SandRidge Energy, Inc. Reports Financial and Operational Results for Second Quarter and First Six Months of 2012 Mississippian Production Averaged 25.2 MBoe per Day in the Second Quarter, a 31% Increase from the Previous Quarter

Drilled Five Second Quarter Mississippian Wells in Three Counties with 30-day IPs Over 1,000 Boe per Day

Record Oil and Total Production of 4.6 MMBbls and 8.2 MMBoe in the Second Quarter

Increasing 2012 Production Guidance by 700 MBoe to 33 MMBoe, a 54% Increase in Oil Production and a 41% Increase in Total Production from 2011

OKLAHOMA CITY, Aug. 2, 2012 /PRNewswire/ -- SandRidge Energy, Inc. (NYSE: SD) today announced financial and operational results for the quarter and six months ended June 30, 2012.

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

Key Financial Results

Second Quarter

  • Adjusted EBITDA of $269 million for second quarter 2012 compared to $157 million in second quarter 2011.
  • Operating cash flow of $222 million for second quarter 2012 compared to $136 million in second quarter 2011.
  • Net income available to common stockholders of $809 million, or $1.47 per diluted share, for second quarter 2012 compared to net income available to common stockholders of $196 million, or $0.42 per diluted share, in second quarter 2011.
  • Adjusted net income of $36.8 million, or $0.07 per diluted share, for second quarter 2012 compared to adjusted net loss of $1.6 million, or $0.00 per diluted share, in second quarter 2011.

Six Months

  • Adjusted EBITDA of $454 million for the first six months of 2012 compared to $308 million in the first six months of 2011.
  • Operating cash flow of $373 million for the first six months of 2012 compared to $239 million in the first six months of 2011.
  • Net income available to common stockholders of $577 million, or $1.14 per diluted share, for the first six months of 2012 compared to net loss applicable to common stockholders of $120 million, or $0.30 per diluted share, in the first six months of 2011.
  • Adjusted net income of $58.1 million, or $0.11 per diluted share, for the first six months of 2012 compared to adjusted net loss of $6.2 million, or $0.01 per diluted share, in the first six months of 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 9.

Highlights

  • Mississippian daily average production grew 31% quarter over quarter and 199% from the comparable period in 2011
  • Current liquidity of $1.3 billion with cash balance of approximately $300 million. At June 30, no borrowings were outstanding under the credit facility and the leverage ratio was 2.9x
  • For the second half of 2012,  81% of projected oil production is hedged at over $100 per barrel and another 37 million barrels of oil are hedged from 2013 to 2015
  • Completed IPO of SandRidge Mississippian Trust II and sold units of SandRidge Mississippian Trust I raising $615 million in total net proceeds
  • Raised $130 million through the sale of non-core Tertiary assets producing approximately 1,100 Boe per day
  • Increasing 2012 production guidance to 33.0 MMBoe from 32.3 MMBoe and increasing 2012 capital expenditure guidance to $2.1 billion from $1.85 billion
  • Decreasing the 2012 mid-point Lifting cost guidance by 6%

    Drilling Activities

    SandRidge averaged 43 rigs operating during the second quarter of 2012 and drilled 297 wells. The company drilled a total of 547 wells during the first six months of 2012. A total of 317 gross (280 net) operated wells were completed and brought on production during the second quarter of 2012, bringing the total number of operated wells completed and brought on production during 2012 to 557 gross (493 net) wells.

    Mississippian Play. During the second quarter of 2012, SandRidge drilled 91 horizontal wells: 71 in Oklahoma and 20 in Kansas. This brings the total horizontal wells drilled during the first half of the year to 159 wells. Additionally, SandRidge drilled 20 disposal wells during the second quarter for a total of 37 disposal wells in the first half of 2012. To date, 872 horizontal wells have been drilled in the Mississippian play, including 392 drilled by SandRidge. SandRidge has an inventory of approximately 8,000 drilling locations on approximately 1.7 million net acres. The company presently has 33 rigs operating in the play: 19 drilling horizontal wells in Oklahoma, 10 drilling horizontal wells in Kansas and four drilling disposal wells. The company plans to drill approximately 380 horizontal wells in the Mississippian play during 2012 and exit the year with 33 rigs drilling horizontal wells.

    Permian Basin. The company drilled 206 wells during the second quarter of 2012 and currently holds approximately 225,000 net acres in the play. SandRidge plans to operate an average of 12 rigs in the Permian Basin throughout the year and plans to drill approximately 750 wells in 2012. The rigs will operate on the Central Basin Platform drilling primarily Grayburg/San Andres vertical wells at depths ranging from 4,500 feet to 7,500 feet.

    Gulf of Mexico. SandRidge plans to drill 9 operated wells and participate in the drilling of 3 non-operated wells during the second half of 2012. Additionally, SandRidge performed 10 operated recompletions during the second quarter and plans to perform 7 additional operated recompletions through the remainder of the year for a total of 17 operated recompletions.  SandRidge also expects to participate in 11 non-operated recompletions during 2012.

    Operational and Financial Statistics

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




    Three Months Ended June 30,


    Six Months Ended June 30,




    2012


    2011


    2012


    2011

    Production









    Oil (MBbl) (1)


    4,556


    2,767


    7,982


    5,348

    Natural gas (MMcf)


    21,903


    17,239


    37,648


    34,505

    Oil equivalent (MBoe)


    8,206


    5,640


    14,257


    11,099

    Daily production (MBoed)


    90.2


    62.0


    78.3


    61.3











    Average price per unit









    Realized oil price per barrel - as reported (1)


    $                85.35


    $                89.09


    $                87.34


    $                84.59

    Realized impact of derivatives per barrel (1)


    4.41


    (12.83)


    0.92


    (10.26)

    Net realized price per barrel (1)


    $                89.76


    $                76.26


    $                88.26


    $                74.33











    Realized natural gas price per Mcf - as reported


    $                 1.87


    $                 3.81


    $                 1.96


    $                 3.67

    Realized impact of derivatives per Mcf


    0.52


    (0.50)


    0.41


    (0.21)

    Net realized price per Mcf


    $                 2.39


    $                 3.31


    $                 2.37


    $                 3.46











    Realized price per Boe - as reported


    $                52.37


    $                55.34


    $                54.09


    $                52.17

    Net realized price per Boe - including impact of derivatives


    $                56.21


    $                47.52


    $                55.68


    $                46.58











    Average cost per Boe









    Lease operating 


    $                14.93


    $                14.51


    $                14.43


    $                14.04

    Production taxes


    1.34


    2.25


    1.63


    2.09

    General and administrative










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


    6.07


    5.00


    6.22


    4.85


    Stock-based compensation


    1.45


    1.68


    1.63


    1.65

    Depletion (3)


    17.94


    13.51


    16.62


    13.52











    Lease operating cost per Boe









    Excluding offshore and tertiary recovery


    $                12.42


    $                13.24


    $                12.79


    $                12.97

    Offshore operations


    22.50


    64.62


    23.09


    43.02

    Tertiary recovery operations (4)


    32.97


    33.37


    31.93


    37.28











    Earnings per share









    Earnings (loss) per share applicable to common stockholders










    Basic


    $                 1.75


    $                 0.49


    $                 1.34


    $                (0.30)


    Diluted


    1.47


    0.42


    1.14


    (0.30)











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










    Basic


    $                 0.05


    $                (0.04)


    $                 0.07


    $                (0.09)


    Diluted


    0.07


    (0.00)


    0.11


    (0.01)











    Weighted average number of common shares outstanding (in thousands)










    Basic


    461,008


    398,435


    430,802


    398,343


    Diluted (5)


    560,640


    495,982


    530,378


    495,781


    (1)

    Includes NGLs.

    (2)

    Includes transaction costs of $11.7 million and $1.7 million for the three-month periods ended June 30, 2012 and 2011, respectively, and $14.6 million and $3.1 million for the six-month periods ended June 30, 2012 and 2011, respectively.

    (3)

    Includes accretion of asset retirement obligation.

    (4)

    Tertiary recovery properties sold June 2012.

    (5)

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

    Discussion of Second Quarter 2012 Financial Results

    Oil and natural gas revenue increased 38% to $430 million in second quarter 2012 from $312 million in the same period of 2011 as a result of increased oil production. Oil production increased 65% to 4.6 MMBbls from second quarter 2011 production of 2.8 MMBbls mainly due to continued development of the company's properties in the Mississippian play and Permian Basin and production contributed by the acquisition of Dynamic Offshore Resources, LLC ("Dynamic") in April 2012. Second quarter 2012 total production increased 45% to 8.2 MMBoe from 5.6 MMBoe in second quarter 2011. Realized reported prices, which exclude the impact of derivative settlements, were $85.35 per barrel and $1.87 per Mcf during second quarter 2012. Realized reported prices in the same period of 2011 were $89.09 per barrel and $3.81 per Mcf.

    Second quarter 2012 production expense was $14.93 per Boe compared to second quarter 2011 production expense of $14.51 per Boe. The increase was primarily due to the additional costs related to Dynamic's offshore operations. Excluding the impact of offshore and tertiary operations, production expense decreased to $12.42 per Boe in second quarter 2012 from $13.24 per Boe in the same period of 2011. The six percent decrease was the result of improving efficiencies throughout the company's core operations in the Mississippian play and Permian Basin.

    Depletion per unit in second quarter 2012 was $17.94 per Boe compared to $13.51 per Boe in the same period of 2011. The increase in rate per unit primarily resulted from the addition of Dynamic's properties 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 six-month periods ended June 30, 2012 and 2011: 



    Three Months Ended June 30,


    Six Months Ended June 30,



    2012


    2011


    2012


    2011



    (in thousands)










    Drilling and production









    Mid-Continent

    $           215,985


    $           144,777


    $           435,436


    $           246,704


    Permian Basin

    180,987


    166,937


    343,306


    337,759


    Gulf of Mexico

    41,114


    98


    41,114


    122


    WTO/Tertiary/Other

    15,534


    8,318


    28,391


    25,109



    453,620


    320,130


    848,247


    609,694

    Leasehold and seismic









    Mid-Continent

    56,886


    70,521


    144,625


    167,630


    Permian Basin

    5,192


    15,335


    8,148


    20,502


    Gulf of Mexico

    9,820


    1


    9,820


    56


    WTO/Tertiary/Other

    912


    2,874


    2,775


    6,305



    72,810


    88,731


    165,368


    194,493










    Pipe inventory (1)

    (8,376)


    4,376


    (3,727)


    8,087










    Total exploration and development (2)

    518,054


    413,237


    1,009,888


    812,274










    Drilling and oil field services

    5,836


    8,030


    13,752


    14,793

    Midstream

    17,754


    4,462


    41,729


    8,635

    Other - general 

    20,410


    18,167


    66,343


    24,363










    Total capital expenditures, excluding acquisitions

    562,054


    443,896


    1,131,712


    860,065










    Acquisitions (3)

    751,064


    7,601


    761,575


    9,149










    Total capital expenditures

    $        1,313,118


    $           451,497


    $        1,893,287


    $           869,214










    Plugging and abandonment

    $            21,721


    $              2,595


    $            25,142


    $              5,038










    (1)

    Pipe inventory expenditures for the three and six-month periods ended June 30, 2012 represent transfers of pipe inventory to the full cost pool for use in drilling and production activities.

    (2)

    Exploration and development expenditures for the six-month periods ended June 30, 2012 and 2011 exclude $10.0 million and $19.0 million, respectively, of estimated loss on Century Plant construction contract.

    (3)

    Acquisition expenditures for the three and six-month periods ended June 30, 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 third and fourth quarters of 2012 and the years 2012 through 2015 as of July 31, 2012 and include contracts that have been novated to or the benefits of which have been conveyed to SandRidge sponsored royalty trusts.



    Quarter Ending







    9/30/2012


    12/31/2012














    Oil:









    Swap Volume (MMBbls)

    4.05


    4.20






    Swap

    $100.52


    $100.67






    Collar Volume (MMBbls)

    0.06


    0.05






    Collar:  High

    $114.00


    $114.00






    Collar:  Low

    $85.00


    $85.00






    LLS Basis Volume (MMBbls)

    0.38


    0.37






    Swap

    $17.48


    $17.49














    Natural Gas:









    Swap Volume (Bcf)

    20.85


    22.05






    Swap

    $2.81


    $3.14






    Collar Volume (Bcf)

    2.16


    2.27






    Collar:  High

    $6.58


    $6.58






    Collar:  Low

    $4.04


    $4.09

























    Year Ending



    12/31/2012


    12/31/2013


    12/31/2014


    12/31/2015










    Oil:









    Swap Volume (MMBbls)

    15.02


    18.52


    6.78


    5.08


    Swap

    $100.22


    $96.24


    $92.15


    $83.69


    Collar Volume (MMBbls)

    0.17


    0.17


    -


    -


    Collar:  High

    $114.00


    $102.50


    -


    -


    Collar:  Low

    $85.00


    $80.00


    -


    -


    Three-way Collar Volume (MMBbls)

    -


    -


    6.57


    -


    Call Price 

    -


    -


    $100.00


    -


    Put Price 

    -


    -


    $90.05


    -


    Short Put Price 

    -


    -


    $70.00


    -


    LLS Basis Volume (MMBbls)

    1.50


    -


    -


    -


    Swap

    $17.27


    -


    -


    -










    Natural Gas:









    Swap Volume (Bcf)

    52.95


    13.50


    -


    -


    Swap

    $3.10


    $3.51


    -


    -


    Collar Volume (Bcf)

    5.84


    6.86


    0.94


    1.01


    Collar:  High

    $6.59


    $6.71


    $7.78


    $8.55


    Collar:  Low

    $4.08


    $3.78


    $4.00


    $4.00

    Balance Sheet

    The company's capital structure at June 30, 2012 and December 31, 2011 is presented below:




    June 30,


    December 31,




    2012


    2011




    (in thousands)







    Cash and cash equivalents

    $           421,073


    $           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


    350,000



    9.875% Senior Notes due 2016, net

    355,591


    354,579



    8.0% Senior Notes due 2018

    750,000


    750,000



    8.75% Senior Notes due 2020, net

    443,841


    443,568



    7.5% Senior Notes due 2021

    900,000


    900,000



    8.125% Senior Notes due 2022

    750,000


    -



      Total debt 

    3,549,432


    2,814,176







    Stockholders' equity





    Preferred stock

    8


    8


    Common stock

    475


    399


    Additional paid-in capital

    5,202,119


    4,568,856


    Treasury stock, at cost

    (6,925)


    (6,158)


    Accumulated deficit

    (2,360,172)


    (2,937,094)



    Total SandRidge Energy, Inc. stockholders' equity

    2,835,505


    1,626,011








    Noncontrolling interest

    1,586,573


    922,939







    Total capitalization

    $        7,971,510


    $        5,363,126

    During the second quarter of 2012, the company's debt, net of cash balances, increased by approximately $522 million primarily as a result of the issuance of $750 million of senior notes to fund the cash portion of the Dynamic acquisition. On July 31, 2012, the company had no amount drawn under its $1.0 billion senior credit facility and approximately $300 million of cash, leaving approximately $1.3 billion of available liquidity. The company was in compliance with all applicable covenants contained in its debt agreements during the six months ended June 30, 2012 and through and as of the date of this release.

    Operational Guidance