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

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