History
Arena Resources spent a decade buying Permian Basin oil fields with borrowed money and share sales, then was bought by SandRidge Energy in July 2010.
2003-2005: Borrowing to buy old oil fields
Arena Resources was cleared to trade on the American Stock Exchange in April 2003. Its plan was to buy mature oil properties in the Permian Basin and drill more wells on them. The first purchase came in May 2004: just over $10 million for an 82% working interest in the East Hobbs San Andres lease in Lea County, New Mexico, with 20 producing wells bought from Enerquest. It was paid for entirely with a credit facility and a bridge loan (a short-term loan) from MidFirst Bank. A July 2004 amendment said the company had removed about 3.4 million barrels of oil equivalent from its original internal estimate of the property's proven reserves.
In January 2005 it bought the Fuhrman-Mascho leases in Andrews County, Texas, for $10.55 million: 84 leases and 172 producing wells. It paid $9.5 million in borrowed cash plus 150,013 shares at $7.00. The purchase was made as much for the drilling locations as for the existing production, and Fuhrman-Mascho became the core asset. In July 2005 the company raised $10 million by selling 970,874 new shares at $10.30, the first equity to sit alongside the bank debt. The record also shows listing notices in 2004 and 2005 about removal of its securities from listing and registration, with no further detail.
2006-2007: Bigger lines, higher prices
In spring 2006 the bank line grew. MidFirst brought in Compass Bank and Bank of Scotland, lifting the ceiling from $50 million to $150 million and the amount actually drawable from $35 million to $65 million, for three years. The signed agreement was dated 3 May 2006. At the end of May the company placed 1.15 million shares at $28.04 with thirty accredited investors, raising $32.2 million, at a 5% discount to the market price. The price was almost triple the $10.30 paid eleven months earlier. In August 2006 the New York Stock Exchange certified the shares for listing.
The record for 2007 is quiet until December, when Arena paid $49 million in cash to Phoenix PetroCorp for the South Fuhrman-Mascho and University Consolidated IX units next to its core Andrews County property. The deal brought 100% working interests, about 5,040 undeveloped acres and an estimated 120 further drilling locations. It was the company's largest purchase, about five times the 2004 deals, and was funded entirely from the bank line. A February 2008 filing added that it also paid a 5,000-share finders fee valued at $204,750.
2008-2009: Equity, then a smaller line
In June 2008 Arena agreed to sell up to 2.5 million shares through Dahlman Rose, Tudor Pickering Holt and Capital One Southcoast, off a shelf registration that became effective the same day. This was an underwritten offering, unlike the private placements of 2005 and 2006.
The next beat came after oil prices crashed. In May 2009 the credit agreement was extended only to mid-July 2009, and at Arena's election the maximum commitment was cut from $150 million to $75 million. The company chose to shrink an unused line rather than keep paying to hold it open. A new amended facility followed in July 2009, running to 30 June 2012 with a $150 million maximum.
2010: Sold to SandRidge
In early April 2010 (the merger agreement is dated 3 April) Arena agreed to be bought by SandRidge Energy. Each Arena share would become 4.7771 SandRidge shares plus $2.50 in cash, subject to both sets of shareholders approving. The formal proxy went out on 7 May, with the board unanimously recommending approval and a shareholder meeting set for 8 June in Tulsa.
Shareholders pushed back. The merger drew nine shareholder class actions in Oklahoma and Nevada, and to settle them the merger agreement was amended in late May. On 2 June SandRidge raised the cash portion from $2.50 to $4.50 a share, both votes were postponed, and Arena won a 30-day window to look for a better bid. The search ended on 1 July with two preliminary approaches, neither judged capable of beating SandRidge. Chairman and co-founder Tim Rochford said the board was satisfied it had tested the market properly, and the vote was set for 16 July.
SandRidge completed the acquisition on 16 July 2010. Every Arena share was cancelled for 4.7771 SandRidge shares and $4.50 in cash, about 191 million SandRidge shares and $178 million in cash in total. The exchange filed to remove the shares from listing on 19 July, and Arena deregistered with the SEC on 29 July 2010, ending its duty to file reports. At that date it no longer existed as an independent company.
Written from the 25 story beats below (2003 to 29 July 2010), which come from the company's own announcements and filings.