EX-99.1 2 d848907dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

SandRidge Energy, Inc. Updates Shareholders on Financial Results for Third Quarter 2014

and First Nine Months of 2014

Reported Adjusted Earnings of $0.07 per Diluted Share and Adjusted EBITDA of $225 Million for the Third Quarter

Restated 2013-2014 Quarterly Financial Results to Incorporate New Accounting Treatment

Will Announce 2015 Capex Plans In February

Fully Undrawn Borrowing Base is $1.2 Billion with Current Facility of $900 Million

Oklahoma City, Oklahoma, January 8, 2015 – SandRidge Energy, Inc. (the “Company”) (NYSE: SD) today announced financial results for the quarter that ended September 30, 2014. The Company also filed restated results for quarterly periods in 2013 and 2014.

Eddie LeBlanc, SandRidge’s Chief Financial Officer and Executive Vice-President, commented, “Today’s release of financial results for the third quarter of 2014 complements our November 2014 operating results press release. As the result of discussions with the SEC, we are now accruing a portion of the annual CO2 under delivery penalty each quarter which we previously recorded at the end of each year. Restated financial statements are included in amended historic quarterly and annual reports we are filing today. Importantly, annual results and cash flows remain unchanged.”

Key Financial Results

Third Quarter

 

  •   Adjusted EBITDA, pro forma for divestitures and net of Noncontrolling Interest, was $225 million in the third quarter of 2014 compared to $160 million in the third quarter of 2013, 41% year-over-year growth.

 

  •   Adjusted operating cash flow of $203 million for third quarter 2014 compared to $227 million in third quarter 2013.

 

  •   Adjusted net income of $43.0 million, or $0.07 per diluted share, for third quarter 2014 compared to adjusted net income of $31.7 million, or $0.06 per diluted share, in third quarter 2013.

Nine Months

 

  •   Adjusted EBITDA, pro forma for divestitures and net of Noncontrolling Interest, was $596 million in the first nine months of 2014 compared to $418 million in the first nine months of 2013, 42% year-over-year growth.

 

  •   Adjusted operating cash flow of $509 million for first nine months of 2014 compared to $569 million in first nine months of 2013. Included in the first nine months of 2014 results is $70 million of cash paid to unwind hedges related to the Gulf of Mexico divestiture.

 

  •   Adjusted net income of $109.2 million, or $0.19 per diluted share, for first nine months of 2014 compared to adjusted net income of $64.9 million, or $0.11 per diluted share, in first nine months of 2013.

Adjusted net income available to common stockholders, pro forma adjusted EBITDA and adjusted operating cash flow are non-GAAP financial measures. Each measure is defined and reconciled to the most directly comparable GAAP measure under “Non-GAAP Financial Measures” beginning on page 7.

 

1

As previously discussed in a Form 8-K filed on November 4, 2014, the Company has been in discussions with the Securities and Exchange Commission regarding certain accounting matters. As a result of these discussions, the Company restated its 2013 Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014. For the three month periods ended, March 31, 2013 and 2014 and June 30, 2013 and 2014, an estimated CO2 under delivery shortfall penalty was recorded in each quarter. The effect of the restatement for 2013 is to transfer a portion of the annual CO2 under delivery shortfall penalty accrual that was previously recorded at year-end to the quarter-end periods within such year. The change in accounting treatment impacts the first, second and third quarters of 2013 by approximately $8 million of net income per quarter, while rendering no change to the 2013 annual net income. The first and second quarters of 2014 are also impacted by approximately $8 million of net income per quarter.

Additionally, the Company also revised the recording of the Century Plant construction contract to account for it under the full cost method of accounting rather than the completed contract method of accounting for the year ended 2012. This resulted in eliminating an equal amount of income and expense from the 2012 Condensed Consolidated Statements of Operations and had no impact on total assets, total liabilities, net income or retained earnings.

These restatements along with our Form 10-Q for the three month period ended September 30, 2014, which also included restated financial information related to the delivery shortfall penalty accrued for the three month period ended September 30, 2013, were filed on January 8, 2015.

James Bennett, SandRidge’s Chief Executive Officer and President, stated, “As highlighted in our November third quarter operations update, we’re expanding our low cost multilateral program and successfully extending our Mid-Continent resource base with Chester and Woodford production. Since the operating update, oil prices have fallen sharply; however, SandRidge is defensively positioned for 2015. We have an enviable hedge position on the vast majority of our liquids production, have no bond maturities until 2020 and at quarter end $1.4 billion of liquidity. Importantly, our Mid-Continent drilling program continues to generate commercial returns, even at current commodity prices. Given the market backdrop, we are high grading our development plans and are already reducing our rig count and capex levels. We anticipate announcing 2015 capital plans and full year guidance in February. Meanwhile, our teams are focused on continued well cost reductions, now further supported by likely lower service costs ahead.”

 

2

Operational and Financial Statistics

Information regarding the Company’s production, pricing, costs and earnings is presented below:

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
   2014      2013     2014     2013  

Production

          

Oil (MBbl)

      2,644         3,372        7,927        10,902   

NGL (MBbl)

      1,109         577        2,500        1,608   

Natural gas (MMcf)

      21,501         25,788        62,335        78,342   

Oil equivalent (MBoe)

      7,337         8,247        20,816        25,567   

Daily production (MBoed)

      79.7         89.6        76.2        93.7   

Production — Pro Forma (1)

          

Oil (MBbl)

      2,644         2,278        7,254        6,629   

NGL (MBbl)

      1,109         453        2,447        1,009   

Natural gas (MMcf)

      21,501         18,525        58,760        52,921   

Oil equivalent (MBoe)

      7,337         5,819        19,495        16,458   

Daily production (MBoed)

      79.7         63.3        71.4        60.3   

Average price per unit

          

Realized oil price per barrel — as reported

    $ 94.60       $ 105.87      $ 97.12      $ 98.39   

Realized impact of derivatives per barrel

      0.26         (6.21 )      (1.27 )      1.10   
  

 

 

     

 

 

    

 

 

    

 

 

  

Net realized price per barrel

    $ 94.86       $ 99.66      $ 95.85      $ 99.49   
  

 

 

     

 

 

    

 

 

    

 

 

  

Realized NGL price per barrel — as reported

    $ 35.84       $ 36.35      $ 37.84      $ 34.49   

Realized impact of derivatives per barrel

      —           —          —          —     
  

 

 

     

 

 

    

 

 

    

 

 

  

Net realized price per barrel

    $ 35.84       $ 36.35      $ 37.84      $ 34.49   
  

 

 

     

 

 

    

 

 

    

 

 

  

Realized natural gas price per Mcf — as reported

    $ 3.24       $ 3.15      $ 3.86      $ 3.36   

Realized impact of derivatives per Mcf

      0.13         0.30        (0.22 )      0.08   
  

 

 

     

 

 

    

 

 

    

 

 

  

Net realized price per Mcf

    $ 3.37       $ 3.45      $ 3.64      $ 3.44   
  

 

 

     

 

 

    

 

 

    

 

 

  

Realized price per Boe — as reported

    $ 49.01       $ 55.68      $ 53.08      $ 54.43   
  

 

 

     

 

 

    

 

 

    

 

 

  

Net realized price per Boe — including impact of derivatives

    $ 49.48       $ 54.08      $ 51.95      $ 55.11   
  

 

 

     

 

 

    

 

 

    

 

 

  

Average cost per Boe

          

Lease operating (2)

    $ 11.27       $ 15.11      $ 12.32      $ 15.25   

Production taxes

      1.14         1.07        1.15        0.97   

General and administrative

          

General and administrative, excluding stock-based compensation

    $ 2.77       $ 4.01      $ 3.80      $ 8.35   

Stock-based compensation

      0.58         0.84        0.76        3.10   
  

 

 

     

 

 

    

 

 

    

 

 

  

Total general and administrative

    $ 3.35       $ 4.85      $ 4.56      $ 11.45   

General and administrative — adjusted

          

General and administrative, excluding stock-based compensation (3)

    $ 2.76       $ 3.68      $ 3.44      $ 4.35   

Stock-based compensation (4)

      0.55         0.64        0.66        0.96   
  

 

 

     

 

 

    

 

 

    

 

 

  

Total general and administrative — adjusted

    $ 3.31       $ 4.32      $ 4.10      $ 5.31   

Depletion (5)

    $ 15.49       $ 17.72      $ 15.99      $ 18.07   

Lease operating cost per Boe

          

Mid-Continent

    $ 7.87       $ 7.02      $ 7.76      $ 7.77   

Earnings per share

          

Earnings (loss) per share applicable to common stockholders

          

Basic

    $ 0.30       $ (0.20 )    $ (0.11 )    $ (1.33 ) 

Diluted

      0.27         (0.20 )      (0.11 )      (1.33 ) 

Adjusted net income per share available to common stockholders

          

Basic

    $ 0.07       $ 0.04      $ 0.14      $ 0.05   

Diluted

      0.07         0.06        0.19        0.11   

Weighted average number of common shares outstanding (in thousands)

          

Basic

      485,458         483,582        485,194        480,209   

Diluted (6)

      575,912         573,716        578,125        571,354   
(1) Excludes production attributable to Permian properties (sold first quarter 2013) and Gulf of Mexico properties (sold first quarter 2014).
(2) Expense for three and nine-month periods ended September 30, 2013 has been restated for quarterly accrual of CO2 delivery shortfall penalty.
(3) Excludes transaction costs, legal settlements, severance and consent solicitation costs totaling $0.1 million and $7.5 million for the three and nine-month periods ended September 30, 2014, respectively. Excludes transaction costs, legal settlements, severance, annual incentive plan adoption effect and consent solicitation costs totaling $2.7 million and $102.2 million for the three and nine-month periods ended September 30, 2013, respectively.
(4) Excludes $0.2 million and $2.2 million for the three and nine-month periods ended September 30, 2014, respectively, and $1.7 million and $54.7 million for the three and nine-month periods ended September 30, 2013, respectively, for the acceleration of stock awards.
(5) Includes accretion of asset retirement obligation.
(6) Includes shares considered antidilutive for calculating earnings per share in accordance with GAAP for certain periods presented.

 

3

Capital Expenditures

The table below summarizes the Company’s capital expenditures for the three and nine-month periods ended September 30, 2014 and 2013:

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2014      2013     2014     2013  
     (in thousands)  

Drilling and production

          

Mid-Continent

    $ 336,171       $ 188,374      $ 743,059      $ 647,019   

Permian Basin

      49,314         44,309        155,788        155,903   

Gulf of Mexico/Gulf Coast

      —           47,708        22,975        161,700   
  

 

 

     

 

 

    

 

 

    

 

 

  
     385,485         280,391        921,822        964,622   

Leasehold and seismic

          

Mid-Continent

      47,260         13,526        127,296        52,611   

Permian Basin

      85         —          624        —     

Gulf of Mexico/Gulf Coast

      —           723        159        2,072   

WTO/Other

      2,255         1,370        7,366        3,832   
  

 

 

     

 

 

    

 

 

    

 

 

  
     49,600         15,619        135,445        58,515   

Inventory

      674         (3,351 )      (728 )      (14,384 ) 

Total exploration and development

      435,759         292,659        1,056,539        1,008,753   
  

 

 

     

 

 

    

 

 

    

 

 

  

Drilling and oil field services

      3,603         3,142        10,877        4,657   

Midstream

      14,045         16,551        25,810        46,883   

Other — general

      14,422         10,230        27,311        38,159   
  

 

 

     

 

 

    

 

 

    

 

 

  

Total capital expenditures, excluding acquisitions

      467,829         322,582        1,120,537        1,098,452   
  

 

 

     

 

 

    

 

 

    

 

 

  

Acquisitions

      367         6,925        16,920        15,527   
  

 

 

     

 

 

    

 

 

    

 

 

  

Total capital expenditures

    $ 468,196       $ 329,507      $ 1,137,457      $ 1,113,979   
  

 

 

     

 

 

    

 

 

    

 

 

  

 

4

Derivative Contracts

The table below sets forth the Company’s consolidated oil and natural gas price swaps and collars for the years 2015 and 2016 as of January 6, 2015 and includes contracts that have been novated to or the benefits of which have been conveyed to SandRidge sponsored royalty trusts.

 

     Year Ending  
     2015     2016  

Oil (MMBbls)

     

Swap Volume

      5.59        1.46   

Swap

    $ 92.44      $ 88.36   

Three-way Collar Volume

      4.58        2.56   

Call Price

    $ 103.48      $ 100.85   

Put Price

    $ 90.28      $ 90.00   

Short Put Price

    $ 76.56      $ 83.13   

Natural Gas (Bcf)

     

Swap Volume

      19.90        —     

Swap

    $ 4.51        —     

Collar Volume

      1.01        —     

Collar: High

    $ 8.55        —     

Collar: Low

    $ 4.00        —     

Natural Gas Basis (Bcf)

     

Swap Volume

      21.9        —     

Swap

    $ (0.27 )      —     

 

5

Selected Balance Sheet Data

The Company’s capital structure at September 30, 2014 and December 31, 2013 is presented below (in thousands):

 

     September 30,
2014		     December 31,
2013		  
     (in thousands)  

Cash and cash equivalents

    $ 590,246      $ 814,663   
  

 

 

    

 

 

  

Long-term debt (net of current maturities)

     

Senior Notes

     

8.75% Senior Notes due 2020, net

      445,232        444,736   

7.5% Senior Notes due 2021

      1,178,598        1,178,922   

8.125% Senior Notes due 2022

      750,000        750,000   

7.5% Senior Notes due 2023, net

      821,471        821,249   
  

 

 

    

 

 

  

Total debt

      3,195,301        3,194,907   

Stockholders’ equity

     

Preferred stock

      8        8   

Common stock

      483        483   

Additional paid-in capital

      5,289,124        5,294,551   

Treasury stock, at cost

      (6,823 )      (8,770 ) 

Accumulated deficit

      (3,511,498 )      (3,460,462 ) 
  

 

 

    

 

 

  

Total SandRidge Energy, Inc. stockholders’ equity

      1,771,294        1,825,810   
  

 

 

    

 

 

  

Noncontrolling interest

      1,266,482        1,349,817   

Total capitalization

    $ 6,233,077      $ 6,370,534   
  

 

 

    

 

 

  

During the third quarter of 2014, the Company’s debt, net of cash balances, increased by approximately $330 million as a result of funding the Company’s drilling program. The Company had no amount drawn under its senior credit facility.

 

6

Non-GAAP Financial Measures

Adjusted operating cash flow, adjusted EBITDA, pro forma adjusted EBITDA, adjusted net income and adjusted net income attributable to noncontrolling interest are non-GAAP financial measures.

The Company defines adjusted operating cash flow as net cash provided by operating activities before changes in operating assets and liabilities and adjusted for cash (paid) received on financing derivatives. It defines EBITDA as net income (loss) before income tax (benefit) expense, interest expense and depreciation, depletion and amortization and accretion of asset retirement obligations. Adjusted EBITDA, as presented herein, is EBITDA excluding asset impairment, interest income, (gain) loss on derivative contracts net of cash received (paid) on settlement of derivative contracts, (gain) loss on sale of assets, transaction costs, legal settlements, consent solicitation costs, severance, loss on extinguishment of debt and other various non-cash items (including non-cash portion of noncontrolling interest and stock-based compensation). Pro forma adjusted EBITDA, as presented herein, is adjusted EBITDA excluding adjusted EBITDA attributable to properties or subsidiaries sold during the period.

Adjusted operating cash flow and adjusted EBITDA are supplemental financial measures used by the Company’s management and by securities analysts, investors, lenders, rating agencies and others who follow the industry as an indicator of the Company’s ability to internally fund exploration and development activities and to service or incur additional debt. The Company also uses these measures because adjusted operating cash flow and adjusted EBITDA relate to the timing of cash receipts and disbursements that the Company may not control and may not relate to the period in which the operating activities occurred. Further, adjusted operating cash flow and adjusted EBITDA allow the Company to compare its operating performance and return on capital with those of other companies without regard to financing methods and capital structure. These measures should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with generally accepted accounting principles (“GAAP”). Adjusted EBITDA should not be considered as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Therefore, the Company’s adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

Management also uses the supplemental financial measure of adjusted net income, which excludes tax (benefit) expense adjustment, asset impairment, (gain) loss on derivative contracts net of cash received (paid) on settlement of derivative contracts, (gain) loss on sale of assets, transaction costs, legal settlements, consent solicitation costs, loss on extinguishment of debt, severance and other non-cash items from income available (loss applicable) to common stockholders. Management uses this financial measure as an indicator of the Company’s operational trends and performance relative to other oil and natural gas companies and believes it is more comparable to earnings estimates provided by securities analysts. Adjusted net income is not a measure of financial performance under GAAP and should not be considered a substitute for loss applicable to common stockholders.

The supplemental measure of adjusted net income attributable to noncontrolling interest is used by the Company’s management to measure the impact on the Company’s financial results of the ownership by third parties of interests in the Company’s less than wholly-owned consolidated subsidiaries. Adjusted net income attributable to noncontrolling interest excludes the portion of asset impairment, (gain) loss on derivative contracts net of cash (paid) received on settlement of derivative contracts, legal settlement and loss on sale of assets attributable to third-party ownership in less than wholly-owned consolidated subsidiaries from net loss attributable to noncontrolling interest. Adjusted net income attributable to noncontrolling interest is not a measure of financial performance under GAAP and should not be considered a substitute for net income attributable to noncontrolling interest.

 

7

The tables below reconcile the most directly comparable GAAP financial measures to operating cash flow, EBITDA and adjusted EBITDA, adjusted net income available to common stockholders and adjusted net income attributable to noncontrolling interest.

Reconciliation of Net Cash Provided by Operating Activities to Adjusted Operating Cash Flow

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2014      2013 (restated)     2014     2013 (restated)  
     (in thousands)  

Net cash provided by operating activities

    $ 164,892       $ 210,324      $ 395,684      $ 595,007   

Add (deduct)

          

Cash (paid) received on financing derivatives

      —           (629 )      (44,128 )      5,099   

Changes in operating assets and liabilities

      37,881         17,483        157,615        (31,150 ) 
  

 

 

     

 

 

    

 

 

    

 

 

  

Adjusted operating cash flow

    $ 202,773       $ 227,178      $ 509,171      $ 568,956   
  

 

 

     

 

 

    

 

 

    

 

 

  

Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Pro Forma Adjusted EBITDA

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2014     2013 (restated)     2014     2013 (restated)  
     (in thousands)  

Net income (loss)

    $ 157,338      $ (81,447 )    $ (11,892 )    $ (597,251 ) 

Adjusted for

         

Income tax (benefit) expense

      (1,064 )      2,363        (2,131 )      7,300   

Interest expense (1)

      59,893        61,793        184,234        212,436   

Depreciation and amortization — other

      14,417        15,270        45,350        46,628   

Depreciation and depletion — oil and natural gas

      112,569        137,639        325,021        434,068   

Accretion of asset retirement obligations

      1,116        8,472        7,927        28,051   
  

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA

      344,269        144,090        548,509        131,232   

Asset impairment

      54        687        167,966        16,330   

Interest income

      (110 )      (408 )      (545 )      (1,587 ) 

Stock-based compensation

      3,438        5,135        12,010        22,769   

(Gain) loss on derivative contracts

      (132,575 )      132,808        (4,792 )      70,051   

Cash received (paid) upon settlement of derivative contracts (2)

      3,445        (12,496 )      (23,382 )      18,396   

Other non-cash expense (income)

      533        (328 )      (1,044 )      (276 ) 

(Gain) loss on sale of assets (3)

      (995 )      539        (978 )      398,364   

Transaction costs

      162        589        399        2,218   

Legal settlements

      —          —          23        1,081   

Consent solicitation costs

      146        1,516        323        22,335   

Effect of Annual Incentive Plan adoption

      —          —          —          14,735   

Severance

      5        2,258        8,927        120,375   

Loss on extinguishment of debt

      —          —          —          82,005   

Non-cash portion of noncontrolling interest (4)

      6,594        (30,174 )      (58,518 )      (132,095 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 224,966      $ 244,216      $ 648,898      $ 765,933   
  

 

 

    

 

 

    

 

 

    

 

 

  

Pro forma adjustments

         

Less EBITDA attributable to

         

Permian properties sold (2013)

      —          —          —          (50,574 ) 

Gulf of Mexico properties sold (2014)

      —          (84,427 )      (53,376 )      (296,946 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Pro forma adjusted EBITDA

    $ 224,966      $ 159,789      $ 595,522      $ 418,413   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) Excludes unrealized gains on interest rate swaps of $2.4 million for the nine-month period ended September 30, 2013.
(2) Excludes amounts paid upon early settlement of derivative contracts.
(3) Includes loss on the Permian divestiture of approximately $398.9 million for the nine-month period ended September 30, 2013.
(4) Represents depreciation and depletion, impairment, loss on sale of Permian Properties (2013), (gain) loss on commodity derivative contracts net of cash (paid) received on settlement, legal settlement and income tax expense attributable to noncontrolling interests.

 

8

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2014     2013 (restated)     2014     2013 (restated)  
     (in thousands)  

Net cash provided by operating activities

    $ 164,892      $ 210,324      $ 395,684      $ 595,007   

Changes in operating assets and liabilities

      37,881        17,483        157,615        (31,150 ) 

Interest expense (1)

      59,893        61,793        184,234        212,436   

Cash paid on early settlement of derivative contracts

      —          —        25,434        29,300   

Transaction costs

      162        589        399        2,218   

Legal settlements

      —          —        23        1,081   

Consent solicitation costs

      146        1,516        323        22,335   

Effect of Annual Incentive Plan adoption

      —          —        —        14,735   

Severance

      (168 )      598        6,775        65,685   

Noncontrolling interest — SDT (2)

      (5,670 )      (8,841 )      (17,361 )      (32,109 ) 

Noncontrolling interest — SDR (2)

      (9,201 )      (15,648 )      (32,251 )      (52,664 ) 

Noncontrolling interest — PER (2)

      (18,697 )      (21,908 )      (58,635 )      (56,751 ) 

Noncontrolling interest — Other (2)

      —          31        (4 )      36   

Other non-cash items

      (4,272 )      (1,721 )      (13,338 )      (4,226 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 224,966      $ 244,216      $ 648,898      $ 765,933   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) Excludes unrealized gains on interest rate swaps of $2.4 million for the nine-month period ended September 30, 2013.
(2) Excludes depreciation and depletion, impairment, loss on sale of Permian Properties (2013), (gain) loss on commodity derivative contracts net of cash (paid) received on settlement, legal settlement and income tax expense attributable to noncontrolling interests.

Reconciliation of Income Available (Loss Applicable) to Common Stockholders to Adjusted Net Income Available

to Common Stockholders

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2014     2013 (restated)     2014     2013 (restated)  
     (in thousands)  

Income available (loss applicable) to common stockholders

    $ 145,957      $ (95,328 )    $ (51,036 )    $ (638,895 ) 

Tax (benefit) expense adjustment

      (1,160 )      687        (1,160 )      4,702   

Asset impairment (1)

      54        687        138,093        16,330   

(Gain) loss on derivative contracts (1)

      (116,719 )      112,580        (7,608 )      53,403   

Cash received (paid) upon settlement of derivative contracts (1)

      4,079        (8,695 )      (18,501 )      18,255   

(Gain) loss on sale of assets (1)

      (995 )      575        (978 )      326,660   

Transaction costs

      162        589        399        2,218   

Legal settlements (1)

      —          —          23        729   

Consent solicitation costs

      146        1,516        323        22,335   

Effect of Annual Incentive Plan adoption

      —          —          —          14,735   

Severance

      5        2,258        8,927        120,375   

Loss on extinguishment of debt

      —          —          —          82,005   

Other non-cash income

      (3 )      —          (1,690 )      (2,549 ) 

Effect of income taxes

      55        2,918        3,235        2,929   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted net income available to common stockholders

      31,581        17,787        70,027        23,232   

Preferred stock dividends

      11,381        13,881        39,144        41,644   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total adjusted net income

    $ 42,962      $ 31,668      $ 109,171      $ 64,876   
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average number of common shares outstanding

         

Basic

      485,458        483,582        485,194        480,209   

Diluted (2)

      575,912        573,716        578,125        571,354   

Total adjusted net income

         

Per share — basic

    $ 0.07      $ 0.04      $ 0.14      $ 0.05   
  

 

 

    

 

 

    

 

 

    

 

 

  

Per share — diluted

    $ 0.07      $ 0.06      $ 0.19      $ 0.11   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

(1) Excludes amounts attributable to noncontrolling interests.
(2) Weighted average fully diluted common shares outstanding for certain periods presented includes shares that are considered antidilutive for calculating earnings per share in accordance with GAAP.

 

9

Reconciliation of Net Income Attributable to Noncontrolling Interest to Adjusted Net Income Attributable to Noncontrolling Interest

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2014     2013     2014     2013  
     (in thousands)  

Net income attributable to noncontrolling interest

    $ 40,162      $ 16,191      $ 49,733      $ 9,393   

Asset impairment

      —          —          29,873        —     

Loss on sale of assets — Permian

      —          (36 )      —          71,704   

Legal settlement

      —          —          —          352   

(Gain) loss on derivative contracts

      (15,856 )      20,228        2,816        16,648   

Cash (paid) received on settlement of derivative contracts

      (634 )      (3,801 )      (4,881 )      141   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted net income attributable to noncontrolling interest

    $ 23,672      $ 32,582      $ 77,541      $ 98,238   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

10

Conference Participation

SandRidge Energy, Inc. will participate in the following upcoming events:

 

  •   January 8, 2015 — Goldman Sachs’ Global Energy Conference; Miami, FL
  •   January 14, 2015 — Global Hunter Securities’ Southern California Energy 1x1 Day; Los Angeles, CA
  •   March 24, 2015 — Howard Weil Energy Conference; New Orleans, LA

At 8:00 am Central Time on the day of each presentation, the corresponding slides and any webcast information will be accessible on the Investor Relations portion of the Company’s website at www.sandridgeenergy.com. Please check the website for updates regularly as this schedule is subject to change. Also, please note that SandRidge Energy, Inc. intends for its website to be used as a reliable source of information for all future events in which it may participate as well as updated presentations regarding the Company. Slides and webcasts (where applicable) will be archived and available for at least 30 days after each use or presentation.

Fourth Quarter 2014 Earnings Release and Conference Call

February 26, 2015 (Thursday) — Earnings press release after market close

February 27, 2015 (Friday) — Earnings conference call at 8:00 am CST

 

11

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 

     Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
     2014     2013
(restated)		     2014     2013
(restated)		  
     (Unaudited)  

Revenues

         

Oil, natural gas and NGL

    $ 359,613      $ 459,211      $ 1,104,835      $ 1,391,510   

Drilling and services

      21,348        16,149        57,280        49,597   

Midstream and marketing

      11,922        14,624        44,706        42,854   

Construction contract

      —          —          —          23,253   

Other

      1,224        3,619        5,056        11,066   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

      394,107        493,603        1,211,877        1,518,280   

Expenses

         

Production

      82,664        124,571        256,473        389,911   

Production taxes

      8,380        8,816        24,027        24,819   

Cost of sales

      15,992        13,773        38,942        45,438   

Midstream and marketing

      11,405        13,224        40,659        39,954   

Construction contract

      —          —          —          23,253   

Depreciation and depletion — oil and natural gas

      112,569        137,639        325,021        434,068   

Depreciation and amortization — other

      14,417        15,270        45,350        46,628   

Accretion of asset retirement obligations

      1,116        8,472        7,927        28,051   

Impairment

      54        687        167,966        16,330   

General and administrative

      24,584        37,714        86,115        172,301   

Employee termination benefits

      5        2,256        8,927        120,374   

(Gain) loss on derivative contracts

      (132,575 )      132,808        (4,792 )      70,051   

(Gain) loss on sale of assets

      (995 )      539        (978 )      398,364   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

      137,616        495,769        995,637        1,809,542   
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from operations

      256,491        (2,166 )      216,240        (291,262 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Other income (expense)

         

Interest expense

      (59,783 )      (61,385 )      (183,689 )      (208,454 ) 

Loss on extinguishment of debt

      —          —          —          (82,005 ) 

Other (expense) income, net

      (273 )      658        3,159        1,163   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total other expense

      (60,056 )      (60,727 )      (180,530 )      (289,296 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      196,435        (62,893 )      35,710        (580,558 ) 

Income tax (benefit) expense

      (1,064 )      2,363        (2,131 )      7,300   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

      197,499        (65,256 )      37,841        (587,858 ) 

Less: net income attributable to noncontrolling interest

      40,161        16,191        49,733        9,393   
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      157,338        (81,447 )      (11,892 )      (597,251 ) 

Preferred stock dividends

      11,381        13,881        39,144        41,644   
  

 

 

    

 

 

    

 

 

    

 

 

  

Income available (loss applicable) to SandRidge Energy, Inc. common stockholders

    $ 145,957      $ (95,328 )    $ (51,036 )    $ (638,895 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) per share

         

Basic

    $ 0.30      $ (0.20 )    $ (0.11 )    $ (1.33 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Diluted

    $ 0.27      $ (0.20 )    $ (0.11 )    $ (1.33 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Weighted average number of common shares outstanding

  

Basic

      485,458        483,582        485,194        480,209   
  

 

 

    

 

 

    

 

 

    

 

 

  

Diluted

      575,911        483,582        485,194        480,209   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

12

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

     September 30,
2014		     December 31,
2013 (revised)		  
     (Unaudited)  
ASSETS       

Current assets

     

Cash and cash equivalents

    $ 590,246      $ 814,663   

Accounts receivable, net

      330,543        349,218   

Derivative contracts

      53,919        12,779   

Prepaid expenses

      6,794        39,253   

Other current assets

      23,223        25,910   
  

 

 

    

 

 

  

Total current assets

      1,004,725        1,241,823   

Oil and natural gas properties, using full cost method of accounting

     

Proved

      11,252,074        10,972,816   

Unproved

      300,224        531,606   

Less: accumulated depreciation, depletion and impairment

      (6,250,457 )      (5,762,969 ) 
  

 

 

    

 

 

  
     5,301,841        5,741,453   
  

 

 

    

 

 

  

Other property, plant and equipment, net

      578,864        566,222   

Derivative contracts

      15,891        14,126   

Other assets

      77,068        121,171   
  

 

 

    

 

 

  

Total assets

    $ 6,978,389      $ 7,684,795   
  

 

 

    

 

 

  
LIABILITIES AND EQUITY     

Current liabilities

     

Accounts payable and accrued expenses

    $ 652,649      $ 812,488   

Derivative contracts

      —          34,267   

Asset retirement obligations

      —          87,063   

Other current liabilities

      18,549        —     
  

 

 

    

 

 

  

Total current liabilities

      671,198        933,818   

Long-term debt

      3,195,301        3,194,907   

Derivative contracts

      —          20,564   

Asset retirement obligations

      57,696        337,054   

Other long-term obligations

      16,418        22,825   
  

 

 

    

 

 

  

Total liabilities

      3,940,613        4,509,168   
  

 

 

    

 

 

  

Commitments and contingencies

     

Equity

     

SandRidge Energy, Inc. stockholders’ equity

     

Preferred stock, $0.001 par value, 50,000 shares authorized

     

8.5% Convertible perpetual preferred stock; 2,650 shares issued and outstanding at September 30, 2014 and December 31, 2013; aggregate liquidation preference of $265,000

      3        3   

6.0% Convertible perpetual preferred stock; 2,000 shares issued and outstanding at September 30, 2014 and December 31, 2013; aggregate liquidation preference of $200,000

      2        2   

7.0% Convertible perpetual preferred stock; 3,000 shares issued and outstanding at September 30, 2014 and December 31, 2013; aggregate liquidation preference of $300,000

      3        3   

Common stock, $0.001 par value, 800,000 shares authorized; 491,262 issued and 490,224 outstanding at September 30, 2014 and 491,609 issued and 490,290 outstanding at December 31, 2013

      483        483   

Additional paid-in capital

      5,292,874        5,298,301   

Additional paid-in capital — stockholder receivable

      (3,750 )      (3,750 ) 

Treasury stock, at cost

      (6,823 )      (8,770 ) 

Accumulated deficit

      (3,511,498 )      (3,460,462 ) 
  

 

 

    

 

 

  

Total SandRidge Energy, Inc. stockholders’ equity

      1,771,294        1,825,810   

Noncontrolling interest

      1,266,482        1,349,817   
  

 

 

    

 

 

  

Total equity

      3,037,776        3,175,627   
  

 

 

    

 

 

  

Total liabilities and equity

    $ 6,978,389      $ 7,684,795   
  

 

 

    

 

 

  

 

13

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Nine Months Ended September 30,  
     2014     2013
(restated)		  
     (Unaudited)  

CASH FLOWS FROM OPERATING ACTIVITIES

     

Net income (loss)

    $ 37,841      $ (587,858 ) 

Adjustments to reconcile net income (loss) to net cash provided by operating activities

     

Depreciation, depletion and amortization

      370,371        480,696   

Accretion of asset retirement obligations

      7,927        28,051   

Impairment

      167,966        16,330   

Debt issuance costs amortization

      7,045        7,730   

Amortization of discount, net of premium, on long-term debt

      394        913   

Loss on extinguishment of debt

      —          82,005   

Deferred income tax provision

      —          4,702   

(Gain) loss on derivative contracts

      (4,792 )      70,051   

Cash paid on settlement of derivative contracts

      (48,816 )      (17,943 ) 

(Gain) loss on sale of assets

      (978 )      398,364   

Stock-based compensation

      15,853        79,317   

Other

      488        1,499   

Changes in operating assets and liabilities

      (157,615 )      31,150   
  

 

 

    

 

 

  

Net cash provided by operating activities

      395,684        595,007   
  

 

 

    

 

 

  

CASH FLOWS FROM INVESTING ACTIVITIES

     

Capital expenditures for property, plant and equipment

      (1,071,465 )      (1,163,539 ) 

Acquisitions of assets

      (16,920 )      (15,527 ) 

Proceeds from sale of assets

      714,294        2,567,355   
  

 

 

    

 

 

  

Net cash (used in) provided by investing activities

      (374,091 )      1,388,289   
  

 

 

    

 

 

  

CASH FLOWS FROM FINANCING ACTIVITIES

  

Repayments of borrowings

      —          (1,115,500 ) 

Premium on debt redemption

      —          (61,997 ) 

Debt issuance costs

      —          (91 ) 

Proceeds from sale of royalty trust units

      22,119        28,985   

Noncontrolling interest distributions

      (150,440 )      (153,002 ) 

Acquisition of ownership interest

      (2,730 )      —     

Stock-based compensation excess tax benefit

      14        (4 ) 

Purchase of treasury stock

      (8,278 )      (31,270 ) 

Repurchase of common stock

      (17,542 )      —     

Dividends paid — preferred

      (45,025 )      (45,025 ) 

Cash (paid) received on settlement of financing derivative contracts

      (44,128 )      5,099   
  

 

 

    

 

 

  

Net cash used in financing activities

      (246,010 )      (1,372,805 ) 
  

 

 

    

 

 

  

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

      (224,417 )      610,491   

CASH AND CASH EQUIVALENTS, beginning of year

      814,663        309,766   
  

 

 

    

 

 

  

CASH AND CASH EQUIVALENTS, end of period

    $ 590,246      $ 920,257   
  

 

 

    

 

 

  

Supplemental Disclosure of Cash Flow Information

     

Cash paid for interest, net of amounts capitalized

    $ (209,939 )    $ (248,233 ) 

Cash paid for income taxes

    $ (543 )    $ (2,911 ) 

Supplemental Disclosure of Noncash Investing and Financing Activities

     

Deposit on pending sale

    $ —        $ (255,000 ) 

Change in accrued capital expenditures

    $ (49,072 )    $ 65,087   

Asset retirement costs capitalized

    $ 3,398      $ 4,145   

 

14

For further information, please contact:

Duane M. Grubert

EVP — Investor Relations and Strategy

SandRidge Energy, Inc.

123 Robert S. Kerr Avenue

Oklahoma City, OK 73102-6406

(405) 429-5515

Cautionary Note to Investors — This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes. The forward-looking statements include statements about the Company’s future capital spending, drilling and development plans, estimates of oil and natural gas production, rates of return, derivative transactions, liquidity, debt maturities and operating costs. We have based these forward-looking statements on our current expectations and assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including the volatility of oil and natural gas prices, our success in discovering, estimating, developing and replacing oil and natural gas reserves, actual decline curves and the actual effect of adding compression to natural gas wells, the availability and terms of capital, the ability of counterparties to transactions with us to meet their obligations, our timely execution of hedge transactions, credit conditions of global capital markets, changes in economic conditions, the amount and timing of future development costs, the availability and demand for alternative energy sources, regulatory changes, including those related to carbon dioxide and greenhouse gas emissions and other factors, many of which are beyond our control. We refer you to the discussion of risk factors in Part I, Item 1A — “Risk Factors” of our amended Annual Report on Form 10-K/A for the year ended December 31, 2013. All of the forward-looking statements made in this press release are qualified by these cautionary statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on our company or our business or operations. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements.

SandRidge Energy, Inc. (NYSE: SD) is an oil and natural gas Company headquartered in Oklahoma City, Oklahoma with its principal focus on exploration and production. SandRidge and its subsidiaries also own and operate gas gathering and processing facilities, saltwater gathering and electrical infrastructure facilities and conduct marketing operations. In addition, Lariat Services, Inc., a wholly-owned subsidiary of SandRidge, owns and operates a drilling rig and related oil field services business. SandRidge focuses its exploration and production activities in the Mid-Continent region of the United States. SandRidge’s internet address is www.sandridgeenergy.com.

 

15