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Press Release Details

SandRidge Energy, Inc. Reports Financial and Operational Results for Fourth Quarter and Full Year of 2017

02/21/2018

OKLAHOMA CITY, Feb. 21, 2018 /PRNewswire/ --SandRidge Energy, Inc. (the "Company" or "SandRidge") (NYSE:SD) today announced financial and operational results for the quarter and fiscal year ended December 31, 2017. Additionally, the Company will host a conference call to discuss these results on February 22, at 8:00 a.m. CT (833-245-9650, International: 647-689-4222 – passcode: 4489951). Presentation slides will be available on the Company's website, www.sandridgeenergy.com, under Investor Relations/Presentations & Events.

SandRidge Energy, Inc. logo. (PRNewsFoto/SandRidge Energy, Inc.)

Highlights During 2017 Include:

Net Income of $47 Million and Adjusted Net Income of $52 Million for 2017

EBITDA of $175 Million and Adjusted EBITDA of $193 Million for 2017

Proved Reserves at Year End 2017 of 178 MMBoe with 17% Increase in Proved Oil Reserves Over Year End 2016

SEC Total Proved PV-10 of $749 Million ($835 Million Using Year End Strip Pricing), 71% Increase Over Year End 2016

Production of 14.9 MMBoe at High End of Guidance for 2017

Oil Production Increase of 73 MBo or 8% in Fourth Quarter 2017 Over Third Quarter 2017

Bill Griffin, President and CEO said, "SandRidge enters 2018 with a revised strategy and strong platform for economic growth.  I step into this role with a full and determined commitment to work diligently with our veteran, senior executive team to quickly implement the announced G&A reductions, while maintaining core competencies and shifting organizational focus.  2017 was a year of solid operating performance, delivering within, or exceeding our production and cost guidance. Importantly, the NPV-10 of our total proved reserve base increased to $835 million when utilizing year-end strip pricing. SandRidge has tremendous potential moving forward.  We are taking steps for meaningful improvements in our cash flow margins and we have a significant undeveloped acreage position and prospect inventory.  These facts, in combination with a strong and clean balance sheet, give us significant optionality to capture the most attractive opportunities and create meaningful value."

Financial Results

Fourth Quarter

For the fourth quarter, the Company reported a net loss of $19 million, or $0.54 per share, and net cash provided by operating activities of $33 million. When adjusting these reported amounts for items that are typically excluded by the investment community on the basis that such items affect the comparability of results, the Company's "adjusted net income" amounted to $12 million, or $0.34 per share, and "operating cash flow" totaled $41 million. Earnings before interest, income taxes, depreciation, depletion, and amortization, adjusted for certain other items, otherwise referred to as "adjusted EBITDA," for the fourth quarter was $49 million.(1)

Full Year

For the full year of 2017, the Company reported net income of $47 million, or $1.44 per share, and net cash provided by operating activities of $181 million. Adjusted net income amounted to $52 million, or $1.61 per share, and operating cash flow totaled $183 million. Adjusted EBITDA for the full year was $193 million. (1)

1) The Company has defined and reconciled certain non-GAAP financial measures including adjusted net income, operating cash flow, EBITDA, adjusted EBITDA, PV-10 and adjusted G&A expense and current net debt, to the most directly comparable GAAP financial measures in supporting tables at the conclusion of this press release under the "Non-GAAP Financial Measures" beginning on page 15.

Liquidity & Capital Structure

As of February 15, 2018, the Company's total liquidity was $496 million, which includes $78 million of cash and $418 million capacity under the credit facility, net of outstanding letters of credit.

The Company currently has no funds drawn under its credit facility and has provided notice that it intends to repay in full its $38 million building note on February 24, 2018. Interest on the building note is scheduled to increase from 8% to 10% in October 2018. Following repayment of the building note, the Company will have no outstanding long-term debt.

Hedging

For 2018, 86% of the Company's expected liquids production is hedged (at the midpoint of guidance) using derivative instruments for approximately  3.8 million barrels of oil at an average NYMEX WTI price of $55.75. In light of the high correlation between NGL and NYMEX WTI prices, the Company manages a portion of its NGL price exposure using NYMEX WTI contracts at a three-to-one (3:1) NGL to crude ratio. For 2018, the Company also has approximately 17.3 billion cubic feet of natural gas (54% of the midpoint of our guidance) hedged at an average price of $3.16 per MMBtu. For 2019, the Company has approximately 1.8 million barrels of oil hedged at an average WTI price of $54.29.

Operational Results and Activity

Production totaled 3.5 MMBoe (29% oil, 22% NGLs and 49% natural gas) for the fourth quarter, and 14.9 MMBoe for the full year of 2017, at the high end of guidance (14.2-14.9 MMBoe). Oil production grew 8% during the fourth quarter to 1,027 MBo from 954 MBo in the third quarter. The Company averaged two rigs in the NW STACK targeting the Meramec and one rig targeting multiple benches of the Niobrara in the North Park Basin during the quarter. Capital expenditures were $80 million during the quarter, bringing the total for the year to $248 million (excluding acquisitions) compared to 2017 guidance of $250-260 million.

Mid-Continent Assets in Oklahoma and Kansas

In the fourth quarter, production in the Mid-Continent totaled 3.2 MMBoe (23% oil). The Company averaged two rigs in the NW STACK targeting the Meramec and drilled three wells (two SRLs and one XRL). Of the three wells drilled, two were under the previously announced Drilling Participation Agreement. The Company brought eight wells online (six SRLs and two XRLs), and the wells with available 30-Day IPs averaged 565 Boepd (72% oil) for SRLs and 770 Boepd (73% oil) for XRLs.

In 2017, the Company drilled eight XRLs and nine SRLs in the NW STACK targeting the Meramec with one to two rigs.  Of the 17 wells drilled, three were under the Drilling Participation Agreement that primarily covers Major and Woodward counties. Drilling and completion costs for SRLs and XRLs are currently $4.4 million and $6.5 million, respectively.

Niobrara Asset in North Park Basin, Jackson County, Colorado

Oil production in the North Park Basin totaled 201 MBo for the fourth quarter. During the quarter, the Company averaged one rig targeting multiple benches in the Niobrara, drilled three XRLs and brought three XRLs online. Two of the XRLs brought online had available 30-Day IPs averaging 1,109 Boepd (91% oil).

In 2017, the Company drilled eight XRLs and brought five wells to sales with one rig in North Park, confirming all four Niobrara benches (A, B, C and D) productive. Commercial productivity was confirmed in the B, C and D benches, while further determination of the A bench commerciality is ongoing. The Company has drilled the first four wells of an eight well spacing test, evaluating the B, C and D benches in a wine rack configuration. The Company will drill the remaining four wells of the test during the second quarter of 2018.

Other Operational Activities

During the fourth quarter, Permian Central Basin Platform properties produced 119 MBoe (1.3 MBoepd, 81% oil, 12% NGLs, 7% natural gas).

Year End 2017 Estimated Proved Reserves

The Company's total estimated SEC proved reserves as of December 31, 2017 were 178 MMBoe, an increase of 8% year over year. Reserves increased due to reserve additions and pricing revisions, with a 130% reserve replacement ratio (excluding pricing adjustments). SEC proved reserves PV-10 was $749 million, an increase of 71% year over year. SEC pricing used in the preparation of the December 31, 2017 reserves was $51.34 per Bbl for oil and $2.98 per MMBtu for natural gas, before adjustments.

For comparative purposes, utilizing NYMEX forward closing prices for oil and natural gas on December 29, 2017 (the last trading day of 2017), total NYMEX strip-based proved reserves at December 31, 2017 were 181 MMBoe, with a PV-10 of $835 million. NYMEX strip-based proved reserves are calculated based on the SEC proved reserves estimation methodology, but applying NYMEX strip prices rather than SEC pricing.  NYMEX strip-based PV-10 uses annual average prices for oil and natural gas shown in the NYMEX Strip Pricing table below.


Oil MBbls


NGLs MBbls


Gas MMcf


Equivalent
MBoe1


Standardized
Measure /PV-
10 $MM

Proved Reserves, December 31, 2016

52,884



33,607



464,782



163,955



$

438


Revisions

804



2,628



44,679



10,879




Purchases

18



70



683



202




Extensions & Additions

12,446



1,914



30,080



19,373




Sales of Assets

(204)



(529)



(7,055)



(1,909)




Production

(4,157)



(3,376)



(44,237)



(14,906)




Proved Reserves, December 31, 2017

61,791



34,314



488,932



177,594



$

749















1) Equivalent Boe are calculated using an energy equivalent ratio of six Mcf of natural gas to one Bbl of oil. Using an energy-equivalent ratio does not factor in price differences and energy-equivalent prices may differ significantly among produced products.



SEC Proved Reserves and NYMEX Strip-Based Proved Reserves



YE 2017@SEC Pricing1


YE 2017@ NYMEX Strip Pricing2



Equivalent MBoe


Standardized
measure / PV-10
$MM


Equivalent MBoe


PV-10 $MM

Developed


123,765



$574

126,675


$630

Undeveloped


53,829



$175


53,905



$206

Total Proved


177,594



$749


180,580



$835










1) SEC Pricing remains flat for reserve life at $51.34/Bo & $2.98/MMBtu

2) NYMEX Strip pricing as of December 29, 2017, shown in table below



NYMEX Strip Pricing

(as of 12/29/2017)

Year


Oil


Gas

2017


$50.96


$3.11

2018


$59.40


$2.83

2019


$55.94


$2.81

2020


$53.60


$2.82

2021


$52.20


$2.85

2022


$51.66


$2.89

2023+


$52.44


$3.08






2018 Operational and Capital Expenditure Guidance

The Company is currently running one drilling rig in the NW STACK under its Drilling Participation Agreement as well as one rig in the North Park Basin. Capital allocation opportunities based on total return are also under review to exploit high-graded Mississippian Lime locations. The 2018 capital expenditure guidance range is $180 - $190 million. As previously announced, the Company is in the process of instituting changes in its organizational structure to efficiently execute its strategic objectives. These changes are expected to reduce ongoing G&A cash expenses by one-third to $36 - $39 million per year. At these new levels of expense, G&A cash expenses will have been cut by more than half since the Company's emergence from bankruptcy in October 2016. Production and other operational guidance detail for the full year of 2018 can be found below.


Guidance



Projection as of



February 21, 2018


Production



Oil (MMBbls)

3.4 - 3.6


Natural Gas Liquids (MMBbls)

2.6 - 2.8


Total Liquids (MMBbls)

6.0 - 6.4


Natural Gas (Bcf)

31.5 - 33.0


Total (MMBoe)

11.3 - 11.9





Price Realization



Oil (per Bbl)

$2.80


Natural Gas Liquids (realized % of NYMEX WTI)

33%


Natural Gas (per MMBtu)

$1.20





Expenses



LOE

$95 - $105 million


Adjusted G&A Expense1

$41 - $44 million





% of Revenue



Production Taxes

4.80%








Capital Expenditures ($ in millions)

Drilling and Completion



Mid-Continent

$6 - $8


North Park Basin

76 - 84


Other2

34


Total Drilling and Completion

$116 - $126





Other E&P



Land, G&G, and Seismic

$15


Infrastructure3

15


Workover

25


Capitalized G&A and Interest

8


Total Other Exploration and Production

$63





General Corporate

1


Total Capital Expenditures

$180 - $190


(excluding acquisitions and plugging and abandonment)





1)

Adjusted G&A expense is a non-GAAP financial measure. The Company has defined this measure at the conclusion of this press release under "Non-GAAP Financial Measures" beginning on page 15. 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.

2)

Primarily 2017 Carryover

3)

Includes Production facilities, Pipeline ROW and Electrical

2017 Actual Results vs. 2017 Capital Expenditure and Operational Guidance

The table below presents the actual results of the Company's operations and capital expenditures for the full year of 2017 in comparison to its previous guidance, provided on November 1, 2017.



FY 2017 Actuals


FY 2017
Guidance
(Midpoint)


Delta








Production







     Oil (MMBbls)


4.2


4.2


0.0

     Natural Gas Liquids (MMBbls)


3.4


3.2


0.2

        Total Liquids (MMBbls)


7.6


7.4


0.2

     Natural Gas (Bcf)


44.2


42.8


1.5

        Total (MMBoe)


14.9


14.5


0.4








Cost per Boe







     LOE


$6.89


$7.08


(0.19)

     Adjusted G&A Expense1


$3.72


$4.10


(0.38)















Capital Expenditures ($ in Millions)

Drilling and Completion







     Mid-Continent


$

66


$

63


$

3

     North Park Basin


56


63


(6)

     Other2


22


20


2

Total Drilling and Completion


144


145


(1)

Other E&P







     Land, G&G, and Seismic


48


46


2

     Infrastructure3


15


18


(3)

     Workovers


28


30


(2)

     Capitalized G&A and Interest


12


14


(2)

Total Other Exploration and Production


102


108


(6)








General Corporate


1


2


(1)








Total Capital Expenditures (excluding acquisitions and plugging and abandonment)


$

248


$

255


$

(7)




1) Adjusted G&A expense is a non-GAAP financial measure. The Company has defined this measure at the conclusion of this press release under the "Non-GAAP Financial Measures" beginning on page 15. 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.


2) 2016 Carryover, Coring, Non-Op and SWD


3) Includes Production facilities, Pipeline ROW and Electrical

Operational and Financial Statistics

Upon emergence from Chapter 11 reorganization on October 4, 2016, the Company elected to adopt fresh start accounting effective October 1, 2016. As a result of the application of fresh start accounting and the effects of the implementation of the plan of reorganization, the financial statements on or after October 1, 2016 are not comparable with the financial statements prior to that date. References to the "Successor" refer to SandRidge subsequent to adoption of fresh start accounting. References to the "Predecessor" refer to SandRidge prior to adoption of fresh start accounting.

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


Successor




Successor


Predecessor


Three Months
Ended


Year Ended


Combined
Year Ended
December 31,
2016


Period from
October 2,
2016 through
December 31,
2016


Period from
January 1,
2016 through
October 1,
2016


December 31, 2017




Production - Total










Oil (MBbl)

1,027



4,157



5,529



1,214



4,315


NGL (MBbl)

775



3,376



4,357



999



3,358


Natural Gas (MMcf)

10,354



44,237



56,895



12,771



44,124


Oil equivalent (MBoe)

3,528



14,906



19,369



4,342



15,027


Daily production (MBoed)

38.3



40.8



52.9



47.2



54.8












Average price per unit










Realized oil price per barrel - as reported

$

53.31



$

48.72



$

39.09



$

47.03



$

36.85


Realized impact of derivatives per barrel

(2.54)



1.03



12.74



7.56



14.20


Net realized price per barrel

$

50.77



$

49.75



$

51.83



$

54.59



$

51.05












Realized NGL price per barrel - as reported

$

23.69



$

18.16



$

13.15



$

14.77



$

12.67


Realized impact of derivatives per barrel










Net realized price per barrel

$

23.69



$

18.16



$

13.15



$

14.77



$

12.67












Realized natural gas price per Mcf - as reported

$

1.92



$

2.09



$

1.84



$

2.07



$

1.78


Realized impact of derivatives per Mcf

0.21



0.06



(0.03)



(0.11)



(0.01)


Net realized price per Mcf

$

2.13



$

2.15



$

1.81



$

1.96



$

1.77












Realized price per Boe - as reported

$

26.35



$

23.90



$

19.53



$

22.64



$

18.63


Net realized price per Boe - including impact of derivatives

$

26.23



$

24.38



$

23.08



$

24.41



$

22.70












Average cost per Boe










Lease operating (1)

$

7.29



$

6.89



$

7.98



$

5.76



$

8.63


Production taxes

$

1.19



$

0.92



$

0.45



$

0.61



$

0.41


Depletion (2)

$

8.66



$

7.92



$

6.56



$

8.31



$

6.05












Earnings per share










(Loss) earnings per share applicable to common stockholders










Basic

$

(0.54)



$

1.45





$

(17.61)



$

2.01


Diluted

$

(0.54)



$

1.44





$

(17.61)



$

2.01












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










Basic

$

0.34



$

1.62





$

1.53



$

(0.13)


Diluted

$

0.34



$

1.61





$

0.86



$

(0.13)












Weighted average number of shares outstanding (in thousands)










Basic

34,494



32,442





18,967



708,928


Diluted (3)

34,547



32,663





33,573



708,928























(1)

Transportation costs are presented as a reduction of revenue by the Successor Company compared to the Predecessor Company's presentation of these costs as lease operating expenses.

(2)

Includes accretion of asset retirement obligation.

(3)

Includes shares considered antidilutive for calculating loss per share in accordance with GAAP.

Capital Expenditures

The table below presents actual results of the Company's capital expenditures for the three months and full year periods ended December 31, 2017 at the same level of detail as its full year capital expenditure guidance.


Three Months Ended


Year Ended


December 31, 2017


December 31, 2017


(In thousands)


(In thousands)





Drilling and Completion




Mid-Continent

$

18,312



$

65,959


North Park Basin

31,449



56,230


Other1

3,870



22,245


Total Drilling and Completion

53,631



144,435






Other E&P




Land, G&G, and Seismic

7,718



47,633


Infrastructure2

9,970



14,759


Workovers

6,241



27,908


Capitalized G&A and Interest

2,748



12,151


Total Other Exploration and Production

26,677



102,452






General Corporate

(49)



1,358






Total Capital Expenditures

$

80,260



$

248,244


(excluding acquisitions and plugging and abandonment)








1) 2016 Carryover, Coring, Non-Op and SWD

2) Infrastructure - Production facilities, Pipeline ROW and Electrical

Derivative Contracts

The table below sets forth the Company's consolidated oil and natural gas price swaps for 2018 and 2019 as of February 21, 2018:



Quarter Ending
















3/31/2018


6/30/2018


9/30/2018


12/31/2018


FY 2018

WTI Swaps:











Total Volume (MMBbls)


1.05


1.00


0.92


0.83


3.80

Daily Volume (MBblspd)


11.7


11.0


10.0


9.0


10.4

Swap Price ($/bbl)


$55.46


$55.50


$56.04


$56.12


$55.75












Natural Gas Swaps:











Total Volume (Bcf)


6.30


3.64


3.68


3.68


17.30

Daily Volume (MMBtupd)


70.0


40.0


40.0


40.0


47.4

Swap Price ($/MMBtu)


$3.24


$3.11


$3.11


$3.11


$3.16














3/31/2019


6/30/2019


9/30/2019


12/31/2019


FY 2019

WTI Swaps:











Total Volume (MMBbls)


0.45


0.46


0.46


0.46


1.83

Daily Volume (MBblspd)


5.0


5.0


5.0


5.0


5.0

Swap Price ($/bbl)


$54.29


$54.29


$54.29


$54.29


$54.29












Capitalization

The Company's capital structure as of December 31, 2017 and December 31, 2016 is presented below:


December 31,


December 31,


2017


2016


(In thousands)





Cash, cash equivalents and restricted cash

$

101,308



$

174,071






Credit facility

$



$


Building note

37,502



36,528


Mandatorily convertible 0% notes



268,780


Total debt

37,502



305,308






Stockholders' equity




Common stock

36



20


Warrants

88,500



88,381


Additional paid-in capital

1,038,324



758,498


Accumulated deficit

(286,920)



(333,982)


Total SandRidge Energy, Inc. stockholders' equity

839,940



512,917






Total capitalization

$

877,442



$

818,225


 

SandRidge Energy, Inc. and Subsidiaries Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)



Successor



Predecessor


Year Ended
December 31,
2017


Period from
October 2, 2016
through December 31,
2016



Period from
January 1, 2016
through
October 1, 2016


Year Ended
December 31,
2015

Revenues









Oil, natural gas and NGL

$

356,210



$

98,307




$

279,971



$

707,434


Other

1,089



149




13,838



61,275


Total revenues

357,299



98,456




293,809



768,709


Expenses









Production

102,728



24,997




129,608



308,701


Production taxes

13,644



2,643




6,107



15,440


Depreciation and depletion—oil and natural gas

118,035



36,061




90,978



324,390


Depreciation and amortization—other

13,852



3,922




21,323



47,382


Impairment

4,019



319,087




718,194



4,534,689


General and administrative

76,024



9,837




116,091



137,715


Terminated merger costs

8,162









Employee termination benefits

4,815



12,334




18,356



12,451


(Gain) loss on derivative contracts

(24,090)



25,652




4,823



(73,061)


Loss on settlement of contract






90,184



50,976


Other operating expenses

479



268




4,348



52,704


Total expenses

317,668



434,801




1,200,012



5,411,387


Income (loss) from operations

39,631



(336,345)




(906,203)



(4,642,678)


Other (expense) income









Interest expense

(3,868)



(372)




(126,099)



(321,421)


Gain on extinguishment of debt






41,179



641,131


Gain on reorganization items, net






2,430,599




Other income, net

2,550



2,744




1,332



2,040


Total other (expense) income

(1,318)



2,372




2,347,011



321,750


Income (loss) before income taxes

38,313



(333,973)




1,440,808



(4,320,928)


Income tax (benefit) expense

(8,749)



9




11



123


Net income (loss)

47,062



(333,982)




1,440,797



(4,321,051)


Less: net loss attributable to noncontrolling interest








(623,506)


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

47,062



(333,982)




1,440,797



(3,697,545)


Preferred stock dividends






16,321



37,950


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

$

47,062



$

(333,982)




$

1,424,476



$

(3,735,495)


Earnings (loss) per share









Basic

$

1.45



$

(17.61)




$

2.01



$

(7.16)


Diluted

$

1.44



$

(17.61)




$

2.01



$

(7.16)


Weighted average number of common shares outstanding









Basic

32,442



18,967




708,928



521,936


Diluted

32,663



18,967




708,928



521,936


 

SandRidge Energy, Inc. and Subsidiaries Condensed Consolidated Balance Sheets

(In thousands)



December 31,


December 31,


2017


2016

ASSETS




Current assets




Cash and cash equivalents

$

99,143



$

121,231


Restricted cash - collateral



50,000


Restricted cash - other

2,165



2,840


Accounts receivable, net

71,277



74,097


Derivative contracts

1,310




Prepaid expenses

5,248



5,375


Other current assets

15,954



3,633


Total current assets

195,097



257,176


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




Proved (includes development and project costs excluded from amortization of $16.7 million at December 31, 2016)

1,056,806



840,201


Unproved

100,884



74,937


Less: accumulated depreciation, depletion and impairment

(460,431)



(353,030)



697,259



562,108


Other property, plant and equipment, net

225,981



255,824


Other assets

1,290



6,284


Total assets

$

1,119,627



$

1,081,392






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




Accounts payable and accrued expenses

$

139,155



$

116,517


Derivative contracts

10,627



27,538


Asset retirement obligations

41,017



66,154


Other current liabilities

8,115



3,497


Total current liabilities

198,914



213,706


Long-term debt

37,502



305,308


Derivative contracts

3,568



2,176


Asset retirement obligations

36,527



40,327


Other long-term obligations

3,176



6,958


Total liabilities

279,687



568,475


Commitments and contingencies (Note 15)




Stockholders' Equity




Common stock, $0.001 par value; 250,000 shares authorized; 35,650 issued and outstanding at December 31, 2017 and 21,042 issued and 19,635 outstanding at December 31, 2016

36



20


Warrants

88,500



88,381


Additional paid-in capital

1,038,324



758,498


Accumulated deficit

(286,920)



(333,982)


Total stockholders' equity

839,940



512,917


Total liabilities and stockholders' equity

$

1,119,627



$

1,081,392


 

SandRidge Energy, Inc. and Subsidiaries Condensed Consolidated Cash Flows

 (In thousands)



Successor



Predecessor


Year Ended
December 31,
2017


Period from
October 2, 2016
through
December 31,
2016



Period from
January 1, 2016
through October 1,
2016


Year Ended
December 31,
2015

CASH FLOWS FROM OPERATING ACTIVITIES









Net income (loss)

$

47,062



$

(333,982)




$

1,440,797



$

(4,321,051)


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









Provision for doubtful accounts

406



(13,166)




16,704




Depreciation, depletion and amortization

131,887



39,983




112,301



371,772


Impairment

4,019



319,087




718,194



4,534,689


Gain on reorganization items, net






(2,442,436)




Debt issuance costs amortization

430






4,996



11,884


Amortization of discount, net of premium, on debt

(330)



(81)




2,734



3,130


Gain on extinguishment of debt






(41,179)



(641,131)


Write off of debt issuance costs








7,108


(Gain) loss on debt derivatives






(1,324)



10,377


Cash paid for early conversion of convertible notes






(33,452)



(32,741)


(Gain) loss on derivative contracts

(24,090)



25,652




4,823



(73,061)


Cash received on settlement of derivative contracts

7,260



7,698




72,608



327,702


Loss on settlement of contract






90,184



50,976


Cash paid on settlement of contract






(11,000)



(24,889)


Stock-based compensation

15,750



6,250




9,075



18,380


Other

344



717




(3,260)



2,842


Changes in operating assets and liabilities increasing (decreasing) cash









Deconsolidation of noncontrolling interest






(9,654)




Receivables

115



12,872




36,116



201,907


Prepaid expenses

127



(1,079)




(5,681)



1,148


Other current assets

191



(260)




(181)



12,710


Other assets and liabilities, net

4,186



1,505




(7,542)



2,239


Accounts payable and accrued expenses

(2,199)



990




(3,595)



(86,470)


Asset retirement obligations

(3,979)



(591)




(61,305)



(3,984)


Net cash provided by (used in) operating activities

181,179



65,595




(112,077)



373,537


CASH FLOWS FROM INVESTING ACTIVITIES









Capital expenditures for property, plant and equipment

(219,246)



(51,676)




(186,452)



(879,201)


Acquisitions of assets

(48,312)






(1,328)



(216,943)


Proceeds from sale of assets

21,834



11,841




20,090



56,504


Net cash used in investing activities

(245,724)



(39,835)




(167,690)



(1,039,640)


CASH FLOWS FROM FINANCING ACTIVITIES









Proceeds from borrowings






489,198



2,065,000


Repayments of borrowings



(414,954)




(74,243)



(939,466)


Debt issuance costs

(1,488)






(333)



(53,244)


Proceeds from building mortgage






26,847




Payment of mortgage proceeds and cash recovery to debt holders






(33,874)




Noncontrolling interest distributions








(138,305)


Cash paid for tax withholdings on vested stock awards

(6,730)



(110)




(44)



(3,535)


Dividends paid—preferred








(11,262)


Other



3






1,250


Net cash (used in) provided by financing activities

(8,218)



(415,061)




407,551



920,438


NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS and     RESTRICTED CASH

(72,763)



(389,301)




127,784



254,335


CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of year

174,071



563,372




435,588



181,253


CASH, CASH EQUIVALENTS and RESTRICTED CASH end of year

$

101,308



$

174,071




$

563,372



$

435,588



Conference Call Information

The Company will host a conference call to discuss these results on Thursday, February 22, 2018 at 8:00 am CT. The telephone number to access the conference call from within the U.S. is (833) 245-9650 and from outside the U.S. is (647) 689-4222. The passcode for the call is 4489951. An audio replay of the call will be available from February 22, 2018 until 11:59 pm CT on March 24, 2018. The number to access the conference call replay from within the U.S. is (800) 585-8367 and from outside the U.S. is (416) 621-4642. The passcode for the replay is 4489951.

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

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures. These non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. Below is additional disclosure regarding each of the non-GAAP measures used in this press release, including reconciliations to their most directly comparable GAAP measure.

Reconciliation of Cash Provided by (Used in) Operating Activities to Operating Cash Flow

The Company defines operating cash flow as net cash provided by (used in) operating activities before changes in operating assets and liabilities, as shown in the following table. Operating cash flow is a supplemental financial measure 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 this measure because operating cash flow relates 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 allows the Company to compare its operating performance and return on capital with those of other companies without regard to financing methods and capital structure. This measure should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with GAAP.


Successor




Successor


Predecessor


Three Months
Ended


Year Ended


Combined
Year Ended
December 31,
2016


Period from
October 2,
2016 through
December 31,
2016


Period from
January 1,
2016 through
October 1,
2016


December 31, 2017





(In thousands)

Net cash provided by (used in) operating activities

$

33,273



$

181,179



$

(46,482)



$

65,595



$

(112,077)


Changes in operating assets and liabilities

7,258



1,559



37,759



(13,437)



51,196


Operating cash flow

$

40,531



$

182,738



$

(8,723)



$

52,158



$

(60,881)


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

The Company defines EBITDA as net (loss) income before income tax (benefit) expense, interest expense, depreciation and amortization - other and depreciation and depletion - oil and natural gas. Adjusted EBITDA, as presented herein, is EBITDA excluding items that the Company believes affect the comparability of operating results such as items whose timing and/or amount cannot be reasonably estimated or are non-recurring, as shown in the following tables.

Adjusted EBITDA is presented because management believes it provides useful additional information used by the Company's management and by securities analysts, investors, lenders, ratings agencies and others who follow the industry, for analysis of the Company's financial and operating performance on a recurring basis and the Company's ability to internally fund exploration and development, and to service or incur additional debt. In addition, management believes that adjusted EBITDA is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry. The Company's adjusted EBITDA may not be comparable to similarly titled measures used by other companies.


Successor




Successor


Predecessor


Three Months
Ended


Year Ended


Combined
Year Ended
December 31,
2016


Period from
October 2,
2016 through
December 31,
2016


Period from
January 1,
2016 through
October 1,
2016


December 31, 2017





(In thousands)

Net (loss) income

$

(18,760)



$

47,062



$

1,106,815



$

(333,982)



$

1,440,797












Adjusted for










Income tax (benefit) expense

(253)



(8,749)



20



9



11


Interest expense

1,377



4,886



129,107



1,590



127,517


Depreciation and amortization - other

3,123



13,852



25,245



3,922



21,323


Depreciation and depletion - oil and natural gas

30,549



118,035



127,039



36,061



90,978


EBITDA

16,036



175,086



1,388,226



(292,400)



1,680,626












Asset impairment

544



4,019



1,037,281



319,087



718,194


Stock-based compensation

3,134



13,923



6,257



1,966



4,291


Loss (gain) on derivative contracts

21,934



(24,090)



30,475



25,652



4,823


Cash (paid) received upon settlement of derivative contracts (1)

(440)



7,260



80,306



13,455



66,851


Loss on settlement of contract





90,184





90,184


Restructuring costs  (2)



8,554



53,544



17,138



36,406


Drilling participation agreement transaction costs

20



2,901








Terminated merger costs

8,162



8,162








Oil field services - exit costs





2,428





2,428


Gain on extinguishment of debt





(41,179)





(41,179)


Gain on reorganization items, net





(2,430,599)





(2,430,599)


Employee incentive and retention





22,984



2,843



20,141


Other

92



(2,620)



(1,840)



(16,660)



14,820












Adjusted EBITDA

$

49,482



$

193,195



$

238,067



$

71,081



$

166,986












(1)

Excludes amounts received for early settlement of contracts in the year ended December 31, 2016.

(2)

Includes severance.

Reconciliation of Cash Provided by (Used in) Operating Activities to Adjusted EBITDA


Successor




Successor


Predecessor


Three Months
Ended


Year Ended


Combined
Year Ended
December 31,
2016


Period from
October 2,
2016 through
December 31,
2016


Period from
January 1,
2016 through
October 1,
2016


December 31, 2017





(In thousands)

Net cash provided by (used in) operating activities

$

33,273



$

181,179



$

(46,482)



65,595



$

(112,077)












Changes in operating assets and liabilities

7,258



1,559



37,759



(13,437)



51,196


Interest expense

1,377



4,886



129,107



1,590



127,517


Cash received on early settlement of derivative contracts





(17,894)





(17,894)


Contractual maturity reached on previous early settlements





17,893



5,756



12,137


Cash paid on early conversion of convertible notes





33,452





33,452


Cash paid on settlement of contract





11,000





11,000


Gain on convertible notes derivative liability





1,324





1,324


Oil field services - exit costs (1)





2,386





2,386


Restructuring costs (1)(2)



6,729



44,180



12,852



31,328


Drilling participation agreement transaction costs

20



2,901








Income tax (benefit) expense

(253)



(8,749)








Terminated merger costs

8,162



8,162








Cash paid for reorganization items





12,483





12,483


Employee incentive and retention





22,984



2,843



20,141


Other

(355)



(3,472)



(10,125)



(4,118)



(6,007)












Adjusted EBITDA

$

49,482



$

193,195



$

238,067



$

71,081



$

166,986












(1)

Excludes associated stock-based compensation.

(2)

Includes severance.

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

The Company defines adjusted net (loss) income as net (loss) income excluding items that the Company believes affect the comparability of operating results and are typically excluded from published estimates by the investment community, including items whose timing and/or amount cannot be reasonably estimated or are non-recurring, as shown in the following tables.

Management uses the supplemental measure of adjusted net (loss) income 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) income is not a measure of financial performance under GAAP and should not be considered a substitute for net (loss) income available to common stockholders.


Successor


Three Months Ended December 31, 2017


Year Ended December 31, 2017


$


$/Diluted Share


$


$/Diluted Share


(In thousands, except per share amounts)

Net (loss) income available to common stockholders

$

(18,760)



$

(0.54)



$

47,062



$

1.44










Asset impairment

544



0.02



4,019



0.12


Loss (gain) on derivative contracts

21,934



0.62



(24,090)



(0.73)


Cash (paid) received upon settlement of derivative contracts

(440)



(0.01)



7,260



0.22


Restructuring costs (1)





8,554



0.26


Drilling participation agreement transaction costs

20





2,901



0.09


Terminated merger costs

8,162



0.24



8,162



0.25


Other

246



0.01



(1,396)



(0.04)










Adjusted net income available to common stockholders

$

11,706



$

0.34



$

52,472



$

1.61











Basic


Diluted (2)


Basic


Diluted (2)

Weighted average number of common shares outstanding

34,494



34,547



32,442



32,663










Total adjusted net income per share

$

0.34



$

0.34



$

1.62



$

1.61










(1)

Includes severance.

(2)

Weighted average fully diluted common shares outstanding for certain periods presented includes shares that are considered antidilutive for calculating loss per share in accordance with GAAP.

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


Combined
Year Ended
December 31,
2016


Successor


Predecessor



Period from October 2, 2016
through December 31, 2016


Period from January 1, 2016
through October 1, 2016


$


$


$/Diluted Share


$


$/Diluted Share


(In thousands, except per share amounts)

Net income (loss) available to common stockholders

$

1,090,494



$

(333,982)



$

(9.95)



$

1,424,476



$

2.01












Asset impairment

1,037,281



319,087



9.50



718,194



1.01


Loss on derivative contracts

30,475



25,652



0.76



4,823



0.01


Cash received upon settlement of derivative contracts (1)

80,306



13,455



0.40



66,851



0.09


Gain on convertible notes derivative liability

(1,324)







(1,324)




Loss on settlement of contract

90,184







90,184



0.13


Restructuring costs (2)

53,544



17,138



0.51



36,406



0.05


Oil field services - exit costs

2,428







2,428




Gain on extinguishment of debt

(41,179)







(41,179)



(0.06)


Gain on reorganization items, net

(2,430,599)







(2,430,599)



(3.43)


Employee incentive and retention

22,984



2,843



0.08



20,141



0.03


Other

1,565



(15,171)



(0.44)



16,736



0.03












Adjusted net (loss) income available to common stockholders

$

(63,841)



$

29,022



$

0.86



$

(92,863)



$

(0.13)















Basic


Diluted (3)


Basic


Diluted (3)

Weighted average number of common shares outstanding



18,967



33,573



708,928



708,928












Total adjusted net income (loss) per share



$

1.53



$

0.86



$

(0.13)



$

(0.13)












(1)

 Excludes amounts received for early settlement of contracts in the 2016 periods.

(2)

 Includes severance.

(3)

 Weighted average fully diluted common shares outstanding for certain periods presented includes shares that are considered antidilutive for calculating loss per share in accordance with GAAP.


Reconciliation of G&A to Adjusted G&A

The Company reports and provides guidance on Adjusted G&A per Boe because it believes this measure is commonly used by management, analysts and investors as an indicator of cost management and operating efficiency on a comparable basis from period to period, compare and make investment recommendations of companies in the oil and gas industry. This non-GAAP measure allows for the analysis of general and administrative spend without regard to stock-based compensation programs, and other non-recurring cash items which can vary significantly between companies. Adjusted G&A per Boe is not a measure of financial performance under GAAP and should not be considered a substitute for general and administrative expense per Boe. Therefore, the Company's Adjusted G&A per Boe may not be comparable to other companies' similarly titled measures.

The Company defines adjusted G&A as general and administrative expense adjusted for certain non-cash stock-based compensation and other non-recurring items, as shown in the following tables.


Successor


Three Months Ended December 31, 2017


Year Ended December 31, 2017


$


$/Boe


$


$/Boe


(In thousands, except per Boe amounts)

General and administrative

$

16,840



$

4.77



$

76,024



$

5.10


Stock-based compensation (1)

(3,134)



(0.88)



(13,925)



(0.94)


Restructuring costs





(3,739)



(0.25)


Drilling participation agreement transaction costs

(20)



(0.01)



(2,901)



(0.19)


Adjusted G&A

$

13,686



$

3.88



$

55,459



$

3.72


 


Combined Year Ended
December 31, 2016


Successor


Predecessor



Period from October 2, 2016
through December 31, 2016


Period from January 1, 2016
through October 1, 2016


$


$/Boe


$


$/Boe


$


$/Boe


(In thousands, except per Boe amounts)

General and administrative

$

125,928



$

6.50



$

9,837



$

2.27



$

116,091



$

7.73


Stock-based compensation (1)

(5,963)



(0.31)



(1,965)



(0.45)



(3,998)



(0.27)


Employee incentive and retention

(22,984)



(1.19)



(2,843)



(0.65)



(20,141)



(1.34)


Restructuring costs

(23,669)



(1.22)



(4,804)



(1.11)



(18,865)



(1.26)


Doubtful receivable (write-off) recovery

(3,556)



(0.18)



13,166



3.02



(16,722)



(1.11)


Shareholder litigation costs

(963)



(0.05)







(963)



(0.06)


Adjusted G&A

$

68,793



$

3.55



$

13,391



$

3.08



$

55,402



$

3.69




(1)

Year ended December 31, 2017, Successor 2016 Period and Predecessor 2016 Period exclude $1.8 million, $4.3 million and $5.1 million, respectively, for the acceleration of certain stock awards.

Reconciliation of PV-10 to Standardized Measure

PV-10 is a non-GAAP financial measure and represents the present value of estimated future cash inflows from proved oil, natural gas and NGL reserves, less future development and production costs, discounted at 10% per annum to reflect timing of future cash flows and using 12-month average prices for the year ended December 31, 2017. PV-10 differs from Standardized Measure because it does not include the effects of income taxes on future net revenues. PV-10 is used by the industry and by management as a reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities. It is useful because its calculation is not dependent on the taxpaying status of the entity. Because of the present value of future income tax discounted at 10% is insignificant, these measures are equivalent.

The PV-10 of strip-based proved reserves is a non-GAAP financial measure and differs from standardized measure because it reflects the estimated proved reserves economically recoverable based on forward NYMEX strip prices rather than SEC pricing and does not include the effects of income taxes on future net revenues. PV-10 of strip-based proved reserves is useful to investors to illustrate the potential value of proved reserves that are economically recoverable in the current commodity price environment rather than SEC prices. Neither the PV-10 of the Company's SEC reserves, the PV-10 of strip-based proved reserves nor the Standardized Measure represents an estimate of fair market value of the Company's oil and natural gas properties.

Net Debt

The Company also uses the term net debt to determine the extent to which the Company's outstanding debt obligations would be satisfied by its cash and cash equivalents on hand. Management believes this metric is useful to investors in determining the Company's current leverage position following recent significant events subsequent to the period.

For further information, please contact:

Johna M. Robinson
Investor Relations
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 "2018 Operational and Capital Expenditure 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 the Company's corporate strategies, future operations, and development plans and appraisal programs, projected acreage position, drilling inventory and locations, estimated oil, and natural gas and natural gas liquids production, rates of return, reserves, price realizations and differentials, hedging program, projected operating, general and administrative and other costs, projected capital expenditures, tax rates, efficiency and cost reduction initiative outcomes, liquidity and capital structure and infrastructure assessment and investment. 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 natural 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 and in comparable "Risk Factor" sections of our Quarterly Reports on Form 10-Q filed after such form 10-K. 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. (NYSE: SD) is an oil and natural gas exploration and production company headquartered in Oklahoma City, Oklahoma with its principal focus on developing high-return, growth-oriented projects in the U.S. Mid-Continent and Niobrara Shale.

 

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SOURCE SandRidge Energy, Inc.