SandRidge Energy, Inc. Reports Financial and Operational Results for Fourth Quarter and Full Year 2012

Mississippian Quarterly Production Grew to 35.9 MBoe per Day, a 19% Increase from the Previous Period and a 131% Increase over the Fourth Quarter of 2011

Record Oil and Total Production of 18.0 MMBbls and 33.6 MMBoe in 2012

Total Proved Reserve Growth of 20% and Reserve Replacement of 454%

Closes Sale of Permian Basin Assets for $2.6 Billion

Updates 2013 Guidance, Giving Effect to the Permian Divestiture

- Estimated Total Production of 34.3 MMBoe

- Estimated Mississippian Production of 17.4 MMBoe, 72% Growth

- Reaffirms Planned Capital Expenditures of $1.75 Billion

28 Feb, 2013, 16:05 ET from SandRidge Energy, Inc.

OKLAHOMA CITY, Feb. 28, 2013 /PRNewswire/ -- SandRidge Energy, Inc. (NYSE: SD) today announced financial and operational results for the quarter and year ended December 31, 2012.

(Logo:  http://photos.prnewswire.com/prnh/20120416/DA88110LOGO)

Key Financial Results

Fourth Quarter

  • Adjusted EBITDA of $318 million for fourth quarter 2012 compared to $175 million in fourth quarter 2011.
  • Operating cash flow of $259 million for fourth quarter 2012 compared to $154 million in fourth quarter 2011.
  • Net loss applicable to common stockholders of $302 million, or $0.63 per diluted share, for fourth quarter 2012 compared to net loss applicable to common stockholders of $389 million, or $0.97 per diluted share, in fourth quarter 2011.
  • Adjusted net income of $35.3 million, or $0.06 per diluted share, for fourth quarter 2012 compared to adjusted net income of $8.7 million, or $0.02 per diluted share, in fourth quarter 2011.

Full Year

  • Adjusted EBITDA of $1,070 million for 2012 compared to $654 million in 2011.
  • Operating cash flow of $915 million for 2012 compared to $542 million in 2011.
  • Net income available to common stockholders of $86 million, or $0.19 per diluted share, for 2012 compared to net income available to common stockholders of $52 million, or $0.13 per diluted share, in 2011.
  • Adjusted net income of $124.3 million, or $0.23 per diluted share, for 2012 compared to adjusted net income of $6.9 million, or $0.01 per diluted share, in 2011.

Adjusted net income available (loss applicable) to common stockholders, adjusted EBITDA and 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 10.

Highlights

  • Consolidated SEC PV-10 reserves value of $7.5 billion, a 9% increase from 2011
  • Consolidated proved reserves of 566 MMBoe, a 20% increase from 2011
  • Consolidated proved oil reserves of 330 MMBbls, a 35% increase from 2011
  • Year end liquidity of $2.5 billion, pro forma for Permian sale and $1.1 billion in debt reduction
  • Mississippian average 30-day IP increased 17% for wells completed in the fourth quarter versus wells completed in the third quarter
  • Reduced Mississippian well cost by 14% in 2012 to $3.1 million
  • Reduced fourth quarter Mississippian lease operating expense by 43% year-over-year
  • New percent of proceeds gathering arrangement captures NGL volumes in the Mississippian play
  • Drilled 60 disposal wells in 2012 bringing the total number of disposal wells to 113 and system capacity to 1.6 million barrels of water per day

Presentation slides to be viewed in conjunction with certain of the above operational highlights are available on the company's website, www.sandridgeenergy.com, under Investor Relations/Events.

Drilling and Operational Activities

SandRidge averaged 42 rigs operating during the fourth quarter of 2012 and drilled 242 wells. The company drilled a total of 1,117 wells during 2012. A total of 232 operated wells were completed and brought on production during the fourth quarter of 2012, bringing the total number of operated wells completed and brought on production during 2012 to 1,088 wells.

Mississippian Play. During the fourth quarter of 2012, SandRidge drilled 125 horizontal wells: 85 in Oklahoma and 40 in Kansas. This brings the total horizontal wells drilled during 2012 to 396 wells. Additionally, SandRidge drilled eight disposal wells in the fourth quarter for a total of 60 disposal wells in 2012. To date, over 1,500 horizontal wells have been drilled in the Mississippian play, including 682 drilled by SandRidge. The company exited the year with 33 rigs operating in the play: 24 drilling horizontal wells in Oklahoma, eight drilling horizontal wells in Kansas and one drilling disposal wells.

Permian Basin. The company drilled 115 wells during the fourth quarter, which brings the total wells drilled during 2012 to 717 wells. The company has announced it has closed the sale of its Permian assets other than those associated with SandRidge Permian Trust. The sold assets produced approximately 23 MBoe per day during the fourth quarter.

Gulf of Mexico. During 2012, SandRidge drilled two wells and participated in the drilling of four non-operated wells with three wells in progress at year end for a total of nine wells in 2012.  Additionally, SandRidge performed 21 recompletions and participated in 12 non-operated recompletions for total of 33 recompletions in 2012.

Proved Reserves

The company's estimated consolidated proved reserves as of December 31, 2012 were 566 MMBoe, representing a 37% increase (after adjustments for asset sales and production) from December 31, 2011. During 2012, the company recognized additional consolidated proved reserves of 265 MMBoe primarily as a result of successful drilling in the Mississippian Play and the Permian Basin and from acquisition of reserves in place from the Gulf of Mexico. This increase was offset by 112 MMBoe of downward revisions, primarily in the Piñon Field as a result of lower natural gas prices.  Proved developed reserves constituted 57% of total consolidated reserves as of December 31, 2012. Third party engineers evaluated a combined 98% of the total consolidated proved PV-10 value as of December 31, 2012.

The December 31, 2012 estimated future net cash flows from consolidated proved reserves, discounted at an annual rate of 10%, before income taxes ("PV-10") were $7.5 billion, an increase of 9% from December 31, 2011 and an increase of 43% after adjustments for asset sales and production. The weighted average wellhead prices, which are based on index prices and adjusted for transportation and regional price differentials, used to estimate the company's consolidated proved reserves and future net revenues were $91.65 per barrel and $2.29 per Mcf at December 31, 2012 compared to $85.77 per barrel and $4.06 per Mcf at December 31, 2011.

Proved developed drilling finding costs and proved developed all-in finding costs, which include drilling, land and seismic costs, were $21.68 and $24.02 per Boe, respectively, for the year ended December 31, 2012.

Analysis of Changes in Consolidated Proved Reserves

Oil(1)

Net Gas

Net Reserves

PV-10

(MBbls)

(MMcf)

(MBoe)

($M)

Year-end 2011(2)(3)

244,784

1,355,056

470,628

$6,875,872

Sales

(23,556)

(548)

(23,647)

Production

(17,962)

(93,549)

(33,553)

Purchases

32,153

202,995

65,986

Extensions

116,915

489,302

198,466

Revisions - changes to previous estimates

(18,536)

26,703

(14,085)

Revisions - price

(3,760)

(564,917)

(97,913)

Year-end 2012(2)(3)

330,040

1,415,042

565,880

$7,488,444

Permian Sale Adjustments

(160,836)

(228,229)

(198,874)

($3,177,582)

Pro Forma Year-end 2012

169,204

1,186,813

367,006

$4,310,862

(1) Includes NGLs.

(2) Includes approximately 38,230 MBoe and 26,350 MBoe attributable to noncontrolling interests at December 31, 2012 and 2011, respectively.

(3) Includes PV-10 attributable to noncontrolling interests of approximately $955 million and $935 million at December 31, 2012 and 2011, respectively.

Operational and Financial Statistics

Information regarding the company's production, pricing, costs and earnings is presented below:

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Production

Oil (MBbl) (1)

5,037

3,290

17,962

11,830

Natural gas (MMcf)

28,717

16,866

93,549

69,306

Oil equivalent (MBoe)

9,823

6,101

33,553

23,381

Daily production (MBoed)

106.8

66.3

91.7

64.1

Average price per unit

Realized oil price per barrel - as reported (1)

$  81.61

$  84.74

$  84.95

$  83.21

Realized impact of derivatives per barrel (1)

9.39

(5.46)

5.07

(6.80)

Net realized price per barrel (1)

$  91.00

$  79.28

$  90.02

$  76.41

Realized natural gas price per Mcf - as reported

$    3.09

$    2.99

$    2.49

$    3.50

Realized impact of derivatives per Mcf

(0.30)

0.12

(0.03)

(0.23)

Net realized price per Mcf

$    2.79

$    3.11

$    2.46

$    3.27

Realized price per Boe - as reported

$  50.89

$  53.97

$  52.43

$  52.47

Net realized price per Boe - including impact of derivatives

$  54.81

$  51.35

$  55.05

$  48.35

Average cost per Boe

Lease operating 

$  13.67

$  13.20

$  14.22

$  13.81

Production taxes

1.12

2.04

1.41

1.97

General and administrative

General and administrative, excluding stock-based compensation (2)

7.45

4.93

5.93

4.70

Stock-based compensation

0.98

1.68

1.28

1.65

Depletion (3)

18.83

14.72

17.79

13.97

Lease operating cost per Boe

Mississippian

$    7.65

$  13.38

$    8.81

$  10.65

Permian Basin

10.86

11.30

11.40

12.81

Offshore

21.51

33.88

21.87

38.30

Earnings per share

(Loss) earnings per share applicable to common stockholders

Basic

$   (0.63)

$   (0.97)

$    0.19

$    0.13

Diluted

(0.63)

(0.97)

0.19

0.13

Adjusted net income (loss) per share available (applicable) to common stockholders

Basic

$    0.04

$   (0.01)

$    0.15

$   (0.12)

Diluted

0.06

0.02

0.23

0.01

Weighted average number of common shares outstanding (in thousands)

Basic

476,241

399,430

453,595

398,851

Diluted (4)

566,664

497,833

546,148

496,779

(1)

Includes NGLs.

(2)

Includes transaction costs, one-time fees for legal settlement and consent solicitation costs totaling $27.8 million and $43.0 million for the three-month period and year ended December 31, 2012, respectively. Includes transaction costs of $0.8 million and $5.4 million for the three-month period and year ended December 31, 2011, respectively.

(3)

Includes accretion of asset retirement obligation.

(4)

Includes shares considered antidilutive for calculating earnings per share in accordance with GAAP for certain periods presented.

Discussion of 2012 Financial Results

Fourth Quarter

Oil and natural gas revenue increased 52% to $500 million in the fourth quarter of 2012 from $329 million in the same period of 2011 as a result of increases in oil and natural gas production. Oil production increased 53% to 5.0 MMBbls from fourth quarter 2011 production of 3.3 MMBbls and natural gas production increased 70% to 28.7 Bcf from fourth quarter 2011 production of 16.9 Bcf. Production increases were attributable to continued development of the company's properties in the Mississippian play and production contributed by properties acquired in the second quarter of 2012. Realized reported prices, which exclude the impact of derivative settlements, were $81.61 per barrel and $3.09 per Mcf during the fourth quarter of 2012. Realized reported prices in the same period of 2011 were $84.74 per barrel and $2.99 per Mcf.

Fourth quarter 2012 production expense was $13.67 per Boe compared to fourth quarter 2011 production expense of $13.20 per Boe. The increase was primarily due to the additional costs related to offshore properties acquired during the second quarter of 2012 and an accrual of $8.5 million at December 31, 2012 related to the company's shortfall in meeting its 2012 CO2 delivery requirement. In SandRidge's primary onshore operations, production expense continued to decrease as a result of improving efficiencies. In the company's Mississippian play, fourth quarter production expense decreased 43% year-over-year from $13.38 to $7.65 per Boe.

Depletion per unit in the fourth quarter of 2012 was $18.83 per Boe compared to $14.72 per Boe in the same period of 2011. The increase in rate per unit primarily resulted from the addition of offshore properties acquired during the second quarter of 2012 to the company's depletable asset base and, to a lesser extent, from non-core asset sales in the first half of 2012 and the fourth quarter of 2011.

Impairments of non-oil and gas assets totaling $315 million were recorded in the fourth quarter of 2012. Upon completion of the Century Plant in Pecos County, Texas in the fourth quarter of 2012, the company determined that future use of its legacy gas treating plants and CO2 compression facilities in the Piñon Field area of west Texas will be limited and, accordingly, recorded a $79 million impairment of those assets. Additionally, upon the company's entry during the fourth quarter of 2012 into an agreement to sell its Permian Properties, the company evaluated its goodwill for impairment and determined its carrying value of approximately $236 million to be fully impaired.

Full Year

Oil and natural gas revenue increased 43% to $1,759 million in 2012 from $1,227 million in 2011 as a result of increases in oil and natural gas production. Oil production increased 52% to 18.0 MMBbls from 2011 production of 11.8 MMBbls and natural gas production increased 35% to 93.5 Bcf from 2011 production of 69.3 Bcf. Production increases were attributable to continued development of the company's properties in the Mississippian play and production contributed by properties acquired in the second quarter of 2012. Realized reported prices, which exclude the impact of derivative settlements, were $84.95 per barrel and $2.49 per Mcf during 2012. Realized reported prices in 2011 were $83.21 per barrel and $3.50 per Mcf.

Production expense for 2012 was $14.22 per Boe compared to 2011 production expense of $13.81 per Boe. The increase was primarily due to the additional costs related to offshore properties acquired during the second quarter of 2012. In the company's Mississippian play, 2012 production expense decreased 17% year-over-year from $10.65 to $8.81 per Boe.

Depletion per unit in 2012 was $17.79 per Boe compared to $13.97 per Boe in 2011. The increase in rate per unit primarily resulted from the addition of offshore properties acquired during the second quarter of 2012 to the company's depletable asset base and, to a lesser extent, from non-core asset sales in the first half of 2012 and the fourth quarter of 2011.

Capital Expenditures

The table below summarizes the company's capital expenditures for the three and twelve-month periods ended December 31, 2012 and 2011 (in thousands):

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Drilling and production

Mid-Continent

$251,108

$173,452

$   927,186

$   620,647

Permian Basin

120,667

180,506

645,045

692,193

Gulf of Mexico

64,801

526

155,249

906

WTO/Tertiary/Other

1,901

15,435

36,579

51,950

438,477

369,919

1,764,059

1,365,696

Leasehold and seismic

Mid-Continent

10,024

74,349

156,961

307,169

Permian Basin

2,555

2,891

15,463

31,977

Gulf of Mexico

2,135

-

14,861

112

WTO/Tertiary/Other

1,094

1,211

3,543

8,710

15,808

78,451

190,828

347,968

Pipe inventory (1)

4,060

1,031

(3,941)

(16,329)

Total exploration and development (2)

458,345

449,401

1,950,946

1,697,335

Drilling and oil field services

302

4,983

27,527

25,674

Midstream

18,454

23,123

80,413

38,514

Other - general 

23,688

16,800

115,096

54,971

Total capital expenditures, excluding acquisitions

500,789

494,307

2,173,982

1,816,494

Acquisitions (3)

(13,758)

11,877

840,740

34,628

Total capital expenditures

$487,031

$506,184

$3,014,722

$1,851,122

Plugging and abandonment

$  19,728

$    5,328

$     84,361

$     16,531

(1)

Pipe inventory expenditures for the years ended December 31, 2012 and 2011 represent transfers of pipe inventory to the full cost pool for use in drilling and production activities.

(2)

Exploration and development expenditures for the three months ended December 31, 2012 and 2011 exclude $40.0 million and $6.0 million, respectively, of estimated loss on Century Plant construction contract. Exploration and development expenditures for the years ended December 31, 2012 and 2011 exclude $50.0 million and $25.0 million, respectively, of estimated loss on Century Plant construction contract.

(3)

Acquisitions for the three months and year ended December 31, 2012 reflects $15.4 million and $16.3 million, respectively, received from Atinum and Repsol to participate in acquisitions. Acquisition expenditures for the year ended December 31, 2012 exclude common stock valued at approximately $542.1 million issued in connection with and tax liability adjustments resulting from the Dynamic acquisition.

Derivative Contracts

The tables below set forth the company's consolidated oil and natural gas price and basis swaps and collars for the years 2013 through 2015 as of February 26, 2013 and include contracts that have been novated to, or the benefits of which have been conveyed to, SandRidge sponsored royalty trusts.

Quarter Ending

3/31/2013

6/30/2013

9/30/2013

12/31/2013

Oil (MMBbls):

Swap Volume

4.53

3.44

3.36

3.34

   Swap

$97.56

$98.84

$98.62

$98.46

Collar Volume

0.04

0.04

0.04

0.04

   Collar:  High

$102.50

$102.50

$102.50

$102.50

   Collar:  Low

$80.00

$80.00

$80.00

$80.00

LLS Basis Volume

0.27

0.27

-

-

  Swap

$15.16

$12.51

-

-

Natural Gas (Bcf):

Collar Volume

1.71

1.71

1.72

1.72

   Collar:  High

$6.71

$6.71

$6.71

$6.71

   Collar:  Low

$3.78

$3.78

$3.78

$3.78

Year Ending

12/31/2013

12/31/2014

12/31/2015

Oil (MMBbls):

Swap Volume

14.67

7.51

5.08

   Swap

$98.31

$92.43

$83.69

Collar Volume

0.17

-

-

   Collar:  High

$102.50

-

-

   Collar:  Low

$80.00

-

-

Three-way Collar Volume

-

8.21

2.92

   Call Price 

-

100.00

$103.13

   Put Price 

-

90.20

$90.82

   Short Put Price 

-

70.00

$73.13

LLS Basis Volume

0.54

-

-

   Swap

$13.83

-

-

Natural Gas (Bcf):

Collar Volume

6.86

0.94

1.01

   Collar:  High

$6.71

$7.78

$8.55

   Collar:  Low

$3.78

$4.00

$4.00

 

Balance Sheet

The company's capital structure at December 31, 2012 and December 31, 2011 is presented below (in thousands):

December 31, 

December 31,

2012

2011

Cash and cash equivalents

$           309,766

$           207,681

Current maturities of long-term debt

$                       -

$               1,051

Long-term debt (net of current maturities)

Senior credit facility

-

-

Mortgage

-

14,978

Senior Notes

Senior Floating Rate Notes due 2014

-

350,000

9.875% Senior Notes due 2016, net

356,657

354,579

8.0% Senior Notes due 2018

750,000

750,000

8.75% Senior Notes due 2020, net

444,127

443,568

7.5% Senior Notes due 2021

1,179,328

900,000

8.125% Senior Notes due 2022

750,000

-

7.5% Senior Notes due 2023, net

820,971

-

  Total debt 

4,301,083

2,814,176

Stockholders' equity

Preferred stock

8

8

Common stock

476

399

Additional paid-in capital

5,228,019

4,568,856

Treasury stock, at cost

(8,602)

(6,158)

Accumulated deficit

(2,851,048)

(2,937,094)

Total SandRidge Energy, Inc. stockholders' equity

2,368,853

1,626,011

Noncontrolling interest

1,493,602

922,939

Total capitalization

$        8,163,538

$        5,363,126

 

During the fourth quarter of 2012, the company's debt, net of cash balances, increased by approximately $365 million and for the full year 2012, increased by approximately $1.4 billion.  This increase is a result of funding the company's drilling program and the cash portion of the Dynamic acquisition. On February 26, 2013, the company had no amount drawn under its $775 million senior credit facility and, due to the closing of the Permian sale, approximately $2.7 billion of cash. The company was in compliance with all applicable covenants contained in its debt agreements during 2012 and through and as of the date of this release.

The company has begun a process to redeem all of its outstanding 9.875% Senior Notes due 2016, with an aggregate principal amount outstanding of $365.5 million, and all of its 8% Senior Notes due 2018, with an aggregate principal amount outstanding of $750 million.  The redemptions, which are being funded with a portion of the proceeds from the sale of the Permian assets, are expected to close on March 28, 2013.

2013 Operational Guidance: The company is updating its guidance for 2013.

Year Ending

December 31, 2013

Previous

Updated

Projection as of

Projection as of

November 8, 2012

February 28, 2013

Production

Oil (MMBbls)  (1)

19.5

15.9

Natural Gas (Bcf)

118.2

110.4

Total (MMBoe)

39.2

34.3

Differentials

Oil  (1)

$8.00

$8.50

Natural Gas

$0.40

$0.45

Costs per Boe

Lifting 

$14.50 - $16.50

$14.50 - $16.50

Production Taxes

1.35 - 1.55

1.00 - 1.20

DD&A - oil & gas

18.00 - 19.80

16.50 - 18.30

DD&A - other

1.80 - 2.00

1.80 - 2.00

Total DD&A

$19.80 - $21.80

$18.30 - $20.30

G&A - cash

4.00 - 4.45

4.00 - 4.45

G&A - stock

1.20 - 1.35

1.35 - 1.50

Total G&A

$5.20 - $5.80

$5.35 - $5.95

Interest Expense

$9.10 - $10.10

$8.10 - $9.10

EBITDA from Oilfield Services, Midstream and Other ($ in millions) (2)

$55

$30

Adjusted Net Income Attributable to Noncontrolling Interest ($ in millions) (3)

$170

$150

P&A Cash Cost ($ in millions)

$120

$120

Corporate Tax Rate (4)

0%

0%

Deferral Rate

0%

0%

Shares Outstanding at End of Period (in millions)

Common Stock

498

498

Preferred Stock (as converted)

90

90

Fully Diluted

588

588

Capital Expenditures ($ in millions)

Exploration and Production

$1,450

$1,450

Land and Seismic

100

100

Total Exploration and Production

$1,550

$1,550

Oil Field Services

30

30

Midstream and Other

170

170

Total Capital Expenditures (excluding acquisitions)

$1,750

$1,750

(1)

Includes NGLs.

(2)

EBITDA from Oilfield Services, Midstream and Other is a non-GAAP financial measure as it excludes from net income interest expense, income tax expense and depreciation, depletion and amortization. The most directly comparable GAAP measure for EBITDA from Oilfield Services, Midstream and Other is Net Income from Oilfield Services, Midstream and Other. Information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time, as management is unable to forecast the excluded items for future periods and/or does not forecast the excluded items on a segment basis.

(3) 

Adjusted Net Income Attributable to Noncontrolling Interest is a non-GAAP financial measure as it excludes unrealized gain or loss on derivative contracts and gain or loss on sale of assets. The most directly comparable GAAP measure for Adjusted Net Income Attributable to Noncontrolling Interest is Net Income Attributable to Noncontrolling Interest. Information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time, as management is unable to forecast the excluded items for future periods.

(4)

As a result of the Permian divestiture, the company expects to incur cash income taxes of approximately $15 million in 2013 with a corresponding expense included in Net Income.

2013 Guidance Update:  The updated guidance gives effect to the Permian divestiture, which closed on February 26, 2013. SandRidge estimates production of approximately 34.3 MMBoe and capital expenditures of $1.75 billion in 2013. A majority of SandRidge's planned capital expenditures will go to funding its Mississippian program, where the company plans to drill approximately 580 horizontal producers and 74 disposal wells in 2013. The remaining 2013 drilling capital will be used to maintain production levels in the company's offshore properties and to drill approximately 220 wells associated with the SandRidge Permian Trust development program.

Non-GAAP Financial Measures

Operating cash flow, adjusted EBITDA, adjusted net income available (loss applicable) to common stockholders, adjusted net income attributable to noncontrolling interest and PV-10 are non-GAAP financial measures.

The company defines operating cash flow as net cash provided by operating activities before changes in operating assets and liabilities and adjusted for cash received (paid) on financing derivatives. It defines EBITDA as net (loss) income before income tax expense (benefit), interest expense and depreciation, depletion and amortization and accretion of asset retirement obligations. Adjusted EBITDA, as presented herein, is EBITDA excluding interest income, realized gains on early settlements of derivative contracts, non-cash realized losses on amended derivative contracts, non-cash realized losses on financing derivative contracts, (gain) loss on sale of assets, transaction costs, legal settlements, consent solicitation fees, bargain purchase gain, loss on extinguishment of debt and other various non-cash items (including non-cash portion of noncontrolling interest, stock-based compensation, unrealized losses (gains) on derivative contracts, provision for doubtful accounts, asset impairment and inventory obsolescence).

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 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, 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 available (loss applicable) to common stockholders, which excludes unrealized losses (gains) on derivative contracts, realized gains on early settlements of derivative contracts, bargain purchase gain, tax benefit resulting from acquisition, financing commitment fees, non-cash realized losses on financing derivative contracts, transaction costs, legal settlements, consent solicitation fees, loss on extinguishment of debt, non-cash realized losses on amended derivative contracts and (gain) loss on sale of assets from (loss applicable) income available 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 available (loss applicable) to common stockholders is not a measure of financial performance under GAAP and should not be considered a substitute for (loss applicable) income available 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 unrealized loss (gain) on commodity derivative contracts and asset impairment attributable to third party ownership in less than wholly-owned consolidated subsidiaries from net (loss) income 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.

PV-10 represents the present value of estimated future cash inflows from proved oil and natural gas reserves, less future development and production costs, discounted at 10% per annum to reflect timing of future cash flows and using 12-month average prices. PV-10 differs from Standardized Measure, the most directly comparable GAAP measure, because it does not include the effects of income taxes on future net revenues. Management uses PV-10 as an arbitrary reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities that are not dependent on the tax-paying status of the entity.

The tables below reconcile the most directly comparable GAAP financial measures to operating cash flow, EBITDA and adjusted EBITDA, adjusted net income available (loss applicable) to common stockholders, adjusted net income attributable to noncontrolling interest and PV-10.

 

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

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

(in thousands)

Net cash provided by operating activities

$198,930

$137,331

$783,160

$458,954

Add (deduct)

Cash received (paid) on financing derivatives

4,185

1,267

(34,518)

6,538

Changes in operating assets and liabilities

56,198

15,368

166,100

76,367

Operating cash flow

$259,313

$153,966

$914,742

$541,859

 

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

(in thousands)

Net (loss) income

$(287,904)

$(374,716)

$   141,571

$108,065

Adjusted for

Income tax expense (benefit)

12

196

(100,362)

(5,817)

Interest expense (1)

88,793

60,274

312,869

243,818

Depreciation and amortization - other

15,729

13,712

60,805

53,630

Depreciation and depletion - oil and natural gas

175,577

87,487

568,029

317,246

Accretion of asset retirement obligations

9,371

2,329

28,996

9,368

EBITDA

1,578

(210,718)

1,011,908

726,310

Asset impairment

314,723

2,825

316,004

2,825

Provision for doubtful accounts

850

889

1,735

2,511

Inventory obsolescence

46

(105)

174

40

Interest income

(450)

(146)

(1,466)

(240)

Stock-based compensation

8,982

9,528

39,682

36,017

Unrealized losses (gains) on derivative contracts

16,950

426,132

(217,755)

(101,034)

Realized gains on early settlements of derivative contracts

-

-

(59,338)

(45,627)

Non-cash realized losses on amended derivative contracts

-

-

117,108

-

Non-cash realized losses on financing derivative contracts

3,974

1,277

10,840

6,443

Other non-cash (income) expense

(625)

(2,672)

(3,821)

(2,012)

(Gain) loss on sale of assets

(666)

(896)

3,089

(2,044)

Transaction costs

369

823

15,645

5,354

Legal settlements

25,000

-

25,000

-

Consent solicitation fees

2,420

-

2,420

-

Bargain purchase gain

-

-

(122,696)

-

Loss on extinguishment of debt

19

-

3,075

38,232

Non-cash portion of noncontrolling interest (2)

(54,955)

(52,183)

(71,647)

(13,167)

Adjusted EBITDA

$ 318,215

$ 174,754

$1,069,957

$653,608

(1)

Excludes unrealized gains on interest rate swaps of $2.4 million and $2.9 million for the three-month periods ended December 31, 2012 and 2011, and $8.1 million and $6.2 million for the years ended December 31, 2012 and 2011, respectively.

(2)

Represents depreciation and depletion, impairment on goodwill and certain Midstream assets, unrealized (gains) losses on commodity derivative contracts and income tax expense attributable to noncontrolling interests.

 

 

Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

(in thousands)

Net cash provided by operating activities

$198,930

$137,331

$   783,160

$458,954

Changes in operating assets and liabilities

56,198

15,368

166,100

76,367

Interest expense (1)

88,793

60,274

312,869

243,818

Realized gains on early settlements of non-financing derivative contracts

-

-

(33,165)

(45,627)

Transaction costs

369

823

15,645

5,354

Legal settlements

25,000

-

25,000

-

Consent solicitation fees

2,420

-

2,420

-

Noncontrolling interest - SDT (2)

(13,416)

(14,793)

(54,590)

(41,165)

Noncontrolling interest - SDR (2)

(16,348)

-

(45,755)

-

Noncontrolling interest - PER (2)

(18,667)

(17,728)

(76,564)

(26,078)

Noncontrolling interest - Other (2)

103

69

263

(248)

Other non-cash items

(5,167)

(6,590)

(25,426)

(17,767)

Adjusted EBITDA

$318,215

$174,754

$1,069,957

$653,608

(1)

Excludes unrealized gains on interest rate swaps of $2.4 million and $2.9 million for the three-month periods ended December 31, 2012 and 2011, and $8.1 million and $6.2 million for the years ended December 31, 2012 and 2011, respectively.

(2)

Excludes depreciation and depletion, impairment on goodwill and certain Midstream assets, unrealized (gains) losses on commodity derivative contracts and income tax expense attributable to noncontrolling interests.

 

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

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

(in thousands)

(Loss applicable) income available to common stockholders

$(301,785)

$(388,597)

$  86,046

$52,482

Tax benefit resulting from acquisition

-

(2,152)

(100,288)

(8,399)

Asset impairment (1)

278,385

2,825

279,666

2,825

Unrealized losses (gains) on derivative contracts (2)

14,141

381,328

(199,764)

(98,178)

Realized gains on early settlements of derivative contracts

-

-

(59,338)

(45,627)

Non-cash realized losses on amended derivative contracts

-

-

117,108

-

Non-cash realized losses on financing derivative contracts

3,974

1,277

10,840

6,443

(Gain) loss on sale of assets

(666)

(896)

3,089

(2,044)

Transaction costs

369

823

15,645

5,354

Legal settlements

25,000

-

25,000

-

Consent solicitation fees

2,420

-

2,420

-

Financing commitment fees

-

-

10,875

-

Bargain purchase gain

-

-

(122,696)

-

Loss on extinguishment of debt

19

-

3,075

38,232

Other non-cash income

(464)

-

(2,907)

-

Effect of income taxes

13

202

42

255

Adjusted net income available (loss applicable) to common stockholders

21,406

 

(5,190)

68,813

(48,657)

Preferred stock dividends

13,881

13,881

55,525

55,583

Total adjusted net income

$   35,287

$     8,691

$124,338

$  6,926

Weighted average number of common shares outstanding

Basic

476,241

399,430

453,595

398,851

Diluted (3)

566,664

497,833

546,148

496,779

Total adjusted net income (loss)

Per share - basic

$      0.04

$     (0.01)

$     0.15

$   (0.12)

Per share - diluted

$      0.06

$      0.02

$     0.23

$    0.01

(1)

Excludes asset impairment attributable to noncontrolling interests.

(2)

Excludes unrealized (gains) losses on commodity derivative contracts attributable to noncontrolling interests.

(3)

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.

 

Reconciliation of Net (Loss) Income Attributable to Noncontrolling Interest to Adjusted Net Income Attributable to Noncontrolling Interest

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

(in thousands)

Net (loss) income attributable to noncontrolling interest

$ (6,627)

$(19,732)

$104,999

$54,324

Asset impairment

36,338

-

36,338

-

Unrealized loss (gain) on commodity derivative contracts

2,809

44,804

(17,991)

(2,856)

Adjusted net income attributable to noncontrolling interest

$32,520

$ 25,072

$123,346

$51,468

 

 

Reconciliation of Standardized Measure of Discounted Net Cash Flows to PV-10

December 31,

2012

2011

(in millions)

Standardized measure of discounted net cash flows (1)

$5,840

$5,216

Present value of future net income tax expense discounted at 10%

1,648

1,660

PV-10 (2)

$7,488

$6,876

(1)

Includes approximately $953 million and $933 million attributable to SandRidge noncontrolling interests at December 31, 2012 and 2011, respectively.

(2)

Includes approximately $955 million and $935 million attributable to SandRidge noncontrolling interests at December 31, 2012 and 2011, respectively.

Conference Call Information

The company will host a conference call to discuss these results on Friday, March 1, 2013 at 8:00 am CST. The telephone number to access the conference call from within the U.S. is 800-599-9816 and from outside the U.S. is 617-847-8705. The passcode for the call is 74704936. An audio replay of the call will be available from March 1, 2013 until 11:59pm CST on March 31, 2013. The number to access the conference call replay from within the U.S. is 888-286-8010 and from outside the U.S. is 617-801-6888. The passcode for the replay is 97467861.

A live audio webcast of the conference call will also be available via SandRidge's website, www.sandridgeenergy.com, under Investor Relations/Events.  The webcast will be archived for replay on the company's website for 30 days.

6th Annual Investor/Analyst Meeting

  • March 5, 2013 (Tuesday), 8:00 am EST, at the Mandarin Oriental New York, 80 Columbus Circle (at 60th Street)

Conference Participation

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

  • March 18, 2013Howard Weil 41st Annual Energy Conference; New Orleans, LA
  • April 15, 2013 – IPAA 2013 OGIS; New York, NY

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.

First Quarter 2013 Earnings Release and Conference Call

May 7, 2013 (Tuesday) – Earnings press release after market close May 8, 2013 (Wednesday) – Earnings conference call at 8:00 am CST

 

SandRidge Energy, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)

 

Three Months Ended December 31,

Years Ended December 31,

2012

2011

2012

2011

(Unaudited)

Revenues

Oil and natural gas

$ 499,907

$  329,288

$ 1,759,282

$ 1,226,794

Drilling and services

25,932

28,180

116,633

103,298

Midstream and marketing

12,620

13,027

40,486

66,690

Century Plant construction

796,323

-

796,323

-

Other

3,316

3,343

18,241

18,431

Total revenues

1,338,098

373,838

2,730,965

1,415,213

Expenses

Production

134,330

80,506

477,154

322,877

Production taxes

10,988

12,459

47,210

46,069

Drilling and services

15,759

16,346

68,227

65,654

Midstream and marketing

12,482

13,227

39,669

66,007

Century Plant construction costs

796,323

-

796,323

-

Depreciation and depletion - oil and natural gas

175,577

87,487

568,029

317,246

Depreciation and amortization - other

15,729

13,712

60,805

53,630

Accretion of asset retirement obligations

9,371

2,329

28,996

9,368

Impairment

314,723

2,825

316,004

2,825

General and administrative

82,884

40,279

241,682

148,643

(Gain) loss on derivative contracts

(19,712)

445,021

(241,419)

(44,075)

(Gain) loss on sale of assets

(666)

(896)

3,089

(2,044)

Total expenses

1,547,788

713,295

2,405,769

986,200

(Loss) income from operations

(209,690)

(339,457)

325,196

429,013

Other income (expense)

Interest expense

(85,921)

(57,255)

(303,349)

(237,332)

Bargain purchase gain

-

-

122,696

-

Loss on extinguishment of debt

(19)

-

(3,075)

(38,232)

Other income, net

1,112

2,460

4,741

3,122

Total other expense

(84,828)

(54,795)

(178,987)

(272,442)

(Loss) income before income taxes

(294,518)

(394,252)

146,209

156,571

Income tax expense (benefit)

12

196

(100,362)

(5,817)

Net (loss) income

(294,530)

(394,448)

246,571

162,388

Less: net (loss) income attributable to noncontrolling interest

(6,626)

(19,732)

105,000

54,323

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

(287,904)

(374,716)

141,571

108,065

Preferred stock dividends 

13,881

13,881

55,525

55,583

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

common stockholders

$ (301,785)

$ (388,597)

$    86,046

$    52,482

(Loss) earnings per share

Basic

$       (0.63)

$       (0.97)

$        0.19

$        0.13

Diluted

$       (0.63)

$       (0.97)

$        0.19

$        0.13

Weighted average number of common shares outstanding

Basic

476,179

399,430

453,595

398,851

Diluted

476,179

399,430

456,015

406,645

 

SandRidge Energy, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except per share data)

 

December 31,

2012

2011

ASSETS

Current assets

Cash and cash equivalents

$   309,766

$   207,681

Accounts receivable, net

445,506

206,336

Derivative contracts

71,022

4,066

Inventories

3,618

6,903

Costs in excess of billings

11,229

-

Prepaid expenses

31,319

14,099

Restricted deposit

255,000

-

Other current assets

15,425

2,755

Total current assets

1,142,885

441,840

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

Proved (includes development and project costs excluded from amortization of $72.4 million and $231.3 million at December 31, 2012 and 2011, respectively)

12,262,921

8,969,296

Unproved

865,863

689,393

Less: accumulated depreciation, depletion and impairment

(5,231,182)

(4,791,534)

7,897,602

4,867,155

Other property, plant and equipment, net

582,375

522,269

Restricted deposits

27,947

27,912

Derivative contracts

23,617

26,415

Goodwill

-

235,396

Other assets

116,305

98,622

Total assets

$9,790,731

$6,219,609

LIABILITIES AND EQUITY

Current liabilities

Current maturities of long-term debt

$           -

$      1,051

Accounts payable and accrued expenses

766,544

506,784

Billings and estimated contract loss in excess of costs incurred

15,546

43,320

Derivative contracts

14,860

115,435

Asset retirement obligations

118,504

32,906

Deposit on pending sale 

255,000

-

Total current liabilities

1,170,454

699,496

Long-term debt

4,301,083

2,813,125

Derivative contracts

59,787

49,695

Asset retirement obligations

379,906

95,210

Other long-term obligations

17,046

13,133

Total liabilities

5,928,276

3,670,659

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 December 31, 2012 and December 31, 2011; aggregate liquidation preference of $265,000