SandRidge Energy, Inc. Updates Shareholders on Operations and Reports Financial Results for Fourth Quarter and Fiscal Year 2015

OKLAHOMA CITY, March 29, 2016 /PRNewswire/ -- SandRidge Energy, Inc. (OTC PINK: SDOC) today announced financial and operational results for the quarter and fiscal year ended December 31, 2015.

James Bennett, SandRidge President and CEO noted, "In 2016 we will be reducing capital spending by around 60% compared to 2015, ensuring liquidity while advancing our operations with one rig in each of our plays.  Combining high-graded development of our Mid-Continent assets with our emerging Niobrara play is resulting in a more diversified company with improved capital efficiencies. We've also reduced our G&A expense in order to match our ongoing activity as we preserve and extend capabilities while managing optionality in this challenging environment."

Previously Announced Fourth Quarter Highlights

Completed Acquisition of North Park Basin Niobrara Shale Oil Assets for $190 Million Adds 1.0 MBoepd of Production and 28 MMBoe of Proved Reserves (81% Oil) and Materially Expands Drilling Inventory

Acquisition of Piñon Gathering System Eliminates ~$40 Million of Annual Expenses

Bond Repurchases and Exchanges Address $400 Million of Debt

The Company currently has two rigs running in the Mississippian and one rig running in the Niobrara, and expects to run one rig in each area starting in May, consistent with a $285 million capital program guidance introduced today. Capital expenditures for 2016 and for future periods are highly dependent on numerous factors including changes in commodity prices and available liquidity and may differ materially from guidance.

Key Financial Results

Fourth Quarter

• Pro forma for divestitures and net of noncontrolling interest, adjusted EBITDA was $79 million in the fourth quarter of 2015 compared to $239 million in the fourth quarter of 2014. Adjusted EBITDA, net of noncontrolling interest, was $67 million in the fourth quarter of 2015 compared to $224 million in the fourth quarter of 2014.
• Adjusted operating cash flow of ($56) million for fourth quarter 2015 compared to $203 million in fourth quarter 2014.
• Adjusted net loss of $74 million, or $0.09 per diluted share, for fourth quarter 2015 compared to adjusted net income of $44 million, or $0.08 per diluted share, in fourth quarter 2014.

Full Year

• Pro forma for divestitures and net of noncontrolling interest, adjusted EBITDA was $589 million in 2015 compared to $873 million in 2014. Adjusted EBITDA, net of noncontrolling interest, was $528 million in 2015 compared to $873 million in 2014.
• Adjusted operating cash flow of $246 million for 2015 compared to $712 million in 2014.
• Adjusted net loss of $135 million, or $0.21 per diluted share, for 2015 compared to $150 million adjusted income, or $0.26 per diluted share, in 2014.

Adjusted net (loss) income available to common stockholders, adjusted EBITDA, pro forma 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 page 9.

Financial Highlights - Subsequent to Fourth Quarter

Revolver Draw and Hiring of Advisors

On January 22, 2016, the Company borrowed $489 million under its Senior Credit Facility, bringing the total amount outstanding to approximately $500 million, including letters of credit. Following the funding of this borrowing, the Company's cash balance was approximately $855 million. On that same day, the Company also announced that it had retained Kirkland & Ellis, LLP and Houlihan Lokey, Inc. as its legal and financial advisors, respectively, to assist the Company in analyzing and considering financial, transactional, and strategic alternatives.

Drilling and Operational Activities

• Mid-Continent: During the fourth quarter of 2015, SandRidge drilled 19 laterals. The Company averaged four horizontal rigs operating in the play. The Company's Mid-Continent assets produced 63.7 MBoepd  (29% oil, 19% NGLs, 52% natural gas) during the fourth quarter.
• West Texas: During the fourth quarter, Permian Basin properties produced approximately 3.8 MBoepd (83% oil, 10% NGLs, 7% natural gas). Legacy West Texas Overthrust properties produced approximately 4.8 MBoepd (99% natural gas, 1% oil).

Proved Reserves

• 325 MMBoe consolidated proved reserves and $1.3 billion of SEC PV-10 reserves value
• 245% reserve replacement prior to revisions
• 153% drill bit reserve replacement with 46 MMBoe organic reserve adds
• 80% of total proved reserves are proved developed reserves
• 43% liquids in consolidated proved reserves

The Company's estimated consolidated proved reserves as of December 31, 2015 were 325 MMBoe. These reserves and their related PV-10 value of $1,315 million are based primarily on 3^rd party engineering reports prepared by Cawley Gillespie and Associates, Inc., Ryder Scott, and Netherland Sewell and Associates. In aggregate, 3^rd party engineers evaluated properties representing 90% of the Company's reserves and 95% of PV-10 at December 31, 2015 with their estimates based on the definitions and disclosure guidelines of the United States Securities and Exchange Commission (SEC) for Oil and Gas Reporting (SEC regulations). 

Year end 2015 reserves and PV-10 were estimated utilizing 12-month average prices and costs, as directed by the SEC. An average Plains Posted oil price of $46.79 per barrel and an average natural gas price of $2.59 per MMBtu were used in calculating the estimated discounted future net cash flows of proved reserves. These prices were then adjusted for quality, transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting wellhead prices.

During 2015, the Company added proved reserves of 73 MMBoe from discoveries and extensions, and the acquisition of its North Park Basin Niobrara asset. The Company's year end reserves reflect approximately 235 MMBoe of negative revisions for the year, the largest component of which is pricing revisions of approximately 205 MMBoe. All of the Company's estimated proved undeveloped reserves at December 31, 2015 are expected to be developed within the next five years. The Company has identified 2,460 3P drilling locations in its Mid-Continent focus area, and over 1,300 drilling locations in its Niobrara asset.

 

 

 

Operational Highlights - Subsequent to Fourth Quarter

Commencement of North Park Basin Niobrara Development

In the fourth quarter, SandRidge entered into a purchase and sales agreement to acquire assets from EE3, LLC, a North Park Basin, Colorado operator producing 1.0 MBoepd from 16 wells with 136,000 net acres of Niobrara Shale oil development potential. SandRidge spud its first operated well, the Gregory, in January and began its initial production in March. The Company intends to drill 22 laterals on its North Park leasehold in 2016.

Termination of West Texas CO₂ Treating Agreement

Subsequent to the fourth quarter of 2015, the Company executed and closed an agreement to settle all claims between itself and a third party arising out of a 30-year agreement for the removal of CO₂ from natural gas volumes produced by the Company in the Piñon field in west Texas. Under the terms of the settlement, the Company transferred substantially all of its exploration and production and midstream assets in the Piñon field to a wholly-owned subsidiary of Occidental Petroleum Corporation along with $11 million cash.  SandRidge was released from all past, current, and future claims and obligations related to the gas treating agreement, which contained minimum CO₂ volume commitments until 2041, and the parties agreed to dismiss pending litigation between them related thereto.

Operational and Financial Statistics

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

 

Capital Expenditures

The table below summarizes the Company's capital expenditures for the three and twelve-month periods ended December 31, 2015 and 2014:

 

Derivative Contracts

The table below sets forth the Company's consolidated oil and natural gas price swaps and collars for 2016 as of March 29, 2016:

 

Balance Sheet

The Company's capital structure at December 31, 2015 and December 31, 2014 is presented below:

 

Non-GAAP Financial Measures

Adjusted operating cash flow, adjusted EBITDA, pro forma adjusted EBITDA, adjusted net (loss) income, and adjusted net income attributable to noncontrolling interest are non-GAAP financial measures.

The Company defines adjusted operating cash flow as net cash provided by operating activities before changes in operating assets and liabilities and adjusted for cash paid on financing derivatives. It defines EBITDA as net (loss) income before income tax expense (benefit), interest expense and depreciation, depletion and amortization and accretion of asset retirement obligations. Adjusted EBITDA, as presented herein, is EBITDA excluding asset impairment, interest income, gain on derivative contracts net of cash received on settlement of derivative contracts, loss on settlement of contract, (gain) loss on sale of assets, legal settlements, severance, oil field services – Permian exit costs, gain on extinguishment of debt and other various items (including non-cash portion of noncontrolling interest and stock-based compensation). Pro forma adjusted EBITDA, as presented herein, is adjusted EBITDA excluding adjusted EBITDA attributable to properties or subsidiaries sold during or after the period.

Adjusted 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 adjusted 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, adjusted 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) income, which excludes asset impairment, gain on derivative contracts net of cash received on settlement of derivative contracts, loss on convertible notes derivative liabilities, loss on settlement of contract, (gain) loss on sale of assets, legal settlements, severance, oil field services – Permian exit costs, gain on extinguishment of debt and other non-cash items from 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) income is not a measure of financial performance under GAAP and should not be considered a substitute for loss applicable to common stockholders.

The supplemental measure of adjusted net income attributable to noncontrolling interest is used by the Company's management to measure the impact on the Company's financial results of the ownership by third parties of interests in the Company's less than wholly-owned consolidated subsidiaries. Adjusted net income attributable to noncontrolling interest excludes the portion of asset impairment and gain on derivative contracts net of cash received on settlement of derivative contracts attributable to third party ownership in less than wholly-owned consolidated subsidiaries from net (loss) income attributable to noncontrolling interest. Adjusted net income attributable to noncontrolling interest is not a measure of financial performance under GAAP and should not be considered a substitute for net (loss) income attributable to noncontrolling interest.

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

 

 

 

 

 

 

 

For further information, please contact:

Duane M. Grubert
EVP – Investor Relations and Strategy
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 the Company's corporate strategies, future operations, drilling plans and capital expenditures. 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 for the year ended December 31, 2014 and in comparable "Risk Factor" 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. (OTC PINK: SDOC) 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.

Logo - http://photos.prnewswire.com/prnh/20120416/DA88110LOGO

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/sandridge-energy-inc-updates-shareholders-on-operations-and-reports-financial-results-for-fourth-quarter-and-fiscal-year-2015-300242794.html

SOURCE SandRidge Energy, Inc.