Both companies have a large presence in the Mississippian Lime, which is primarily an oil producing area spread across Northern Oklahoma and Southern Kansas.
The basin was largely considered tapped out but horizontal drilling and hydraulic fracturing have kindled hopes of new reserves there.
Midstates' all-stock proposal which would give SandRidge shareholders 60 percent of the combined entity comes weeks after SandRidge ended efforts to buy Bonanza Creek Energy.
SandRidge abandoned the $746-million pursuit in December following opposition from investors including top shareholder, Carl Icahn.
"The combined company will have zero net debt, strong liquidity, and forecasted free cash flow generation of up to $480 million over the next five years," Midstates Chief Executive David Sambrooks in a statement.
The deal also has the support of Fir Tree Partners a shareholder in both companies that had opposed SandRidge's pursuit of Bonanza Creek and Avenue Capital Group. Fir Tree and Avenue together own 40 percent of Midstates.
SandRidge shareholders would receive 1.068 shares of Midstates for each share held, as per Midstates' Monday closing price.
SandRidge shares rose 3 percent to $17.00 in premarket trading on Tuesday.
The combined company, which could be valued at nearly $1 billion, will save $70 million annually and have free cash flow of over $100 million, Oklahoma-based Midstates said.
SandRidge, Fir Tree and Avenue Capital did not immediately respond to requests for comment.
Moelis is Midstates' financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison is providing legal counsel.