditable against any subsequent payment of the termination fee.

Specific Performance

In addition to any other remedy that may be available to each party, including monetary damages, each of the parties will be entitled to an injunction or injunctions, or any other appropriate form of specific performance or equitable relief, to prevent breaches of the merger agreement and to enforce specifically its terms and provisions.

Expected Timing of the Merger

The merger is expected to be completed in the first quarter of 2018. However, neither SandRidge nor Bonanza Creek can predict the actual date on which the merger will be completed, nor can the parties assure that the merger will be completed, because completion is subject to conditions beyond each party’s control.

Comparison of Rights of Common Stockholders of SandRidge and Common Stockholders of Bonanza Creek

Bonanza Creek stockholders receiving shares of SandRidge common stock in connection with the merger will have different rights once they become stockholders of SandRidge due to differences between the governing corporate documents of SandRidge and Bonanza Creek. These differences are described in more detail under “Comparison of Rights of Common Stockholders of SandRidge and Common Stockholders of Bonanza Creek.”

Risk Factors

Before voting at the Bonanza Creek special meeting or the SandRidge special meeting, you should carefully consider all of the information contained in or incorporated by reference into this joint proxy statement/prospectus, as well as the specific factors under the heading “Risk Factors.”

 



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SANDRIDGE

The following table sets forth SandRidge’s selected consolidated historical financial information that has been derived from (i) consolidated financial statements of SandRidge and the SandRidge predecessor, as of and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, and (ii) SandRidge’s unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2017 and 2016. References to the “SandRidge successor” relate to SandRidge subsequent to October 1, 2016 and references to the “SandRidge predecessor” relate to SandRidge on and prior to October 1, 2016.

The information set forth below is only a summary and is not necessarily indicative of the results of future operations of SandRidge nor does it include the effects of the merger. You should read this financial information together with SandRidge’s consolidated financial statements, the related notes and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its Annual Report on Form 10-K as of and for the year ended December 31, 2016 filed on March 3, 2017, and Quarterly Report on Form 10-Q as of and for the quarter ended September 30, 2017 filed on November 3, 2017, each of which is incorporated into this joint proxy statement/prospectus by reference. In SandRidge’s view, the unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary to fairly state SandRidge’s interim financial information. For more information, see the section entitled “Where You Can Find More Information.”

 

    SandRidge
Successor
                SandRidge Predecessor                 SandRidge
Successor
                SandRidge
Predecessor
 
  Period
from
October 2,
2016

through
December 31,
                Period
from
January 1,
2016
through
October 1,
    Year Ended December 31,                 Nine
Months
Ended
September 30,
                Nine
Months
Ended
September 30,
 
  2016                 2016     2015     2014     2013     2012                 2017                 2016  
                                                                (Unaudited)                 (Unaudited)  

Statement of Operations Data (in thousands, except per share data)

                                 

Revenues

  $ 98,456           $ 293,809     $ 768,709     $ 1,558,758     $ 1,983,388     $ 1,934,642           $ 264,093           $ 293,809  

Total operating expenses(1)

    434,801             1,200,012       5,411,387       968,534       2,152,389       1,609,446             206,232             1,200,012  
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

(Loss) income from operations

    (336,345           (906,203     (4,642,678     590,224       (169,001     325,196             57,861             (906,203
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

Other (expense) income

                                 

Interest expense, net

    (372           (126,099     (321,421     (244,109     (270,234     (303,349           (2,757           (126,099

Bargain purchase gain

    —               —         —         —         —         122,696             —               —    

Gain (loss) on extinguishment of debt

    —               41,179       641,131       —         (82,005     (3,075           —               41,179  

Reorganization items

    —               2,430,599       —         —         —         —               —               (243,672

Other income, net

    2,744             1,332       2,040       3,490       12,445       4,741             2,222             1,332  
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

Total income (expense)

    2,372             2,347,011       321,750       (240,619     (339,794     (178,987           (535           (327,260
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

(Loss) income before income taxes

    (333,973           1,440,808       (4,320,928     349,605       (508,795     146,209             57,326             (1,233,463

Income tax expense (benefit)

    9             11       123       (2,293     5,684       (100,362           (8,496           11  
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

 



 

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    SandRidge
Successor
                SandRidge Predecessor                 SandRidge
Successor
                SandRidge
Predecessor
 
  Period
from
October 2,
2016

through
December 31,
                Period
from
January 1,
2016
through
October 1,
    Year Ended December 31,                 Nine
Months
Ended
September 30,
                Nine
Months
Ended
September 30,
 
  2016                 2016     2015     2014     2013     2012                 2017                 2016  
                                                                (Unaudited)                 (Unaudited)  

Net (loss) income

    (333,982           1,440,797       (4,321,051     351,898       (514,479     246,571             65,822             (1,233,474

Less: net (loss) income attributable to noncontrolling interest

    —               —         (623,506     98,613       39,410       105,000             —               —    
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

Net (loss) income attributable to SandRidge Energy, Inc.

    (333,982           1,440,797       (3,697,545     253,285       (553,889     141,571             65,822             (1,233,474

Preferred stock dividends

    —               16,321       37,950       50,025       55,525       55,525             —               16,321  
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

(Loss applicable) income available to SandRidge Energy, Inc. common stockholders

  $ (333,982         $ 1,424,476     $ (3,735,495   $ 203,260     $ (609,414   $ 86,046           $ 65,822           $ (1,249,795
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

(Loss) earnings per share

                                 

Basic

  $ (17.61         $ 2.01     $ (7.16   $ 0.42     $ (1.27   $ 0.19           $ 2.07           $ (1.76
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

Diluted

  $ (17.61         $ 2.01     $ (7.16   $ 0.42     $ (1.27   $ 0.19           $ 2.06           $ (1.76
 

 

 

         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

         

 

 

 

 

(1) Includes full cost ceiling limitation impairments of $319.1 million, $657.4 million, $657.4 million, $4.5 billion and $164.8 million for the period from October 2, 2016 through December 31, 2016, the period from January 1, 2016 through October 1, 2016, the nine months ended September 30, 2016, and the years ended December 31, 2015 and 2014, respectively. No full cost ceiling limitation impairments were recorded for the nine months ended September 30, 2017 or the years ended December 31, 2013 or 2012.

 

    SandRidge
Successor
                SandRidge Predecessor                 SandRidge
Successor
 
  As of December 31,                 As of December 31,                 As of
September 30,
 
  2016                 2015     2014     2013     2012                 2017  
                                                          (Unaudited)  

Balance Sheet Data (in thousands)

                       

Cash and cash equivalents

  $ 121,231           $ 435,588     $ 181,253     $ 814,663     $ 309,766           $ 133,201  

Property, plant and equipment, net

  $ 817,932           $ 2,234,702     $ 6,215,057     $ 6,307,675     $ 8,479,977           $ 913,759  

Total assets(1)

  $ 1,081,392           $ 2,922,027     $ 7,211,823     $ 7,630,307     $ 9,716,787           $ 1,138,783  

Total debt(1)

  $ 305,308           $ 3,562,378     $ 3,148,034     $ 3,140,419     $ 4,227,139           $ 37,601  

Total stockholders’ equity (deficit)

  $ 512,917           $ (1,187,733   $ 3,209,820     $ 3,175,627     $ 3,862,455           $ 858,283  

Total liabilities and stockholders’ equity (deficit)

  $ 1,081,392           $ 2,922,027     $ 7,211,823     $ 7,630,307     $ 9,716,787           $ 1,138,783  

 

(1) Reflects the reclassification of certain debt issuance costs from other assets to long-term debt of $69.1 million, $47.4 million, $54.5 million and $73.9 million for the years ended December 31, 2015, 2014, 2013 and 2012, respectively, as a result of the retrospective adoption of ASU 2015-03 on January 1, 2016.

There have been no cash dividends declared or paid on either SandRidge’s or the SandRidge predecessor’s common stock.

 



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BONANZA CREEK

The following table sets forth Bonanza Creek’s selected consolidated historical financial information that has been derived from (i) consolidated financial statements of the Bonanza Creek predecessor, as of and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012, (ii) the Bonanza Creek successor’s unaudited condensed consolidated financial statements for the period ended September 30, 2017 and (iii) the Bonanza Creek predecessor’s unaudited condensed consolidated financial statements for the period ended April 28, 2017 and the nine months ended September 30, 2016. References to the “Bonanza Creek successor” relate to Bonanza Creek subsequent to April 28, 2017 and references to the “Bonanza Creek predecessor” relate to Bonanza Creek on and prior to April 28, 2017.

The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Bonanza Creek nor does it include the effects of the merger. You should read this financial information together with Bonanza Creek’s consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Bonanza Creek” included within this joint proxy statement/prospectus. In Bonanza Creek’s view, the unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary to fairly state Bonanza Creek’s interim financial information. For more information, see the section entitled “Where You Can Find More Information.”

 

    Bonanza Creek Predecessor                 Bonanza
Creek
Successor
                Bonanza Creek
Predecessor
 
    For the Year Ended December 31,                 Period from
April 29,

2017
through
September 30,
                Period from
January 1,
2017
through
April 28,
    Nine
Months
Ended
September 30,
 
  2016     2015     2014     2013     2012                 2017                 2017     2016  
                                              (Unaudited)                 (Unaudited)  

Statement of Operations Data (in thousands, except per share amounts)

                           

Total operating net revenues(1)

  $ 195,295     $ 292,679     $ 558,633     $ 421,860     $ 231,205           $ 73,346           $ 68,589     $ 148,029  

Income (loss) from operations(1)

    (129,110     (907,444     (47,506     146,995       77,903             3,816             (1,600     (80,687

Net income (loss)

    (198,950     (745,547     20,283       69,184       46,523             748             2,660       (131,616

Basic net income (loss) per common share

  $ (4.04   $ (15.57   $ 0.50     $ 1.72     $ 1.17           $ 0.04           $ 0.05     $ (2.67

Basic weighted-average common shares outstanding

    49,268       47,874       40,139       39,337       39,052             20,410             49,559       49,244  

Diluted net income (loss) per common share

  $ (4.04   $ (15.57   $ 0.49     $ 1.71     $ 1.17           $ 0.04           $ 0.05     $ (2.67

Diluted weighted-average common shares outstanding

    49,268       47,874       40,290       39,403       39,052             20,438             50,971       49,244  
   

Selected Cash Flow Data (in thousands):

                           

Net cash provided by (used in) operating activities

  $ 14,563     $ 226,023     $ 339,958     $ 295,685     $ 156,911           $ 11,419           $ (19,884   $ 30,578  

Net cash used in investing activities

    (67,401     (452,573     (837,232     (453,893     (304,552           (48,108           (5,904     (68,223

Net cash provided by (used in) financing activities

  $ 112,062     $ 245,307     $ 319,276     $ 334,522     $ 149,819           $ (2,398         $ 15,406     $ 149,734  
   

Sales Volumes:

                           

Oil (MBbls)

    4,309.9       6,072.3       5,618.7       3,887.2       2,191.0             1,244.5             1,068.5       3,476.6  

Natural gas (MMcf)

    12,231.3       14,551.1       15,395.8       9,975.9       5,473.2             3,897.8             3,336.1       9,502.2  

Natural gas liquids (MBbls)

    1,587.0       1,821.9       396.3       352.8       284.7             513.6             449.0       1,197.2  

 



 

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Table of Contents
    Bonanza Creek Predecessor                 Bonanza
Creek
Successor
                Bonanza Creek
Predecessor
 
    For the Year Ended December 31,                 Period from
April 29,

2017
through
September 30,
                Period from
January 1,
2017
through
April 28,
    Nine
Months
Ended
September 30,
 
  2016     2015     2014     2013     2012                 2017                 2017     2016  
                                              (Unaudited)                 (Unaudited)  

Average Sales Price (before derivatives):

                           

Oil (per Bbl)

  $ 35.42     $ 40.98     $ 81.95     $ 91.84     $ 89.08           $ 44.21           $ 48.28     $ 33.75  

Natural gas (per Mcf)

  $ 1.88     $ 1.82     $ 5.11     $ 4.66     $ 3.62           $ 2.32           $ 2.57     $ 1.59  

Natural gas liquids (per Bbl)

  $ 12.39     $ 9.49     $ 49.14     $ 51.74     $ 55.54           $ 16.84           $ 17.52     $ 11.73  
   

Average Sales Price (after derivatives):

                           

Oil (per Bbl)

  $ 39.68     $ 62.10     $ 84.00     $ 88.82     $ 88.40           $ 44.21           $ 48.28     $ 38.28  

Natural gas (per Mcf)

  $ 1.88     $ 2.01     $ 5.16     $ 4.70     $ 3.76           $ 2.32           $ 2.57     $ 1.59  

Natural gas liquids (per Bbl)

  $ 12.39     $ 9.49     $ 49.14     $ 51.74     $ 55.54           $ 16.84           $ 17.52     $ 11.73  
   

Expense per BOE:

                           

Lease operating expense and gas plant and midstream operating expense

  $ 7.12     $ 7.40     $ 8.44     $ 8.09     $ 9.06           $ 8.65           $ 8.04     $ 7.05  

Severance and ad valorem taxes

  $ 1.93     $ 1.81     $ 5.88     $ 4.61     $ 4.04           $ 2.01           $ 2.73     $ 1.84  

Depreciation, depletion, and amortization

  $ 14.01     $ 23.73     $ 26.66     $ 23.75     $ 19.54           $ 5.06           $ 13.54     $ 13.52  

General and administrative

  $ 9.71     $ 6.81     $ 9.51     $ 9.40     $ 9.27           $ 13.01           $ 7.28     $ 7.93  

 

(1) Amounts reflect results for continuing operations and exclude results for discontinued operations related to non-core properties in California sold or held for sale as of December 31, 2014, 2013 and 2012.

 

     Bonanza Creek Predecessor                  Bonanza Creek
Successor
 
     As of Year Ended December 31,                  As of September 30,  
   2016      2015      2014      2013      2012                  2017  

Balance Sheet Data (in thousands)

                       

Cash and cash equivalents

   $ 80,565      $ 21,341      $ 2,584      $ 180,582      $ 4,268            $ 31,096  

Property and equipment, net (excludes assets held for sale)

     1,018,968        922,344        1,756,477        1,267,249        943,175              731,930  

Oil and gas properties held for sale, net of accumulated depreciation, depletion, and amortization

     —          214,922        —          360        582              —    

Total assets

     1,134,478        1,259,641        1,990,086        1,541,812        1,002,490              804,063  

Debt

                       

Credit facility

     191,667        79,000        33,000        —          158,000              —    

Senior Notes, net of unamortized premium and deferred financing costs

     793,698        792,666        791,616        504,724        —                —    

Total stockholders’ equity

   $ 19,061      $ 209,407      $ 740,071      $ 656,028      $ 578,518            $ 693,067  

There have been no cash dividends declared or paid on either Bonanza Creek’s or the Bonanza Creek predecessor’s common stock.

 



 

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SUMMARY SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF SANDRIDGE

The following selected unaudited pro forma condensed combined financial statements (the “pro forma financial statements”) have been prepared to reflect the effects of the merger on the financial statements of SandRidge. The unaudited pro forma condensed combined balance sheet (the “pro forma balance sheet”) is presented as if the merger had occurred on September 30, 2017. The unaudited pro forma combined statements of operations (the “pro forma statements of operations”) for the year ended December 31, 2016, and the nine months ended September 30, 2017, are presented as if the merger had occurred on January 1, 2016. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the statements of operations only, are expected to have a continuing impact on the combined results.

The following selected unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the pro forma events occurred as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors.” The following selected unaudited pro forma condensed combined financial information should be read in conjunction with the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” and related notes included in this joint proxy statement/prospectus.

 

     Nine Months
Ended
September 30,
2017
     Year Ended
December 31,
2016
 
     (In millions, except per share
amounts)
 

Unaudited Pro Forma Statements of Combined Operations Data

     

Oil, Natural Gas and NGL Sales

   $ 405.2      $ 573.6  

Net Income Attributable to SandRidge

     74.0        523.8  

Earnings per Share, Basic

     1.43        13.48  

Earnings per Share, Diluted

     1.43        13.48  

 

     As of
September 30,
2017
 
     (In millions)  

Unaudited Pro Forma Condensed Combined Balance Sheet Data

  

Cash

   $ 2.3  

Total Assets

     1,851.4  

Long-Term Debt

     271.3  

Total Stockholders’ Equity

     1,200.2  

 



 

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Table of Contents

UNAUDITED COMPARATIVE PER SHARE INFORMATION

The following tables show per share data regarding earnings (losses) from continuing operations, book value per share and cash dividends for SandRidge and Bonanza Creek on a historical and pro forma combined basis after giving effect to the merger. The pro forma earnings (losses) from continuing operations information was prepared as if the merger had been completed on January 1, 2016. The pro forma book value per share information was computed as if the merger had been completed on September 30, 2017.

The following comparative per share data is derived from the historical consolidated financial statements of each of SandRidge and Bonanza Creek. The information below should be read in conjunction with the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 161.

 

     SandRidge Successor           SandRidge
Predecessor
 
     Nine Months
Ended
September 30,

2017
     October 2, 2016
through
December 31,

2016
          January 1, 2016
through October 1,

2016
 
     (Unaudited)                     

Historical- SandRidge

           

Earnings (Loss) Per Share, Basic

   $ 2.07      $ (17.61       $ 2.01  

Earnings (Loss) Per Share, Diluted

   $ 2.06      $ (17.61       $ 2.01  

Book Value Per Share

   $ 27.03      $ 27.04         $ —    

Cash Dividends

   $ —        $ —           $ —    

 

     Bonanza Creek
Successor
          Bonanza Creek Predecessor  
     April 29, 2017
through
September 30,

2017
          January 1, 2017
through
April 28,

2017
     Year Ended
December 31,

2016
 
     (Unaudited)           (Unaudited)         

Historical- Bonanza Creek

           

Earnings (Loss) Per Share, Basic

   $ 0.04         $ 0.05      $ (4.04

Earnings (Loss) Per Share, Diluted

   $ 0.04         $ 0.05      $ (4.04

Book Value Per Share

   $ 33.96         $ —        $ 0.39  

Cash Dividends

   $ —           $ —        $ —    

 

     Nine Months
Ended
September 30,
2017
     Year Ended
December 31,
2016
 
     (Unaudited)  

Pro Forma Combined:

     

Earnings Per Share, Basic

   $ 1.43      $ 13.48  

Earnings Per Share, Diluted

   $ 1.43      $ 13.48  

Book Value Per Share

   $ 23.24      $ —    

Cash Dividends

   $ —        $ —    

 



 

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Table of Contents
     Nine Months
Ended
September 30,
2017
     Year Ended
December 31,
2016
 
     (Unaudited)  

Equivalent Pro Forma Combined:

     

Earnings Per Share, Basic

   $ 1.37      $ 12.94  

Earnings Per Share, Diluted

   $ 1.37      $ 12.94  

Book Value Per Share

   $ 22.31      $ —    

Cash Dividends

   $ —        $ —    

 



 

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Table of Contents

COMPARATIVE STOCK PRICE DATA AND DIVIDENDS

Comparative Per Share Market Price Information

SandRidge’s common stock is listed on the NYSE under the symbol “SD.” Bonanza Creek’s common stock is listed on the NYSE under the symbol “BCEI.” The following table sets forth the closing sales prices per share of SandRidge common stock and Bonanza Creek common stock as of November 14, 2017, the last full trading day before the public announcement of the merger, and                , the last trading day for which this information could be calculated before the date of this joint proxy statement/prospectus. The table also shows the estimated equivalent per share value of the merger consideration for each share of SandRidge common stock on the relevant date.

 

     SandRidge
Common Stock
Closing Price
     Bonanza Creek
Common Stock
Closing Price
     Exchange Ratio      Estimated
SandRidge
Equivalent Per
Share Value(1)
 

November 14, 2017

   $ 18.43      $ 30.66        0.9116      $ 36.00  
   $      $         $  

 

(1) The estimated equivalent per share value of the merger consideration represents the sum of $19.20, the cash portion of the merger consideration, plus the stock portion of the merger consideration, based on the closing prices of SandRidge common stock of $18.43 on November 14, 2017 and $                on                , respectively, and, in each case, the applicable exchange ratio, assuming that such closing price was equal to the SandRidge average stock price. The actual exchange ratio at the completion of the merger will be determined based on the SandRidge average stock price and there can be no assurance that the SandRidge average stock price will be greater than, less than or equal to $18.43 or                . If the SandRidge average stock price is between (or equal to) $17.50 and $21.38 per share, the exchange ratio will be the quotient of $16.80 divided by the SandRidge average stock price. If the SandRidge average stock price is greater than $21.38, the exchange ratio will be 0.7858. If the SandRidge average stock price is less than $17.50, the exchange ratio will be 0.9600. The SandRidge average stock price from October 18, 2017 through November 14, 2017 was $18.89. The SandRidge average stock price from                through                , was $        .

The above table shows only historical comparisons. These comparisons may not provide meaningful information to Bonanza Creek stockholders in determining whether to adopt the merger agreement. Bonanza Creek stockholders are urged to obtain current market quotations for SandRidge common stock and Bonanza Creek common stock and to carefully review the other information contained in this joint proxy statement/prospectus or incorporated by reference into this joint proxy statement/prospectus in considering whether to adopt the merger agreement. See the section entitled “Where You Can Find More Information.”

Comparative Stock Prices

The following tables sets forth, for the periods indicated, the high and low sales prices per share of SandRidge common stock and Bonanza Creek common stock as reported on the NYSE.

 



 

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Table of Contents

SandRidge Common Stock

 

     SandRidge Price Range  
         High              Low      

SandRidge Successor Company

     

Fiscal Year Ending December 31, 2017

     

Fourth Quarter (through December 8, 2017)

   $ 20.45      $ 14.65  

Third Quarter

   $ 20.62      $ 16.63  

Second Quarter

   $ 20.72      $ 15.03  

First Quarter

   $ 23.96      $ 16.80  

Fiscal Year Ended December 31, 2016

     

Fourth Quarter (from October 4, 2016 through December 31, 2016)

   $ 26.85      $ 15.75  

SandRidge Predecessor Company

     

Fourth Quarter (through October 3, 2016)

   $ 0.02      $ 0.01  

Third Quarter

   $ 0.06        —    

Second Quarter

   $ 0.11      $ 0.01  

First Quarter

   $ 0.20      $ 0.03  

Fiscal Year Ended December 31, 2015

     

Fourth Quarter

   $ 0.56      $ 0.17  

Third Quarter

   $ 0.90      $ 0.25  

Second Quarter

   $ 2.30      $ 0.81  

First Quarter

   $ 2.53      $ 1.13  

Bonanza Creek Common Stock

 

     Bonanza Creek Price Range  
         High              Low      

Bonanza Creek Successor Company

     

Fiscal Year Ending December 31, 2017

     

Fourth Quarter (through December 8, 2017)

   $ 35.50      $ 26.00  

Third Quarter

   $ 34.32      $ 23.33  

Second Quarter (from April 29, 2017 through June 30, 2017)

   $ 40.60      $ 27.79  

Bonanza Creek Predecessor Company

     

Second Quarter (through April 28, 2017)

   $ 1.25      $ 0.42  

First Quarter

   $ 3.38      $ 0.92  

Fiscal Year Ended December 31, 2016

     

Fourth Quarter

   $ 2.35      $ 0.67  

Third Quarter

   $ 2.35      $ 0.60  

Second Quarter

   $ 4.67      $ 1.25  

First Quarter

   $ 5.50      $ 0.88  

Fiscal Year Ended December 31, 2015

     

Fourth Quarter

   $ 9.54      $ 3.72  

Third Quarter

   $ 18.18      $ 3.93  

Second Quarter

   $ 30.69      $ 17.35  

First Quarter

   $ 30.81      $ 20.23  

 



 

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As of            , the last date before the date of this joint proxy statement/prospectus for which it was practicable to obtain this information, there were            shares of SandRidge common stock outstanding and approximately             holders of record of SandRidge common stock, and            shares of Bonanza Creek common stock outstanding and approximately            holders of record of Bonanza Creek common stock.

If the SandRidge average stock price is between (or equal to) $17.50 and $21.38 per share, the exchange ratio will be adjusted and will be the quotient of $16.80 divided by the SandRidge average stock price. If the SandRidge average stock price is greater than $21.38, the exchange ratio will be fixed at 0.7858. If the SandRidge average stock price is less than $17.50, the exchange ratio will be fixed at 0.9600. Depending on changes in the market price of SandRidge common stock, the market value of the shares of SandRidge common stock that holders of Bonanza Creek common stock will have the right to receive on the date the merger is completed may vary significantly from the market value of the shares of SandRidge common stock that holders of Bonanza Creek common stock would receive if the merger were completed on the date of this joint proxy statement/prospectus. As a result, you should obtain recent market prices of SandRidge common stock and Bonanza Creek common stock prior to voting your shares. See the section entitled “Risk Factors—Risks Relating to the Merger.”

Dividends

Neither SandRidge nor Bonanza Creek has declared or paid any cash dividends with respect to their common stock since emerging from bankruptcy, and neither anticipates declaring any dividend with respect to its common stock in the foreseeable future. In addition to other restrictions on dividends, the merger agreement prohibits each company (unless consented to in advance by the other company, which consent may not be unreasonably withheld, conditioned or delayed) from paying dividends to holders of such company’s common stock until the earlier of the effective time and the termination of the merger agreement in accordance with its terms. For additional information, see the section entitled “The Merger—Dividend Policy.”

 



 

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts but reflect SandRidge’s and Bonanza Creek’s current beliefs, expectations or intentions regarding future events. Words such as “anticipate,” “believe,” “plan,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “pursue,” “will,” “should,” “target,” “assume,” “foresee,” and other similar words, phrases or expressions are intended to identify such forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, without limitation, SandRidge’s plans, objectives, expectations and intentions with respect to future operations and services; required approvals of the merger by Bonanza Creek’s stockholders and the share issuance by SandRidge’s stockholders, and by governmental regulatory authorities; the stock price of SandRidge following the consummation of the merger; the stock price of SandRidge prior to the consummation of the merger; the satisfaction of the closing conditions to the proposed merger; the future composition of the SandRidge board and the management team of the combined company; and the timing of the completion of the merger.

Forward-looking statements in this joint proxy statement/prospectus are based on certain key expectations and assumptions made by SandRidge and Bonanza Creek. Although the management of each of SandRidge and Bonanza Creek believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because SandRidge and Bonanza Creek can give no assurance that they will prove correct. Additionally, all forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, many of which are generally outside the control of SandRidge and Bonanza Creek and difficult to predict. These risks and uncertainties also include those set forth under the section entitled “Risk Factors” as well as, among others, risks and uncertainties relating to:

 

    the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement or the failure to satisfy the closing conditions;

 

    the possibility that the consummation of the proposed merger is delayed or does not occur, including due to the failure to obtain the required approvals of the SandRidge stockholders and Bonanza Creek stockholders, which may have adverse effects on the business and the stock price of SandRidge and Bonanza Creek;

 

    the ability to obtain the regulatory approvals required to complete the merger as contemplated by the merger agreement, and the timing and conditions for such approvals;

 

    fluctuations in the stock price of SandRidge prior to the consummation of the proposed merger;

 

    the taking of governmental action (including the passage of legislation) to block the merger or otherwise adversely affecting SandRidge and Bonanza Creek;

 

    the outcome of any legal proceedings that have been or may be instituted against SandRidge, Bonanza Creek or others following announcement of the merger contemplated by the merger agreement;

 

    the disruption from the merger making it more difficult for Bonanza Creek and SandRidge to maintain relationships with their respective customers, employees or suppliers;

 

    the inability of the combined company to recruit, hire or retain key personnel;

 

    the ability to successfully integrate the operations of SandRidge and Bonanza Creek;

 

    the impact of the announcement and pendency of the merger and the combination of SandRidge’s and Bonanza Creek’s businesses on the financial condition, results of operations, strategy and plans of SandRidge, Bonanza Creek and/or the combined company;

 

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    the expected benefits of the merger and the ability of SandRidge to realize those benefits;

 

    unexpected costs or unexpected liabilities that may arise from the merger, whether or not consummated;

 

    liabilities from operations for which SandRidge or Bonanza Creek, as applicable, do not have insurance and/or do not receive full indemnification;

 

    equipment specialization and new technologies;

 

    difficulty in building and deploying new equipment;

 

    operating hazards attendant to the natural gas and oil business and other risks associated with drilling oil and natural gas wells;

 

    shortages, delays in delivery and interruptions in supply of equipment, supplies and materials;

 

    operating costs;

 

    failure by customers to pay or satisfy their contractual obligations (particularly with respect to fixed term contracts);

 

    the ability to repay indebtedness when due;

 

    interest rate volatility and the volatility of oil, natural gas and natural gas liquids (“NGL”) prices;

 

    estimates of oil, natural gas and NGL reserves and the need to replace the oil, natural gas and NGL reserves produced;

 

    availability of satisfactory oil, natural gas and NGL marketing and transportation;

 

    concentration of operations in any geographic region;

 

    limitations of seismic data;

 

    weather, environmental risks and ability to satisfy future environmental costs; and

 

    the impact of global economic conditions, fluctuations in exchange rates, labor relations, competitive actions taken by competitors (whether in response to the announcement of the merger agreement or otherwise), terrorist attacks or natural disasters.

SandRidge and Bonanza Creek caution that the foregoing list of factors is not exhaustive. Additional information concerning these and other risk factors is contained in SandRidge’s most recently filed Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other SEC filings, as such filings may be amended from time to time. Such forward-looking statements speak only as of the date hereof. All subsequent written and oral forward-looking statements concerning SandRidge, Bonanza Creek, the merger or other matters attributable to SandRidge or Bonanza Creek or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Neither SandRidge nor Bonanza Creek undertakes any obligation to update publicly any of these forward-looking statements to reflect new information or events or circumstances that may arise after the date hereof, except as may be required under applicable securities law.

 

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RISK FACTORS

In addition to the other information included and incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statements Regarding Forward-Looking Statements,” you should carefully consider the following risk factors before deciding whether to vote for the merger agreement proposal, in the case of Bonanza Creek stockholders, or for the share issuance proposal, in the case of SandRidge stockholders. In addition, you should read and consider the risks associated with the businesses of each of Bonanza Creek and SandRidge because these risks will relate to the combined company following the completion of the merger. Descriptions of some of these risks can be found in the Annual Report of SandRidge on Form 10-K for the fiscal year ended December 31, 2016, as such risks may be updated or supplemented in SandRidge’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this joint proxy statement/prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this document. See the section entitled “Where You Can Find More Information.”

Risks Relating to the Merger

The value of the stock portion of the merger consideration is subject to change based on fluctuations in the value of SandRidge common stock, and Bonanza Creek stockholders may, in certain circumstances, receive stock consideration with a value that, at the time received, is less than $16.80 per share of Bonanza Creek common stock.

The market value of SandRidge common stock will fluctuate during the period before the date of the special meeting of Bonanza Creek stockholders to vote on the adoption of the merger agreement, during the 20 consecutive trading day period that the exchange ratio will be based upon, and the time between the last day of the 20 trading day period and the time Bonanza Creek stockholders receive merger consideration in the form of SandRidge common stock, as well as thereafter. The closing price of one share of SandRidge common stock on                was $        , which, assuming that price was the SandRidge average stock price, implied a total consideration per share of $        on such date.

Upon completion of the merger, each issued and outstanding share of Bonanza Creek common stock (other than shares of Bonanza Creek common stock held by (i) Bonanza Creek as treasury shares, (ii) SandRidge, Merger Sub or any of their direct or indirect subsidiaries, (iii) any direct or indirect subsidiary of Bonanza Creek, or (iv) any holder of record who is entitled to demand and properly demands appraisal of such shares pursuant to and in compliance with the DGCL (the shares of Bonanza Creek common stock described in clauses (i) through (iv) together referred to previously in this joint proxy statement/prospectus as the excluded shares)) will be converted into the right to receive the merger consideration. The number of shares of SandRidge common stock included in the merger consideration depends on the SandRidge average stock price. If the SandRidge average stock price is between (or equal to) $17.50 and $21.38 per share, the exchange ratio will be the quotient obtained by dividing $16.80 by the SandRidge average stock price. If the SandRidge average stock price is greater than $21.38, the exchange ratio will be 0.7858. If the SandRidge average stock price is less than $17.50, the exchange ratio will be 0.9600. Accordingly, the actual number of shares and the value of SandRidge common stock delivered to Bonanza Creek stockholders will depend on the SandRidge average stock price, and the value of the shares of SandRidge common stock delivered for each such share of Bonanza Creek common stock may be greater than or less than, or equal to, $36.00.

It is impossible to accurately predict the market price of SandRidge common stock at the effective time or during the period over which the SandRidge average stock price is calculated and therefore impossible to accurately predict the number or value of the shares of SandRidge common stock that Bonanza Creek stockholders will receive in connection with the merger.

The market prices of SandRidge common stock and Bonanza Creek common stock are subject to general price fluctuations in the market for publicly traded equity securities and have experienced volatility in the past.

 

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Neither SandRidge nor Bonanza Creek is permitted to terminate the merger agreement or re-solicit the vote of SandRidge stockholders or Bonanza Creek stockholders, as applicable, solely because of changes in the market prices of either company’s common stock. Stock price changes may result from a variety of factors, including general market and economic conditions and changes in the respective businesses, operations and prospects, and regulatory considerations of SandRidge and Bonanza Creek. Market assessments of the benefits of the proposed merger and the likelihood that the merger will be completed, as well as general and industry-specific market and economic conditions, may also affect market prices of SandRidge common stock and Bonanza Creek common stock. Many of these factors are beyond SandRidge’s and Bonanza Creek’s control. Bonanza Creek stockholders should obtain current market quotations for shares of SandRidge common stock and for shares of Bonanza Creek common stock.

The market value of SandRidge common stock could be negatively affected by risks and conditions that apply to SandRidge, which may be different from the risks and conditions applicable to Bonanza Creek, and SandRidge stockholders will have different rights than Bonanza Creek stockholders.

Following the merger, existing SandRidge stockholders and former Bonanza Creek stockholders will own interests in a combined company operating an expanded business with more assets and a different mix of liabilities. The business of SandRidge and its subsidiaries and other companies it may acquire in the future are different from those of Bonanza Creek. There is a risk that various factors, conditions and developments that would not affect the price of Bonanza Creek common stock could negatively affect the price of SandRidge common stock. Current SandRidge stockholders and Bonanza Creek stockholders may not wish to continue to invest in the combined company, or may wish to reduce their investment in the combined company, including in order to comply with institutional investing guidelines, to increase diversification, to track any rebalancing of stock indices in which SandRidge common stock is included, to respond to the risk profile of the combined company or to realize a gain. In addition, if, following the merger, large amounts of SandRidge common stock are sold, the price of SandRidge common stock could decline.

Holders of shares of SandRidge common stock that were previously holders of Bonanza Creek common stock will have rights as SandRidge stockholders that differ from the rights they had as Bonanza Creek stockholders before the merger. For a detailed comparison of the rights of SandRidge stockholders to the rights of Bonanza Creek stockholders, see the section entitled “Comparison of Rights of Common Stockholders of SandRidge and Common Stockholders of Bonanza Creek.”

The merger is subject to conditions, including certain conditions that may not be satisfied, or completed on a timely basis, if at all. Failure to complete the merger could have material and adverse effects on SandRidge and Bonanza Creek.

Completion of the merger is subject to a number of conditions, including the approval by SandRidge stockholders of the share issuance proposal and approval by Bonanza Creek stockholders of the merger agreement proposal, which make the completion and timing of the completion of the merger uncertain. See the section entitled “The Merger Agreement—Conditions to Completion of the Merger” for a more detailed discussion. Also, either SandRidge or Bonanza Creek may terminate the merger agreement if the merger has not been consummated by May 14, 2018 or, at either party’s discretion, if the only conditions to closing that have not been satisfied or waived by that date are those related to the termination or expiration of any waiting period under the HSR Act or the issuance of an order, decree, ruling, injunction or other action that is in effect and is restraining, enjoining or otherwise prohibiting the consummation of the merger, July 14, 2018, except that this right to terminate the merger agreement will not be available to any party if the failure of the consummation of the merger and the other transactions is primarily due to the failure of such party to perform any of its obligations under the merger agreement.

SandRidge and Bonanza Creek have determined that the merger is not subject to the requirements of the HSR Act and therefore is not subject to any waiting period thereunder.

 

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If the merger is not completed, SandRidge’s and Bonanza Creek’s respective ongoing businesses may be adversely affected and, without realizing any of the benefits of having consummated the merger, SandRidge and Bonanza Creek will be subject to a number of risks, including the following:

 

    SandRidge and Bonanza Creek will be required to pay their respective costs relating to the merger agreement, such as legal, accounting, financial advisory and printing fees, whether or not the merger is completed and, in certain circumstances, a termination fee and/or expenses of the other party to the other party;

 

    time and resources committed by SandRidge’s and Bonanza Creek’s management to matters relating to the merger and the merger agreement could otherwise have been devoted to pursuing other beneficial opportunities;

 

    the market price of SandRidge common stock or Bonanza Creek common stock could decline to the extent that the current market price reflects a market assumption that the merger will be completed;

 

    if the merger agreement is terminated and the Bonanza Creek board seeks another business combination, Bonanza Creek stockholders cannot be certain that Bonanza Creek will be able to find a party willing to enter into a transaction agreement on terms equivalent to or more attractive than the terms agreed to in the merger agreement; and

 

    if the merger agreement is terminated and the SandRidge board seeks another acquisition, SandRidge stockholders cannot be certain that SandRidge will be able to find a party willing to enter into a transaction as attractive to SandRidge as the acquisition of Bonanza Creek.

The merger agreement contains provisions that limit Bonanza Creek’s and SandRidge’s ability to pursue alternatives to the merger, could discourage a potential competing acquiror of Bonanza Creek or SandRidge from making a favorable alternative transaction proposal and, in specified circumstances, could require Bonanza Creek or SandRidge to pay the other party a termination fee of $26,116,219.

The merger agreement contains certain provisions that restrict Bonanza Creek’s and SandRidge’s ability to (i) initiate, solicit or knowingly encourage or knowingly facilitate (including by furnishing or providing information) any inquiries, proposals, or offers regarding, or the making of an alternative proposal, (ii) enter into, participate or engage in or continue any discussions or negotiations with respect to an alternative proposal or any inquiry or indication of interest that would reasonably be expected to lead to an alternative proposal, (iii) furnish any non-public information or access to its properties, assets or employees, in each case, in connection with or in response to an alternative proposal or any inquiry or indication of interest that would reasonably be expected to lead to an alternative proposal, (iv) approve or recommend to its stockholders, or execute or enter into any letter of intent or agreement in principle, or any other agreement providing for an alternative proposal (other than certain permitted confidentiality agreements), and (v) resolve, agree, or publicly propose to take any of the foregoing actions. Further, even if the SandRidge board or the Bonanza Creek board withdraws, modifies, or qualifies its recommendation with respect to the share issuance proposal or the merger agreement proposal, as applicable, unless the merger agreement has been terminated in accordance with its terms, both Bonanza Creek and SandRidge will still be required to submit the merger agreement proposal and the share issuance proposal, as applicable, to a vote at its special meeting. In addition, the other party generally has an opportunity to offer to modify the terms of the merger in response to any third-party alternative transaction proposal before a party’s board of directors may withdraw, modify or qualify its recommendation with respect to the merger agreement proposal or the share issuance proposal, as applicable. In some circumstances, upon termination of the merger agreement, Bonanza Creek or SandRidge will be required to pay a termination fee of $26,116,219 to the other party. See the sections entitled “The Merger Agreement—No Solicitation of Alternative Proposals,” “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Expenses and Termination Fees Relating to the Termination of the Merger Agreement.”

These provisions could discourage a potential third-party acquirer or merger partner that might have an interest in acquiring all or a significant portion of Bonanza Creek or SandRidge or pursuing an alternative

 

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transaction with either from considering or proposing such a transaction, even if, in the case of an acquisition of Bonanza Creek, it were prepared to pay consideration with a higher per share price than the per share price proposed to be received in the merger or might result in a potential third-party acquiror or merger partner proposing to pay a lower price to the stockholders of Bonanza Creek or the stockholders of SandRidge than it might otherwise have proposed to pay because of the added expense of the $26,116,219 termination fee that may become payable in certain circumstances.

Bonanza Creek’s executive officers and directors have interests in the merger that may be different from, or in addition to, the interests of Bonanza Creek stockholders generally.

When considering the recommendation of the Bonanza Creek board with respect to the merger, you should be aware that Bonanza Creek’s executive officers and directors may have interests in the merger that are different from, or in addition to, those of Bonanza Creek’s stockholders more generally. The Bonanza Creek board was aware of these interests during its deliberations on the merits of the merger and in deciding to recommend that Bonanza Creek stockholders vote for the adoption of the merger agreement at the Bonanza Creek special meeting.

Upon completion of the merger, outstanding restricted stock units and stock options issued pursuant to the Bonanza Creek 2017 LTIP will be treated as described in the section entitled “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger.”

See the section entitled “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger” for a more detailed description of the interests of Bonanza Creek’s executive officers and directors.

Bonanza Creek and SandRidge will be subject to business uncertainties while the merger is pending, which could adversely affect their businesses.

In connection with the pendency of the merger, it is possible that certain persons with whom Bonanza Creek and SandRidge have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Bonanza Creek or SandRidge, as the case may be, as a result of the merger, which could negatively affect Bonanza Creek’s or SandRidge’s revenues, earnings and cash flows, as well as the market price of Bonanza Creek’s or SandRidge’s respective common stock, regardless of whether the merger is completed.

Under the terms of the merger agreement, each of Bonanza Creek and SandRidge are subject to certain restrictions on the conduct of its business prior to the effective time, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures, as applicable. Such limitations could negatively affect Bonanza Creek’s and SandRidge’s businesses and operations prior to the completion of the merger.

The merger is subject to the receipt of approvals, consents or clearances from regulatory authorities that may impose conditions that could have an adverse effect on SandRidge or Bonanza Creek or, if not obtained, could prevent completion of the merger.

Completion of the merger is conditioned upon the receipt of certain governmental approvals. Although each party has agreed to use their respective reasonable best efforts to obtain the requisite governmental approvals, there can be no assurance that these approvals will be obtained and that the other conditions to completing the merger will be satisfied. In addition, the governmental authorities from which the regulatory approvals are required may impose conditions on the completion of the merger or require changes to the terms of the merger or other agreements to be entered into in connection with the merger agreement. Such conditions or changes and the

 

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process of obtaining regulatory approvals could have the effect of delaying or impeding consummation of the merger or of imposing additional costs or limitations on SandRidge or Bonanza Creek following completion of the merger, any of which might have an adverse effect on SandRidge or Bonanza Creek following completion of the merger. For additional information about the regulatory approvals process, see the section entitled “The Merger—Regulatory Approvals.”

The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of SandRidge following completion of the pro forma events.

The unaudited pro forma condensed combined financial information in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what SandRidge’s actual financial position or results of operations would have been had the pro forma events been completed on the dates indicated. Further, SandRidge’s actual results and financial position after the pro forma events may differ materially and adversely from the unaudited pro forma condensed combined financial data that is included in this joint proxy statement/prospectus. The unaudited pro forma condensed combined financial information has been prepared with the assumption that SandRidge will be identified as the acquirer under GAAP and reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed.

Completion of the merger may trigger change in control or other provisions in certain agreements to which Bonanza Creek is a party.

The consummation of the merger may trigger change in control or other provisions in certain agreements to which Bonanza Creek is a party. If SandRidge and Bonanza Creek are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if SandRidge and Bonanza Creek are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Bonanza Creek.

Risks Relating to SandRidge After Completion of the Merger

Following the merger, the market price of SandRidge common stock may be volatile, and holders of SandRidge’s common stock could lose a significant portion of their investment due to drops in the market price of SandRidge’s common stock following completion of the merger.

The market price of SandRidge’s common stock may be volatile, and following completion of the merger, stockholders may not be able to resell their shares of SandRidge common stock at or above the price at which they acquired the common stock pursuant to the merger agreement or otherwise due to fluctuations in its market price, including changes in price caused by factors unrelated to SandRidge’s performance or prospects.

Specific factors that may have a significant effect on the market price for SandRidge’s common stock include, among others, the following:

 

    changes in stock market analyst recommendations or earnings estimates regarding SandRidge’s common stock or other comparable companies;

 

    actual or anticipated fluctuations in SandRidge’s revenue stream or future prospects;

 

    reaction to public announcements by SandRidge following the merger;

 

    strategic actions taken by SandRidge or its competitors, such as acquisitions;

 

    failure of SandRidge to achieve the perceived benefits of the merger, including financial results, as rapidly as or to the extent anticipated by financial or industry analysts;

 

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    new laws or regulations or new interpretations of existing laws or regulations applicable to SandRidge’s business and operations or the oil and natural gas industries;

 

    changes in tax or accounting standards, policies, guidance, interpretations or principles;

 

    adverse conditions in the financial markets or general U.S. or international economic conditions, including those resulting from war, incidents of terrorism and responses to such events; and

 

    sales of SandRidge common stock by members of SandRidge’s management team or significant stockholders.

If the merger is completed, SandRidge may not achieve the intended benefits and the merger may disrupt its current plans or operations.

There can be no assurance that SandRidge will be able to successfully integrate Bonanza Creek’s assets or otherwise realize the expected benefits of the merger. In addition, SandRidge’s business may be negatively impacted following the merger if it is unable to effectively manage its expanded operations. The integration will require significant time and focus from SandRidge’s management following the merger. Additionally, consummating the merger could disrupt current plans and operations, which could delay the achievement of SandRidge’s strategic objectives.

After the merger is completed, Bonanza Creek stockholders will become stockholders of SandRidge and have their rights as stockholders governed by SandRidge’s organizational documents.

Upon consummation of the merger, Bonanza Creek stockholders will receive SandRidge common stock that will be governed by SandRidge’s organizational documents and the DGCL. For a detailed discussion of the differences between rights as stockholders of Bonanza Creek and rights as stockholders of SandRidge, see the section entitled “Comparison of Rights of Common Stockholders of SandRidge and Common Stockholders of Bonanza Creek.”

Bonanza Creek and SandRidge may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the merger from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on SandRidge’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the merger, then that injunction may delay or prevent the merger from being completed. Currently, neither Bonanza Creek nor SandRidge is aware of any securities class action lawsuits or derivative lawsuits being filed in connection with the merger.

SandRidge is expected to incur substantial expenses related to the consummation of the merger.

The combined company is expected to incur substantial expenses in connection with the consummation of the merger. While SandRidge and Bonanza Creek have assumed that a certain level of expenses would be incurred, there are many factors beyond their control that could affect the total amount or the timing of the expenses.

The combined company may not be able to utilize a portion of Bonanza Creek’s or SandRidge’s net operating loss carryforwards (“NOLs”) to offset future taxable income for U.S. federal tax purposes, which could adversely affect the combined company’s net income and cash flows.

As of April 29, 2017, Bonanza Creek’s estimated federal income tax NOLs were approximately $248 million which will expire in 2037. SandRidge is projected to have federal income tax NOLs of

 

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approximately $808 million as of December 31, 2017, which will expire between 2025 and 2037. Utilization of these NOLs depends on many factors that are subject to change, including the combined company’s future taxable income. In addition, Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), generally imposes an annual limitation on the amount of an NOL and certain other tax attributes, including built-in losses, that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382). Determining the limitations under Section 382 is technical and highly complex. An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of the corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.

Bonanza Creek underwent an ownership change in April 2017 as a result of its emergence from Chapter 11 bankruptcy proceedings, and we believe Bonanza Creek will undergo another ownership change as a result of SandRidge’s acquisition of Bonanza Creek pursuant to the merger, and the corresponding annual limitation associated with either of those changes in ownership could prevent the combined company from fully utilizing—prior to their expiration—Bonanza Creek’s NOLs as of the effective time. SandRidge underwent an ownership change in October 2016 as a result of its emergence from Chapter 11 bankruptcy proceedings. While SandRidge’s issuance of stock pursuant to the merger would, standing alone, be insufficient to result in another ownership change with respect to SandRidge, there can be no assurances that SandRidge will not undergo another ownership change as a result of the merger taking into account other changes in ownership of SandRidge stock occurring within the relevant three-year period described above. As a result of the ownership change that occurred in October 2016 or if SandRidge were to undergo another ownership change, the combined company may be prevented from fully utilizing SandRidge’s NOLs and certain other tax attributes, including built-in losses, as of the time of the merger. Future changes in stock ownership or future regulatory changes could also limit the combined company’s ability to utilize Bonanza Creek’s or SandRidge’s NOLs. To the extent the combined company is not able to offset future taxable income with Bonanza Creek’s or SandRidge’s NOLs and other attributes, the combined company’s net income and cash flows may be adversely affected.

Other Risk Factors Relating to SandRidge

SandRidge’s business is and will be subject to the risks described above. In addition, SandRidge is, and will continue to be, subject to the risks described in SandRidge’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. The risks described above and in those filings represent all known material risks with respect to SandRidge’s business. See the section entitled “Where You Can Find More Information” for the location of information incorporated by reference into this joint proxy statement/prospectus.

Risk Factors Relating to Bonanza Creek

Further declines in oil and, to a lesser extent, natural gas prices will adversely affect Bonanza Creek’s business, financial condition or results of operations and its ability to meet its capital expenditure obligations or targets and financial commitments.

The price Bonanza Creek receives for its oil and, to a lesser extent, natural gas and NGLs, heavily influences its revenue, profitability, cash flows, liquidity, the borrowing base under its $191.7 million revolving credit facility (the “Bonanza Creek successor credit facility”), access to capital, present value and quality of its reserves, the nature and scale of its operations and future rate of growth. Oil and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. In recent years, the markets for oil and natural gas have been volatile. These markets will likely continue to be volatile in the future. Further, oil prices and natural gas prices do not necessarily fluctuate in direct relation to each other. Because approximately 75% of Bonanza Creek’s estimated proved reserves as of December 31, 2016 were oil and NGLs, its financial results are more sensitive to movements in oil prices. Since

 

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mid-2014, the price of crude oil has significantly declined and has not regained previous highs. As a result, Bonanza Creek experienced significant decreases in crude oil revenues and recorded asset impairment charges due to commodity price declines. A prolonged period of low market prices for oil, natural gas and NGLs, like the current commodity price environment, or further declines in the market prices for oil and natural gas, will result in capital expenditures being further curtailed and will adversely affect Bonanza Creek’s business, financial condition and liquidity and its ability to meet obligations, targets or financial commitments. For the nine months ended September 30, 2017, the daily New York Mercantile exchange (“NYMEX”) WTI oil spot price ranged from a high of $54.48 per Bbl to a low of $42.48 per Bbl, and the NYMEX natural gas HH spot price ranged from a high of $3.71 per MMBtu to a low of $2.44 per MMBtu. As of December 8, 2017, the daily NYMEX WTI oil spot price and NYMEX natural gas HH spot price was $57.34 per Bbl and $2.79 per MMBtu, respectively.

The prices Bonanza Creek receives for its production, and the levels of its production, depend on numerous factors beyond its control. These factors include, but are not limited to, the following:

 

    worldwide and regional economic conditions impacting the global supply and demand for oil and natural gas;

 

    the actions from members of the Organization of Petroleum Exporting Countries and other oil producing nations;

 

    the price and quantity of imports of foreign oil and natural gas;

 

    political conditions in or affecting other oil-producing and natural gas-producing countries, including the current conflicts in the Middle East and conditions in South America and Russia;

 

    the level of global oil and natural gas exploration and production;

 

    the level of global oil and natural gas inventories;

 

    localized supply and demand fundamentals and transportation availability;

 

    weather conditions and natural disasters;

 

    domestic and foreign governmental regulations;

 

    speculation as to the future price of oil and the speculative trading of oil and natural gas futures contracts;

 

    the price and availability of competitors’ supplies of oil and natural gas;

 

    technological advances affecting energy consumption;

 

    variability in subsurface reservoir characteristics, particularly in areas with immature development history;

 

    the availability of pipeline capacity and infrastructure; and

 

    the price and availability of alternative fuels.

Substantially all of Bonanza Creek’s production is sold to purchasers under contracts at market-based prices. Declines in commodity prices may have the following effects on Bonanza Creek’s business:

 

    reduction of its revenues, profit margins, operating income and cash flows;

 

    reduction in the amount of crude oil, natural gas and NGLs that Bonanza Creek can produce economically and may lead to reduced liquidity and the inability to pay its liabilities as they come due;

 

    certain properties in its portfolio becoming economically unviable;

 

    delay or postponement of some of its capital projects;

 

    significant reductions in future capital programs, resulting in a reduced ability to develop its reserves;

 

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    limitations on Bonanza Creek’s financial condition, liquidity and/or ability to finance planned capital expenditures and operations;

 

    reduction to the borrowing base under the Bonanza Creek successor credit facility or limitations in its access to sources of capital, such as equity or debt;

 

    declines in its stock price;

 

    refinery industry demand for crude oil;

 

    storage availability for crude oil;

 

    the ability of Bonanza Creek’s vendors, suppliers, and customers to continue operations due to the prevailing adverse market conditions; and

 

    asset impairment charges resulting from reductions in the carrying values of Bonanza Creek’s crude oil and natural gas properties at the date of assessment.

Bonanza Creek’s production is not fully hedged, and it is exposed to fluctuations in the price of oil and will be affected by continuing and prolonged declines in the price of oil and natural gas.

Oil and natural gas prices are volatile, and Bonanza Creek currently only has a portion of its anticipated future production hedged. As a result, some of its future production will be sold at market prices, exposing Bonanza Creek to fluctuations in the price of oil and natural gas unless it enters into new hedging transactions. To the extent that the price of oil and natural gas decline below current levels, Bonanza Creek’s results of operations and financial condition would be materially adversely impacted.

Due to reduced commodity prices and lower operating cash flows, Bonanza Creek may be unable to maintain adequate liquidity and its ability to make interest payments in respect of any indebtedness could be adversely affected.

Oil, natural gas and NGL prices have significantly declined since mid-2014 and have not regained previous highs. This continued depressed price environment has caused a reduction in Bonanza Creek’s available liquidity. Bonanza Creek has substantial capital needs, including in connection with the continued development of its oil and gas assets. Bonanza Creek may not have the ability to generate sufficient cash flows from operations and, therefore, sufficient liquidity to meet its anticipated working capital, debt service and other liquidity needs.

Terrorist attacks could have a material adverse effect on Bonanza Creek’s business, financial condition or results of operations.

Terrorist attacks may significantly affect the energy industry, including Bonanza Creek’s operations and those of its current and potential customers, as well as general economic conditions, consumer confidence and spending and market liquidity. Strategic targets, such as energy-related assets, may be at greater risk of future attacks than other targets in the United States. Bonanza Creek’s insurance may not protect it against such occurrences. Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on Bonanza Creek’s business, financial condition and results of operations.

Bonanza Creek recently emerged from bankruptcy, which could adversely affect its business and relationships.

It is possible that Bonanza Creek having filed for bankruptcy and its recent emergence from the Chapter 11 bankruptcy proceedings could adversely affect its business and relationships with customers, employees and suppliers. Due to uncertainties, many risks exist, including the following:

 

    key suppliers could terminate their relationship or require financial assurances or enhanced performance;

 

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    the ability to renew existing contracts and compete for new business may be adversely affected;

 

    the ability to attract, motivate and/or retain key executives and employees may be adversely affected;

 

    employees may be distracted from performance of their duties or more easily attracted to other employment opportunities;

 

    competitors may take business away from Bonanza Creek, and its ability to attract and retain customers may be negatively impacted; and

 

    Bonanza Creek has five new directors on its board that have no prior experience with Bonanza Creek or the management team, and as a result go-forward operation plans and strategy may differ materially from past practice.

The occurrence of one or more of these events could have a material and adverse effect on Bonanza Creek’s operations, financial condition and reputation. There can be no assurance that having been subject to bankruptcy protection will not adversely affect Bonanza Creek’s operations in the future.

Bonanza Creek’s actual financial results after emergence from bankruptcy may not be comparable to its historical financial information as a result of the implementation of the Bonanza Creek reorganization plan and the transactions contemplated thereby and the adoption of fresh-start accounting.

In connection with the disclosure statement Bonanza Creek filed with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), and the hearing to consider confirmation of Bonanza Creek’s Third Amended Joint Prepackaged Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated April 6, 2017 (the “Bonanza Creek reorganization plan”), Bonanza Creek prepared projected financial information to demonstrate to the Bankruptcy Court the feasibility of the Bonanza Creek reorganization plan and its ability to continue operations upon emergence from bankruptcy. Those projections were prepared solely for the purpose of the bankruptcy proceedings and have not been, and will not be, updated on an ongoing basis and should not be relied upon by investors. At the time they were prepared, the projections reflected numerous assumptions concerning anticipated future performance and with respect to prevailing and anticipated market and economic conditions that were and remain beyond Bonanza Creek’s control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects. Actual results will likely vary significantly from those contemplated by the projections. As a result, investors should not rely on these projections.

In addition, upon emergence from bankruptcy, Bonanza Creek adopted fresh-start accounting, as a consequence of which its assets and liabilities were adjusted to fair value and its accumulated deficit was restated to zero. Accordingly, Bonanza Creek’s future financial conditions and results of operations following its emergence are not be comparable to the financial condition or results of operations reflected in its historical financial statements. The lack of comparable historical financial information may discourage investors from purchasing Bonanza Creek’s common stock.

There is a limited trading market for Bonanza Creek’s securities and the market price of its securities is subject to volatility.

Upon emergence from bankruptcy, Bonanza Creek’s common stock was canceled and it issued new common stock. The market price of the new common stock could be subject to wide fluctuations in response to, and the level of trading that develops with the new common stock may be affected by, numerous factors, many of which are beyond Bonanza Creek’s control. These factors include, among other things, Bonanza Creek’s new capital structure as a result of the transactions contemplated by the Bonanza Creek reorganization plan, its limited trading history subsequent to its emergence from bankruptcy, its limited trading volume, the concentration of holdings of its new common stock, the lack of comparable historical financial information due

 

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to its adoption of fresh-start accounting, actual or anticipated variations in its operating results and cash flow, the nature and content of its earnings releases, announcements or events that impact its products, customers, competitors or markets, business conditions in its markets and the general state of the securities markets and the market for energy-related stocks, as well as general economic and market conditions and other factors that may affect Bonanza Creek’s future results.

Upon emergence from bankruptcy, the composition of Bonanza Creek’s board of directors changed significantly.

Pursuant to the Bonanza Creek reorganization plan, the composition of Bonanza Creek’s board of directors changed significantly. The Bonanza Creek board is made up of six directors, of which five had not previously served on the Bonanza Creek board. The new directors have different backgrounds, experiences and perspectives from those individuals who previously served on the Bonanza Creek board and, thus, may have different views on the issues that will determine the future of Bonanza Creek. As a result, the future strategy and plans of the Bonanza Creek may differ materially from those of the past.

The Bonanza Creek successor credit facility has restrictive covenants that could limit its growth and its ability to finance its operations, fund capital needs, respond to changing conditions and engage in other business activities that may be in its best interests.

The Bonanza Creek successor credit facility contains restrictive covenants that limit its ability to engage in activities that may be in its long-term best interests. Bonanza Creek’s ability to borrow under the Bonanza Creek successor credit facility is subject to compliance with certain financial covenants, including the maintenance of certain financial ratios, including a minimum current ratio, a maximum leverage ratio and a minimum interest coverage ratio. In addition, Bonanza Creek successor credit facility contains covenants that, among other things, limit its ability:

 

    incur or guarantee additional indebtedness;

 

    issue preferred stock;

 

    sell or transfer assets;

 

    pay dividends on, redeem or repurchase capital stock;

 

    repurchase or redeem subordinated debt;

 

    make certain acquisitions and investments;

 

    create or incur liens;

 

    engage in transactions with affiliates;

 

    enter into agreements that restrict distributions or other payments from restricted subsidiaries to Bonanza Creek;

 

    enter into sale-leaseback transactions;

 

    consolidate, merge or transfer all or substantially all of its assets; and

 

    engage in certain business activities.

Bonanza Creek’s failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of its indebtedness. Bonanza Creek would not have sufficient working capital to satisfy its debt obligations in the event of an acceleration of all or a significant portion of its outstanding indebtedness. As of the date of this joint proxy statement/prospectus, Bonanza Creek was in compliance with all financial and non-financial covenants.

 

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Bonanza Creek may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on it by the restrictive covenants contained in the Bonanza Creek successor credit facility. Bonanza Creek’s ability to comply with the financial ratios and financial condition tests under the Bonanza Creek successor credit facility may be affected by events beyond its control and, as a result, Bonanza Creek may be unable to meet these ratios and financial condition tests. These financial ratio restrictions and financial condition tests could limit Bonanza Creek’s ability to obtain future financings, make needed capital expenditures, withstand a continued downturn in commodity prices, its business or the economy in general or otherwise conduct necessary corporate activities.

Borrowings under the Bonanza Creek successor credit facility are limited by its borrowing base, which is subject to periodic redetermination.

Beginning on April 1, 2018, the borrowing base under the Bonanza Creek successor credit facility will be redetermined at least semiannually and up to one additional time between scheduled determinations upon request of Bonanza Creek or lenders holding 66 2/3% of the aggregate commitments. Redeterminations are based upon a number of factors, including commodity prices and reserve levels. In addition, Bonanza Creek’s lenders have substantial flexibility to reduce Bonanza Creek’s borrowing base due to subjective factors. Upon a redetermination, Bonanza Creek could be required to repay a portion of its bank debt to the extent its outstanding borrowings at such time exceed the redetermined borrowing base. Bonanza Creek may not have sufficient funds to make such repayments, which could result in a default under the terms of the facility and an acceleration of the loans thereunder requiring it to negotiate renewals, arrange new financing or sell significant assets, all of which could have a material adverse effect on its business and financial results.

Drilling for and producing oil and natural gas are high-risk activities with many uncertainties that could adversely affect Bonanza Creek’s business, financial condition or results of operations.

Bonanza Creek’s future financial condition and results of operations will depend on the success of its exploitation, exploration, development and production activities. Bonanza Creek’s oil and natural gas exploration and production activities are subject to numerous risks beyond its control, including the risk that drilling will not result in commercially viable oil or natural gas production. Bonanza Creek’s decisions to purchase, explore, develop or otherwise exploit drilling locations or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. For a discussion of the uncertainty involved in these processes, see “Bonanza Creek’s estimated proved reserves and ultimate number of prospective well development locations are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of Bonanza Creek’s reserves” below. Bonanza Creek’s cost of drilling, completing and operating wells is often uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors, including, but not limited to, the following, may result in substantial losses, including personal injury or loss of life, penalties, damage or destruction of property and equipment, and curtailments, delays or cancellations of Bonanza Creek’s scheduled drilling projects:

 

    shortages of or delays in obtaining equipment and qualified personnel;

 

    facility or equipment malfunctions;

 

    unexpected operational events;

 

    unanticipated environmental liabilities;

 

    pressure or irregularities in geological formations;

 

    adverse weather conditions, such as blizzards, ice storms, tornadoes, floods, and fires;

 

    reductions in oil and natural gas prices;

 

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    delays imposed by or resulting from compliance with regulatory requirements, such as permitting delays;

 

    proximity to and capacity of transportation facilities;

 

    title problems;

 

    safety concerns; and

 

    limitations in the market for oil and natural gas.

Bonanza Creek’s estimated proved reserves and ultimate number of prospective well development locations are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of Bonanza Creek’s reserves.

The process of estimating oil and natural gas reserves and the production possible from Bonanza Creek’s oil and gas wells is complex. It requires interpretations of available technical data and many assumptions, including assumptions relating to current and future economic conditions and commodity prices. Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this joint proxy statement/prospectus. See the section entitled “Information About Bonanza Creek—Reserves” in this joint proxy statement/prospectus for information about Bonanza Creek’s estimated oil and natural gas reserves and the PV-10 (a non-GAAP financial measure) as of December 31, 2016, 2015 and 2014.

In order to prepare its estimates, Bonanza Creek must project production rates and the timing of development expenditures. Bonanza Creek must also analyze available geological, geophysical, production and engineering data. The extent, quality and reliability of this data can vary. The process also requires economic assumptions about matters such as oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds, and given the current volatility in pricing, such assumptions are difficult to make. Although the Bonanza Creek reserve information contained in this joint proxy statement/prospectus is reviewed by independent reserve engineers, estimates of oil and natural gas reserves are inherently imprecise, particularly as they relate to state-of-the-art technologies being employed such as the combination of hydraulic fracturing and horizontal drilling.

Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves will vary from Bonanza Creek’s estimates. Any significant variance could materially affect the estimated quantities and present value of reserves shown in this joint proxy statement/prospectus and Bonanza Creek’s impairment charges. In addition, Bonanza Creek may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and natural gas prices and other factors, many of which are beyond its control.

The present value of future net revenues from Bonanza Creek’s proved reserves will not necessarily be the same as the current market value of its estimated oil and natural gas reserves.

You should not assume that the present value of future net revenues from Bonanza Creek’s proved reserves is the current market value of its estimated oil and natural gas reserves. In accordance with SEC requirements for the years ended December 31, 2016, 2015 and 2014, Bonanza Creek based the estimated discounted future net revenues from its proved reserves on the unweighted arithmetic average of the first-day-of-the-month commodity prices for the preceding twelve months (after adjustment for location and quality differentials), without giving effect to derivative transactions. Actual future net revenues from Bonanza Creek’s oil and natural gas properties will be affected by factors such as:

 

    actual prices it receives for oil and natural gas and hedging instruments;

 

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    actual cost of development and production expenditures;

 

    the amount and timing of actual production;

 

    the amount and timing of future development costs;

 

    wellbore productivity realizations above or below type curve forecast models;

 

    the supply and demand of oil and natural gas; and

 

    changes in governmental regulations or taxation.

The timing of both Bonanza Creek’s production and incurrence of expenses in connection with the development and production of oil and natural gas properties will affect the timing and amount of actual future net revenues from proved reserves, and thus their actual present value. In addition, the 10% discount factor (the factor required by the SEC) used when calculating discounted future net revenues may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with Bonanza Creek or the oil and natural gas industry in general.

As a result of the sustained decrease in prices for oil, natural gas and NGLs, Bonanza Creek has taken write-downs of the carrying value of its properties and may be required to take further write-downs if oil and natural gas prices remain depressed or decline further or if it has substantial downward adjustments to its estimated proved reserves, increases in its estimates of development costs or deterioration in its drilling results.

Bonanza Creek reviews its proved oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, from time to time, Bonanza Creek may be required to write-down the carrying value of its oil and natural gas properties. A write-down constitutes a non-cash charge to earnings. Oil, natural gas and NGL prices have significantly declined since mid-2014 and have not regained previous highs. Due to a bid received while assets were held for sale, Bonanza Creek recorded a $10.0 million impairment of oil and gas properties for the year ended December 31, 2016. Additionally, given the history of price volatility in the oil and natural gas markets, prices could remain depressed or decline further or other events may arise that would require Bonanza Creek to record further impairments of the book values associated with oil and natural gas properties. Accordingly, Bonanza Creek may incur significant impairment charges in the future which could have a material adverse effect on its results of operations and could reduce its earnings and stockholders’ equity for the periods in which such charges are taken.

Bonanza Creek intends to pursue the further development of its properties in the Wattenberg Field through horizontal drilling. Horizontal drilling operations can be more operationally challenging and costly relative to Bonanza Creek’s historic vertical drilling operations.

Horizontal drilling is generally more complex and more expensive on a per well basis than vertical drilling. As a result, there is greater risk associated with a horizontal well drilling program. Risks associated with Bonanza Creek’s horizontal drilling program include, but are not limited to, the following, any of which could materially and adversely impact the success of its horizontal drilling program and thus its cash flows and results of operations:

 

    landing its well bore in the desired drilling zone;

 

    effectively controlling the level of pressure flowing from particular wells;

 

    staying in the desired drilling zone while drilling horizontally through the formation;

 

    running its casing the entire length of the wellbore;

 

    running tools and other equipment consistently through the horizontal wellbore;

 

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    fracture stimulating the planned number of stages;

 

    preventing downhole communications with other wells;

 

    successfully cleaning out the well bore after completion of the final fracture stimulation stage; and

 

    designing and maintaining efficient forms of artificial lift throughout the life of the well.

Ultimately, the success of these drilling and completion techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period. If Bonanza Creek’s drilling results are less than anticipated or it is unable to execute its drilling program because of capital constraints, lease expirations, access to gathering systems, limited takeaway capacity or depressed natural gas and oil prices, the return on Bonanza Creek’s investment in these areas may not be as attractive as anticipated. Further, as a result of any of these developments, Bonanza Creek could incur material impairments of its oil and gas properties and the value of its undeveloped acreage could decline in the future.

Bonanza Creek’s ability to produce natural gas and oil economically and in commercial quantities could be impaired if it is unable to acquire adequate supplies of water for its drilling operations or is unable to dispose of or recycle the water it uses at a reasonable cost and in accordance with applicable environmental rules.

The hydraulic fracture stimulation process on which Bonanza Creek depends to produce commercial quantities of oil and natural gas requires the use and disposal of significant quantities of water. Bonanza Creek’s inability to secure sufficient amounts of water (including as a result of droughts), or to dispose of or recycle the water used in its operations, could adversely impact its operations. The imposition of new environmental initiatives and regulations could include restrictions on its ability to conduct certain operations such as hydraulic fracturing or disposal of waste, including, but not limited to, produced water, drilling fluids and other wastes associated with the exploration, development or production of natural gas. Compliance with environmental regulations and permit requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase Bonanza Creek’s operating costs and cause delays, interruptions or termination of its operations, the extent of which cannot be predicted, and all of which could have an adverse effect on its operations and financial condition.

The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and oilfield services could adversely affect Bonanza Creek’s ability to execute its exploration and development plans within its budget and on a timely basis.

Shortages or the high cost of drilling rigs, equipment, supplies, personnel or oilfield services could delay or adversely affect Bonanza Creek’s development and exploration operations or cause it to incur significant expenditures that are not provided for in its capital budget, which could have a material adverse effect on its business, financial condition or results of operations and may lead to reduced liquidity and the inability to pay its liabilities as they come due.

Bonanza Creek’s exploration, development and exploitation projects require substantial capital expenditures. Bonanza Creek may be unable to obtain needed capital or financing on satisfactory terms, which could lead to expiration of its leases or a decline in its oil and natural gas reserves or anticipated production volumes.

Bonanza Creek’s exploration, development and exploitation activities are capital intensive. Bonanza Creek makes and expects to continue to make substantial capital expenditures in its business for the development, exploitation, production and acquisition of oil and natural gas reserves. At this time, Bonanza Creek intends to finance future capital expenditures primarily through cash flows provided by operating activities and borrowings under the Bonanza Creek successor credit facility. However, continuation of the recent declines, or further declines in commodity prices coupled with its financing needs may require Bonanza Creek to alter or increase its capitalization substantially through the issuance of additional equity securities, debt securities or the strategic

 

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sale of assets. The issuance of additional debt may require that a portion of Bonanza Creek’s cash flows provided by operating activities be used for the payment of principal and interest on its debt, thereby reducing its ability to use cash flows to fund working capital, capital expenditures and acquisitions. In addition, upon the issuance of certain debt securities (other than on a borrowing base redetermination date), Bonanza Creek’s borrowing base under the Bonanza Creek successor credit facility would be reduced. The issuance of additional equity securities could have a dilutive effect on the value of Bonanza Creek’s common stock.

Bonanza Creek’s cash flows provided by operating activities and access to capital are subject to a number of variables, including:

 

    Bonanza Creek’s proved reserves;

 

    the amount of oil and natural gas Bonanza Creek is able to produce from existing wells;

 

    the prices at which Bonanza Creek’s oil and natural gas are sold;

 

    the costs of developing and producing Bonanza Creek’s oil and natural gas production;

 

    Bonanza Creek’s ability to acquire, locate and produce new reserves;

 

    the ability and willingness of Bonanza Creek’s banks to lend; and

 

    Bonanza Creek’s ability to access the equity and debt capital markets.

If the borrowing base under the Bonanza Creek successor credit facility or if Bonanza Creek’s revenues decrease as a result of lower oil or natural gas prices, operating difficulties, declines in reserves or for any other reason, Bonanza Creek may have limited ability to obtain the capital necessary to sustain its operations. If additional capital is needed, it may not be able to obtain debt or equity financing on favorable terms, or at all. If cash generated by operations or cash available under the Bonanza Creek successor credit facility is not sufficient to meet Bonanza Creek’s capital requirements, the failure to obtain additional financing could result in a curtailment of its operations relating to development of its drilling locations, which in turn could lead to a possible expiration of its undeveloped leases and a decline in its oil and natural gas reserves, and an adverse effect on its business, financial condition and results of operations.

Increased costs of capital could adversely affect Bonanza Creek’s business.

Recent and continuing disruptions and volatility in the global financial markets may lead to an increase in interest rates or a contraction in credit availability, impacting Bonanza Creek’s ability to finance its operations. Bonanza Creek’s business and operating results can be harmed by factors such as the terms and cost of capital, increases in interest rates or a reduction in credit rating. Changes in any one or more of these factors could cause Bonanza Creek’s cost of doing business to increase, limit its access to capital, limit its ability to pursue acquisition opportunities, reduce its cash flows available for drilling, render it unable to replace reserves and production and place Bonanza Creek at a competitive disadvantage.

Concentration of Bonanza Creek’s operations in a few core areas may increase its risk of production loss.

Bonanza Creek’s assets and operations are concentrated in two core areas: the Wattenberg Field in Colorado and the Dorcheat Macedonia Field in southern Arkansas. These core areas currently provide approximately 98% of Bonanza Creek’s current sales volumes and the vast majority of its development projects.

The Wattenberg and Dorcheat Macedonia Fields represent 81% and 19%, respectively, of Bonanza Creek’s 2016 total sales volumes and 79% and 19%, respectively, of its total sales volumes for the nine months ended September 30, 2017. Because Bonanza Creek’s operations are not as diversified geographically as some of its competitors, the success of its operations and its profitability may be disproportionately exposed to the effect of any regional events, including: fluctuations in prices of crude oil, natural gas and NGLs produced from wells in

 

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the area, accidents or natural disasters, restrictive governmental regulations and curtailment of production or interruption in the availability of gathering, processing or transportation infrastructure and services, and any resulting delays or interruptions of production from existing or planned new wells. Similarly, the concentration of Bonanza Creek’s assets within a small number of producing formations exposes it to risks, such as changes in field-wide rules, which could adversely affect development activities or production relating to those formations. In addition, in areas where exploration and production activities are increasing, as has been the case in recent years in the Wattenberg Field, Bonanza Creek is subject to increasing competition for drilling rigs, oilfield equipment, services, supplies and qualified personnel, which may lead to periodic shortages or delays. These constraints and the resulting shortages or high costs could delay Bonanza Creek’s operations and materially increase its operating and capital costs.

Bonanza Creek does not maintain business interruption (loss of production) insurance for its oil and gas producing properties. Loss of production or limited access to reserves in either of Bonanza Creek’s core operating areas could have a significant negative impact on its cash flows and profitability.

Bonanza Creek has limited control over activities on properties in which it owns an interest but does not operate, which could reduce its production and revenues.

Bonanza Creek does not operate all of the properties in which it has an interest. As a result, Bonanza Creek may have a limited ability to exercise influence over normal operating procedures, expenditures or future development of underlying properties and their associated costs. For all of the properties that are operated by others, Bonanza Creek is dependent on their decision-making with respect to day-to-day operations over which it has little control. The failure of an operator of wells in which Bonanza Creek has an interest to adequately perform operations, or an operator’s breach of applicable agreements, could reduce production and revenues Bonanza Creek receives from that well. The success and timing of Bonanza Creek’s drilling and development activities on properties operated by others depend upon a number of factors outside of its control, including the timing and amount of capital expenditures, the available expertise and financial resources, the inclusion of other participants and the use of technology. Bonanza Creek’s lack of control over non-operated properties also makes it more difficult for it to forecast capital expenditures, revenues, production and related matters.

Bonanza Creek is dependent on third party pipeline, trucking and rail systems to transport its production and, in the Wattenberg Field, gathering and processing systems to prepare its production. These systems have limited capacity and at times have experienced service disruptions. Curtailments, disruptions or lack of availability in these systems would interfere with Bonanza Creek’s ability to market the oil and natural gas it produces, and could materially and adversely affect its cash flow and results of operations.

Market conditions or the unavailability of satisfactory oil and natural gas transportation arrangements may hinder Bonanza Creek’s access to oil and natural gas markets or delay its production getting to market. The marketability of Bonanza Creek’s oil and natural gas and production, particularly from its wells located in the Wattenberg Field, depends in part on the availability, proximity and capacity of gathering, processing, pipeline, trucking and rail systems. The amount of oil and natural gas that can be produced and sold is subject to limitation in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage to the gathering or transportation system, or lack of contracted capacity on such systems. A portion of Bonanza Creek’s production may also be interrupted, or shut in, from time to time for numerous other reasons, including as a result of accidents, maintenance, weather, field labor issues or disruptions in service. Curtailments and disruptions in these systems may last from a few days to several months. Any significant curtailment in gathering, processing or pipeline system capacity, significant delay in the construction of necessary facilities or lack of availability of transport, would interfere with Bonanza Creek’s ability to market the oil and natural gas it produces, and could materially and adversely affect its cash flow and results of operations, and the expected results of its drilling program.

Currently, there are no natural gas pipeline systems that service wells in the North Park Basin, which is prospective for the Niobrara formation. In addition, Bonanza Creek is not aware of any plans to construct a

 

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facility necessary to process natural gas produced from this basin. If neither Bonanza Creek nor a third party constructs the required pipeline system and processing facility, Bonanza Creek may not be able to fully develop its resources in the North Park Basin.

The development of Bonanza Creek’s proved undeveloped reserves may take longer and may require higher levels of capital expenditures than it currently anticipates. Therefore, Bonanza Creek’s undeveloped reserves may not be ultimately developed or produced.

Approximately 44% of Bonanza Creek’s total proved reserves were classified as proved undeveloped as of December 31, 2016. Development of these reserves may take longer and require higher levels of capital expenditures than Bonanza Creek currently anticipates or that may be available to it. Delays in the development of Bonanza Creek’s reserves or increases in costs to drill and develop such reserves will reduce the value of its estimated proved undeveloped reserves and future net revenues estimated for such reserves and may result in some projects becoming uneconomic. In addition, delays in the development of reserves could cause Bonanza Creek to have to reclassify its proved reserves as unproved reserves.

Unless Bonanza Creek replaces its oil and natural gas reserves, its reserves and production will decline, which would adversely affect its business, financial condition and results of operations.

In general, production from oil and gas properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics. Bonanza Creek’s current proved reserves will decline as reserves are produced and, therefore, its level of production and cash flows will be affected adversely unless Bonanza Creek conducts successful exploration and development activities or acquires properties containing proved reserves. Thus, Bonanza Creek’s future oil and natural gas production and, therefore, its cash flow and income are highly dependent upon its level of success in finding or acquiring additional reserves. However, there can be no assurance that Bonanza Creek’s future acquisition, development and exploration activities will result in any specific amount of additional proved reserves or that it will be able to drill productive wells at acceptable costs.

Bonanza Creek may incur substantial losses and be subject to substantial liability claims as a result of its oil and natural gas operations. Additionally, Bonanza Creek may not be insured for, or its insurance may be inadequate to protect it against, these risks, including those related to its hydraulic fracturing operations.

Bonanza Creek’s oil and natural gas exploration and production activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including, but not limited to, the possibility of:

 

    environmental hazards, such as spills, uncontrollable flows of oil, natural gas, brine, well fluids, natural gas, hazardous air pollutants or other pollution into the environment, including soil, groundwater and shoreline contamination;

 

    releases of natural gas and hazardous air pollutants or other substances into the atmosphere (including releases at Bonanza Creek’s gas processing facilities);

 

    hazards resulting from the presence of hydrogen sulfide (H2S) or other contaminants in natural gas it produces;

 

    abnormally pressured formations resulting in well blowouts, fires or explosions;

 

    mechanical difficulties, such as stuck oilfield drilling and service tools and casing collapse;

 

    cratering (catastrophic failure);

 

    downhole communication leading to migration of contaminants;

 

    personal injuries and death; and

 

    natural disasters.

 

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Any of these risks could adversely affect Bonanza Creek’s ability to conduct operations or result in substantial losses to it as a result of:

 

    injury or loss of life;

 

    damage to and destruction of property, natural resources and equipment;

 

    pollution and other environmental damage;

 

    regulatory investigations and penalties;

 

    suspension of its operations; and

 

    repair and remediation costs.

The presence of H2S, a toxic, flammable and colorless gas, is a common risk in the oil and gas industry and may be present in small amounts for brief periods from time to time at Bonanza Creek’s well locations. Additionally, at one of its Arkansas properties, Bonanza Creek produces a small amount of gas from four wells where it has identified the presence of H2S at levels that would be hazardous in the event of an uncontrolled gas release or unprotected exposure. In addition, Bonanza Creek’s operations in Arkansas and Colorado are susceptible to damage from natural disasters such as flooding, wildfires or tornados, which involve increased risks of personal injury, property damage and marketing interruptions. The occurrence of one of these operating hazards may result in injury, loss of life, suspension of operations, environmental damage and remediation and/or governmental investigations and penalties. The payment of any of these liabilities could reduce, or even eliminate, the funds available for exploration and development, or could result in a loss of Bonanza Creek’s properties.

As is customary in the oil and gas industry, Bonanza Creek maintains insurance against some, but not all, of these potential risks and losses. Although Bonanza Creek believes the coverage and amounts of insurance that it carries are consistent with industry practice, it does not have insurance protection against all risks that it faces. Insurance costs will likely continue to increase which could result in Bonanza Creek’s determination to decrease coverage and retain more risk. In addition, pollution and environmental risks generally are not fully insurable. If Bonanza Creek incurs substantial liability, and the damages are not fully covered by insurance or are in excess of policy limits, then its business, results of operations and financial condition may be materially adversely affected.

Because hydraulic fracturing activities are part of Bonanza Creek’s operations, they are covered by its insurance against claims made for bodily injury, property damage and clean-up costs stemming from a sudden and accidental pollution event. However, Bonanza Creek may not have coverage if the operator is unaware of the pollution event and unable to report the “occurrence” to the insurance company within the required time frame. Bonanza Creek also does not have coverage for gradual, long-term pollution events.

Under certain circumstances, Bonanza Creek has agreed to indemnify third parties against losses resulting from its operations. Pursuant to Bonanza Creek’s surface leases, it typically indemnifies the surface owner for clean-up and remediation of the site. As owner and operator of oil and gas wells and associated gathering systems and pipelines, Bonanza Creek typically indemnifies the drilling contractor for pollution emanating from the well, while the contractor indemnifies it against pollution emanating from its equipment.

Drilling locations that Bonanza Creek decides to drill may not yield oil or natural gas in commercially viable quantities.

Bonanza Creek describes some of its drilling locations and its plans to explore those drilling locations in this joint proxy statement/prospectus. Bonanza Creek’s drilling locations are in various stages of evaluation, ranging from a location that is ready to drill to a location that will require substantial additional evaluation. There is no way to predict in advance of drilling and testing whether any particular location will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. Prior to drilling, the use

 

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of 2-D and 3-D seismic technologies, various other technologies and the study of producing fields in the same area will not enable Bonanza Creek to know conclusively whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in sufficient quantities to be economically viable. In addition, the use of 2-D and 3-D seismic data and other technologies requires greater pre-drilling expenditures than traditional drilling strategies, and Bonanza Creek could incur greater drilling and testing expenses as a result of such expenditures which may result in a reduction in its returns or increase its losses. Even if sufficient amounts of oil or natural gas exist, Bonanza Creek may damage the potentially productive hydrocarbon bearing formation or experience mechanical difficulties while drilling or completing the well, resulting in a reduction in production from the well or abandonment of the well. If Bonanza Creek drills any dry holes in its current and future drilling locations, its profitability and the value of its properties will likely be reduced. There can be no assurance that the analogies Bonanza Creek draws from available data from other wells, more fully explored locations or producing fields will be applicable to its drilling locations. Further, initial production rates reported by Bonanza Creek or other operators may not be indicative of future or long-term production rates. In sum, the cost of drilling, completing and operating any well is often uncertain, and new wells may not be productive.

Bonanza Creek’s potential drilling locations are scheduled to be developed over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. In addition, Bonanza Creek may not be able to raise the substantial amount of capital that would be necessary to drill a substantial portion of its potential drilling locations.

Bonanza Creek’s management has identified and scheduled drilling locations as an estimation of its future multi-year drilling activities on its existing acreage. These potential drilling locations, including those without proved undeveloped reserves, represent a significant part of Bonanza Creek’s growth strategy. Bonanza Creek’s ability to drill and develop these locations is subject to a number of uncertainties, including uncertainty in the level of reserves, the availability of capital to it and other participants, seasonal conditions, regulatory approvals, oil, natural gas and NGL prices, availability of permits, costs and drilling results. Because of these uncertainties, Bonanza Creek does not know if the numerous potential drilling locations it has identified will ever be drilled or if it will be able to produce oil or natural gas from these or any other potential drilling locations. Pursuant to existing SEC rules and guidance, subject to limited exceptions, proved undeveloped reserves may only be booked if they relate to wells scheduled to be drilled within five years of the date of booking, and Bonanza Creek may therefore be required to downgrade to probable or possible any proved undeveloped reserves that are not developed within this five-year time frame. These limitations may limit Bonanza Creek’s potential to book additional proved undeveloped reserves as it pursues its drilling program.

Certain of Bonanza Creek’s undeveloped leasehold acreage is subject to leases that will expire over the next several years unless production is established on units containing the acreage.

The terms of Bonanza Creek’s oil and gas leases stipulate that the lease will terminate if not held by production, rentals, or production. As of the date of this joint proxy statement/prospectus, the majority of Bonanza Creek’s acreage in Arkansas was held by unitization, production, or drilling operations and therefore not subject to lease expiration. As of the date of this joint proxy statement/prospectus, approximately 8,132 net acres of Bonanza Creek’s properties in the Rocky Mountain region were not held by production. For these properties, if production in paying quantities is not established on units containing these leases during the next year, then approximately 3,531 net acres will expire in 2017, approximately 3,953 net acres will expire in 2018, and approximately 648 net acres will expire in 2019 and thereafter. While some expiring leases may contain predetermined extension payments, other expiring leases will require Bonanza Creek to negotiate new leases at the time of lease expiration. It is possible that market conditions at the time of negotiation could require Bonanza Creek to agree to new leases on less favorable terms than the terms of the expired leases. If Bonanza Creek’s leases expire, it will lose its right to develop the related properties.

 

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Bonanza Creek may incur losses as a result of title deficiencies.

The existence of a title deficiency can diminish the value of an acquired leasehold interest and can adversely affect Bonanza Creek’s results of operations and financial condition. Title insurance covering mineral leasehold interests is not generally available. As is industry standard, Bonanza Creek may rely upon a land professional’s careful examination of public records prior to purchasing or leasing a mineral interest. Once a mineral or leasehold interest has been acquired, Bonanza Creek typically defers the expense of obtaining further title verification by a practicing title attorney until approval to drill the related drilling block is required. Bonanza Creek performs the necessary curative work to correct deficiencies in the marketability of the title and it has compliance and control measures to ensure any associated business risk is approved by the appropriate Bonanza Creek authority. In cases involving more serious title deficiencies, all or part of a mineral or leasehold interest may be determined to be invalid or unleased, and, as a result, the target area may be deemed to be undrillable until owners can be contacted and curative measures performed to perfect title. In other cases, title deficiencies may result in Bonanza Creek’s failure to have paid royalty owners correctly. Certain title deficiencies may also result in litigation to effectively agree or render a decision upon title ownership.

Bonanza Creek faces various risks associated with the long term trend toward increased activism against oil and gas exploration and development activities.

Opposition toward oil and gas drilling and development activity has been growing globally. Companies in the oil and gas industry are often the target of activist efforts from both individuals and non-governmental organizations regarding safety, environmental compliance and business practices. Anti-development activists are working to, among other things, reduce access to federal and state government lands and delay or cancel certain projects such as the development of oil or gas shale plays. For example, environmental activists continue to advocate for increased regulations or bans on shale drilling in the United States, even in jurisdictions that are among the most stringent in their regulation of the industry. Future activist efforts could result in the following:

 

    delay or denial of drilling permits;

 

    shortening of lease terms or reduction in lease size;

 

    restrictions on installation or operation of production, gathering or processing facilities;

 

    restrictions on the use of certain operating practices, such as hydraulic fracturing, or the disposal of related waste materials, such as hydraulic fracturing fluids and produced water;

 

    increased severance and/or other taxes;

 

    cyber-attacks;

 

    legal challenges or lawsuits;

 

    negative publicity about Bonanza Creek or the oil and gas industry in general;

 

    increased costs of doing business;

 

    reduction in demand for Bonanza Creek’s products; and

 

    other adverse effects on Bonanza Creek’s ability to develop its properties and expand production.

Bonanza Creek may need to incur significant costs associated with responding to these initiatives. Complying with any resulting additional legal or regulatory requirements that are substantial could have a material adverse effect on Bonanza Creek’s business, financial condition and results of operations.

Bonanza Creek is subject to health, safety and environmental laws and regulations that may expose it to significant costs and liabilities.

Bonanza Creek is subject to stringent and complex federal, state and local laws and regulations governing health and safety aspects of its operations, the discharge of materials into the environment and the protection of

 

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the environment. These laws and regulations may impose on Bonanza Creek’s operations numerous requirements, including the obligation to obtain a permit before conducting drilling or underground injection activities; restrictions on the types, quantities and concentration of materials that may be released into the environment; limitations or prohibitions of drilling activities that impact threatened or endangered species or that occur on certain lands lying within wilderness, wetlands and other protected areas; the application of specific health and safety criteria to protect workers; and the responsibility for cleaning up any pollution resulting from operations. Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly actions. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties; the imposition of investigatory or remedial obligations; the issuance of injunctions limiting or preventing some or all of Bonanza Creek’s operations; delays in granting permits, or even the cancellation of leases.

There is an inherent risk of incurring significant environmental costs and liabilities in the performance of Bonanza Creek’s operations, some of which may be material, due to its handling of petroleum hydrocarbons and wastes, its emissions into air and water, the underground injection or other disposal of its wastes, the use and disposition of hydraulic fracturing fluids, and historical industry operations and waste disposal practices. Under certain environmental laws and regulations, Bonanza Creek may be liable for the full cost of removing or remediating contamination, regardless of whether it was at fault, and even when multiple parties contributed to the release and the contaminants were released in compliance with all applicable laws. In addition, accidental spills or releases on Bonanza Creek’s properties may expose it to significant liabilities that could have a material adverse effect on its financial condition or results of operations. Aside from government agencies, the owners of properties where Bonanza Creek’s wells are located, the owners or operators of facilities where its petroleum hydrocarbons or wastes are taken for reclamation or disposal, and other private parties may be able to sue it to enforce compliance with environmental laws and regulations, collect penalties for violations, or obtain damages for any related personal injury, property, or natural resource damage. Some sites Bonanza Creek operates are located near current or former third-party oil and natural gas operations or facilities, and there is a risk that historic contamination has migrated from those sites to Bonanza Creek’s. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly requirements could require Bonanza Creek to make significant expenditures to attain and maintain compliance or may otherwise have a material adverse effect on Bonanza Creek’s own results of operations, competitive position or financial condition. Bonanza Creek may not be able to recover some or any of these costs from insurance.

Evolving environmental legislation or regulatory initiatives, including those related to hydraulic fracturing, could result in increased costs and additional operating restrictions or delays.

Bonanza Creek is subject to extensive federal, state, and local laws and regulations concerning health, safety, and environmental protection. Governmental authorities frequently add to those requirements, and both oil and gas development generally, and hydraulic fracturing specifically, are receiving increasing regulatory attention. Bonanza Creek’s operations utilize hydraulic fracturing, an important and commonly used process in the completion of oil and natural gas wells in low-permeability formations. Hydraulic fracturing involves the injection of water, proppant, and chemicals under pressure into rock formations to stimulate hydrocarbon production.

In May 2016, the EPA issued amended New Source Performance Standards (known as “Quad Oa”) focused on achieving reductions in methane and volatile organic compound emissions at oil and natural gas operations. These rules, among other things, require leak detection and repair, additional control requirements for pneumatic controllers and pumps, and additional control requirements for oil well completions, gathering, boosting, and compressor stations. On May 26, 2017, the EPA announced a 90-day stay of certain portions of the Quad Oa standards, which stay was vacated in part by the U.S. Court of Appeals for the D.C. Circuit on July 3, 2017. The EPA also proposed a two-year stay of the certain portions of the Quad Oa standards on June 12, 2017, which stay is currently under consideration and the court emphasized is not impacted by its July 3, 2017 decision. At this

 

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point, Bonanza Creek cannot predict the cost to comply with such air regulatory requirements or the timing of their implementation.

On December 17, 2014, the EPA proposed to revise and lower the existing 75 ppb NAAQS for ozone under the federal Clean Air Act to a range within 65-70 ppb. On October 1, 2015, EPA finalized a rule lowering the standard to 70 ppb. This lowered ozone NAAQS could result in an expansion of ozone nonattainment areas across the United States, including areas in which Bonanza Creek operates. In a related development, in 2015, the State of Colorado received a bump-up to its existing ozone non-attainment status from “marginal” to “moderate.” This increased status will result in additional requirements under the CAA for the State of Colorado and will include a state rulemaking to implement such requirements. This rulemaking process started in early 2017 and is ongoing. Oil and natural gas operations in ozone nonattainment areas may be subject to increased regulatory burdens in the form of more stringent emission controls, emission offset requirements, and increased permitting delays and costs.

In February 2014, the Colorado Department of Public Health and Environment’s Air Quality Control Commission finalized regulations imposing strict new requirements relating to air emissions from oil and gas facilities in Colorado that are even more stringent than comparable federal rules. These new Colorado rules include storage tank control, monitoring, recordkeeping and reporting requirements as well as leak detection and repair requirements for both well production facilities and compressor stations and associated equipment. These new requirements, which represent the first time a state has directly regulated methane (a greenhouse gas) emissions from the upstream oil and gas sector, have and will continue to impose additional costs on Bonanza Creek’s operations.

Some activists have attempted to link hydraulic fracturing to various environmental problems, including potential adverse effects to drinking water supplies as well as migration of methane and other hydrocarbons and increased earthquakes. The federal government is studying the environmental risks associated with hydraulic fracturing and evaluating whether to adopt additional regulatory requirements. For example, the EPA has commenced a multi-year study of the potential impacts of hydraulic fracturing on drinking water resources, which was finalized in December 2016 and concludes drinking water resources can be affected by hydraulic fracturing under specific circumstances. In addition, in 2011, the EPA announced its intention to propose regulations under the federal Clean Water Act to regulate wastewater discharges from hydraulic fracturing and other natural gas production. EPA finalized these rules on June 28, 2016 and extended the compliance date for these rules until August 29, 2019. The EPA also has issued guidance for issuing underground injection permits for hydraulic fracturing operations that use diesel fuel under the agency’s SDWA authority.

Moreover, the U.S. Department of the Interior finalized new rules for hydraulic fracturing activities on federal lands that, in general, would cover disclosure of fracturing fluid components, well bore integrity, and handling of flowback water. The rule was stayed pending the outcome of litigation, but the 10th Circuit Court of Appeals dismissed the appeal from the decision vacating the rule and the underlying case on September 21, 2017. It is unclear whether the rule remains in effect and industry groups have filed for a rehearing of the appeal. Responses to the rehearing requests were due on November 20, 2017. The BLM also proposed rules to address venting and flaring of methane on BLM land, which the U.S. House of Representatives has passed a bill to repeal, and the U.S. Occupational Safety and Health Administration has proposed stricter standards for worker exposure to silica, which would apply to use of sand as a proppant for hydraulic fracturing. The current Congress has taken efforts to repeal the BLM methane rules. In early February 2017, the U.S. House of Representatives voted to eliminate the BLM methane rules using the Congressional Review Act (the “CRA”). However, the CRA requires majority approval from the Senate and approval of the President to officially repeal these rules and the Senate failed to approve the repeal in May 2017. Additionally, the Department of the Interior (the parent department of BLM) announced in October 2017 that it would delay the effectiveness of the BLM methane rules that were to become effective in January 2018.

Apart from these ongoing federal initiatives, state governments where Bonanza Creek operates have moved to impose stricter requirements on hydraulic fracturing and other aspects of oil and gas production. Colorado, for

 

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example, comprehensively updated its oil and gas regulations in 2008 and adopted significant additional amendments in 2011, 2014 and 2015. Colorado is also currently considering amendments to rules regulating flowlines used in oil and gas operations, with hearings set for January 2018. Among other things, the updated and amended regulations require operators to reduce methane emissions associated with hydraulic fracturing, compile and report additional information regarding well bore integrity, publicly disclose the chemical ingredients used in hydraulic fracturing, increase the minimum distance between occupied structures and oil and gas wells, undertake additional mitigation for nearby residents, implement additional groundwater testing and incur increased monetary penalties for violations of the State’s oil and gas conservation commission rules and regulations. In early 2016, COGCC finalized a rulemaking to implement rules applicable to the permitting of large-scale oil and gas facilities in urban mitigation areas and rules requiring operators to register with and provide operational information to municipalities prior to conducting oil and gas operations with notice prior to engaging in certain operations.

In some instances certain local governments are adopting new requirements on hydraulic fracturing and other oil and gas operations. Some counties in Colorado, for instance, have amended their land use regulations to impose new requirements on oil and gas development, while other local governments have entered memoranda of agreement with oil and gas producers to accomplish the same objective. In addition, voters in Colorado have proposed or advanced ballot initiatives restricting or banning oil and gas development in Colorado. Because a substantial portion of Bonanza Creek’s operations and reserves are located in Colorado, the risks it faces with respect to such ballot initiatives are greater than other companies with more geographically diverse operations. The adoption of future federal, state or local laws or implementing regulations imposing new environmental obligations on, or otherwise limiting, Bonanza Creek’s operations could make it more difficult and more expensive to complete oil and natural gas wells, increase its costs of compliance and doing business, delay or prevent the development of certain resources (including especially shale formations that are not commercial without the use of hydraulic fracturing), or alter the demand for and consumption of its products and services. There can be no assurance that any such outcome would not be material, and any such outcome could have a material adverse impact on Bonanza Creek’s cash flows and results of operations.

Climate change laws and regulations restricting emissions of “greenhouse gases” could result in increased operating costs and reduced demand for the oil and natural gas that Bonanza Creek produces, while the physical effects of climate change could disrupt Bonanza Creek’s production and cause it to incur significant costs in preparing for or responding to those effects.

There is a growing belief that human-caused (anthropogenic) emissions of GHGs may be linked to climate change. Climate change and the costs that may be associated with its impacts and the regulation of GHGs have the potential to affect Bonanza Creek’s business in many ways, including negatively impacting the costs it incurs in providing its products and services and the demand for and consumption of its products and services (due to potential changes in both costs and weather patterns).

In May 2016, the EPA promulgated rules regarding criteria for aggregating multiple small surface sites into a single source for air-quality permitting purposes applicable to the oil and natural gas industry. This rule could cause small facilities, on an aggregate basis, to be deemed a major source, thereby triggering more stringent air permitting requirements. The EPA also adopted regulations requiring the reporting of GHG emissions from specific categories of higher GHG emitting sources in the United States, including certain oil and natural gas production facilities, which include certain of Bonanza Creek’s operations. Information in such report may form the basis for further GHG regulation. Further, the EPA has continued with its comprehensive strategy for further reducing methane emissions from oil and gas operations, with a final rule being issued in May 2016 as part of “Quad Oa” discussed above. The EPA’s GHG rules could adversely affect Bonanza Creek’s operations and restrict or delay its ability to obtain air permits for new or modified facilities. On May 26, 2017, the EPA announced a 90-day stay of certain portions of the Quad Oa standards, which stay was vacated in part by the U.S. Court of Appeals for the D.C. Circuit on July 3, 2017. The EPA also proposed a two-year stay of the certain portions of the Quad Oa standards on June 12, 2017, which stay is currently under consideration and the court emphasized is not impacted by its July 3, 2017 decision.

 

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Moreover, Congress has from time to time considered adopting legislation to reduce emissions of GHGs or promote the use of renewable fuels. As an alternative, some proponents of GHG controls have advocated mandating a national “clean energy” standard. On August 3, 2015, the EPA issued new regulations limiting carbon dioxide emissions from existing power generation facilities, known as the Clean Power Plan. Under this rule, nationwide carbon dioxide emissions would be reduced by approximately 30% from 2005 levels by 2030 with a flexible interim goal. Several industry groups and states challenged the rule. On February 9, 2016, the Supreme Court of the United States stayed the implementation of this rule pending judicial review. On March 28, 2017, President Trump signed an Executive Order directing the EPA to review the regulations, and on April 4, 2017, the EPA announced that it was reviewing the 2015 carbon dioxide regulations. On April 28, 2017, the U.S. Court of Appeals for the District of Columbia stayed the litigation pending the current administration’s review. That stay was extended for another 60 days on August 8, 2017. On October 9, 2017, the EPA announced that it will repeal the Clean Power Plan. In addition, the United States reached agreement during the December 2015 United Nations climate change conference to reduce its GHG emissions by 26-28% by 2025 compared with 2005 levels, and also to provide periodic updates on its progress. On June 1, 2017, President Trump announced that the United States would withdraw from the Paris Agreement and that it would potentially seek to renegotiate the Paris Agreement on more favorable terms. Although President Trump has the authority to unilaterally withdraw the United States from the Paris Agreement, per the terms of the Paris Agreement, such a withdrawal may not be made until three years from the effective date of the Paris Agreement, which is November 4, 2019, and any such withdrawal only becomes effective one year after the notice of withdrawal is provided.

In the meantime, many states already have taken such measures, which have included renewable energy standards, development of GHG emission inventories or cap and trade programs. Cap and trade programs typically work by requiring major sources of emissions or major producers of fuels to acquire and surrender emission allowances, with the number of available allowances reduced each year until the overall GHG emission reduction goal is achieved. These allowances would be expected to escalate significantly in cost over time.

The adoption of legislation or regulatory programs to reduce emissions of GHGs could require Bonanza Creek to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new regulatory or reporting requirements. If Bonanza Creek is unable to recover or pass through a significant level of its costs related to complying with climate change regulatory requirements imposed on us, it could have a material adverse effect on its results of operations and financial condition. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and natural gas Bonanza Creek produces. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on Bonanza Creek’s business, financial condition and results of operations.

Competition in the oil and natural gas industry is intense, making it more difficult for Bonanza Creek to acquire properties, market oil and natural gas and secure trained personnel.

Bonanza Creek’s ability to acquire additional drilling locations and to find and develop reserves in the future will depend heavily on its financial resources and ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment for acquiring properties, marketing oil and natural gas and securing equipment and trained personnel. Also, there is substantial competition for capital available for investment in the oil and natural gas industry. Many of Bonanza Creek’s competitors possess and employ financial, technical and personnel resources substantially greater than Bonanza Creek’s. Those companies may be able to pay more for productive oil and natural gas properties and exploratory drilling locations or to identify, evaluate, bid for and purchase a greater number of properties and locations than Bonanza Creek’s financial or personnel resources permit. Furthermore, these companies may also be better able to withstand unsuccessful drilling attempts, sustained periods of volatility in financial markets and generally adverse global and industry-wide economic conditions, and may be better able to absorb the burdens resulting from changes in relevant laws and regulations, which would adversely affect Bonanza Creek’s competitive position. In addition, companies may be able to offer better compensation packages to attract and retain qualified personnel than Bonanza Creek

 

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is able to offer. Bonanza Creek may not be able to compete successfully in the future in acquiring prospective reserves, developing reserves, marketing hydrocarbons, attracting and retaining quality personnel and raising additional capital, which could have a material adverse effect on its business.

If Bonanza Creek fails to retain its existing senior management or technical personnel or attract qualified new personnel, such failure could adversely affect its operations. The volatility in commodity prices and business performance may affect Bonanza Creek’s ability to retain senior management and the loss of these key employees may affect its business, financial condition and results of operations.

To a large extent, Bonanza Creek depends on the services of its senior management and technical personnel. The loss of the services of its senior management, technical personnel, or any of the vice presidents of Bonanza Creek, could have a material adverse effect on its operations or strategy. The volatility in commodity prices and Bonanza Creek’s business performance may affect its ability to incentivize and retain senior management or key employees. Competition for experienced senior management, technical and other professional personnel remains strong. If Bonanza Creek cannot retain its current personnel or attract additional experienced personnel, its ability to compete could be adversely affected. Also, the loss of experienced personnel could lead to a loss of technical expertise. Bonanza Creek does not maintain, nor does it plan to obtain, any insurance against the loss of any of these individuals.

Bonanza Creek’s derivative activities could result in financial losses or could reduce its income.

To achieve more predictable cash flows and to reduce Bonanza Creek’s exposure to adverse fluctuations in the prices of oil and natural gas, it may in the future enter into derivative arrangements for a portion of its oil and natural gas production, including collars and fixed-price swaps. Bonanza Creek has not in the past designated any of its derivative instruments as hedges for accounting purposes and has recorded all derivative instruments on its balance sheet at fair value. Changes in the fair value of Bonanza Creek’s derivative instruments are recognized in earnings. Accordingly, Bonanza Creek’s earnings may fluctuate significantly as a result of changes in the fair value of its derivative instruments.

Derivative arrangements also expose Bonanza Creek to the risk of financial loss in some circumstances, including when:

 

    production is less than the volume covered by the derivative instruments;

 

    the counterparty to the derivative instrument defaults on its contract obligations; or

 

    there is an increase in the differential between the underlying price in the derivative instrument and actual prices received.

In addition, these types of derivative arrangements may limit the benefit Bonanza Creek would receive from increases in the prices for oil and natural gas and may expose it to cash margin requirements.

Bonanza Creek is exposed to credit risks of its hedging counterparties, third parties participating in its wells and its customers.

Bonanza Creek’s principal exposures to credit risk are through receivables resulting from commodity derivatives instruments, which were zero at December 31, 2016, joint interest and other receivables of $4.5 million at September 30, 2017 and the sale of Bonanza Creek’s oil, natural gas and NGLs production of $25.4 million in receivables at September 30, 2017, which it markets to energy marketing companies, refineries and affiliates.

Joint interest receivables arise from billing entities who own partial interest in the wells Bonanza Creek operates. These entities participate in Bonanza Creek’s wells primarily based on their ownership in leases on which it wishes to drill. Bonanza Creek can do very little to choose who participates in its wells.

 

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Bonanza Creek is also subject to credit risk due to concentration of its oil, natural gas and NGLs receivables with significant customers. This concentration of customers may impact its overall credit risk since these entities may be similarly affected by changes in economic and other conditions. For the year ended December 31, 2016, sales to Silo Energy, LLC, Lion Oil Trading & Transport, Inc., and Duke Energy Field Services accounted for approximately 50%, 18% and 14%, respectively, of Bonanza Creek’s total sales. For the nine months ended September 30, 2017, sales to NGL Crude Logistics, LLC, Duke Energy Field Services, Lion Oil Trading & Transportation Inc., and Kaiser Francis Oil Company represented 37%, 18%, 16% and 10%, respectively, of Bonanza Creek’s total sales. Beginning in 2017 and continuing for seven years, Bonanza Creek has contracted to sell all of its crude oil produced for a one-rig program in the Wattenberg Field to NGL Crude Logistics, LLC.

Bonanza Creek is exposed to credit risk in the event of default of its counterparty, principally with respect to hedging agreements but also insurance contracts and bank lending commitments. Bonanza Creek does not require most of its customers to post collateral. The inability or failure of Bonanza Creek’s significant customers to meet their obligations to it or their insolvency or liquidation may adversely affect its financial results. Deterioration in the credit markets may impact the credit ratings of Bonanza Creek’s current and potential counterparties and affect their ability to fulfill their existing obligations to it and their willingness to enter into future transactions with Bonanza Creek.

Current or proposed financial legislation and rulemaking could have an adverse effect on Bonanza Creek’s ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with its business.

The Dodd-Frank Act establishes, among other provisions, federal oversight and regulation of the over-the-counter derivatives market and entities that participate in that market. The Dodd-Frank Act also establishes margin requirements and certain transaction clearing and trade execution requirements. The Dodd-Frank Act may require Bonanza Creek to comply with margin requirements in its derivative activities, although the application of those provisions to it is uncertain at this time. The financial reform legislation may also require the counterparties to Bonanza Creek’s derivative instruments to spin off some of their derivatives activities to separate entities, which may not be as creditworthy as the current counterparties.

The Dodd-Frank Act and any new regulations could significantly increase the cost of derivative contracts (including through requirements to post collateral, which could adversely affect Bonanza Creek’s available liquidity), materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks Bonanza Creek encounters, reduce its ability to monetize or restructure its existing derivative contracts and increase its exposure to less creditworthy counterparties. If Bonanza Creek reduces its use of derivative as a result of the Dodd-Frank Act and regulations, its results of operations may be more volatile and its cash flows may be less predictable, which could adversely affect its ability to plan for and fund capital expenditures.

Bonanza Creek may be involved in legal cases that may result in substantial liabilities.

Like many oil and gas companies, Bonanza Creek is from time to time involved in various legal and other cases, such as title, royalty or contractual disputes, regulatory compliance matters and personal injury or property damage matters, in the ordinary course of its business. Such legal cases are inherently uncertain and their results cannot be predicted. Regardless of the outcome, such cases could have an adverse impact on Bonanza Creek because of legal costs, diversion of management and other personnel and other factors. In addition, it is possible that a resolution of one or more such cases could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in Bonanza Creek’s business practices, which could materially and adversely affect its business, operating results and financial condition. Accruals for such liability, penalties or sanctions may be insufficient. Judgments and estimates to determine accruals or range of losses related to legal and other cases could change from one period to the next, and such changes could be material.

 

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Bonanza Creek is subject to federal, state, and local taxes, and may become subject to new taxes and certain federal income tax deductions currently available with respect to oil and gas exploration and development may be eliminated as a result of future legislation.

The federal, state and local governments in the areas in which Bonanza Creek operates impose taxes on the oil and natural gas products it sells, and, for many of its wells, sales and use taxes on significant portions of its drilling and operating costs. Many states have raised state taxes on energy sources or state taxes associated with the extraction of hydrocarbons and additional increases may occur. In addition, there has been a significant amount of discussion by legislators and presidential administrations concerning a variety of energy tax proposals.

There have been proposals for legislative changes that, if enacted into law, would eliminate certain key U.S. federal income tax incentives currently available to oil and natural gas exploration and production companies. Such changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and gas properties; (ii) the elimination of current deductions for intangible drilling and development costs; (iii) the elimination of the deduction for certain U.S. production activities; and (iv) an extension of the amortization period for certain geological and geophysical expenditures. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could become effective. Any such changes in U.S. federal income tax law could eliminate or defer certain tax deductions within the industry that are currently available with respect to oil and gas exploration and development, and any such change could negatively affect Bonanza Creek’s financial condition, results of operations and cash flow.

Changes to federal tax deductions, as well as any changes to or the imposition of new state or local taxes (including production, severance or similar taxes) could negatively affect Bonanza Creek’s financial condition and results of operations.

Bonanza Creek is subject to cyber security risks. A cyber incident could occur and result in information theft, data corruption, operational disruption or financial loss.

The oil and gas industry has become increasingly dependent on digital technologies to conduct certain exploration, development, production, processing and distribution activities. For example, Bonanza Creek depends on digital technologies to interpret seismic data, manage drilling rigs, production equipment and gathering and transportation systems, conduct reservoir modeling and reserves estimation and process and record financial and operating data. Pipelines, refineries, power stations and distribution points for both fuels and electricity are becoming more interconnected by computer systems. At the same time, cyber incidents, including deliberate attacks or unintentional events, have increased. Bonanza Creek’s technologies, systems, networks and those of its vendors, suppliers and other business partners may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of its business operations. In addition, weaknesses in the cyber security of Bonanza Creek’s vendors, suppliers, and other business partners could facilitate an attack on its technologies, systems and networks. In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period. Given the politically sensitive nature of hydraulic fracturing and the controversy generated by its opponents, Bonanza Creek’s technologies, systems and networks may be of particular interest to certain groups with political agendas, which may seek to launch cyber-attacks as a method of promoting their message. Bonanza Creek’s systems and insurance coverage for protecting against cyber security risks may not be sufficient.

Bonanza Creek depends on digital technology, including information systems and related infrastructure, as well as cloud applications and services, to process and record financial and operating data, communicate with its employees and business parties, analyze seismic and drilling information, estimate quantities of oil and gas reserves as well as other activities related to its business. Bonanza Creek’s business partners, including vendors, service providers, purchasers of its production and financial institutions, are also dependent on digital

 

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technology. The technologies needed to conduct Bonanza Creek’s oil and gas exploration and development activities make certain information the target of theft or misappropriation.

Although to date Bonanza Creek has not experienced any material losses relating to cyber-attacks, it may suffer such losses in the future.

 

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INFORMATION ABOUT THE PARTIES

SandRidge Energy, Inc.

SandRidge Energy, Inc. is an oil and natural gas company with a principal focus on exploration and production activities in the Mid-Continent and Rockies regions of the United States.

Shares of SandRidge common stock are traded on the NYSE under the symbol “SD.”

The principal executive offices of SandRidge are located at 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102 and its telephone number is (405) 429-5500. Additional information about SandRidge and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”

Brook Merger Sub, Inc.

Brook Merger Sub, Inc. is a wholly owned subsidiary of SandRidge. Merger Sub was formed by SandRidge solely in contemplation of the merger, has not conducted any business and has no assets, liabilities or other obligations of any nature other than as set forth in the merger agreement. Its principal executive offices are located at c/o SandRidge Energy, Inc., 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102 and its telephone number is (405) 429-5500.

Bonanza Creek Energy, Inc.

Bonanza Creek Energy, Inc. is an independent energy company engaged in the acquisition, exploration, development and production of onshore oil and associated liquids-rich natural gas in the United States, with assets primarily in the Wattenberg Field in Colorado and in the Dorcheat Macedonia Field in southern Arkansas.

Shares of Bonanza Creek common stock are traded on the NYSE under the symbol “BCEI.”

The principal executive offices of Bonanza Creek are located at 410 17th Street, Suite 1400, Denver, Colorado 80202 and its telephone number is (720) 440-6100. See the section entitled “Information About Bonanza Creek” for additional information about Bonanza Creek and its subsidiaries.

 

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SANDRIDGE SPECIAL MEETING

General

This joint proxy statement/prospectus is being provided to SandRidge stockholders as part of a solicitation of proxies by the SandRidge board for use at the SandRidge special meeting and at any adjournments or postponements of such special meeting. This joint proxy statement/prospectus provides SandRidge stockholders with important information about the SandRidge special meeting and should be read carefully in its entirety.

Date, Time and Place of the SandRidge Special Meeting

The SandRidge special meeting will be held on                , 2018 at            , at            a.m., local time.

Purposes of the SandRidge Special Meeting

The SandRidge special meeting is being held to consider and vote upon the proposal to approve the issuance of shares of SandRidge common stock to Bonanza Creek stockholders in connection with the merger (referred to previously in this joint proxy statement/prospectus as the share issuance proposal).

Recommendation of the SandRidge Board

The SandRidge board unanimously recommends that the SandRidge stockholders vote “FOR” the approval of the share issuance proposal.

The SandRidge board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the share issuance, are fair to, and in the best interests of, SandRidge and its stockholders, and (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the share issuance.

This joint proxy statement/prospectus contains important information regarding the foregoing proposal and factors that SandRidge stockholders should consider when deciding how to cast their votes. SandRidge stockholders are encouraged to read the entire document carefully, including the annexes to and documents incorporated by reference into this document, for more detailed information regarding the merger agreement and the transactions contemplated by the merger agreement, including the share issuance proposal.

Attendance at the SandRidge Special Meeting

Only SandRidge stockholders of record as of the close of business on the record date, beneficial owners as of the close of business on the record date, holders of valid proxies for the SandRidge special meeting and invited guests of SandRidge may attend the SandRidge special meeting.

All attendees must present a form of government-issued photo identification, such as a driver’s license or passport, in order to be admitted to the SandRidge special meeting. The additional items, if any, that attendees must bring depend on whether they are stockholders of record, beneficial owners or proxy holders and are set forth below.

 

    A SandRidge stockholder of record (a SandRidge stockholder who holds shares directly registered in such stockholder’s name with SandRidge’s transfer agent, American Stock Transfer & Trust Company, LLC, as of the record date) who wishes to attend the SandRidge special meeting in person should bring government-issued photo identification.

 

    A beneficial owner of SandRidge common stock who wishes to attend the SandRidge special meeting in person should bring:

 

    government-issued photo identification; and

 

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    proof of beneficial ownership as of the record date (e.g., a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker).

 

    A proxy holder who wishes to attend the SandRidge special meeting in person should bring:

 

    government-issued photo identification;

 

    the validly executed proxy naming such person as the proxy holder, signed by the SandRidge stockholder; and

 

    proof of the signing stockholder’s record ownership as of the record date.

No cameras, laptops, recording equipment or other similar electronic devices, signs, placards, briefcases, backpacks, large bags or packages will be permitted in the SandRidge special meeting. SandRidge reserves the right to deny admittance to any SandRidge stockholder who attempts to bring any such item into the SandRidge special meeting. Small purses are permissible, but they and any bags or packages permitted in the SandRidge special meeting room will be subject to inspection. The use of mobile phones or other communication devices, tablets and similar electronic devices during the SandRidge special meeting is prohibited, and such devices must be turned off and put away before entering the meeting room. All security procedures and instructions require strict adherence. By attending the SandRidge special meeting, SandRidge stockholders agree to abide by the agenda and procedures for the SandRidge special meeting, copies of which will be distributed to attendees at the SandRidge special meeting.

Record Date

The record date for the determination of stockholders entitled to notice of and to vote at the SandRidge special meeting is            . Only SandRidge stockholders who held shares of record at the close of business on            are entitled to vote at the SandRidge special meeting and any adjournment or postponement of the SandRidge special meeting, so long as such shares remain outstanding on the date of the SandRidge special meeting.

Outstanding Shares as of Record Date

As of the close of business on the record date, there were            shares of SandRidge common stock outstanding, held by            holders of record, and no shares of SandRidge preferred stock outstanding. Each share of SandRidge common stock entitles its holder of record to one vote at the SandRidge special meeting. SandRidge common stock is the only class of stock entitled to vote at the SandRidge special meeting, and holders of SandRidge common stock are entitled to vote on the share issuance proposal.

A complete list of registered SandRidge stockholders entitled to vote at the SandRidge special meeting will be available for inspection at the place of the SandRidge special meeting during the meeting.

Quorum

In order for business to be conducted at the SandRidge special meeting, a quorum must be present. A quorum requires the presence, in person or represented by proxy, of holders of a majority of the voting power of the outstanding shares of SandRidge stock entitled to vote at the SandRidge special meeting. For purposes of determining whether there is a quorum, all shares that are present, including abstentions, will count towards the quorum.

Vote Required

Approval of the share issuance proposal requires the affirmative vote of a majority of the shares of SandRidge common stock present in person or represented by proxy at the SandRidge special meeting and

 

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entitled to vote on the share issuance proposal, assuming a quorum is present. Any abstention by a SandRidge stockholder will have the same effect as a vote against the share issuance proposal. The failure of any SandRidge stockholder to submit a vote (e.g. by failing to submit a proxy or to appear in person) will not be counted in determining the votes cast in connection with this proposal and therefore will have no effect on the outcome of the share issuance proposal.

Because the share issuance proposal is non-routine, brokers, banks and other nominees do not have discretionary authority to vote on the share issuance proposal and will not be able to vote on the share issuance proposal absent instructions from the beneficial owner. The failure of a beneficial owner to provide voting instructions to its broker, bank or other nominee will have no effect on the share issuance proposal.

If shares are held in the name of a broker, bank or other nominee, the beneficial owner of such shares will receive separate instructions from his or her broker, bank or other nominee describing how to vote such shares.

A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. SandRidge does not expect any broker-non votes at the SandRidge special meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas the share issuance proposal to be presented at the SandRidge special meeting is considered non-routine. As a result, no broker will be permitted to vote shares at the SandRidge special meeting without receiving instructions from the beneficial owner of such shares.

How to Vote

SandRidge stockholders of record as of the close of business on the record date may have their shares voted by submitting a proxy or may vote in person at the SandRidge special meeting by following the instructions provided on the enclosed proxy card. SandRidge recommends that SandRidge stockholders entitled to vote submit a proxy even if they plan to attend the SandRidge special meeting.

SandRidge stockholders who hold their shares beneficially in “street name” and wish to submit a proxy must provide instructions to the broker, bank, trustee or other nominee that holds their shares of record as to how to vote their shares with respect to the share issuance proposal. SandRidge stockholders who hold their shares beneficially and wish to vote in person at the SandRidge special meeting must obtain proxies issued in their own names (known as a “legal proxy”).

SandRidge stockholders of record may submit a proxy in one of three ways or vote in person at the SandRidge special meeting:

 

    Internet: SandRidge stockholders may submit their proxy over the Internet at the web address shown on their proxy card. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m., Eastern Time, on                    , 2018. Stockholders will be given an opportunity to confirm that their voting instructions have been properly recorded. SandRidge stockholders who submit a proxy this way need not send in their proxy card.

 

    Telephone: SandRidge stockholders may submit their proxy by calling the toll-free telephone number shown on their proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m., Eastern Time, on                    , 2018. Easy-to-follow voice prompts will guide stockholders through the voting and allow them to confirm that their instructions have been properly recorded. SandRidge stockholders who submit a proxy this way need not send in their proxy card.

 

    Mail: SandRidge stockholders may submit their proxy by properly completing, signing, dating and mailing their proxy card in the postage-paid envelope (if mailed in the United States) included with this joint proxy statement/prospectus. SandRidge stockholders who submit a proxy this way should mail the proxy card early enough so that it is received before the date of the SandRidge special meeting.

 

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    In Person: SandRidge stockholders may vote in person at the SandRidge special meeting or by sending a representative with an acceptable proxy that has been signed and dated. Attendance at the SandRidge special meeting will not, however, in and of itself constitute a vote or a revocation of a prior proxy.

SandRidge stockholders are encouraged to submit a proxy promptly. Each valid proxy received in time will be voted at the SandRidge special meeting according to the choice specified, if any. Executed but uninstructed proxies (i.e., proxies that are properly signed, dated and returned but are not marked to tell the proxies how to vote) will be voted in accordance with the recommendations of the SandRidge board.

Proxies and Revocation

SandRidge stockholders of record may revoke their proxies at any time before their shares are voted at the SandRidge special meeting in any of the following ways:

 

    sending a written notice of revocation to SandRidge at 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102, Attention: Corporate Secretary, which must be received before their shares are voted at the SandRidge special meeting;

 

    properly submitting a new, later-dated proxy card, which must be received before their shares are voted at the SandRidge special meeting (in which case only the later-dated proxy is counted and the earlier proxy is revoked);

 

    submitting a proxy via the Internet or by telephone at a later date, which must be received by 11:59 p.m., Eastern Time, on                    , 2018 (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or

 

    attending the SandRidge special meeting and voting in person. Attendance at the SandRidge special meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.

SandRidge beneficial owners may change their voting instruction only by submitting new voting instructions to the brokers, banks or other nominees that hold their shares of record.

Inspector of Election

The SandRidge board has appointed            to act as the inspector of election at the SandRidge special meeting.

Solicitation of Proxies

SandRidge will pay for the proxy solicitation costs related to the SandRidge special meeting. In addition to sending and making available these materials, some of SandRidge’s directors, officers and other employees may solicit proxies by contacting SandRidge stockholders by telephone, by mail, by e-mail or in person. SandRidge stockholders may also be solicited by press releases issued by SandRidge and/or Bonanza Creek, postings on SandRidge’s or Bonanza Creek’s websites and advertisements in periodicals. None of SandRidge’s directors, officers or employees will receive any extra compensation for their solicitation services. SandRidge has also retained MacKenzie Partners, Inc. (“MacKenzie”) to assist in the solicitation of proxies for an estimated fee of approximately $            , plus reasonable out-of-pocket expenses. SandRidge will also reimburse brokers, banks and other nominees for their expenses in sending proxy solicitation materials to the beneficial owners of SandRidge common stock and obtaining their proxies.

Adjournments

The SandRidge special meeting may be adjourned by the chairman of the SandRidge special meeting, regardless of whether there is a quorum, without further notice other than by an announcement made at the

 

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SandRidge special meeting. In the case that a quorum is not present at the SandRidge special meeting, or in the case that a quorum is present at the SandRidge special meeting but there are not sufficient votes at the time of the SandRidge special meeting to adopt the share issuance proposal, then the chairman of the SandRidge special meeting has the power to adjourn the SandRidge special meeting.

If the adjournment is for more than 30 days or if after the adjournment a new record date is set for the adjourned meeting, a notice of the adjourned meeting must be given to each SandRidge stockholder of record entitled to vote at the SandRidge special meeting.

No Dissenters’ Rights

Under the DGCL, as well as the governing documents of SandRidge, the SandRidge stockholders are not entitled to dissenters’ rights in connection with the merger.

Other Matters

At this time, SandRidge knows of no other matters to be submitted at the SandRidge special meeting.

Householding of Special Meeting Materials

Unless SandRidge has received contrary instructions, SandRidge may send a single copy of this joint proxy statement/prospectus and notice to any household at which two or more stockholders reside if SandRidge believes the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce SandRidge’s expenses.

Questions and Additional Information

SandRidge stockholders may contact SandRidge’s proxy solicitor, MacKenzie Partners, Inc., with any questions about the proposals or how to vote or to request additional copies of any materials at:

 

 

LOGO

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

proxy@mackenziepartners.com

Stockholders May Call Toll-Free: (800) 322-2885

Banks & Brokers May Call Collect: (212) 929-5500

 

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BONANZA CREEK SPECIAL MEETING

General

This joint proxy statement/prospectus is being provided to Bonanza Creek stockholders as part of a solicitation of proxies by the Bonanza Creek board for use at the Bonanza Creek special meeting and at any adjournments or postponements of such special meeting. This joint proxy statement/prospectus provides Bonanza Creek stockholders with information about the Bonanza Creek special meeting and should be read carefully in its entirety.

Date, Time and Place of the Bonanza Creek Special Meeting

The Bonanza Creek special meeting will be held on                , 2018 at                , at                a.m., local time.

Purposes of the Bonanza Creek Special Meeting

The Bonanza Creek special meeting is being held to consider and vote upon the following proposals:

 

    Proposal 1: to adopt the merger agreement, a copy of which is attached as Annex A hereto, pursuant to which the merger will be consummated with Bonanza Creek surviving as a wholly owned subsidiary of SandRidge (referred to previously in this joint proxy statement/prospectus as the merger agreement proposal); and

 

    Proposal 2: to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger (referred to previously in this joint proxy statement/prospectus as the advisory compensation proposal).

Recommendation of the Bonanza Creek Board

The Bonanza Creek board unanimously recommends that the Bonanza Creek stockholders vote:

 

    Proposal 1: “FOR” the merger agreement proposal; and

 

    Proposal 2: “FOR” the advisory compensation proposal.

The Bonanza Creek board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Bonanza Creek’s stockholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, (iii) directed that the merger agreement be submitted to Bonanza Creek’s stockholders for adoption and (iv) recommended that the holders of Bonanza Creek common stock approve and adopt the merger agreement and the transactions contemplated thereby, including the merger.

This joint proxy statement/prospectus contains important information regarding these proposals and factors that Bonanza Creek stockholders should consider when deciding how to cast their votes. Bonanza Creek stockholders are encouraged to read the entire document carefully, including the annexes to and the documents incorporated by reference into this document, for more detailed information regarding the merger agreement, the merger and the other transactions contemplated by the merger agreement.

The Advisory Compensation Proposal and Interests of Directors

In considering the recommendations of the Bonanza Creek board, Bonanza Creek stockholders should be aware that some of Bonanza Creek’s directors and executive officers may have interests that are different from, or in addition to, the interests of Bonanza Creek stockholders more generally. For more information see the section titled “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger.”

 

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Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Act, requires Bonanza Creek to provide its stockholders with the opportunity to vote to approve, on an advisory, (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger, as disclosed in this joint proxy statement/prospectus, including the compensation table and the related narrative named executive officer compensation disclosures set forth in “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger.” This vote is commonly referred to as a “golden parachute say on pay” vote. Accordingly, Bonanza Creek’s stockholders are being provided with the opportunity to cast an advisory vote on those change of control payments.

Accordingly, Bonanza Creek is seeking approval of the following resolution at the Bonanza Creek special meeting:

“RESOLVED, that Bonanza Creek’s stockholders approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the Merger, as disclosed pursuant to Item 402(t) of Regulation S-K under the section entitled “The Merger—Interests of Certain Bonanza Creek Directors and Executive Officers in the Merger” of the Joint Proxy Statement/Prospectus (which disclosure includes the compensation table and related narrative named executive officer compensation disclosures required pursuant to Item 402(t) of Regulation S-K).”

Bonanza Creek stockholders should note that the advisory compensation proposal is merely an advisory vote which will not be binding on Bonanza Creek, SandRidge or their respective boards of directors. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the merger is consummated, the eligibility of the Bonanza Creek named executive officers for such payments and benefits will not be affected by the outcome of the advisory vote.

The proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger is a vote separate and apart from the vote on the proposal to adopt the merger agreement. Accordingly, a Bonanza Creek stockholder may vote to approve one proposal and not the other. The vote on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Bonanza Creek’s named executive officers in connection with the merger is not a condition to the completion of the merger.

Attendance at the Bonanza Creek Special Meeting

Only Bonanza Creek stockholders of record as of the close of business on the record date, beneficial owners as of the close of business on the record date, holders of valid proxies for the Bonanza Creek special meeting and invited guests of Bonanza Creek may attend the Bonanza Creek special meeting.

All attendees must present a form of government-issued photo identification, such as a driver’s license or passport, in order to be admitted to the Bonanza Creek special meeting. The additional items, if any, that attendees must bring depend on whether they are stockholders of record, beneficial owners or proxy holders and are set forth below.

 

    A Bonanza Creek stockholder of record (a Bonanza Creek stockholder who holds shares directly registered in such stockholder’s name with Bonanza Creek’s transfer agent, Broadridge Investor Communications Solutions, Inc.) who wishes to attend the Bonanza Creek special meeting in person should bring government-issued photo identification.

 

    A beneficial owner of Bonanza Creek common stock who wishes to attend the Bonanza Creek special meeting in person should bring:

 

    government-issued photo identification; and

 

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    proof of beneficial ownership as of the record date (e.g., a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker).

 

    A proxy holder who wishes to attend the Bonanza Creek special meeting in person should bring:

 

    government-issued photo identification;

 

    the validly executed proxy naming such person as the proxy holder, signed by the Bonanza Creek stockholder; and

 

    proof of the signing stockholder’s record ownership as of the record date.

No cameras, laptops, recording equipment or other similar electronic devices, signs, placards, briefcases, backpacks, large bags or packages will be permitted in the Bonanza Creek special meeting. Bonanza Creek reserves the right to deny admittance to any Bonanza Creek stockholder who attempts to bring any such item into the Bonanza Creek special meeting. Small purses are permissible, but they and any bags or packages permitted in the Bonanza Creek special meeting room will be subject to inspection. The use of mobile phones or other communication devices, tablets and similar electronic devices during the Bonanza Creek special meeting is prohibited, and such devices must be turned off and put away before entering the meeting room. All security procedures and instructions require strict adherence. By attending the Bonanza Creek special meeting, Bonanza Creek stockholders agree to abide by the agenda and procedures for the Bonanza Creek special meeting, copies of which will be distributed to attendees at the Bonanza Creek special meeting.

Record Date

The record date for the determination of stockholders entitled to notice of and to vote at the Bonanza Creek special meeting is            . Only Bonanza Creek stockholders who held shares of record at the close of business on            are entitled to vote at the Bonanza Creek special meeting and any adjournment or postponement of the Bonanza Creek special meeting, so long as such shares remain outstanding on the date of the Bonanza Creek special meeting.

Outstanding Shares as of Record Date

As of the close of business on the record date, there were            shares of Bonanza Creek common stock outstanding, held by            holders of record, and no shares of Bonanza Creek preferred stock outstanding. Each outstanding share of Bonanza Creek common stock entitles its holder of record to one vote on each matter considered at the Bonanza Creek special meeting. Bonanza Creek common stock is the only class of stock entitled to vote at the Bonanza Creek special meeting, and holders of Bonanza Creek common stock are entitled to vote on the merger agreement proposal and the advisory compensation proposal.

A complete list of registered Bonanza Creek stockholders entitled to vote at the Bonanza Creek special meeting will be available for inspection during ordinary business hours at the principal place of business of Bonanza Creek at 410 17th Street, Suite 1400, Denver, Colorado 80202 for a period of at least 10 days before the Bonanza Creek special meeting and at the place of the Bonanza Creek special meeting for the duration of the meeting.

Quorum

In order for business to be conducted at the Bonanza Creek special meeting, a quorum must be present. A quorum requires the presence, in person or represented by proxy, of holders of a majority of the shares of Bonanza Creek common stock entitled to vote at the Bonanza Creek special meeting. For purposes of determining whether there is a quorum, all shares that are present and entitled to vote will count towards the quorum, including abstentions.

 

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Vote Required

The votes required for each proposal are as follows:

 

    Proposal 1—the merger agreement proposal. The affirmative vote of the holders of a majority of the outstanding shares of Bonanza Creek common stock entitled to vote on the merger agreement proposal is required to adopt the merger agreement proposal. The failure of any Bonanza Creek stockholder to submit a vote (e.g., by not submitting a proxy or not voting in person) and any abstention by a Bonanza Creek stockholder will have the same effect as a vote “against” the merger agreement proposal.

 

    Proposal 2—the advisory compensation proposal. The affirmative vote of the holders of a majority of the shares of Bonanza Creek common stock present in person or represented by proxy at the Bonanza Creek special meeting and entitled to vote on the advisory compensation proposal, assuming a quorum is present, is required to approve the advisory compensation proposal. Abstentions will be considered shares present and entitled to vote and will have the same effect as votes “against” the advisory compensation proposal. While the Bonanza Creek board intends to consider the vote resulting from this proposal, the vote is advisory only and therefore not binding on Bonanza Creek or SandRidge, and, if the proposed merger with SandRidge is approved by Bonanza Creek stockholders and consummated, the compensation will be payable even if the advisory compensation proposal is not approved.

If shares are held in the name of a broker, bank or other nominee, the beneficial owner of such shares will receive separate instructions from his or her broker, bank or other nominee describing how to vote such shares.

A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Bonanza Creek does not expect any broker-non votes at the Bonanza Creek special meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas each of the proposals to be presented at the Bonanza Creek special meeting are considered non-routine. As a result, no broker will be permitted to vote shares at the Bonanza Creek special meeting without receiving instructions from the beneficial owner of such shares.

How to Vote

Bonanza Creek stockholders of record as of the close of business on the record date may have their shares voted by submitting a proxy or may vote in person at the Bonanza Creek special meeting by following the instructions provided on the enclosed proxy card. Bonanza Creek recommends that Bonanza Creek stockholders entitled to vote submit a proxy even if they plan to attend the Bonanza Creek special meeting.

Bonanza Creek stockholders who hold their shares beneficially in “street name” and wish to submit a proxy must provide instructions to the broker, bank, trustee or other nominee that holds their shares of record as to how to vote their shares with respect to Proposals 1 and 2. Bonanza Creek stockholders who hold their shares beneficially and wish to vote in person at the Bonanza Creek special meeting must obtain a “legal proxy.”

Bonanza Creek stockholders of record may submit a proxy in one of three ways or vote in person at the Bonanza Creek special meeting:

 

    Internet: Bonanza Creek stockholders may submit their proxy over the Internet at the web address shown on their proxy card. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m., Eastern Time, on                    , 2018. Stockholders will be given an opportunity to confirm that their voting instructions have been properly recorded. Bonanza Creek stockholders who submit a proxy this way need not send in their proxy card.

 

   

Telephone: Bonanza Creek stockholders may submit their proxy by calling the toll-free telephone number shown on their proxy card. Telephone voting is available 24 hours a day and will be accessible

 

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until 11:59 p.m., Eastern Time, on                    , 2018. Easy-to-follow voice prompts will guide stockholders through the voting and allow them to confirm that their instructions have been properly recorded. Bonanza Creek stockholders who submit a proxy this way need not send in their proxy card.

 

    Mail: Bonanza Creek stockholders may submit their proxy by properly completing, signing, dating and mailing their proxy card in the postage-paid envelope (if mailed in the United States) included with this joint proxy statement/prospectus. Bonanza Creek stockholders who submit a proxy this way should mail the proxy card early enough so that it is received before the date of the Bonanza Creek special meeting.

 

    In Person: Bonanza Creek stockholders may vote in person at the Bonanza Creek special meeting or by sending a representative with an acceptable proxy that has been signed and dated. Attendance at the Bonanza Creek special meeting will not, however, in and of itself constitute a vote or a revocation of a prior proxy.

Bonanza Creek stockholders are encouraged to submit a proxy promptly. Each valid proxy received in time will be voted at the Bonanza Creek special meeting according to the choice specified, if any. Executed but uninstructed proxies (i.e., proxies that are properly signed, dated and returned but are not marked to tell the proxies how to vote) will be voted in accordance with the recommendations of the Bonanza Creek board.

Proxies and Revocation

Bonanza Creek stockholders of record may revoke their proxies at any time before their shares are voted at the Bonanza Creek special meeting in any of the following ways:

 

    sending a written notice of revocation to Bonanza Creek at 410 17th Street, Suite 1400, Denver, Colorado 80202, Attention: Corporate Secretary, which must be received before their shares are voted at the Bonanza Creek special meeting;

 

    properly submitting a new, later-dated proxy card, which must be received before their shares are voted at the Bonanza Creek special meeting (in which case only the later-dated proxy is counted and the earlier proxy is revoked);

 

    submitting a proxy via the Internet or by telephone at a later date, which must be received by 11:59 p.m., Eastern Time, on                    (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or

 

    attending the Bonanza Creek special meeting and voting in person. Attendance at the Bonanza Creek special meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.

Bonanza Creek beneficial owners may change their voting instruction by submitting new voting instructions to the brokers, banks or other nominees that hold their shares of record.

Inspector of Election

The Bonanza Creek board has appointed            to act as the inspector of election at the Bonanza Creek special meeting.

Solicitation of Proxies

Bonanza Creek will pay for the proxy solicitation costs related to the Bonanza Creek special meeting. In addition to sending and making available these materials, some of Bonanza Creek’s directors, officers and other employees may solicit proxies by contacting Bonanza Creek stockholders by telephone, by mail, by e-mail or in person. Bonanza Creek stockholders may also be solicited by press releases issued by Bonanza Creek and/or SandRidge, postings on Bonanza Creek’s or SandRidge’s websites and advertisements in periodicals. None of

 

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Bonanza Creek’s directors, officers or employees will receive any extra compensation for their solicitation services. Bonanza Creek has also retained Innisfree M&A Incorporated (“Innisfree”) to assist in the solicitation of proxies for a fee expected not to exceed $20,000, plus reasonable out-of-pocket expenses. Bonanza Creek will also reimburse brokers, banks and other nominees for their expenses in sending proxy solicitation materials to the beneficial owners of Bonanza Creek common stock and obtaining their proxies.

Adjournments

The Bonanza Creek special meeting may be adjourned by the chairman of the Bonanza Creek special meeting, regardless of whether there is a quorum, without further notice other than by an announcement made at the Bonanza Creek special meeting. In the case that a quorum is not present at the Bonanza Creek special meeting, or in the case that a quorum is present at the Bonanza Creek special meeting but there are not sufficient votes at the time of the Bonanza Creek special meeting to adopt the merger agreement, then the chairman of the Bonanza Creek special meeting has the power to adjourn the Bonanza Creek special meeting.

If the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting must be given to each Bonanza Creek stockholder of record entitled to vote at the Bonanza Creek special meeting.

Appraisal Rights

Bonanza Creek stockholders are entitled to appraisal rights under Section 262 of the DGCL, provided they satisfy the special criteria and conditions set forth in Section 262 of the DGCL. Bonanza Creek common stock held by stockholders that do not vote for approval of the merger and make a demand for appraisal in accordance with Delaware law will not be converted into the right to receive the merger consideration, but will be converted into the right to receive from the combined company consideration determined in accordance with Delaware law. For additional information, see the section entitled “The Merger—Appraisal Rights and Dissenters’ Rights.”

Other Matters

At this time, Bonanza Creek knows of no other matters to be submitted at the Bonanza Creek special meeting.

Householding of Special Meeting Materials

Unless Bonanza Creek has received contrary instructions, Bonanza Creek may send a single copy of this joint proxy statement/prospectus and notice to any household at which two or more stockholders reside if Bonanza Creek believes the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce Bonanza Creek’s expenses.

 

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Questions and Additional Information

Bonanza Creek stockholders may contact Bonanza Creek’s proxy solicitor, Innisfree M&A Incorporated, with any questions about the proposals or how to vote or to request additional copies of any materials at:

 

 

LOGO

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders May Call Toll-Free: (877) 750-0637

Banks & Brokers May Call Collect: (212) 750-5833

 

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THE MERGER

This section of this joint proxy statement/prospectus describes the material aspects of the proposed merger. This section may not contain all of the information that is important to you. You should carefully read this entire joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus, including the full text of the merger agreement, a copy of which is attached to this joint proxy statement/prospectus as Annex A, for a more complete understanding of the proposed merger. In addition, important business and financial information about each of SandRidge and Bonanza Creek is included in or incorporated by reference into this joint proxy statement/prospectus and is included in the annexes hereto. See the section entitled “Where You Can Find More Information.”

Effects of the Merger

Upon satisfaction or waiver of the conditions to closing, on the closing date of the merger, Merger Sub, a wholly owned subsidiary of SandRidge formed for the purpose of effecting the merger, will merge with and into Bonanza Creek. Bonanza Creek will be the surviving corporation in the merger. At the effective time, each share of Bonanza Creek common stock issued and outstanding immediately prior to the effective time (other than excluded shares) will be converted into the right to receive (i) $19.20 in cash, without interest and subject to any required withholding taxes, and (ii) a number of shares of SandRidge common stock, equal to the quotient (referred to previously in this joint proxy statement/prospectus as the exchange ratio) determined by dividing (A) $16.80 by (B) the volume-weighted average price per share of SandRidge common stock for the 20 consecutive trading days ending on the third-to-last trading day prior to the closing date of the merger (referred to previously in this joint proxy statement/prospectus as the SandRidge average stock price); provided, however, that (x) if the SandRidge average stock price is an amount greater than $21.38, then the exchange ratio will be 0.7858, and (y) if the SandRidge average stock price is an amount less than $17.50, then the exchange ratio will be 0.9600 (such aggregate amount of cash and number of shares of SandRidge common stock is referred to previously in this joint proxy statement/prospectus as the merger consideration). If the aggregate number of shares of SandRidge common stock that a Bonanza Creek stockholder is entitled to receive as part of the merger consideration includes a fraction of a share of SandRidge common stock, such Bonanza Creek stockholder will receive cash in lieu of that fractional share.

In addition, all Bonanza Creek warrants will be automatically exercised in accordance with the terms of the Bonanza Creek warrant agreement.

Furthermore, the Bonanza Creek board will adopt resolutions to (i) adjust the terms of outstanding Bonanza Creek stock options to provide that, at the effective time, such outstanding Bonanza Creek stock options will be converted into options to acquire shares of SandRidge common stock, (ii) adjust the terms of outstanding Bonanza Creek RSUs (other than Director RSUs) to provide that, at the effective time, such outstanding Bonanza Creek RSUs will be converted into restricted stock unit awards with respect to shares of SandRidge common stock and (iii) adjust the terms of outstanding Director RSUs to provide that such Director RSUs will vest in full and be canceled and converted into the right to receive the specified merger consideration, subject to certain limitations, in each case, as described in the section entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation.” Additionally, the Bonanza Creek board will adopt resolutions to adjust the terms of outstanding Bonanza Creek stock options and Bonanza Creek RSUs (other than Director RSUs) to provide for accelerated vesting in certain circumstances, as described in the section entitled “The Merger—Treatment of Bonanza Creek Long-Term Incentive Compensation.”

Background of the Merger

SandRidge’s mission is to create resource value from its oil and natural gas development and production activities in the Mid-Continent and Rockies regions of the United States. In pursuit of its mission, SandRidge focuses on key strategies, including focusing on its complementary operating areas, preserving capital (in part by

 

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focusing drilling efforts on locations that make the most effective use of existing infrastructure), focusing on cost efficiencies, focusing on capital allocation, mitigating commodity price risk by entering into derivative contracts, maintaining flexibility (including by maintaining multi-year inventories of both oil and natural gas drilling locations) and pursuing opportunistic acquisitions. SandRidge’s acquisition of Bonanza Creek is a direct continuation of this strategy.

SandRidge’s existing assets in the Mid-Continent and Niobrara are in different stages of the development cycle. The combination of mature Mississippi Lime assets and emerging North Park Niobrara and NW STACK assets, in the absence of significant development-ready inventory, results in a higher risk profile. In part to improve SandRidge’s risk profile, the SandRidge board and management believed it was prudent and in the best interests of shareholders to evaluate strategic transactions that provided PDP reserves and lower risk, development-ready, high return inventory in an area nearby SandRidge’s current operations which strategically fit with SandRidge’s geography and core competencies. SandRidge’s mature Mississippi Lime assets in the Mid-Continent generate significant production and material free cash flow, which help fund investment and value creation in its emerging assets. However, they are declining assets that do not offer meaningful opportunities for additional development and oil and cash flow growth. SandRidge also owns promising development projects in the North Park Basin and within the NW STACK plays, but both require additional time and capital prior to engaging in development drilling and investment. In particular, the SandRidge board and management recognized that the NW STACK required additional time to delineate and that the North Park Basin required significant investment over the next several years, including the construction of midstream and pipeline takeaway infrastructure, before full field development can be realized.

Further, given the proximity and similarity of the Niobrara in the DJ Basin to SandRidge’s North Park asset, over prior months SandRidge had been evaluating potential acquisition opportunities in the DJ Basin complementary to its Niobrara North Park asset, but with greater PDP reserves and lower risk, development-ready, high return inventory. Thus, as part of a basin wide study, SandRidge management had prepared proprietary geologic mapping models across the DJ Basin and had identified Bonanza Creek to the SandRidge board as a potential acquisition target that provided an optimal mix of existing production and additional development potential.

The SandRidge board and management recognized that Bonanza Creek could provide meaningful PDP reserves and lower risk, development-ready, high return inventory in an area proximal to SandRidge’s existing operations and which fit SandRidge’s core competencies. SandRidge’s management and the SandRidge board believed the potential acquisition could fill the gap between SandRidge’s mature producing Mississippi Lime assets and its emerging North Park Basin and NW STACK plays. Additionally, the SandRidge board and management team recognized that Bonanza Creek’s assets were generally more known, lower risk and desirable to investors versus SandRidge’s existing assets and could raise the pro forma value of SandRidge, accelerating SandRidge’s transition away from the Mississippi Lime play.

Like SandRidge, the Bonanza Creek board and management regularly review Bonanza Creek’s performance, future growth prospects and overall strategic direction and consider potential opportunities to strengthen its business and enhance shareholder value. These reviews have included consideration of investments, diversification into new basins, purchases and sales of assets and businesses, joint ventures and potential strategic business combinations and other transactions with third parties that would further its strategic objectives and ability to create shareholder value.

On June 11, 2017, Richard J. Carty resigned as a member of the Bonanza Creek board and left his role as President and Chief Executive Officer of Bonanza Creek. In connection with the departure of Mr. Carty, the Bonanza Creek board appointed R. Seth Bullock, a managing director of Alvarez & Marsal, LLC, as interim Chief Executive Officer and initiated a search with a nationally recognized search firm for a new Chief Executive Officer. Concurrently with such search, the Bonanza Creek board authorized the exploration of the potential benefits of a strategic business combination involving Bonanza Creek relative to the standalone plan or other strategic alternatives. At the time, Bonanza Creek was trading at an implied equity value of approximately $711 million.

 

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After presentations from four investment banks in mid-to-late June 2017, the Bonanza Creek board selected Evercore Group L.L.C. (“Evercore”) as its financial advisor based on the quality of Evercore’s presentation, its strong track record with respect to recent merger and acquisition (“M&A”) and acquisition and divestiture (“A&D”) transactions involving exploration and production (“E&P”) companies, its knowledge of the oil and gas industry and its demonstrated expertise in advising on strategic transactions. On July 11, 2017, the Bonanza Creek board, representatives of Bonanza Creek management, and representatives of Evercore participated in an initial call regarding the process to explore a potential sale or business combination. Among other things, Evercore over the next several weeks discussed outreach to potential counterparties with representatives of the Bonanza Creek board and Bonanza Creek management and began to contact counterparties to discuss initial indications of interest for a potential strategic combination with Bonanza Creek. The Bonanza Creek board also asked Bonanza Creek management to prepare a standalone business plan and valuation of Bonanza Creek.

In July 2017, the Bonanza Creek board contacted Kirkland & Ellis LLP (“Kirkland”) to assist Bonanza Creek in considering a potential sale or business combination. Among other things, Kirkland over the next several weeks worked with representatives of the Bonanza Creek board to discuss options for a strategic business combination.

On August 8, 2017, Bonanza Creek publicly announced that the Bonanza Creek board had engaged an executive search firm to identify and review Chief Executive Officer candidates and that it was simultaneously assessing strategic opportunities.

At the direction of the Bonanza Creek board, between July 15, 2017 and August 18, 2017, Evercore reached out to 40 potential counterparties, including both oil and gas companies and private equity firms to obtain a general level of interest in a strategic transaction with Bonanza Creek. Bonanza Creek entered into confidentiality agreements that contained standard standstill provisions with 20 potential counterparties and subsequently provided them with limited confidential information via an electronic data room summarizing certain of Bonanza Creek’s leases, proved developed producing reserves and midstream operations. Evercore requested that the counterparties provide preliminary indications of interest by August 25, 2017.

Given SandRidge’s prior basin level preparation and identification of Bonanza Creek as a potential acquisition target, upon learning of the Bonanza Creek process with Evercore, SandRidge became very interested in learning more.

On August 17, 2017, a representative of SandRidge called a representative of Evercore to express interest in a potential strategic combination with Bonanza Creek. Following the conversation, the representative of Evercore spoke with a representative of the Bonanza Creek board, who directed Evercore to allow SandRidge to execute a confidentiality agreement, if desired. SandRidge management decided to forgo signing a confidentiality agreement and submit a proposal based on publicly available information.

On August 19, 2017, SandRidge contacted Morgan Stanley to assist SandRidge in evaluating a potential transaction with Bonanza Creek.

On August 25, 2017, continuing prior SandRidge board discussions regarding potential transactions, including potential transactions in the DJ Basin, which included the identification of Bonanza Creek as a potential acquisition target and the belief that that Bonanza Creek could provide meaningful PDP reserves, immediate incremental production and lower risk, development-ready, high return inventory in an area nearby SandRidge’s existing operations, SandRidge management presented Bonanza Creek with an indicative, non-binding indication of interest to acquire Bonanza Creek, based on publicly available data, research analyst statements and consensus estimates and forecasts with respect to the anticipated future performance of Bonanza Creek. The indication of interest to acquire Bonanza Creek consisted of 50% cash, 50% stock consideration at a 20% premium to the Bonanza Creek Common Stock share price as of August 18, 2017. Subsequently, SandRidge management also sent the analysis and indicative proposal to the SandRidge board in connection with an update on M&A opportunities under evaluation.

 

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On August 27-28, 2017, Evercore circulated to the Bonanza Creek board and Kirkland indications of interest received from 11 potential counterparties, including SandRidge. The indications of interest included public all-stock and part-stock, part-cash mergers, business combinations in which Bonanza Creek would acquire a private company, and an all-cash take private transaction.

On August 28, 2017 and again on August 31, 2017, James D. Bennett, the Chief Executive Officer of SandRidge, met with an independent director of the Bonanza Creek board to discuss, among other things, mutual interests and backgrounds, and briefly, a potential merger of the two companies.

On August 31, 2017, the Bonanza Creek board held a meeting to discuss the indications of interest received from the 11 potential counterparties. Representatives of Evercore reviewed the indications of interest that had been received by the Bonanza Creek board and presented a review of Bonanza Creek’s standalone business plan and implied valuation analysis and Evercore’s initial analysis and comparison of the indications of interest. The Bonanza Creek board confirmed that it was comfortable with the standalone business plan and projections referenced therein. Representatives of Kirkland reviewed the Bonanza Creek board’s duties with respect to potential strategic transaction alternatives, including a sale transaction or business combination. After a thorough discussion, the Bonanza Creek board determined to seek revised proposals from six potential counterparties, including SandRidge, a private entity that had proposed an all-stock business combination with Bonanza Creek in its initial proposal (“Company A”), a public company that had offered all stock consideration in its initial proposal (“Company B”), a private entity that had proposed an all-cash take private transaction with Bonanza Creek in its initial proposal (“Company C”), a private entity that proposed an all-stock business combination with Bonanza Creek in its initial proposal (“Company D”), and a private entity that proposed part-stock, part-cash business combination with Bonanza Creek in its initial proposal (“Company E”). In addition, the Bonanza Creek board requested that Evercore provide additional comparative analyses of the proposals from the six potential counterparties.

After the August 31, 2017 Bonanza Creek board meeting, Evercore reached out to the six potential counterparties and requested such parties to submit revised proposals by October 17, 2017. Evercore also provided each counterparty a comprehensive reverse due diligence request list and requested that each potential counterparty populate an electronic data room with relevant information about such counterparty. In addition, Evercore requested that each potential counterparty other than Company C prepare management presentations that would enable the Bonanza Creek board and Bonanza Creek management to assess the operation and technical expertise of such counterparty and its management team. The Bonanza Creek board determined that Company C did not need to prepare a management presentation and Bonanza Creek did not need to engage in reverse due diligence of Company C because Company C’s proposal was for all-cash consideration and involved a transaction in which the Bonanza Creek stockholders would not have a continuing interest in the combined company.

Following the August 31, 2017 Bonanza Creek board meeting and continuing through October 20, 2017, each potential counterparty engaged in diligence of Bonanza Creek, and Bonanza Creek management and representatives of Kirkland and of Evercore engaged in reciprocal due diligence on each potential counterparty (other than Company C). Evercore engaged with each potential counterparty on a regular basis to prompt each counterparty to submit a competitive revised proposal. In addition, during such time period, the Bonanza Creek board continued its search for a new Chief Executive Officer and instructed its search firm to interview and assess the strengths of the Chief Executive Officer of each counterparty (other than Company C).

On September 6, 2017, at the direction of the Bonanza Creek board, Evercore provided to the Bonanza Creek board updated comparative analyses of the proposals from the potential counterparties that Bonanza Creek had requested to provide revised proposals. These analyses were based on preliminary information that had been provided by the potential counterparties at that time, which was prior to undertaking Bonanza Creek’s reverse diligence effort.

 

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On September 11, 2017, each of Company B and Company E executed separate amendments to their existing confidentiality agreements to allow for mutual exchange of information between Bonanza Creek and such party. Also on September 11, 2017, Bonanza Creek entered into a confidentiality agreement with SandRidge that contained a standard standstill provision. On September 12, 2017, Company A and Company D executed amendments to the existing confidentiality agreements to allow for mutual exchange of information. Upon execution of the amendments (or the initial confidentiality agreement in the case of SandRidge), counterparties were granted access to a separate electronic dataroom.

On September 18, 2017, SandRidge contacted Vinson & Elkins L.L.P. (“V&E”) to assist SandRidge in considering a potential merger with Bonanza Creek.

On September 18, 2017, Bonanza Creek management and Evercore met telephonically with SandRidge management and representatives of Morgan Stanley to provide a presentation regarding Bonanza Creek’s assets and operations.

On September 21, 2017, the SandRidge board held a regularly scheduled quarterly board meeting at which management provided an acquisition strategy update. Previously, SandRidge management had presented at regularly scheduled quarterly board meetings its process for evaluating and prioritizing acquisition opportunities based on asset desirability. SandRidge previously screened over 150 potential transactions, including potential public company, private company and asset-based transactions, and evaluated in detail numerous potential targets in the STACK, SCOOP and other areas. As part of the acquisition update, Mr. J. Bennett summarized existing M&A opportunities under evaluation, and the SandRidge board and SandRidge’s management discussed details respecting the potential merger with Bonanza Creek, which SandRidge was actively evaluating and to which SandRidge previously presented an indicative, non-binding indication of interest. SandRidge’s management responded to questions from the SandRidge board regarding the process for pursuing such opportunities, including a potential merger with Bonanza Creek, and the Board’s involvement and fiduciary duties in connection therewith.

On September 22, 2017, Mr. J. Bennett met with a representative of the Bonanza Creek board over lunch, during which Mr. J. Bennett discussed general management philosophy and the exploration and production industry generally.

On September 28, 2017, representatives of the Bonanza Creek board, Bonanza Creek management, Evercore and Kirkland held management presentations with Company B and Company E.

On September 29, 2017, these same Bonanza Creek representatives held a management presentation with SandRidge. During such management presentations, representatives of SandRidge, Company B and Company E provided background on their respective management teams, assets and operations and their view of a combined company.

On October 3, 2017, Evercore delivered a draft merger agreement prepared by Kirkland to each potential counterparty. Such merger agreement was based on the same form, but had been tailored to the potential transaction structure proposed by each relevant counterparty.

On October 3, 2017, representatives of the Bonanza Creek board, Bonanza Creek management, Evercore and Kirkland held a management presentation with Company A. On October 4, 2017, these same Bonanza Creek representatives held a management presentation with Company D. During such management presentations, representatives of Company A and Company D provided background on their respective management teams, assets and operations and their view of a combined company.

On October 6, 2017, SandRidge management and technical staff held a call with Evercore to discuss SandRidge’s technical diligence of Bonanza Creek. SandRidge presented Evercore with a 92-page technical

 

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presentation that showed that SandRidge had mapped and evaluated the Niobrara A, B and C, as well as the Codell formation section by section using hundreds of control points. SandRidge showed that it had divided the Bonanza Creek Niobrara formation into eight distinct type curve areas, as well as evaluated the Codell formation and developed a view of risked locations based on geology, offset well performance and density, original oil-in-place, and existing well recovery to date.

On October 12, 2017, representatives of Kirkland held legal diligence calls with legal representatives of Company A, Company B and Company E. On October 16, 2017, representatives of Kirkland held a legal diligence call with legal representatives of SandRidge. Company C’s cash offer did not require a legal diligence call, and Company D did not respond to a request for a legal diligence call.

On October 13, 2017, the SandRidge board held a meeting by telephone to discuss the potential transaction with Bonanza Creek. Members of SandRidge management highlighted certain key takeaways of the potential transaction, including (i) the strategic geographic, operational and economic benefits of the combination, (ii) relative trading multiples and share price performance, (iii) illustrative combined company market capitalization, liquidity and other financial measures, and (iv) complementary focus areas and business strategies. SandRidge management discussed key transaction benefits, including a greater percentage of oil reserves and increased oil production, an improved risk and financial profile, additional development opportunities close to existing infrastructure, continued low leverage and strong liquidity position, the potential for attracting investors with increased size and improved scale, and improved operational, technical and financial efficiencies and synergies. Management also discussed the potential risks of the transaction, including risks associated with valuation, pro forma leverage and liquidity, and market perception. Management also detailed for the SandRidge board the due diligence process and summarized details regarding Bonanza Creek’s acreage position and expirations, other operators and activity in the DJ Basin and midstream considerations. Management further provided the SandRidge board with a preliminary Bonanza Creek standalone financial forecast and preliminary net asset value sensitivity analysis. The SandRidge board asked numerous questions and requested that SandRidge management work with Morgan Stanley on a combination analysis to be presented at the next SandRidge board meeting.

Also on October 13, 2017, after the telephonic meeting of the SandRidge board, members of the SandRidge board and management held a telephonic meeting to discuss the technical analysis supporting the valuation of Bonanza Creek’s assets.

On October 16, 2017, Mr. J. Bennett had a telephone conversation with a representative of the Bonanza Creek board to advise that SandRidge was actively working to resolve additional diligence matters and address questions from the SandRidge board with the intention of presenting a revised transaction proposal to the SandRidge board later in the week.

On October 17, 2017, the SandRidge board held a telephonic meeting to discuss the potential transaction with Bonanza Creek. SandRidge management and representatives of Morgan Stanley reviewed with the SandRidge board an overview of Bonanza Creek as well as certain preliminary financial and strategic considerations relating to the potential transaction. Representatives of V&E reviewed with the SandRidge board certain legal matters including the terms of the draft merger agreement. The SandRidge board requested management, with the assistance of Morgan Stanley and V&E, to further present its analysis respecting the proposed acquisition of Bonanza Creek at a subsequent meeting.

On October 17, 2017, the Bonanza Creek board received revised proposals and markups of, or issues lists regarding, the draft merger agreement from Company A and Company B. Company A’s offer proposed Bonanza Creek stockholders would retain 50% of a combined company in an “up-C” transaction structure, which is a two-tiered ownership structure in which the counterparty’s existing equityholders would own an interest in Bonanza Creek’s operating subsidiary that was exchangeable, under certain circumstances, into Bonanza Creek Common Stock, which would remain publicly traded. Company A’s offer also proposed a corporate headquarters

 

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in Denver, Colorado and that a representative of Company A would serve as Chief Executive Officer of the combined company. Company B proposed an all-stock merger with an exchange ratio that represented a downward adjustment to the exchange ratio (implied or otherwise stated) of approximately 23% from Company B’s initial indication of interest, based on the number of shares of Company B common stock that were offered as merger consideration. On October 17, 2017, the Bonanza Creek board also received an issues list, but not a revised proposal, from Company D that also proposed an “up-C” structure for the transaction. Company C verbally indicated that it did not plan to send a revised proposal because it would not increase the offer Company C made in its initial indication of interest, meaning that such offer would represent a discount to Bonanza Creek’s then-current share price.

On October 19, 2017, the SandRidge board held a telephonic meeting to continue its evaluation of the potential transaction with Bonanza Creek. Representatives of Morgan Stanley and SandRidge management discussed certain preliminary financial analyses. Representatives of Morgan Stanley and SandRidge management discussed certain financing alternatives available to the pro forma combined company following closing. Representatives of V&E summarized the terms of the proposed draft merger agreement and SandRidge’s proposed changes thereto. Management discussed a proposed revised indication of interest. Following this discussion, the SandRidge board authorized representatives of management, with the assistance of Morgan Stanley and V&E, to proceed with the transaction negotiations and to submit a revised indication of interest with aggregate consideration of no greater than $725 million, composed of no greater than 55% cash (on the basis of $725 million total consideration) and the remainder in shares of SandRidge common stock.

Following the SandRidge board meeting, SandRidge delivered a revised non-binding proposal and markup of the draft merger agreement to Bonanza Creek. SandRidge’s October 19, 2017 proposal was for $34.15 per share of Bonanza Creek Common Stock, approximately 55% of which was payable in cash. SandRidge’s revised proposal represented aggregate consideration of $712 million based on information SandRidge had as of that day, an increase of 16% from SandRidge’s initial indication of interest (based on the Bonanza Creek share price as of August 18, 2017), and a premium to Bonanza Creek’s then-current stock price of approximately 6%. Under SandRidge’s proposal of October 19, 2017, Bonanza Creek stockholders would have the option to receive all cash, all stock or a combination of the two, subject to an aggregate cap on the total cash consideration of $398 million and an aggregate cap of 16.43 million SandRidge shares issued as consideration. SandRidge’s revised proposal represented an increase in the percentage of consideration payable in cash from SandRidge’s initial indication of interest. SandRidge’s proposal was subject to further due diligence, board approval and negotiation of definitive documents.

On October 20, 2017, Company D delivered a revised proposal to the Bonanza Creek board for a business combination in which Bonanza Creek’s stockholders would own 60% of the combined company and a summary issues list for the merger transaction to the Bonanza Creek board.

In the morning of October 23, 2017, a representative of Bonanza Creek management delivered an assessment of Bonanza Creek’s reverse due diligence to the Bonanza Creek board. In addition, later on October 23, 2017, Company E delivered a revised proposal, a term sheet describing the potential transaction, and an outline of structuring steps. Company E proposed a multi-step merger transaction, the result of which was that Bonanza Creek would survive and the Bonanza Creek stockholders would own approximately 39% of the combined entity. Company E also revised its proposal to eliminate the cash component of the consideration and instead submitted an all-stock proposal.

On October 24, 2017, the Bonanza Creek board held a meeting in New York to discuss, among other topics, the revised proposals that had been received. Representatives of Kirkland and of Evercore attended the meeting. Representatives of Kirkland reviewed the directors’ duties in the context of a potential strategic transaction and reviewed a summary of the markups and issues lists provided by the various potential counterparties. Evercore then presented an analysis of Bonanza Creek’s standalone business plan and separate analyses of the strategic proposals and potential business combinations with the counterparties. After a robust discussion, and based on a

 

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thorough analysis of the potential benefits of each transaction, including the consideration payable in the relevant potential strategic transaction and potential long-term value that could be realized by a combined company based on each counterparty’s management, assets, and operations, the Bonanza Creek board determined to continue discussions with SandRidge and Company A and to suspend discussions regarding a strategic transaction with Company B, Company D, and Company E unless such parties increased their revised proposals. Since Company C had not submitted a revised proposal, the Bonanza Creek board did not continue to pursue a transaction with Company C. Over the next few days, Evercore reached out to each potential counterparty and relayed the Bonanza Creek board’s message to each counterparty.

On October 25, 2017, representatives of Evercore and Kirkland reached out to their counterparts at Morgan Stanley and V&E to advise them that Bonanza Creek was willing to continue discussions with SandRidge and was also in discussions with another potential counterparty, as well as Bonanza Creek’s expectations regarding the timing of the potential transaction.

On October 26, 2017, representatives of SandRidge, Bonanza Creek, Kirkland and V&E participated in a legal organizational call that focused on reciprocal title and environmental diligence to be conducted by the parties. Bonanza Creek management and Company A management also began conducting reciprocal title and environmental diligence on each other’s assets. Over the next few weeks, the parties requested and reviewed additional legal diligence materials from each other.

On October 27, 2017, representatives of SandRidge, Bonanza Creek, Evercore and Morgan Stanley participated in a due diligence call that primarily focused on production, and financial results and projections. This call was followed by a call focused on environmental, health and safety matters.

Later in the afternoon of October 27, 2017, representatives of Kirkland and of V&E met in person to discuss SandRidge’s markup of the draft merger agreement. Kirkland discussed the material changes with the Bonanza Creek board.

On October 29, 2017, legal counsel to Company A delivered a draft contribution agreement to Kirkland that implemented the “up-C” structure referenced in Company A’s revised proposal.

On October 29, 2017, SandRidge management provided a update to the SandRidge board regarding the potential transaction, including regarding the status of the Bonanza board’s evaluation process and the extensive reciprocal due diligence which was ongoing.

Also on October 30, 2017, a representative of Evercore reached out to the respective financial advisors for SandRidge and Company A to inform them that the Bonanza Creek board had determined to continue discussions toward a potential transaction and that the Bonanza Creek board had scheduled a meeting for November 3, 2017 to select a potential counterparty to finalize a transaction with. During each of these two conversations, the representative of Evercore recommended that each potential counterparty improve the economic terms of its current proposal. Furthermore, during the conversation between the representatives of Evercore and Company A, the Evercore representative suggested that it would be helpful if Company A’s proposal could be modified to add a cash component, therefore enabling Bonanza Creek’s stockholders to monetize a portion of their interest in Bonanza Creek.

On October 30, 2017, representatives of the Bonanza Creek board, Evercore, and certain equityholders of Company A held a call to discuss possible methods for adding a cash component to Company A’s proposal. The Company A equityholders suggested that they might be willing to consider adding a cash tender offer following the closing of the proposed transaction.

On October 30, 2017, representatives of SandRidge met with the Bonanza Creek board and management to respond to questions regarding SandRidge operations and assets.

 

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On October 31, 2017, representatives of Kirkland and of counsel to Company A met in person to discuss Company A’s markup of the draft contribution agreement. Kirkland discussed the material changes with the Bonanza Creek board.

On October 31, 2017, Kirkland delivered a revised draft of the merger agreement to V&E.

Also on October 31, 2017, Company A delivered a revised proposal to the Bonanza Creek board. Company A’s revised proposal was for an up-C structure in which Bonanza Creek would own 56% of the combined company prior to a $150 million reverse Dutch auction tender offer at a price per share of up to $32.50 that would commence shortly after closing and be backstopped by an equity owner of Company A. Company A also proposed that Bonanza Creek and Company A could potentially mutually agree to acquire an additional asset package that would become part of the combined company (the “Company A Asset Acquisition”). Company A’s offer was subject to further due diligence.

On October 31, 2017, Mr. J. Bennett and a representative of the Bonanza Creek board had a telephone conversation to further discuss the potential merger and expectations as to timing and process.

On November 1, 2017, representatives of SandRidge held a telephone conversation with representatives of Bonanza Creek to discussed recent midstream-related production curtailments and potential remediation plans.

On November 1-2, 2017, counsel to Company A delivered initial drafts of the ancillary transactions documents, including a registration rights agreement and amended and restated corporate documents, to Kirkland.

In the morning of November 3, 2017, based on feedback from Evercore, Company A delivered a revised proposal to the Bonanza Creek board. Company A’s revised proposal continued to propose an up-C structure in which Bonanza Creek would own 56% of the combined company prior to the proposed tender offer. However, Company A now proposed two alternatives for the cash tender offer backstopped by an equity owner of Company A: (i) a $150 million reverse Dutch auction tender offer at a price per Bonanza Creek share of up to $32.50 or a $100 million reverse Dutch auction tender offer at a price per Bonanza Creek share of up to $35.00 that would commence shortly after closing or (ii) subject to mutual agreement on the mechanics, a cash distribution of $67.5 million followed by a tender offer as set forth in (i), above, such that the total dividend and tender consideration would equal either up to $100 million at $35.00 per Bonanza Creek share or $150 million at $32.50 per Bonanza Creek share. Company A also continued to propose that Bonanza Creek and Company A could potentially mutually agree to the Company A Asset Acquisition.

Throughout the day on November 3, 2017, representatives of the Bonanza Creek board, of Bonanza Creek management, and of Kirkland participated in conference calls regarding the status of reciprocal diligence, tax diligence, and the current status of the proposals received from SandRidge and Company A. Over the course of the next week, representatives of Kirkland requested additional diligence materials from Company A, including background materials on Company A management’s existing compensation and benefits arrangements.

Immediately prior to the Bonanza Creek board meeting scheduled for the afternoon of November 3, 2017, Mr. J. Bennett called a representative of the Bonanza Creek board and subsequently delivered a letter to the Bonanza Creek board indicating that SandRidge was continuing its due diligence review, including regarding the production curtailment matter and other material developments, to update its valuation and continued to be very interested in pursuing a transaction.

In the afternoon of November 3, 2017, the Bonanza Creek board held a telephonic meeting to discuss the status of the proposals. Representatives of Evercore reviewed the most recent strategic proposals received from SandRidge and Company A. Although there had been no further contact from Company B, the Bonanza Creek board also requested that Evercore provide an update, based on the current market price of Company B’s

 

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common stock, on the current value of the proposal received from Company B on October 17, 2017, which proposal had not been updated or increased by Company B since such date. Given that neither Company B’s initial indication of interest nor Company B’s revised proposal, which represented an approximately 23% decrease in the exchange ratio (implied or otherwise stated), provided an appropriate ownership split between the Bonanza Creek stockholders and the stockholders of Company B, a majority of the Bonanza Creek board believed that further discussions with Company B were unlikely to be fruitful. After thorough discussion, including regarding the management, assets and operations of each of Company A and SandRidge, and taking into consideration that SandRidge had not submitted a revised proposal, the Bonanza Creek board determined to have Evercore advise Company A that Bonanza Creek would like to proceed with negotiations toward a definitive agreement. In addition, the Bonanza Creek board requested that Evercore advise SandRidge that Bonanza Creek had determined to proceed with negotiations with another potential counterparty and if SandRidge desired to continue communications with Bonanza Creek, it should resolve any diligence issues and submit a revised proposal as quickly as possible.

In the evening of November 3, 2017, counsel to Company A delivered drafts of additional ancillary documents, and Kirkland provided the Bonanza Creek board with a list of outstanding issues on the transaction documents with Company A. That evening, representatives of Evercore informed Morgan Stanley that Bonanza Creek had determined to proceed with negotiations with another potential counterparty and offered to facilitate any diligence issues that SandRidge had outstanding. Representatives of Morgan Stanley advised Evercore that SandRidge would like to continue to work with Bonanza Creek to resolve outstanding due diligence items to be in a position to submit a revised proposal.

On November 4, 2017, Kirkland delivered revised drafts of the contribution agreement and ancillary documents to counsel to Company A.

On November 5, 2017, counsel to Company A and representatives of Kirkland discussed Company A’s reaction to the draft documents Kirkland had circulated the prior evening.

In the morning on November 6, 2017, the Bonanza Creek board held an update call during which representatives of Kirkland and of Evercore discussed the outstanding issues on the Company A transaction documents and mechanics of the tender offer proposed by Company A.

On November 6, 2017 representatives of SandRidge met in Denver with representatives of Bonanza Creek to further discuss sources of recent midstream-related production curtailments and the status and timing of planned remediation.

On November 6, 2017, Company A provided the Bonanza Creek board information regarding Company A’s proposed management compensation packages for members of Company A management who would work at the combined company after closing. The Bonanza Creek board and Kirkland reiterated the request for background materials on Company A management’s existing compensation and benefits arrangements.

Later on November 6, 2017, counsel to Company A and representatives of the financial advisors to Company A held a call with representatives of Kirkland and of Evercore to discuss the mechanics for the tender offer proposed by Company A. Representatives of Company A relayed that Company A would be willing to fund the tender offer through a private placement of Bonanza Creek Common Stock to an equity holder of Company A, but that such private placement would be capped at the lower of (i) $150 million and (ii) the amount that would result in Company A’s ownership of the combined company being 49.9%, in order to limit the percentage interest of the combined company that would be held by Company A after the transaction in an effort to prevent Company A from being the accounting acquirer in the transaction.

In the afternoon of November 6, 2017, the Bonanza Creek board and representatives of Kirkland and of Evercore held a call to discuss the Company A Asset Acquisition. After discussion, the Bonanza Creek board determined that it did not desire to pursue the Company A Asset Acquisition within the scope of a potential transaction with Company A.

 

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In the late evening of November 6, 2017, counsel to Company A delivered revised drafts of the contribution agreement and related ancillary documents to Kirkland.

On November 7, 2017, the Bonanza Creek board held a regularly scheduled meeting to discuss operational and 2018 capital budget matters.

On November 7, 2017, Kirkland provided the Bonanza Creek board an update on the negotiation of the contribution agreement and ancillary documents with counsel to Company A, and the Bonanza Creek board provided feedback on the outstanding issues.

Also on November 7, 2017, counsel to Company A and Kirkland held calls to discuss legal diligence matters and exchanged additional legal diligence requests and comments on ancillary documents.

From November 7 through November 9, 2017, Bonanza Creek provided SandRidge with responses to SandRidge’s outstanding due diligence requests.

On November 8, 2017, the Bonanza Creek board held a call to discuss the status of negotiations with Company A and feedback received by Evercore on SandRidge’s proposal. The Bonanza Creek board also asked Kirkland to provide an update on the negotiation of definitive documentation with SandRidge. Representatives of Kirkland noted that Kirkland had not engaged with V&E on the draft merger agreement since October 31, 2017, but that the transaction documents were fairly close and could be resolved quickly, subject to a few remaining issues on which the Bonanza Creek board and SandRidge needed to provide feedback.

In the evening of November 8, 2017, Kirkland delivered revised drafts of the ancillary documents for a potential transaction with Company A to counsel for Company A.

On November 9, 2017, counsel to Company A provided initial diligence information regarding Company A management’s existing compensation and benefits arrangements.

On November 9, 2017, Mr. J. Bennett separately contacted a representative of the Bonanza Creek board and the independent chairman of the Bonanza Creek board, and advised them that SandRidge had substantially completed its due diligence review and anticipated presenting a revised proposal to the SandRidge board by the end of the week.

On the morning of November 10, 2017, the SandRidge board held a telephonic board meeting to discuss the results of SandRidge management’s due diligence review and to consider whether and at what valuation to make a revised proposal to Bonanza Creek. SandRidge management summarized for the SandRidge board the due diligence review and findings. Representatives of Morgan Stanley discussed with the SandRidge board certain financial analyses. The SandRidge board discussed the analyses, whether to make a revised proposal to Bonanza Creek, and approaches to protect against a downturn in commodity prices that could reduce the value of Bonanza Creek’s assets, including consideration of an increased hedging program. Following extensive discussions, including a discussion regarding the increase in oil prices and the opportunity to lock in an increased price through hedging, the SandRidge board requested additional information on SandRidge management’s ability to execute such a hedging program. Following the board meeting, SandRidge management produced such information and, having considered the factors more fully detailed under the section entitled “The Merger—Recommendation of the SandRidge Board and Reasons for the Merger,” the SandRidge board authorized management to make a revised proposal valued at $751 million total consideration, composed of $398 million in cash and the balance in shares of SandRidge common stock based on the stock’s closing price on November 10, 2017.

On November 10, 2017, V&E delivered a revised draft of the merger agreement to Kirkland, and later that same day Kirkland and V&E exchanged initial drafts of their respective client’s disclosure letters. Representatives of Kirkland and of V&E also held a call in the afternoon of November 10, 2017 to discuss

 

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SandRidge’s proposed changes to the merger agreement. During this call, V&E reiterated the prior request that

The Mangrove Partners Master Fund Ltd. and its affiliates (collectively, “Mangrove Partners”), a holder of approximately 7.6% of Bonanza Creek stock and a principal of whom was an independent member of the Bonanza Creek board, enter into a voting agreement to support the transaction. Kirkland agreed to relay the request to the Bonanza Creek board and Mangrove Partners.

In the afternoon of November 10, 2017, SandRidge delivered a revised proposal to the Bonanza Creek board. SandRidge’s revised proposal was for aggregate consideration of $751 million, composed of $398 million in cash and the balance in shares of SandRidge common stock based on the stock’s closing price on November 10, 2017. Under the terms of the draft merger agreement of November 10, 2017, Bonanza Creek stockholders would have the option to receive all cash, all stock consideration or a combination of the two, subject to an aggregate cap on the total cash consideration of $398 million. SandRidge’s proposal expired at 5:00 p.m., Eastern Time, on November 11, 2017 unless Bonanza Creek executed an exclusivity agreement in substantially the form attached to SandRidge’s proposal. SandRidge requested that the exclusivity period expire on November 14, 2017.

In the evening of November 10, 2017, representatives of the Bonanza Creek board and Mr. J. Bennett held a call to discuss the latest SandRidge offer and messaging of the potential transaction to the market.

Also in the evening of November 10, 2017, representatives of the Bonanza Creek board, Bonanza Creek management, Evercore, Company A, certain equityholders of Company A, and the financial advisors to Company A held a call to discuss the Company A Asset Acquisition.

Later in the evening of November 10, 2017, representatives of Kirkland and of counsel to Company A held a conference call to discuss outstanding issues on the transaction documents and structuring, including the financial statements that would be required in connection with the transaction.

On November 11, 2017, the Bonanza Creek board held an all-day telephonic board meeting to discuss the proposals received from SandRidge and from Company A. Representatives of Kirkland reviewed outstanding issues on the legal documentation. Representatives of Evercore reviewed the status of discussions with SandRidge and Company A and, at the direction of the Bonanza Creek board, Evercore’s comparative analysis of the two proposed transactions.

During such meeting, with respect to Company A, it was reported that Company A had recently revised its proposal regarding management, and no longer proposed to provide a Chief Executive Officer for the combined company but instead suggested that Bonanza Creek’s interim Chief Executive Officer remain as the combined company Chief Executive Officer until a permanent Chief Executive Officer could be hired. Instead, Company A would provide an executive chairman for the combined company board and Bonanza Creek would continue its search for a permanent Chief Executive Officer. Further, the Bonanza Creek board was advised of the status of discussions regarding compensation for Company A management who would join the combined company. It was the view of representatives of the Bonanza Creek board that Company A’s requested compensation structure was high as compared to a similarly situated public company to the potential combined company. Finally, the Bonanza Creek board discussed the potential risks, including with respect to liquidity of the Bonanza Creek Common Stock, of an acquisition by Bonanza Creek of a private entity with limited operating history and one significant equityholder.

Also during such meeting, with respect to SandRidge, it was noted that the potential transaction with SandRidge represented the only change of control proposal at a material premium to Bonanza Creek’s then-current common stock price and included a majority of the consideration in cash. The Bonanza Creek board also noted the valuation of SandRidge’s stock and long-term potential trading multiple of the stock of the combined company. In addition, it was noted the positive assessment of the SandRidge Chief Executive Officer that the Bonanza Creek board had received from the search firm that assessed each counterparty’s Chief Executive

 

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Officer, as well as the positive assessment of the SandRidge Chief Executive Officer and management received from members of Bonanza Creek management. Finally, the Bonanza Creek board discussed the potential strengths of the combined company relative to Bonanza Creek’s standalone business plan and relative to a transaction with Company A. The Bonanza Creek board noted that it believed the risk-adjusted value of a combined company with SandRidge was greater than Bonanza Creek’s standalone business plan (including the status of the search for a permanent Chief Executive Officer) or a transaction with Company A.

After a lengthy discussion during the November 11, 2017 Bonanza Creek board meeting, the Bonanza Creek board determined certain additional conditions that must be met for the Bonanza Creek board to further consider either the SandRidge proposal or the Company A proposal. In connection therewith the Bonanza Creek board requested that Evercore ask Company A to consider the following modifications to its proposal: (i) the equityholder of Company A would undertake an acquisition of $150 million of Bonanza Creek Common Stock in a private placement at a premium to Bonanza Creek’s stock price, with the proceeds of such private placement being used to fund a tender offer at a premium to Bonanza Creek’s stock price after closing, (ii) the designated executive of Company A would serve as interim Chief Executive Officer for the combined company, until such time as a permanent Chief Executive Officer was hired, at the same compensation as had been discussed for such executive to serve in the executive chairman role, and (iii) the combined company would not pursue the Company A Asset Acquisition.

In addition, the Bonanza Creek board requested that Evercore ask SandRidge to consider the following modifications to its proposal: (i) extend SandRidge’s proposal response deadline to the evening of November 12, 2017, (ii) agree to a fixed value, subject to a collar of 12.5% on each side of the fixed value, for the stock component of the merger consideration in order to improve the certainty of Bonanza Creek stockholders receiving aggregate consideration of $36.00 per share and (iii) appoint two members of the existing Bonanza Creek board to the SandRidge board at the closing.

A representative of Evercore left the meeting to convey such messages to Company A and SandRidge. The representative of Evercore returned to the meeting with a response from Company A that (i) the Company A equityholder was not willing to purchase Bonanza Creek Common Stock at a premium, and instead suggested that Bonanza Creek could fund a post-closing tender offer at a premium using $150 million of debt financing raised by the combined company, (ii) the designated executive of Company A would only serve as interim CEO if such executive’s compensation were increased and such executive received a signing bonus and (iii) Company A was willing to cease pursuing the Company A Asset Acquisition. The representative of Evercore also conveyed that SandRidge had informed Evercore that SandRidge needed time to convene its board, but would extend the deadline for a response to its proposal and consider a collar on the merger consideration. Toward the end of the November 11, 2017 Bonanza Creek board meeting, Evercore presented the Bonanza Creek board with its preliminary analysis regarding the fairness, from a financial point of view, of the SandRidge’s proposed merger consideration to the holders of the shares of Bonanza Creek’s Common Stock issued and outstanding immediately prior to the effective time that are entitled to receive that merger consideration.

In the afternoon of November 12, 2017, the Bonanza Creek board, representatives of Kirkland and representatives of Evercore held a telephonic meeting to discuss the mechanics and benefits of the collar and interplay with SandRidge’s proposed election mechanism. In addition, the Bonanza Creek board discussed Bonanza Creek’s representation on the SandRidge board after closing. After discussion, the Bonanza Creek board instructed Evercore to continue to discuss with SandRidge (i) the addition of a collar mechanism to the merger agreement with SandRidge and (ii) the appointment of two members of the Bonanza Creek board to the SandRidge board at the closing of the merger.

On November 12, 2017, the SandRidge board met telephonically to consider the requested modifications to the transaction terms requested by Bonanza Creek. Representatives of Morgan Stanley presented an analysis of transactions in which a collar was used with respect to the stock component and an extensive discussion ensued following which the SandRidge board authorized management to propose a collar of 10% on each side of the

 

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fixed value. The SandRidge board also discussed the requested board seats and determined that SandRidge would agree to appoint one member of the existing Bonanza Creek board to the SandRidge board at the closing of the merger provided that such individual have financial or operating experience in the Rocky Mountain region, be mutually acceptable to both SandRidge and Bonanza Creek, and be subject to the approval of the SandRidge nominating and governance committee. The SandRidge board further instructed the SandRidge management team to request again that Mangrove Partners enter into a voting agreement.

Following the November 12, 2017 meeting of the SandRidge board, a representative of SandRidge’s financial advisor, Morgan Stanley, informed a representative of Evercore that SandRidge would require (i) a 10% collar mechanism instead of a 12.5% collar, (ii) one Bonanza Creek board member on the SandRidge board instead of two, subject to the certain criteria set by the SandRidge board, and (iii) that Mangrove Partners enter into a voting agreement.

Throughout the day on November 12, 2017, Kirkland and V&E exchanged drafts of the merger agreement and ancillary documents.

In the evening of November 12, 2017, SandRidge and Bonanza Creek executed an exclusivity agreement providing for exclusivity regarding a potential transaction until 11:59 p.m., Central Time, on November 14, 2017.

In the morning of November 13, 2017, members of SandRidge management, Bonanza Creek management, representatives of Morgan Stanley and Evercore held a telephonic meeting to discuss the coordination of investor relations and employee communications relating to the transaction.

On the morning of November 13, 2017, the Bonanza Creek board met telephonically, together with members of Bonanza Creek management, of Kirkland, and of Evercore, to discuss and review the draft merger agreement and to consider the proposed transaction. Representatives of Kirkland reviewed the duties of the directors with respect to the proposed transaction and the terms of the draft merger agreement, in which several matters related to the collar mechanic remained open. Also at this meeting, Evercore reviewed with the Bonanza Creek board its financial analysis of the merger consideration and rendered an oral opinion, confirmed by delivery of a written opinion dated November 13, 2017, to the Bonanza Creek board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, the merger consideration to be received from SandRidge by the Bonanza Creek stockholders pursuant to the merger agreement was fair, from a financial point of view, to the holders of the shares of Bonanza Creek’s common stock issued and outstanding immediately prior to the effective time that are entitled to receive that merger consideration. Following extensive discussion, the Bonanza Creek board (i) unanimously determined that the merger was fair to, and in the best interests of, Bonanza Creek and its stockholders, (ii) unanimously approved and declared advisable the merger agreement, subject to any final changes regarding the open matters related to the collar to be agreed to by Mr. Tyree, Mr. Steck and Mr. Vogel (the “Bonanza Creek delegates”), the merger and the other transactions contemplated by the merger agreement and (iii) authorized Bonanza Creek to enter into the merger agreement with such changes as were approved by the Bonanza Creek delegates.

Throughout the day on November 13, 2017, Kirkland and V&E exchanged drafts of the merger agreement and ancillary agreements related thereto. In addition, the SandRidge board, the Bonanza Creek board, members of SandRidge management, members of Bonanza Creek management, Kirkland, V&E, Morgan Stanley and Evercore continued to work on materials for announcement of the transaction.

In the afternoon of November 13, 2017, the SandRidge board met telephonically, together with members of SandRidge management and representatives of V&E and of Morgan Stanley, to discuss and review the draft merger agreement and to consider the proposed transaction. Representatives of V&E reviewed the duties of the directors with respect to the proposed transaction and the terms of the draft merger agreement and draft voting agreement. Also at this meeting, Morgan Stanley rendered its oral opinion, subsequently confirmed by delivery of a written opinion, dated November 14, 2017, that, as of such date and based upon and subject to the various

 

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assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the consideration to be paid by SandRidge pursuant to the merger agreement was fair from a financial point of view to SandRidge. Following extensive discussion, the SandRidge board authorized management and V&E to finalize the merger agreement, including provisions related to the mechanics around the collar, as well as to require that Mangrove Partners enter into a voting agreement.

In the evening of November 13, 2017, Brian Steck, an independent member of the Bonanza Creek board and principal of Mangrove Partners, advised SandRidge that his firm would not agree to be bound by the provisions of a voting agreement. Mr. Steck advised SandRidge management that he was not serving as an appointee of Mangrove Partners and that, while Mangrove Partners was supportive of the transaction and intended to vote in favor of the transaction, as a matter of policy, Mangrove Partners would not agree to enter into a voting agreement. Mr. Steck and Mangrove Partners did, however, agree that each would publicly support the transaction in communications announcing the companies’ entry into a merger agreement. Given the SandRidge board’s prior authorization having been conditioned upon securing the voting agreement, SandRidge management informed the Bonanza Creek board that SandRidge would have to reconvene its board the next day and thus was not in a position to execute the merger agreement.

On the morning of November 14, 2017, the SandRidge board met telephonically to discuss the voting agreement matter. SandRidge management briefed the SandRidge board on their discussions the prior evening with the Bonanza Creek delegates and with Mr. Steck. SandRidge management also advised the SandRidge board that, upon its request, Mangrove Partners had expressed its support in writing for the transaction and a willingness to vote in favor of the adoption of the merger agreement. SandRidge management then recommended that the SandRidge board agree to the terms of the merger agreement even in the absence of a voting agreement with Mangrove Partners. Following discussion, the SandRidge board (i) unanimously determined that the merger was fair to, and in the best interests of, SandRidge and its stockholders, (ii) unanimously approved and declared advisable the merger agreement, and the other transactions contemplated by the merger agreement, including the issuance of SandRidge common stock, and (iii) authorized SandRidge to enter into the merger agreement.

Throughout the day on November 14, 2017, Kirkland and V&E exchanged drafts of the merger agreement and ancillary agreements related thereto, and the Bonanza Creek delegates discussed the outstanding issues with Mr. J. Bennett.

After the close of trading on November 14, 2017, the Bonanza Creek delegates met telephonically, with members of Kirkland present, to discuss resolution of the final open issues in the merger agreement.

After the call with the Bonanza Creek delegates, the parties executed the merger agreement.

Prior to the opening of trading on November 15, 2017 of SandRidge common stock and Bonanza Creek common stock on the New York Stock Exchange, SandRidge and Bonanza Creek issued a joint press release announcing the execution of the merger agreement.

Recommendation of the SandRidge Board and Reasons for the Merger

At a meeting held on November 14, 2017, the SandRidge board unanimously determined the merger agreement and the transactions contemplated thereby, including the share issuance, are fair to, and in the best interests of, SandRidge and its stockholders. The SandRidge board also approved and declared advisable the merger agreement and the transactions contemplated thereby, including the share issuance. The SandRidge board recommends that SandRidge’s stockholders vote “FOR” the share issuance proposal.

In evaluating the proposed transaction, the SandRidge board consulted with SandRidge’s management and legal and financial advisors and, in reaching its determination and recommendation, considered a number of factors that the SandRidge board viewed as bearing on its decisions. The factors considered favored the conclusion of the SandRidge board that the merger agreement and the transactions contemplated by the merger

 

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agreement, including the share issuance, are advisable and in the best long-term interests of SandRidge and its stockholders, and included:

 

    the SandRidge board’s belief that SandRidge’s existing assets—which consist of (i) mature Mississippi Lime assets in the Mid-Continent that generate significant production and material free cash flow, which help fund investment and value creation in its emerging assets but are declining assets that do not offer meaningful opportunities for additional development and oil and cash flow growth, (ii) North Park Basin Niobrara assets that are in the delineation phase of the development cycle and require significant investment over the next several years, including the construction of midstream and pipeline takeaway infrastructure, before full field development can be realized and (iii) NW STACK assets in the Mid-Continent that are also in the early phases of the development cycle and are being efficiently delineated under a development agreement that provides an initial $100 million of capital from SandRidge’s financial partner—lack significant development-ready inventory, and therefore results in a higher risk profile;

 

    the SandRidge board’s belief that the expansion of SandRidge’s Niobrara position to include Bonanza Creek’s DJ Basin assets will provide SandRidge with development opportunities close to existing infrastructure and add 30-50% return, development-ready inventory within a well-known, highly delineated area;

 

    the SandRidge board’s belief that the acquisition would allow SandRidge to accelerate oil production through lower risk development drilling of the Bonanza Creek assets, while continuing SandRidge’s plan of building infrastructure and conducting further testing in the North Park Basin and ongoing delineation of its NW STACK assets over the next several years;

 

    the SandRidge board’s expectation that the acquisition will be accretive to cash flow per share and net asset value per share;

 

    the SandRidge board’s expectation that the acquisition will result in an approximately 17% improvement in 2018 EBITDA margin per BOE (approximately 21% assuming all $20.0 million in general and administrative expense savings are realized);

 

    the SandRidge board’s expectation that the acquisition will result in at least $20 million in annual general and administrative expense savings (notwithstanding the fact that a conservative $10 million forecast of annual general and administrative savings was included in the financial analysis prepared for the SandRidge board for the purpose of evaluation the transaction);

 

    the SandRidge board’s expectation that the acquisition will result in a 41% increase in oil production in 2018;

 

    the SandRidge board’s expectation that the acquisition will be accomplished while maintaining a strong balance sheet with a year-end net debt to last twelve months EBITDA leverage ratio at or below 2.0 (1.9 assuming all $20.0 million in general and administrative expense savings are realized) over the next three years;

 

    the SandRidge board’s expectation that SandRidge will maintain a strong liquidity position, with approximately $300 million of liquidity at the closing of the merger;

 

    the SandRidge board’s belief that Bonanza Creek’s assets in the DJ Basin, will complement SandRidge’s existing assets in the North Park Basin, each of which target the same Niobrara formation;

 

    the SandRidge board’s belief that the acquisition of Bonanza Creek increases SandRidge’s oil exposure, production, reserves and high return locations, and significantly expands the development portfolio of the combined company; and

 

    the SandRidge board’s believe that the acquisition of Bonanza Creek will result in greater liquidity for current stockholders of SandRidge and will create a combined company with a market capitalization in excess of $1 billion, which the SandRidge board believes will attract greater analyst coverage and investor interest.

 

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The SandRidge board also considered the following factors in support of its conclusion that the merger agreement and the transactions contemplated by the merger agreement, including the share issuance, are advisable and in the best interests of SandRidge and its stockholders:

 

    the SandRidge board’s belief that compared to an analysis of the standalone prospects of SandRidge, the combined company is expected to generate a higher return on investment for stockholders, with a reduction of the overall risks inherent in achieving such returns;

 

    the SandRidge board’s understanding of SandRidge’s and Bonanza Creek’s businesses as well as their respective financial performance, results of operations and future prospects, which supported the SandRidge board’s view that the merger consideration reflected a reasonable price for Bonanza Creek;

 

    the opinion of Morgan Stanley, dated November 14, 2017, to the SandRidge board as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be paid by SandRidge pursuant to the merger agreement, which opinion was based on and subject to the factors and assumptions set forth therein, as more fully described below under the section entitled “The Merger—Opinion of SandRidge’s Financial Advisor;”

 

    the review by the SandRidge board with its advisors of the structure of the proposed transaction and the financial and other terms of the merger agreement, as well as the likelihood of consummation of the proposed transaction and the SandRidge board’s evaluation of the likely time period necessary to complete the transaction.

The SandRidge board also considered the following specific aspects and terms of the merger agreement:

 

    the nature of the closing conditions included in the merger agreement, as well as the likelihood of satisfaction of all conditions to completion of the merger;

 

    the restrictions on the conduct of Bonanza Creek’s business during the period between the execution of the merger agreement and the completion of the merger as set forth in the merger agreement;

 

    that SandRidge’s representations and interim operating covenants are not unduly burdensome and provide SandRidge sufficient flexibility to operate its business between the signing of the merger agreement and the closing of the merger;

 

    the efforts required by each party to obtain approvals from or clearances by the applicable governmental authorities;

 

    the expectation that the parties will obtain all necessary regulatory approvals without unacceptable conditions;

 

    that SandRidge’s obligation to close the merger is conditioned on a vote of its stockholders to approve the issuance of SandRidge common stock to be used as merger consideration;

 

    the terms of the merger agreement relating to no shop covenants and termination fees, and that such provisions are reasonably constructed;

 

    the right of the SandRidge board to change its recommendation to SandRidge stockholders, subject to certain conditions (including considering any adjustments to the merger agreement proposed by Bonanza Creek and payment to Bonanza Creek of a $26,116,219 termination fee if Bonanza Creek terminates the merger agreement because of such change of recommendation);

 

    the fact that the stock component of the merger consideration is subject to a collar mechanism which helps protect the value of the merger consideration during the pendency of the transaction;

 

   

that the merger agreement provides that SandRidge must take all necessary action to appoint to the SandRidge board one Bonanza Creek director (who was serving as of the date of the merger agreement) who has been a corporate executive with financial or operating experience in the oil and gas industry in the Rocky Mountain region of the United States, as mutually agreed upon by SandRidge

 

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