SandRidge Energy, Inc. Reports Financial and Operational Results for Second Quarter and First Six Months of 2011

Signs $500 Million Mississippian Joint Venture

Launches New Mississippian Play, Targeting One Million Acres

Announces Three-Year Strategic Plan

- Self-Funding Capital Program

- Double-Digit Annual Production Growth

- Debt to EBITDA Ratio of Less Than 2:1

Increases 2011 Production Guidance to 24.1 MMBoe, 20% Growth from 2010

Aug 04, 2011, 16:05 ET from SandRidge Energy, Inc.

OKLAHOMA CITY, Aug. 4, 2011 /PRNewswire/ -- SandRidge Energy, Inc. (NYSE: SD) today announced financial and operational results for the quarter and six months ended June 30, 2011.

Key Financial Results

Second Quarter

  • Adjusted EBITDA of $156 million ($182 million including realized gains on out-of-period derivative contract settlements) for second quarter 2011 compared to $132 million ($195 million including realized gains on out-of-period derivative contract settlements) in second quarter 2010.
  • Operating cash flow of $134 million for second quarter 2011 compared to $135 million in second quarter 2010.
  • Net income available to common stockholders of $196 million, or $0.42 per diluted share, for second quarter 2011 compared to net income available to common stockholders of $45 million, or $0.21 per diluted share, in second quarter 2010.
  • Adjusted net loss of $2.0 million, or $0.00 per diluted share, (adjusted net income of $23.9 million, or $0.05 per diluted share, including realized gains on out-of-period derivative contract settlements) in second quarter 2011 compared to adjusted net loss of $1.9 million, or $0.01 per diluted share, (adjusted net income of $60.4 million, or $0.23 per diluted share, including realized gains on out-of-period derivative contract settlements) in second quarter 2010.

Six Months

  • Adjusted EBITDA of $305 million ($341 million including realized gains on out-of-period derivative contract settlements) for the first six months of 2011 compared to $274 million ($336 million including realized gains on out-of-period derivative contract settlements) in the first six months of 2010.
  • Operating cash flow of $234 million for the first six months of 2011 compared to $222 million in the first six months of 2010.
  • Net loss applicable to common stockholders of $120 million, or $0.30 per diluted share, for the first six months of 2011 compared to net income available to common stockholders of $63 million, or $0.31 per diluted share, in the first six months of 2010.
  • Adjusted net loss of $9.0 million, or $0.02 per diluted share, (adjusted net income of $26.2 million, or $0.05 per diluted share, including realized gains on out-of-period derivative contract settlements) in the first six months of 2011 compared to adjusted net income of $10.5 million, or $0.04 per diluted share, (adjusted net income of $72.8 million, or $0.28 per diluted share, including realized gains on out-of-period derivative contract settlements) in the first six months of 2010.

Adjusted net (loss applicable) income available 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

  • Drilled 238 wells during second quarter 2011 and 461 wells during first six months of 2011.
  • Oil production in second quarter 2011 of 2.77 MMBbls compared to 2.58 MMBbls in first quarter 2011 and 1.34 MMBbls in second quarter 2010.
  • Total production in second quarter 2011 of 5.64 MMBoe compared to 5.46 MMBoe in first quarter 2011 and 4.56 MMBoe in second quarter 2010.
  • July 2011 average daily production of 66 MBoe with one-day record high of 68 MBoe.
  • Most active driller in the Mid-Continent Mississippian Play with 14 rigs operating and 111 horizontal wells drilled.
  • Added 200,000 net acre position in new Mississippian Play.
  • Increasing 2011 capital expenditure guidance by $500 million, from $1.3 billion to $1.8 billion, reflecting an increase in Mississippian drilling activity and continued acreage purchases both in the Mississippian and the Central Basin Platform.
  • Increasing 2011 production guidance to 24.1 MMBoe from 23.3 MMBoe.
  • Guiding 2012 capital program to $1.8 billion and production to 29.1 MMBoe.

Tom L. Ward, Chairman and CEO commented, "We are pleased to announce the joint venture with Atinum Partners on our Mississippian project where results continue to meet or exceed our expectations. Our management team has been consistent in discussing several alternatives to fund the drilling of our large Mississippian acreage position within ten years and bring forward the NAV of this asset. With this announcement, we will begin to increase our rig count in Oklahoma and Kansas to average 24 rigs in 2012, which nearly doubles our current rig count. Additionally, we have identified and established an acreage position in a new area that is similar in size, characteristics and cost to our first Mississippian play. In connection with increasing our rig count and acreage position, we are increasing our 2011 capital budget to $1.8 billion and establishing a 2012 capital budget of $1.8 billion.

"The execution of our 2011 and 2012 plans will move the company significantly toward our 2014 goal of a self-funding capital program, delivering double-digit annual production growth and a debt to EBITDA ratio of less than 2 times."

Drilling Activities

SandRidge averaged 29 rigs operating during the second quarter of 2011 and drilled 238 wells. The company drilled a total of 461 wells during the first six months of 2011. A total of 231 gross (219 net) operated wells were completed and brought on production during the second quarter of 2011, bringing the total number of operated wells completed and brought on production during 2011 to 439 gross (408 net). Currently, the company has 32 rigs operating (including 2 drilling saltwater disposal wells), of which 21 are SandRidge-owned Lariat rigs.

Permian Basin

The company drilled 200 wells in the Permian Basin during the second quarter of 2011 and 399 wells during the first six months of 2011. The company has identified approximately 7,900 drilling locations on its 228,000 net acres in the Permian Basin. Production from the Permian Basin grew from approximately 13,100 Boe per day in second quarter 2010 to approximately 28,100 Boe per day in second quarter 2011, reflecting the Arena acquisition in July 2010, development of the company's acreage holdings and the previously announced sales of Wolfberry and New Mexico assets producing approximately 3,100 Boe per day. SandRidge presently operates 16 rigs in the Permian Basin, all of which are operating on the Central Basin Platform drilling primarily San Andres and Clear Fork vertical wells at depths ranging from 4,500 feet to 7,500 feet. The company plans to drill over 800 wells in the Permian Basin in 2011.

Mississippian Play

The Mississippian oil play in the Mid-Continent area of Oklahoma and Kansas is an expansive, shallow carbonate hydrocarbon system. During the second quarter of 2011, SandRidge drilled 38 horizontal wells in the Mississippian play bringing the total number of operated wells drilled during 2011 in the Mississippian to 61. Industry-wide, approximately 250 horizontal wells have been drilled in the Mississippian across a 150-mile long area with SandRidge having drilled 111 wells. The company grew its Mississippian production from approximately 770 Boe per day in second quarter 2010 to over 8,400 Boe per day in second quarter 2011. SandRidge has identified over 4,000 drilling locations on approximately 900,000 net acres it has leased in the play. The company presently has 16 rigs operating in the play, of which 14 are drilling horizontal producer wells with 2 drilling saltwater disposal wells, and plans to increase the Mississippian rig count to average 24 rigs in 2012. SandRidge plans to drill 172 horizontal wells in the Mississippian play in 2011.

New Mississippian Play

SandRidge has established a 200,000 net acre position in a new horizontal Mississippian play comparable in size, characteristics and cost to the now proven Mississippian horizontal play. This new play is a shallow hydrocarbon system in a thick, porous, carbonate section. The Mississippian section ranges from 250 to 700 feet thick with enhanced porosity development just beneath the pre-Pennsylvanian unconformity. The geological setting is an extensive regional stratigraphic trap within a hydrocarbon system that has a long history of Mississippian production from thousands of vertical wells.

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,

2011

2010

2011

2010

Production(1)

Oil (MBbl)(2)

2,767

1,344

5,348

2,555

Natural gas (MMcf)

17,239

19,316

34,505

38,373

Oil equivalent (MBoe)

5,640

4,564

11,099

8,951

Daily production (MBoed)

62.0

50.2

61.3

49.4

Average price per unit

Realized oil price per barrel - as reported (2)

$   89.09

$   62.56

$   84.59

$   64.43

Realized impact of derivatives per barrel (2)

(12.83)

3.30

(10.26)

2.96

Net realized price per barrel (2)

$   76.26

$   65.86

$   74.33

$   67.39

Realized natural gas price per Mcf - as reported

$     3.81

$     3.41

$     3.67

$     4.04

Realized impact of derivatives per Mcf

(0.50)

2.65

(0.21)

2.36

Net realized price per Mcf

$     3.31

$     6.06

$     3.46

$     6.40

Realized price per Boe - as reported

$   55.34

$   32.87

$   52.17

$   35.71

Net realized price per Boe - including impact of derivatives

$   47.52

$   45.03

$   46.58

$   46.67

Average cost per Boe

Lease operating

$   14.51

$   12.27

$   14.04

$   11.87

Production taxes

2.25

1.18

2.09

1.14

General and administrative

General and administrative, excluding stock-based compensation

5.00

5.81

4.85

5.73

Stock-based compensation

1.68

1.61

1.65

1.59

Depletion

13.51

11.90

13.52

11.91

Lease operating cost per Boe

Excluding offshore and tertiary recovery

$   13.24

$   10.95

$   12.97

$   10.54

Offshore operations

64.62

28.13

43.02

26.06

Tertiary recovery operations

33.37

55.79

37.28

58.13

Earnings per share

Income (loss) per share available (applicable) to common stockholders

Basic

$     0.49

$     0.22

$   (0.30)

$     0.31

Diluted

0.42

0.21

(0.30)

0.31

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

Basic

$   (0.04)

$   (0.05)

$   (0.09)

$   (0.03)

Diluted

(0.00)

(0.01)

(0.02)

0.04

Weighted average number of common shares outstanding (in thousands)

Basic

398,435

203,839

398,343

203,831

Diluted(3)

495,982

259,566

495,782

259,479

(1)

2011 production includes impact from 2011 Wolfberry and New Mexico asset sales of approximately 3,100 Boe per day.

(2)

Includes NGLs.

(3)

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

Discussion of Second Quarter 2011 Financial Results

Oil and natural gas revenue increased 108% to $312.1 million in second quarter 2011 from $150.0 million in the same period of 2010 as a result of increases in oil production and realized reported oil prices. Oil production increased 106% to 2.77 MMBbls from second quarter 2010 production of 1.34 MMBbls mainly due to oil production from Permian Basin properties acquired in July 2010 and continued development of the company's oil properties. Second quarter 2011 total production increased 24% to 5.64 MMBoe from 4.56 MMBoe in second quarter 2010. Realized reported prices, which exclude the impact of derivative settlements, were $89.09 per barrel and $3.81 per Mcf during second quarter 2011. Realized reported prices in the same period of 2010 were $62.56 per barrel and $3.41 per Mcf.

Production expense increased 46% to $81.8 million in second quarter 2011 from $56.0 million in the same period of 2010 due primarily to the addition of costs from Permian Basin properties acquired in July 2010. Second quarter 2011 production expense was $14.51 per Boe compared to second quarter 2010 production expense of $12.27 per Boe.

Depletion per unit in second quarter 2011 was $13.51 per Boe compared to $11.90 per Boe in the same period of 2010. The increase in rate per unit primarily was a result of an increase in the company's depreciable oil and natural gas properties, mainly due to the Arena acquisition in July 2010.

Capital Expenditures

The table below summarizes the company's capital expenditures for the three and six-month periods ended June 30, 2011 and 2010:

Three Months Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

(in thousands)

Drilling and production

Permian Basin

$ 173,100

$   83,410

$ 345,638

$ 122,856

Mid-Continent

147,939

31,290

249,934

46,284

WTO

2,082

88,709

12,874

174,034

Tertiary

6,584

6,504

13,284

9,227

Other

621

8,669

2,151

24,396

330,326

218,582

623,881

376,797

Leasehold and seismic

Permian Basin

15,335

11,890

20,502

15,410

Mid-Continent

70,521

10,277

167,630

17,465

WTO

1,516

1,143

3,190

5,677

Tertiary

46

88

214

88

Other

1,313

896

2,957

1,738

88,731

24,294

194,493

40,378

Pipe inventory(1)

4,376

(24,262)

8,087

(6,805)

Total exploration and development(2)

423,433

218,614

826,461

410,370

Drilling and oil field services

8,030

8,195

14,793

17,612

Midstream

4,462

16,337

8,635

36,759

Other - general

18,167

5,818

24,363

12,804

Total capital expenditures

$ 454,092

$ 248,964

$ 874,252

$ 477,545

(1)

Pipe inventory expenditures for the three and six-month periods ended June 30, 2010 represent transfers of pipe to the full cost pool for use in drilling and production activities.

(2)

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

Derivative Contracts

The tables below set forth the company's oil swaps and natural gas price and basis swaps for the years 2011 through 2015 as of August 1, 2011 and include contracts, the benefits of which have been conveyed to SandRidge Mississippian Trust I.

Quarter Ending

3/31/2011

6/30/2011

9/30/2011

12/31/2011

Oil Swaps

Volume (MMBbls)

1.95

2.09

2.47

2.55

Swap

$86.20

$87.19

$87.75

$88.15

Natural Gas Swaps

Volume (Bcf)

14.27

6.05

3.55

1.84

Swap

$4.67

$4.57

$4.62

$4.61

Collar Volume (Bcf)

0.00

0.00

0.00

0.00

Collar:  High

NM

NM

NM

NM

Collar:  Low

NM

NM

NM

NM

Natural Gas Basis Swaps

Volume (Bcf)

25.65

25.94

26.22

26.22

Swap

$0.47

$0.47

$0.47

$0.47

Year Ending

12/31/2011

12/31/2012

12/31/2013

12/31/2014

12/31/2015

Oil Swaps

Volume (MMBbls)

9.06

11.15

10.81

4.14

1.50

Swap

$87.40

$89.35

$94.99

$101.77

$100.54

Natural Gas Swaps

Volume (Bcf)

25.71

3.64

0.00

0.00

0.00

Swap

$4.63

$4.90

NM

NM

NM

Collar Volume (Bcf)

0.00

0.40

0.86

0.94

1.01

Collar:  High

NM

$6.20

$7.15

$7.78

$8.55

Collar:  Low

NM

$4.00

$4.00

$4.00

$4.00

Natural Gas Basis Swaps

Volume (Bcf)

104.03

113.46

14.60

0.00

0.00

Swap

$0.47

$0.55

$0.46

NM

NM

Balance Sheet

The company's capital structure at June 30, 2011 and December 31, 2010 is presented below:

June 30,

December 31,

2011

2010

(in thousands)

Cash and cash equivalents

$        4,615

$            5,863

Current maturities of long-term debt

$        1,019

$            7,293

Long-term debt (net of current maturities)

Senior credit facility

80,000

340,000

Mortgage

15,508

16,029

Senior Notes

Senior Floating Rate Notes due 2014

350,000

350,000

8.625% Senior Notes due 2015

-

650,000

9.875% Senior Notes due 2016, net

353,619

352,707

8.0% Senior Notes due 2018

750,000

750,000

8.75% Senior Notes due 2020, net

443,307

443,057

7.5% Senior Notes due 2021

900,000

-

 Total debt

2,893,453

2,909,086

Stockholders' equity

Preferred stock

8

8

Common stock

398

398

Additional paid-in capital

4,550,689

4,528,912

Treasury stock, at cost

(4,525)

(3,547)

Accumulated deficit

(3,109,725)

(2,989,576)

Total SandRidge Energy, Inc. stockholders' equity

1,436,845

1,536,195

Noncontrolling interest

359,840

11,288

Total capitalization

$ 4,690,138

$     4,456,569

At June 30, 2011, the company's debt was $2.9 billion, a decrease of approximately $279 million from March 31, 2011. In April, the company raised approximately $535 million in proceeds from the sale of a portion of its interest in SandRidge Mississippian Trust I (NYSE: SDT) and the divestiture of its non-core New Mexico properties, with proceeds from these transactions used to repay borrowings under the senior credit facility. On August 1, 2011, the company had $195 million drawn under its $790 million senior credit facility and approximately $2.2 million of cash, leaving approximately $573 million of available liquidity (including the impact of outstanding letters of credit). The company was in compliance with all of the financial and other covenants contained in its debt agreements as of and during the six months ended June 30, 2011.

Operational Guidance



Year Ending



December 31, 2011








Previous


Updated



Projection as of


Projection as of



May 5, 2011


August 4, 2011

Production





Oil (MMBbls)  (1)

12.3


12.4


Natural Gas (Bcf)

66.5


70.0


Total (MMBoe)

23.3


24.1






Differentials





Oil  (1)

$13.00


$13.00


Natural Gas

0.75


0.75






Costs per Boe





Lifting

$11.80 - $13.10


$14.10 - $15.50


Production Taxes

2.05 - 2.30


2.05 - 2.30


DD&A - oil & gas

12.80 - 14.20


12.80 - 14.20


DD&A - other

2.40 - 2.65


2.20 - 2.40


Total DD&A

$15.20 - $16.85


$15.00 - $16.60


G&A - cash

4.25 - 4.75


4.25 - 4.75


G&A - stock

1.55 - 1.75


1.45 - 1.60


Total G&A

$5.80 - $6.50


$5.70 - $6.35


Interest Expense

$10.20 - $11.30


$9.60 - $10.60






Net Income Attributable to Noncontrolling Interest ($ in millions)

$26.1


$26.1






Corporate Tax Rate

0%


0%

Deferral Rate

0%


0%






Shares Outstanding at End of Period (in millions)





Common Stock

415.6


415.6


Preferred Stock (as converted)

90.1


90.1


Fully Diluted

505.7


505.7






Capital Expenditures ($ in millions)





Exploration and Production

$1,065


$1,265


Land and Seismic

105


380


Total Exploration and Production

$1,170


$1,645


Oil Field Services

25


40


Midstream and Other

105


115


Total Capital Expenditures

$1,300


$1,800







(1)  Includes NGLs.






2011 Guidance Update: The company is updating certain guidance for 2011 from the information previously provided on May 5, 2011. The company has increased its projected oil and natural gas production to reflect increased drilling activity. Projected lifting costs have increased to $14.10 to $15.50 per barrel from $11.80 to $13.10 per barrel due to higher workover activity level, saltwater disposal in the Central Basin Platform and higher costs associated with rapid growth of the emerging Mississippian play. Per unit DD&A-other, G&A-stock and interest expense have decreased due to the increase in projected production. Projected capital expenditures have increased to $1.8 billion from $1.3 billion primarily due to increased leasing activity, well count and well costs in the Mississippian play.



Year Ending



December 31, 2012






Initial



Projection as of



August 4, 2011

Production



Oil (MMBbls)  (1)

16.7


Natural Gas (Bcf)

74.8


Total (MMBoe)

29.1




Capital Expenditures ($ in millions)



Exploration and Production

$1,550


Land and Seismic

170


Total Exploration and Production                                  

$1,720


Oil Field Services

20


Midstream and Other

60


Total Capital Expenditures

$1,800





(1)  Includes NGLs.




2012 Initial Operational Guidance: The company is introducing certain guidance for 2012. The company expects to incur approximately $1.8 billion in capital expenditures and produce approximately 29.1 MMBoe.

Non-GAAP Financial Measures

Operating cash flow, adjusted EBITDA and adjusted net (loss applicable) income available to common stockholders 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. It defines EBITDA as net income (loss) before income tax (benefit) expense, interest expense and depreciation, depletion and amortization. Adjusted EBITDA, as presented herein, is EBITDA excluding interest income, realized gains on out-of-period derivative contract settlements, (gain) loss on sale of assets, transaction costs, loss on extinguishment of debt and other various non-cash items (including noncontrolling interest, stock-based compensation, unrealized (gain) loss 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 (loss applicable) income available to common stockholders, which excludes unrealized (gain) loss on derivative contracts, realized gains on out-of-period derivative contract settlements, transaction costs, loss on extinguishment of debt and (gain) loss on sale of assets from net income available (loss applicable) to common stockholders. Management uses this financial measure as an indicator of the company's operational trends and performance relative to other oil and natural gas companies and believes it is more comparable to earnings estimates provided by securities analysts. Adjusted net (loss applicable) income available to common stockholders is not a measure of financial performance under GAAP and should not be considered a substitute for net income available (loss applicable) to common stockholders.

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

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




Three Months Ended June 30,


Six Months Ended June 30,



2011


2010


2011


2010



(in thousands)










Net cash provided by operating activities

$ 181,247


$ 110,857


$ 261,004


$ 258,459










(Deduct) add









Changes in operating assets and liabilities

(47,324)


24,598


(27,100)


(36,588)










Operating cash flow

$ 133,923


$ 135,455


$ 233,904


$ 221,871



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





Three Months Ended June 30,


Six Months Ended June 30,




2011


2010


2011


2010




(in thousands)











Net income (loss)

$ 210,016


$   53,515


$ (92,328)


$   80,752











Adjusted for









Income tax (benefit) expense

(7,054)


150


(6,967)


162


Interest expense(1)

61,369


59,858


122,576


118,099


Depreciation and amortization - other

13,275


11,820


26,368


24,123


Depreciation and depletion - oil and natural gas

76,186


54,319


150,072


106,597

EBITDA

353,792


179,662


199,721


329,733












Provision for doubtful accounts

1,594


-


1,596


84


Inventory obsolescence

20


124


20


124


Interest income

(38)


(98)


(43)


(167)


Stock-based compensation

8,881


7,336


17,099


14,218


Unrealized (gains) losses on derivative contracts

(187,904)


2,735


79,350


(12,776)


Realized gains on out-of-period derivative










contract settlements

(25,825)


(62,424)


(35,201)


(62,424)


Other non-cash expense

109


729


(51)


322


(Gain) loss on sale of assets

(524)


388


(725)


84


Transaction costs

1,745


3,765


3,087


4,753


Loss on extinguishment of debt

2,051


-


38,232


-


Non-cash portion of noncontrolling interest(2)

2,245


-


2,245


-











Adjusted EBITDA

$ 156,146


$ 132,217


$ 305,330


$ 273,951











(1)

Excludes unrealized loss (gain) on interest rate swaps of $0.4 million and ($1.4) million for the three-month periods ended June 30, 2011 and 2010, respectively, and $4.4 million and $8.2 million for the six-month periods ended June 30, 2011 and 2010, respectively.

(2)

Represents depreciation and depletion of ($3.3) million for the three and six-month periods ended June 30, 2011 and unrealized gains on commodity derivative contracts of $5.5 million for the three and six-month periods ended June 30, 2011 attributable to noncontrolling interests.



Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA




Three Months Ended June 30,


Six Months Ended June 30,



2011


2010


2011


2010



(in thousands)










Net cash provided by operating activities

$ 181,247


$ 110,857


$ 261,004


$ 258,459










Changes in operating assets and liabilities

(47,324)


24,598


(27,100)


(36,588)

Interest expense(1)

61,369


59,858


122,576


118,099

Realized gains on out-of-period derivative









contract settlements

(25,825)


(62,424)


(35,201)


(62,424)

Transaction costs

1,745


3,765


3,087


4,753

Noncontrolling interest(2)

(10,909)


(1,096)


(10,916)


(2,234)

Other non-cash items

(4,157)


(3,341)


(8,120)


(6,114)










Adjusted EBITDA

$ 156,146


$ 132,217


$ 305,330


$ 273,951



















(1)

Excludes unrealized loss (gain) on interest rate swaps of $0.4 million and ($1.4) million for the three-month periods ended June 30, 2011 and 2010, respectively, and $4.4 million and $8.2 million for the six-month periods ended June 30, 2011 and 2010, respectively.

(2)

Excludes depreciation and depletion of ($3.3) million for the three and six-month periods ended June 30, 2011 and unrealized gains on commodity derivative contracts of $5.5 million for the three and six-month periods ended June 30, 2011 attributable to noncontrolling interests.



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




Three Months Ended June 30,


Six Months Ended June 30,



2011


2010


2011


2010



(in thousands, except per share data)










Income available (loss applicable)  to common









stockholders

$ 196,135


$ 44,884


$ (120,149)


$ 63,489

Tax benefit resulting from Arena acquisition

(6,986)


-


(6,986)


-










Unrealized (gains) losses on derivative contracts(1)

(182,374)


2,735


84,880


(12,776)

Realized gains on out-of-period derivative









contract settlements

(25,825)


(62,424)


(35,201)


(62,424)

(Gain) loss on sale of assets

(524)


388


(725)


84

Transaction costs

1,745


3,765


3,087


4,753

Loss on extinguishment of debt

2,051


-


38,232


-

Effect of income taxes

(64)


152


20


137










Adjusted net (loss applicable) income available to common stockholders

(15,842)


(10,500)


(36,842)


(6,737)

Preferred stock dividends

13,881


8,631


27,821


17,263










Total adjusted net (loss) income

$   (1,961)


$ (1,869)


$   (9,021)


$ 10,526










Weighted average number of common shares outstanding


















Basic

398,435


203,839


398,343


203,831


Diluted(2)

495,982


259,566


495,782


259,479










Total adjusted net (loss) income









Per share - basic

$     (0.04)


$   (0.05)


$       (0.09)


$   (0.03)


Per share - diluted

$     (0.00)


$   (0.01)


$       (0.02)


$    0.04










(1)

Excludes unrealized gains on commodity derivative contracts of $5.5 million for the three and six-month periods ended June 30, 2011 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.



Conference Call Information

The company will host a conference call to discuss these results on Friday, August 5, 2011 at 8:00 am CDT. The telephone number to access the conference call from within the U.S. is 866-271-5140 and from outside the U.S. is 617-213-8893. The passcode for the call is 65105088. An audio replay of the call will be available from August 5, 2011 until 11:59 pm CDT on September 5, 2011. 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 62166030.

A live audio webcast of the conference call also will 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:

  • August 8, 2011Tuohy Brothers' 2nd Annual Nat Gas Infrastructure & Production One-on-One Conference; New York, NY
  • August 10, 2011 – Tudor, Pickering, Holt & Co., 2011 Hotter 'N Hell Energy Conference; Houston, TX
  • August 16, 2011 – Enercom's The 2011 Oil & Gas Conference™; Denver, CO
  • August 17, 2011 – Summer NAPE E&P Conference; Houston, TX
  • August 31, 2011 – Simmons & Company International, 2011 European Energy Conference; Scotland, UK
  • September 7, 2011 – Barclays Capital, 2011 CEO Energy Conference; New York, NY
  • September 21, 2011 – Deutsche Bank, 2011 Energy Conference; Boston, MA
  • September 27, 2011 – IHS Herold, 20th Annual Pacesetters Energy Conference; Stamford, CT
  • October 5, 2011Johnson Rice & Co., 2011 Energy Conference; New Orleans, LA
  • October 11, 2011 – Deutsche Bank, 19th Annual Leveraged Finance Conference; Scottsdale, AZ

At 8:00 am Central Time on the day of each presentation, the corresponding slides and 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.

Third Quarter 2011 Earnings Release and Conference Call

November 3, 2011 (Thursday) – Earnings press release after market close

November 4, 2011 (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


Six Months Ended





June 30,


June 30,





2011


2010


2011


2010





(Unaudited)

Revenues









Oil and natural gas

$ 312,111


$ 149,995


$  579,053


$ 319,580


Drilling and services

28,537


3,901


49,571


9,661


Midstream and marketing

16,313


22,598


38,570


50,587


Other

7,813


5,945


10,427


13,606




Total revenues

364,774


182,439


677,621


393,434












Expenses









Production

81,834


56,009


155,791


106,281


Production taxes

12,666


5,404


23,242


10,242


Drilling and services

18,058


1,024


33,099


8,233


Midstream and marketing

15,873


19,779


38,156


45,285


Depreciation and depletion - oil and natural gas

76,186


54,319


150,072


106,597


Depreciation and amortization - other

13,275


11,820


26,368


24,123


General and administrative

37,678


33,865


72,091


65,539


(Gain) loss on derivative contracts

(169,988)


(119,621)


107,640


(181,573)


(Gain) loss on sale of assets

(524)


388


(725)


84




Total expenses

85,058


62,987


605,734


184,811


Income from operations

279,716


119,452


71,887


208,623












Other income (expense)









Interest income

38


98


43


167


Interest expense

(61,725)


(64,259)


(121,167)


(126,348)


Loss on extinguishment of debt

(2,051)


-


(38,232)


-


Other income (expense), net

138


(530)


1,335


706




Total other expense

(63,600)


(64,691)


(158,021)


(125,475)

Income (loss) before income taxes

216,116


54,761


(86,134)


83,148

Income tax (benefit) expense

(7,054)


150


(6,967)


162

Net income (loss)

223,170


54,611


(79,167)


82,986


Less: net income attributable to noncontrolling interest

13,154


1,096


13,161


2,234

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

210,016


53,515


(92,328)


80,752

Preferred stock dividends

13,881


8,631


27,821


17,263


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










common stockholders

$ 196,135


$   44,884


$ (120,149)


$   63,489












Earnings (loss) per share











Basic

$       0.49


$       0.22


$       (0.30)


$       0.31




Diluted

$       0.42


$       0.21


$       (0.30)


$       0.31












Weighted average number of common shares outstanding











Basic

398,435


203,839


398,343


203,831




Diluted

495,982


259,566


398,343


226,406



SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)




June 30,


December 31,




2011


2010




(Unaudited)



ASSETS


Current assets




Cash and cash equivalents

$        4,615


$            5,863

Accounts receivable, net

162,976


146,118

Derivative contracts

2,513


5,028

Inventories

7,571


3,945

Other current assets

12,897


14,636



Total current assets

190,572


175,590







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





Proved

8,552,148


8,159,924


Unproved

624,668


547,953


Less: accumulated depreciation, depletion and impairment

(4,625,330)


(4,483,736)




4,551,486


4,224,141







Other property, plant and equipment, net

519,364


509,724

Restricted deposits

27,902


27,886

Goodwill


235,396


234,356

Other assets

71,954


59,751



Total assets

$ 5,596,674


$     5,231,448







LIABILITIES AND EQUITY




Current liabilities




Current maturities of long-term debt

$        1,019


$            7,293

Accounts payable and accrued expenses

423,971


376,922

Billings and estimated contract loss in excess of costs incurred

41,232


31,474

Derivative contracts

149,374


103,409

Asset retirement obligation

25,360


25,360



Total current liabilities

640,956


544,458







Long-term debt

2,892,434


2,901,793

Derivative contracts

162,057


124,173

Asset retirement obligation

93,780


94,517

Other long-term obligations

10,762


19,024



Total liabilities

3,799,989


3,683,965







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 June 30, 2011 and December 31, 2010; aggregate liquidation preference





of $265,000

3


3


6.0% Convertible perpetual preferred stock; 2,000 shares issued and outstanding





at June 30, 2011 and December 31, 2010; aggregate liquidation preference of





$200,000

2


2


7.0% Convertible perpetual preferred stock; 3,000 shares issued and outstanding





at June 30, 2011 and December 31, 2010; aggregate liquidation preference of





$300,000

3


3

Common stock, $0.001 par value, 800,000 shares authorized; 410,498 issued and





409,918 outstanding at June 30, 2011 and 406,830 issued and 406,360





outstanding at December 31, 2010

398


398

Additional paid-in capital

4,550,689


4,528,912

Treasury stock, at cost

(4,525)


(3,547)

Accumulated deficit

(3,109,725)


(2,989,576)



Total SandRidge Energy, Inc. stockholders' equity

1,436,845


1,536,195

Noncontrolling interest

359,840


11,288



Total equity

1,796,685


1,547,483



Total liabilities and equity

$ 5,596,674


$     5,231,448



SandRidge Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)










Six Months Ended




June 30,




2011


2010




(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES





Net (loss) income

$    (79,167)


$  82,986


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






Provision for doubtful accounts

1,596


84



Inventory obsolescence

20


124



Depreciation, depletion and amortization

176,440


130,720



Debt issuance costs amortization

5,748


5,121



Discount amortization on long-term debt

1,162


1,049



Loss on extinguishment of debt

38,232


-



Deferred income taxes

(6,986)


-



Unrealized loss (gain) on derivative contracts

79,350


(12,776)



(Gain) loss on sale of assets

(725)


84



Investment (income) loss

(67)


261



Stock-based compensation

18,301


14,218



Changes in operating assets and liabilities

27,100


36,588


Net cash provided by operating activities

261,004


258,459


CASH FLOWS FROM INVESTING ACTIVITIES






Capital expenditures for property, plant and equipment

(871,901)


(427,336)



Proceeds from sale of assets

369,251


6,042



Refunds of restricted deposits

-


5,095


Net cash used in investing activities

(502,650)


(416,199)


CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from borrowings

1,725,000


841,914



Repayments of borrowings

(1,741,795)


(662,869)



Premium on debt redemption

(30,338)


-



Debt issuance costs

(19,640)


(11,546)



Proceeds from issuance of units by SandRidge Mississippian Trust I

336,892


-



Noncontrolling interest distributions

(1,501)


(1,506)



Noncontrolling interest contributions

-


157



Stock issuance expense

(231)


(87)



Stock-based compensation excess tax benefit

7


14



Purchase of treasury stock

(6,030)


(2,852)



Dividends paid - preferred

(28,980)


(11,263)



Derivative settlements

7,014


-


Net cash provided by financing activities

240,398


151,962


NET DECREASE IN CASH AND CASH EQUIVALENTS

(1,248)


(5,778)







CASH AND CASH EQUIVALENTS, beginning of year

5,863


7,861

CASH AND CASH EQUIVALENTS, end of period

$       4,615


$    2,083







Supplemental Disclosure of Noncash Investing and Financing Activities




Change in accrued capital expenditures

$       2,351


$  50,209


Convertible perpetual preferred stock dividends payable

$     16,572


$  14,447


Adjustment to oil and natural gas properties for estimated contract loss

$     19,000


$            -



For further information, please contact:

Kevin R. White
Senior Vice President
SandRidge Energy, Inc.
123 Robert S. Kerr Avenue
Oklahoma City, OK 73102-6406
(405) 429-5515

Cautionary Note to Investors - This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, the information appearing under the heading "Operational Guidance."  These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes.  The forward-looking statements include projections and estimates of leverage, net income, drilling rigs operating, drilling locations, funding, oil and natural gas production, derivative transactions, shares outstanding, pricing differentials, operating costs and capital spending, tax rates, and descriptions of our development plans.  We have based these forward-looking statements on our current expectations and assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances.  However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including the volatility of oil and natural gas prices, our success in discovering, estimating, developing and replacing oil and natural gas reserves, actual decline curves and the actual effect of adding compression to gas wells, the availability and terms of capital, the ability of counterparties to transactions with us to meet their obligations, our timely execution of hedge transactions, credit conditions of global capital markets, changes in economic conditions, the amount and timing of future development costs, the availability and demand for alternative energy sources, regulatory changes, including those related to carbon dioxide and greenhouse gas emissions, and other factors, many of which are beyond our control.  We refer you to the discussion of risk factors in Part I, Item 1A -  "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2010 and in comparable "risk factors" sections of our Quarterly Reports on Form 10-Q filed after the date of this press release.  All of the forward-looking statements made in this press release are qualified by these cautionary statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on our company or our business or operations.  Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements.  We undertake no obligation to update or revise any forward-looking statements.

SandRidge Energy, Inc. is an oil and natural gas company headquartered in Oklahoma City, Oklahoma with its principal focus on exploration and production. SandRidge and its subsidiaries also own and operate gas gathering and processing facilities and CO2 treating and transportation facilities and conduct marketing and tertiary oil recovery operations. In addition, Lariat Services, Inc., a wholly-owned subsidiary of SandRidge, owns and operates a drilling rig and related oil field services business. SandRidge focuses its exploration and production activities in the West Texas Overthrust, Permian Basin, Mid-Continent, Cotton Valley Trend in East Texas, Gulf Coast and the Gulf of Mexico. SandRidge's internet address is www.sandridgeenergy.com.

SOURCE SandRidge Energy, Inc.



RELATED LINKS

http://www.sandridgeenergy.com