SandRidge Energy, Inc. Reports Financial and Operational Results for Third Quarter and First Nine Months of 2012

SandRidge Initiates Process to Evaluate Sale of Permian Assets

Mississippian Location Count Increases from Approximately 8,000 to 11,000, Reflecting an Increased Density from Three to Four Wells per Section

Mississippian Production Averaged 30.2 MBoe per Day in the Third Quarter, a 20% Increase from the Previous Quarter and a 138% Increase Year-Over-Year

Issues 2013 Guidance: Targeting Production Growth of 18% to 39.2 MMBoe(1) and Reducing Capital Expenditures 19% to $1.75 Billion

08 Nov, 2012, 16:05 ET from SandRidge Energy, Inc.

OKLAHOMA CITY, Nov. 8, 2012 /PRNewswire/ -- SandRidge Energy, Inc. (NYSE: SD) today announced financial and operational results for the quarter and nine months ended September 30, 2012.

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

Key Financial Results

Third Quarter

  • Adjusted EBITDA of $297 million for third quarter 2012 compared to $171 million in third quarter 2011.
  • Operating cash flow of $281 million for third quarter 2012 compared to $147 million in third quarter 2011.
  • Net loss applicable to common stockholders of $184 million, or $0.39 per diluted share, for third quarter 2012 compared to net income available to common stockholders of $561 million, or $1.16 per diluted share, in third quarter 2011.
  • Adjusted net income of $29.6 million, or $0.05 per diluted share, for third quarter 2012 compared to adjusted net income of $5.1 million, or $0.01 per diluted share, in third quarter 2011.

Nine Months

  • Adjusted EBITDA of $752 million for the first nine months of 2012 compared to $484 million in the first nine months of 2011.
  • Operating cash flow of $654 million for the first nine months of 2012 compared to $386 million in the first nine months of 2011.
  • Net income available to common stockholders of $393 million, or $0.81 per diluted share, for the first nine months of 2012 compared to net income available to common stockholders of $441 million, or $0.97 per diluted share, in the first nine months of 2011.
  • Adjusted net income of $87.6 million, or $0.16 per diluted share, for the first nine months of 2012 compared to adjusted net income of $3.1 million, or $0.01 per diluted share, in the first nine months of 2011.

(1) Guidance presented herein does not give effect to any sale of Permian assets. 

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

  • Record oil and total production of 4.9 MMBbls and 9.5 MMBoe in the third quarter
  • SandRidge has now drilled 91 Mississippian wells in eight counties in Kansas covering over 170 miles; 65 wells had an average 30-day IP of 291 Boe per day
  • SandRidge has drilled and studied the results of 75 wells supporting the development of the Mississippian play with at least four horizontal wells per section
  • Current liquidity of $1.3 billion with a cash balance of approximately $535 million; at September 30, no borrowings were outstanding under the credit facility and the leverage ratio was 3.2x

SandRidge announced that it is exploring the sale of its assets in the Permian Basin, other than those associated with SandRidge Permian Trust.  The relevant assets produce approximately 24,500 Boe per day (67% oil, 15% NGLs and 18% natural gas).  Proceeds would be used to fund the company's capital expenditure program in the Mississippian Play and to repay debt, building upon SandRidge's strong liquidity and further improving its leverage.

Tom Ward, SandRidge's Chairman and CEO, commented, "Our acquisitions and development of properties in the Permian Basin over the last four years have been integral to our conversion from a natural gas company to an oil rich enterprise.  Now, we believe there is an opportunity to capitalize on current strong valuations for mature, conventional oil assets in the Permian Basin and convert the proceeds of a sale into development of our industry leading position in the high growth, high return Mississippian Play.  At the same time, this transaction would strengthen our balance sheet and provide liquidity that, together with cash flow, would fully fund capital expenditures through 2014."

Drilling and Operational Activities

SandRidge averaged 46 rigs operating during the third quarter of 2012 and drilled 328 wells. The company drilled a total of 875 wells during the first nine months of 2012. A total of 302 gross operated wells were completed and brought on production during the third quarter of 2012, bringing the total number of operated wells completed and brought on production during 2012 to 859 gross wells.

Mississippian Play. During the third quarter of 2012, SandRidge drilled 112 horizontal wells: 78 in Oklahoma and 34 in Kansas. This brings the total horizontal wells drilled during the first nine months of 2012 to 271 wells. Additionally, SandRidge drilled 15 disposal wells during the third quarter for a total of 52 disposal wells in the first nine months of 2012. To date, 1,140 horizontal wells have been drilled in the Mississippian play, including 507 drilled by SandRidge. The company presently has 32 rigs operating in the play: 21 drilling horizontal wells in Oklahoma, nine drilling horizontal wells in Kansas and two drilling disposal wells. The company plans to drill approximately 390 horizontal wells in the Mississippian play during 2012 and exit the year with 32 rigs drilling horizontal wells.

Permian Basin. The company drilled 214 wells during the third quarter, which brings the total wells drilled during the first nine months of 2012 to 602 wells. SandRidge plans to operate 10 rigs in the Permian Basin during the fourth quarter and will drill approximately 740 wells in 2012. The rigs will operate on the Central Basin Platform, where the company currently holds approximately 225,000 net acres, drilling primarily Grayburg/San Andres/Clear Fork vertical wells at depths ranging from 4,500 feet to 7,500 feet. Including SandRidge Permian Trust's production, SandRidge produced approximately 31,000 Boe per day in the Permian Basin during the third quarter.  The company has announced it is exploring a sale of its Permian assets other than those associated with the trust.  The relevant assets produce approximately 24,500 Boe per day.

Gulf of Mexico. SandRidge drilled two operated wells and participated in the drilling of one non-operated well during the third quarter. SandRidge plans to either drill or participate in the drilling of three additional wells in the fourth quarter. Additionally, SandRidge performed 13 recompletions during the third quarter and plans to perform eight additional recompletions through the remainder of the year for a total of 21 recompletions. SandRidge also expects to participate in 16 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 September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

Production

Oil (MBbl) (1)

4,943

3,192

12,925

8,540

Natural gas (MMcf)

27,184

17,935

64,832

52,440

Oil equivalent (MBoe)

9,473

6,181

23,730

17,280

Daily production (MBoed)

103.0

67.2

86.6

63.3

Average price per unit

Realized oil price per barrel - as reported (1)

$  84.50

$  79.31

$  86.25

$  82.61

Realized impact of derivatives per barrel (1)

7.34

(2.37)

3.38

(7.31)

Net realized price per barrel (1)

$  91.84

$  76.94

$  89.63

$  75.30

Realized natural gas price per Mcf - as reported

$    2.60

$    3.64

$    2.23

$    3.66

Realized impact of derivatives per Mcf

(0.37)

(0.56)

0.08

(0.25)

Net realized price per Mcf

$    2.23

$    3.08

$    2.31

$    3.41

Realized price per Boe - as reported

$  51.54

$  51.52

$  53.07

$  51.94

Net realized price per Boe - including impact of derivatives

$  54.32

$  48.66

$  55.14

$  47.56

Average cost per Boe

Lease operating 

$  14.47

$  14.01

$  14.45

$  14.03

Production taxes

1.37

1.68

1.53

1.95

General and administrative

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

3.90

4.23

5.30

4.62

Stock-based compensation

1.04

1.64

1.40

1.65

Depletion (3)

18.49

14.03

17.36

13.70

Lease operating cost per Boe

Mid-Continent

$    9.62

$  10.12

$    9.86

$  10.64

Permian Basin

10.19

13.82

11.57

13.35

Offshore

21.26

33.58

22.06

39.62

Earnings per share

Earnings (loss) per share applicable to common stockholders

Basic

$   (0.39)

$    1.41

$    0.88

$    1.11

Diluted

(0.39)

1.16

0.81

0.97

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

Basic

$    0.03

$   (0.02)

$    0.10

$   (0.10)

Diluted

0.05

0.01

0.16

0.01

Weighted average number of common shares outstanding (in thousands)

Basic

476,037

399,270

445,991

398,656

Diluted (4)

566,551

497,700

537,300

496,428

(1)

Includes NGLs.

(2)

Includes transaction costs of $0.7 million and $1.4 million for the three-month periods ended September 30, 2012 and 2011, respectively, and $15.3 million and $4.5 million for the nine-month periods ended September 30, 2012 and 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 Third Quarter 2012 Financial Results

Oil and natural gas revenue increased 53% to $488 million in third quarter 2012 from $318 million in the same period of 2011 as a result of increases in oil and natural gas production and realized reported oil prices. Oil production increased 55% to 4.9 MMBbls from third quarter 2011 production of 3.2 MMBbls and natural gas production increased 52% to 27.2 Bcf from third quarter 2011 production of 17.9 Bcf. Production increases were attributable to continued development of the company's properties in the Mississippian play and Permian Basin and production contributed by properties acquired in the second quarter of 2012. Realized reported prices, which exclude the impact of derivative settlements, were $84.50 per barrel and $2.60 per Mcf during third quarter 2012. Realized reported prices in the same period of 2011 were $79.31 per barrel and $3.64 per Mcf.

Third quarter 2012 production expense was $14.47 per Boe compared to third quarter 2011 production expense of $14.01 per Boe. The increase was primarily due to the additional costs related to offshore properties acquired during the second quarter of 2012. In SandRidge's primary onshore operations, production expense continued to decrease as a result of improving efficiencies.  In the Permian Basin, the third quarter production expense decreased 26% year-over-year from $13.82 to $10.19 per Boe.  In the Mid-Continent region, which is comprised mostly of the company's Mississippian assets, third quarter production expense decreased 5% year-over-year from $10.12 to $9.62 per Boe.

Depletion per unit in third quarter 2012 was $18.49 per Boe compared to $14.03 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.

Capital Expenditures

The table below summarizes the company's capital expenditures for the three and nine-month periods ended September 30, 2012 and 2011:

Three Months Ended

 September 30,

Nine Months Ended

September 30,

2012

2011

2012

2011

Drilling and production

Mid-Continent

$240,642

$200,494

$  676,078

$  447,195

Permian Basin

181,072

173,927

524,378

511,687

Gulf of Mexico

49,334

259

90,448

381

WTO/Tertiary/Other

6,287

11,405

34,678

36,514

477,335

386,085

1,325,582

995,777

Leasehold and seismic

Mid-Continent

19,790

65,189

164,415

232,819

Permian Basin

4,434

8,583

12,908

29,086

Gulf of Mexico

2,906

56

12,726

112

WTO/Tertiary/Other

-

1,195

2,449

7,499

27,130

75,023

192,498

269,516

Pipe inventory (1)

(4,274)

(25,446)

(8,001)

(17,359)

Total exploration and development (2)

500,191

435,662

1,510,079

1,247,934

Drilling and oil field services

14,571

5,898

28,323

20,692

Midstream

20,229

6,757

61,958

15,392

Other - general 

25,067

13,808

91,410

38,172

Total capital expenditures, excluding acquisitions

560,058

462,125

1,691,770

1,322,190

Acquisitions (3)

75,444

13,602

837,019

22,751

Total capital expenditures

$635,502

$475,727

$2,528,789

$1,344,941

Plugging and abandonment

$  39,491

$    6,163

$    64,633

$    11,203

(1)

Pipe inventory expenditures represent transfers of pipe inventory to the full cost pool for use in drilling and production activities.

(2)

Exploration and development expenditures for the nine-month periods ended September 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 nine-month period ended September 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 fourth quarter of 2012 and the years 2013 through 2015 as of November 5, 2012 and include contracts that have been novated to, or the benefits of which have been conveyed to, SandRidge sponsored royalty trusts.

Quarter Ending

Year Ending

12/31/2012

12/31/2013

12/31/2014

12/31/2015

Oil (MMBbls):

Swap Volume

4.20

18.52

7.51

5.08

  Swap

$100.67

$96.24

$92.43

$83.69

Collar Volume

0.05

0.17

-

-

  Collar:  High

$114.00

$102.50

-

-

  Collar:  Low

$85.00

$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

0.37

0.54

-

-

  Swap

$17.49

$13.83

-

-

Natural Gas (Bcf):

Swap Volume

22.05

-

-

-

  Swap

$3.14

-

-

-

Collar Volume

2.27

6.86

0.94

1.01

  Collar:  High

$6.58

$6.71

$7.78

$8.55

  Collar:  Low

$4.09

$3.78

$4.00

$4.00

 

Balance Sheet

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

September 30,

December 31,

2012

2011

Cash and cash equivalents

$        673,680

$       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

356,117

354,579

8.0% Senior Notes due 2018

750,000

750,000

8.75% Senior Notes due 2020, net

443,984

443,568

7.5% Senior Notes due 2021

1,179,426

900,000

8.125% Senior Notes due 2022

750,000

-

7.5% Senior Notes due 2023, net

820,904

-

  Total debt 

4,300,431

2,814,176

Stockholders' equity

Preferred stock

8

8

Common stock

476

399

Additional paid-in capital

5,209,029

4,568,856

Treasury stock, at cost

(7,038)

(6,158)

Accumulated deficit

(2,544,473)

(2,937,094)

Total SandRidge Energy, Inc. stockholders' equity

2,658,002

1,626,011

Noncontrolling interest

1,547,018

922,939

Total capitalization

$     8,505,451

$    5,363,126

During the third quarter of 2012, the company's debt, net of cash balances, increased by approximately $500 million primarily as a result of the August senior notes offering and funding the company's drilling program. Proceeds from the August $1.1 billion senior notes offering were used to refinance $350 million of 2014 senior note maturities with the remaining net proceeds to be used to fund the company's 2013 drilling program. On November 5, 2012, the company had no amount drawn under its $775 million senior credit facility and approximately $535 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 nine months ended September 30, 2012 and through and as of the date of this release.

2012 Operational Guidance: The company is updating its full guidance for 2012.

Year Ending

December 31, 2012

Previous

Updated

Projection as of

Projection as of

August 2, 2012

November 8, 2012

Production

Oil (MMBbls)  (1)

18.2

17.8

Natural Gas (Bcf)

88.8

93.0

Total (MMBoe)

33.0

33.3

Differentials

Oil  (1)

$9.00

$9.00

Natural Gas

$0.50

$0.50

Costs per Boe

Lifting 

$15.00 - $17.00

$14.50 - $16.50

Production Taxes

1.75 - 1.95

1.75 - 1.95

DD&A - oil & gas

16.50 - 18.25

16.50 - 18.25

DD&A - other

1.75 - 1.95

1.75 - 1.95

Total DD&A

$18.25 - $20.20

$18.25 - $20.20

G&A - cash

4.70 - 5.20

4.70 - 5.20

G&A - stock

1.15 - 1.30

1.20 - 1.35

Total G&A

$5.85 - $6.50

$5.90 - $6.55

Interest Expense

$8.70 - $9.60

$8.70 - $9.60

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

$50

$60

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

$134

$129

P&A Cash Cost ($ in millions)

$60

$70

Corporate Tax Rate

0%

0%

Deferral Rate

0%

0%

Shares Outstanding at End of Period (in millions)

Common Stock

493

493

Preferred Stock (as converted)

90

90

Fully Diluted

583

583

Capital Expenditures ($ in millions)

Exploration and Production

$1,700

$1,720

Land and Seismic

200

200

Total Exploration and Production

$1,900

$1,920

Oil Field Services

30

35

Midstream and Other

170

195

Total Capital Expenditures (excluding acquisitions)

$2,100

$2,150

(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.

2013 Operational Guidance: The company is presenting full guidance for 2013.

Year Ending

December 31, 2013

Initial

Projection as of

November 8, 2012

Production

Oil (MMBbls)  (1)

19.5

Natural Gas (Bcf)

118.2

Total (MMBoe)

39.2

Differentials

Oil  (1)

$8.00

Natural Gas

$0.40

Costs per Boe

Lifting 

$14.50 - $16.50

Production Taxes

1.35 - 1.55

DD&A - oil & gas

18.00 - 19.80

DD&A - other

1.80 - 2.00

Total DD&A

$19.80 - $21.80

G&A - cash

4.00 - 4.45

G&A - stock

1.20 - 1.35

Total G&A

$5.20 - $5.80

Interest Expense

$9.10 - $10.10

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

$55

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

$170

P&A Cash Cost ($ in millions)

$120

Corporate Tax Rate

0%

Deferral Rate

0%

Shares Outstanding at End of Period (in millions)

Common Stock

498

Preferred Stock (as converted)

90

Fully Diluted

588

Capital Expenditures ($ in millions)

Exploration and Production

$1,450

Land and Seismic

100

Total Exploration and Production

$1,550

Oil Field Services

30

Midstream and Other

170

Total Capital Expenditures (excluding acquisitions)

$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.

2013 Guidance:  SandRidge estimates production of approximately 39.2 MMBoe and capital expenditures of $1.75 billion in 2013.  The higher gas percentage of total production in 2013 reflects a significant reduction in drilling capital directed toward the company's Permian Basin assets. 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 the company's offshore properties, where it intends to spend approximately $200 million, 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 and adjusted net income attributable to noncontrolling interest 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 obligation. 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, loss (gain) on sale of assets, transaction costs, 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 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 expense (benefit) resulting from acquisition, financing commitment fees, non-cash realized losses on financing derivative contracts, transaction costs, loss on extinguishment of debt, non-cash realized losses on amended derivative contracts and loss (gain) 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 losses (gains) on commodity derivative contracts attributable to third party ownership in less than wholly-owned consolidated subsidiaries from net 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.

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 and adjusted net income attributable to noncontrolling interest.

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

Three Months Ended September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

Net cash provided by operating activities

$166,524

$  64,081

$584,230

$321,623

Add (deduct)

Cash received (paid) on financing derivative contracts

6,609

(167)

(38,703)

5,271

Changes in operating assets and liabilities

107,877

82,910

108,889

59,232

Operating cash flow

$281,010

$146,824

$654,416

$386,126

 

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

Three Months Ended September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

Net (loss) income

$(170,420)

$575,109

$ 434,265

$482,781

Adjusted for

Income tax expense (benefit)

173

954

(103,414)

(6,013)

Interest expense (1)

84,403

60,968

224,076

183,545

Depreciation and amortization - other

16,497

13,551

46,357

39,918

Depreciation and depletion - oil and natural gas

166,126

84,472

392,452

229,759

Accretion of asset retirement obligation

9,053

2,253

19,625

7,039

EBITDA

105,832

737,307

1,013,361

937,029

Provision for doubtful accounts

332

26

885

1,622

Inventory obsolescence

80

125

128

145

Interest income

(476)

(51)

(1,016)

(94)

Stock-based compensation

9,125

9,390

30,700

26,489

Unrealized losses (gains) on derivative contracts

220,434

(606,515)

(234,705)

(527,166)

Realized gains on early settlements of derivative contracts

(2,115)

(9,876)

(59,465)

(40,894)

Non-cash realized losses on amended derivative contracts

-

-

117,108

-

Non-cash realized losses on financing derivative contracts

3,055

2,319

6,866

5,166

Other non-cash (income) expense

(1,344)

710

(3,196)

661

Loss (gain) on sale of assets

375

(422)

3,755

(1,148)

Transaction costs

681

1,444

15,276

4,531

Bargain purchase gain

-

-

(124,446)

-

Loss on extinguishment of debt

3,056

-

3,056

38,232

Non-cash portion of noncontrolling interest (2)

(41,545)

36,771

(16,692)

39,016

Adjusted EBITDA

$ 297,490

$171,228

$ 751,615

$483,589

(1)

Excludes unrealized gains on interest rate swaps of $2.0 million for the three-month periods ended September 30, 2012 and 2011, and $5.6 million and $3.4 million for the nine-month periods ended September 30, 2012 and 2011, respectively.

(2)

Represents depreciation and depletion, 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 September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

Net cash provided by operating activities

$166,524

$  64,081

$584,230

$321,623

Changes in operating assets and liabilities

107,877

82,910

108,889

59,232

Interest expense (1)

84,403

60,968

224,076

183,545

Realized gains on early settlements of non-financing derivative contracts

(2,115)

(9,876)

(33,165)

(40,894)

Transaction costs

681

1,444

15,276

4,531

Noncontrolling interest - SDT (2)

(13,933)

(15,341)

(41,174)

(26,372)

Noncontrolling interest - SDR (2)

(16,537)

-

(29,407)

-

Noncontrolling interest - PER (2)

(21,794)

(8,350)

(57,897)

(8,350)

Noncontrolling interest - Other (2)

51

(433)

160

(317)

Other non-cash items

(7,667)

(4,175)

(19,373)

(9,409)

Adjusted EBITDA

$297,490

$171,228

$751,615

$483,589

(1)

Excludes unrealized gains on interest rate swaps of $2.0 million for the three-month periods ended September 30, 2012 and 2011, and $5.6 million and $3.4 million for the nine-month periods ended September 30, 2012 and 2011, respectively.

(2)

Excludes depreciation and depletion, 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 September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

(Loss applicable) income available to common stockholders

$(184,301)

$561,228

$392,621

$441,079

Tax expense (benefit) resulting from acquisition

-

739

(103,328)

(6,247)

Unrealized losses (gains) on derivative contracts (1)

195,422

(564,385)

(213,905)

(479,506)

Realized gains on early settlements of derivative contracts

(2,115)

(9,876)

(59,465)

(40,894)

Non-cash realized losses on amended derivative contracts

-

-

117,108

-

Non-cash realized losses on financing derivative contracts

3,055

2,319

6,866

5,166

Loss (gain) on sale of assets

375

(422)

3,755

(1,148)

Transaction costs

681

1,444

15,276

4,531

Financing commitment fees

-

-

10,875

-

Bargain purchase gain

-

-

(124,446)

-

Loss on extinguishment of debt

3,056

-

3,056

38,232

Other non-cash income

(658)

-

(2,443)

-

Effect of income taxes

217

193

(47)

201

Adjusted net income available (loss applicable) to common stockholders

15,732

(8,760)

45,923

(38,586)

Preferred stock dividends

13,881

13,881

41,644

41,702

Total adjusted net income

$   29,613

$    5,121

$  87,567

$    3,116

Weighted average number of common shares outstanding

Basic

476,037

399,270

445,991

398,656

Diluted (2)

566,551

497,700

537,300

496,428

Total adjusted net income (loss)

Per share - basic

$      0.03

$    (0.02)

$     0.10

$    (0.10)

Per share - diluted

$      0.05

$     0.01

$     0.16

$     0.01

(1)

Excludes unrealized (gains) losses on commodity derivative contracts 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.

 

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,

2012

2011

2012

2011

Net income attributable to noncontrolling interest

$10,668

$60,895

$111,626

$74,055

Unrealized losses (gains) on commodity derivative contracts

25,012

(42,130)

(20,800)

(47,660)

Adjusted net income attributable to noncontrolling interest

$35,680

$18,765

$  90,826

$26,395

Conference Call Information

The company will host a conference call to discuss these results on Friday, November 9, 2012 at 8:00 am CST. The telephone number to access the conference call from within the U.S. is 800-599-9795 and from outside the U.S. is 617-786-2905. The passcode for the call is 45827904. An audio replay of the call will be available from November 9, 2012 until 11:59 pm CST on December 9, 2012. The number to access the conference call replay from within the U.S. is 888-286-8010 and from outside the U.S. is +1-617-801-6888. The passcode for the replay is 10431835.

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.

Conference Participation

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

  • November 13, 2012 – Bank of America Merrill Lynch 2012 Global Energy Conference; Miami, FL
  • November 15, 2012 – Citi 2012 North American Credit Conference; New York City, NY
  • December 04, 2012 – Bank of America Merrill Lynch 2012 Leveraged Finance Conference; Boca Raton, FL
  • December 04, 2012 – Capital One Southcoast 7th Annual Energy Conference; New Orleans, LA
  • January 08, 2013 – Goldman Sachs 2013 Global Energy Conference; Miami, FL

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 and Year End 2012 Earnings Release and Conference Call

February 28, 2013 (Thursday) – Earnings press release after market close March 1, 2013 (Friday) – Earnings conference call at 8:00 am CST

SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2012

2011

2012

2011

(Unaudited)

Revenues

Oil and natural gas

$  488,252

$ 318,453

$ 1,259,375

$  897,506

Drilling and services

27,760

25,547

90,701

75,118

Midstream and marketing

10,708

15,092

27,866

53,663

Other

6,078

4,661

14,925

15,088

Total revenues

532,798

363,753

1,392,867

1,041,375

Expenses

Production

137,033

86,580

342,824

242,371

Production taxes

12,967

10,368

36,222

33,610

Drilling and services

15,666

16,209

52,468

49,308

Midstream and marketing

10,674

14,624

27,187

52,780

Depreciation and depletion - oil and natural gas

166,126

84,472

392,452

229,759

Depreciation and amortization - other

16,497

13,551

46,357

39,918

Accretion of asset retirement obligation

9,053

2,253

19,625

7,039

General and administrative

46,781

36,272

158,798

108,364

Loss (gain) on derivative contracts

193,497

(596,736)

(221,707)

(489,096)

Loss (gain) on sale of assets

375

(422)

3,755

(1,148)

Total expenses

608,669

(332,829)

857,981

272,905

(Loss) income from operations

(75,871)

696,582

534,886

768,470

Other income (expense)

Interest expense

(81,894)

(58,952)

(217,428)

(180,077)

Bargain purchase gain

-

-

124,446

-

Loss on extinguishment of debt

(3,056)

-

(3,056)

(38,232)

Other income (expense), net

1,242

(672)

3,629

662

Total other expense

(83,708)

(59,624)

(92,409)

(217,647)

(Loss) income before income taxes

(159,579)

636,958

442,477

550,823

Income tax expense (benefit)

173

954

(103,414)

(6,013)

Net (loss) income 

(159,752)

636,004

545,891

556,836

Less: net income attributable to noncontrolling interest

10,668

60,895

111,626

74,055

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

(170,420)

575,109

434,265

482,781

Preferred stock dividends 

13,881

13,881

41,644

41,702

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

$ (184,301)

$ 561,228

$   392,621

$  441,079

(Loss) earnings per share

Basic

$     (0.39)

$      1.41

$        0.88

$       1.11

Diluted

$     (0.39)

$      1.16

$        0.81

$       0.97

Weighted average number of common shares outstanding

Basic

476,037

399,270

445,991

398,656

Diluted

476,037

497,700

537,300

496,428

 

 

SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

September 30,

December 31,

2012

2011

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$      673,680

$    207,681

Accounts receivable, net

382,094

206,336

Derivative contracts

81,127

4,066

Inventories

3,343

6,903

Costs in excess of billings and estimated contract loss

36,133

-

Prepaid expenses

37,187

14,099

Other current assets

15,623

2,755

Total current assets

1,229,187

441,840

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

Proved

11,784,691

8,969,296

Unproved

939,045

689,393

Less: accumulated depreciation, depletion and impairment

(5,167,938)

(4,791,534)

7,555,798

4,867,155

Other property, plant and equipment, net

638,160

522,269

Restricted deposits

27,943

27,912

Derivative contracts

36,394

26,415

Goodwill

235,396

235,396

Other assets

121,369

98,622

Total assets

$   9,844,247

$  6,219,609

LIABILITIES AND EQUITY

Current liabilities

Current maturities of long-term debt

$              -

$        1,051

Accounts payable and accrued expenses

779,200

506,784

Billings and estimated contract loss in excess of costs incurred

-

43,320

Derivative contracts

18,503

115,435

Asset retirement obligation

117,044

32,906

Total current liabilities

914,747

699,496

Long-term debt

4,300,431

2,813,125

Derivative contracts

53,760

49,695

Asset retirement obligation

354,479

95,210

Other long-term obligations

15,810

13,133

Total liabilities

5,639,227

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 September 30, 2012 and December 31, 2011; aggregate liquidation preference of $265,000

3

3

6.0% Convertible perpetual preferred stock; 2,000 shares issued and outstanding at September 30, 2012 and December 31, 2011; aggregate liquidation preference of $200,000

2

2

7.0% Convertible perpetual preferred stock; 3,000 shares issued and outstanding at September 30, 2012 and December 31, 2011; aggregate liquidation preference of $300,000

3

3

Common stock, $0.001 par value, 800,000 shares authorized; 491,805 issued and 490,807 outstanding at September 30, 2012 and 412,827 issued and 411,953  outstanding at December 31, 2011

476

399

Additional paid-in capital

5,209,029

4,568,856

Treasury stock, at cost

(7,038)

(6,158)

Accumulated deficit

(2,544,473)

(2,937,094)

Total SandRidge Energy, Inc. stockholders' equity

2,658,002

1,626,011

Noncontrolling interest

1,547,018

922,939

Total equity

4,205,020

2,548,950

Total liabilities and equity

$   9,844,247

$  6,219,609

 

 

SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended

September 30,

2012

2011

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$   545,891

$   556,836

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation, depletion and amortization

438,809

269,677

Accretion of asset retirement obligation

19,625

7,039

Debt issuance costs amortization

11,348

8,624

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

1,940

1,766

Interest accretion on notes receivable

(495)

-

Bargain purchase gain

(124,446)

-

Loss on extinguishment of debt

3,056

38,232

Deferred income taxes

(103,328)

(6,986)

Unrealized gain on derivative contracts

(234,705)

(527,166)

Realized loss on amended derivative contracts

117,108

-

Realized (gain) loss on financing derivative contracts

(17,783)

4,870

Loss (gain) on sale of assets

3,755

(1,148)

Investment (income) loss

(784)

653

Stock-based compensation

33,128

28,458

Changes in operating assets and liabilities

(108,889)

(59,232)

Net cash provided by operating activities

584,230

321,623

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures for property, plant and equipment

(1,625,737)

(1,300,180)

Acquisition of assets, net of cash received

(837,019)

(22,751)

Proceeds from sale of assets

422,171

624,767

Net cash used in investing activities

(2,040,585)

(698,164)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

1,850,344

2,033,000

Repayments of borrowings

(366,029)

(2,130,042)

Premium on debt redemption

(825)

(30,338)

Debt issuance costs

(48,220)

(19,652)

Proceeds from issuance of royalty trust units

587,086

917,528

Proceeds from the sale of royalty trust units

123,548

-

Noncontrolling interest distributions

(127,023)

(21,182)

Stock issuance expense

-

(231)

Stock-based compensation excess tax benefit

8

52

Purchase of treasury stock

(12,807)

(12,048)

Dividends paid - preferred

(45,025)

(46,243)

Cash (paid) received on settlement of financing derivative contracts

(38,703)

5,271

Net cash provided by financing activities

1,922,354

696,115