SandRidge Energy Defends Bid for Atinum Midcon's Drilling Portfolio

By Katy Stech 

SandRidge Energy Inc. defended its move to purchase Atinum Midcon I LLC's oil and gas drilling investments out of bankruptcy, urging a federal judge to disregard protest from Wells Fargo Bank N.A. officials who said the bank's proposal to forgive $75 million is a better offer.

In court papers, SandRidge lawyers said the offer from Wells Fargo, which handles Atinum's loan of more than $265 million, wasn't valid because it covered only a subset of Atinum's roughly 1,600 oil and gas wells in northern Oklahoma and southern Kansas.

Under its offer, Wells Fargo offered to forgive $75 million in debt owed by Atinum, a Houston energy investor. SandRidge's bid is valued about $67 million, made up of $47 million in cash and about $19 million in forgiven debt.

Earlier this week, Wells Fargo officials argued that lawyers who put Atinum into bankruptcy in U.S. Bankruptcy Court in Houston on July 22 wrongly declared SandRidge's offer as superior.

They argued in court filings that Atinum officials were motivated to placate SandRidge and sell the company's portfolio quickly for insurance reasons: Equity owners could get roughly $240 million on account of their lost investment if the case is converted to chapter 7 before the end of 2016.

More broadly, Wells Fargo lawyers also said SandRidge was to blame for many of Atinum's financial problems, pressuring it to invest in a "series of disastrous wells" SandRidge drilled and completed in late 2015 and early 2016.

In response, SandRidge said in court papers that Wells Fargo's "claims are without merit."

Judge Marvin Isgur agreed to hear arguments on the dispute at a hearing Friday.

Founded in 2011 with the purchase of some ownership interests in roughly 860,000 gross acres of oil and gas interests located in the Mississippian Lime formation, Atinum made a deal with SandRidge to find underground oil and gas deposits and build wells to pull the resource out.

SandRidge itself recently emerged from bankruptcy, using the process to cut $3.7 billion in debt and transfer ownership to a group of bondholders. The Oklahoma City company emerged from protection Oct. 4.

The proposed purchase by SandRidge would take Atinum's ownership out of the hands of private-equity funds managed by JB Asset Management Co., a South Korean asset-management company, according to court papers.

Atinum blamed its bankruptcy on the drop in oil and gas prices. The price drop, caused by an oversupply, led Atinum's revenue from oil and gas sales to fall to $76 million last year from roughly $176 million in 2014.

Write to Katy Stech at [e-mail]

(END) Dow Jones Newswires

October 28, 2016 14:07 ET (18:07 GMT)

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