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SandRidge Energy First Quarter 2020 Results; Sells Corporate HQ

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   |    Tuesday,May 19,2020

SandRidge Energy, Inc. reported its Q1 2020 results.

Results and highlights during the quarter:

• Produced 28.2 MBoepd for the quarter
• Incurred a net loss of $13 million, or $0.36 per share, driven largely by a non-cash ceiling test write down, and adjusted net loss of $7 million, or $0.21 per share
• Generated Adjusted EBITDA of $20 million for the quarter
• Decreased G&A and Adjusted G&A year-over-year by 45% and 40%, respectively, to $5.5 million, or $2.14 per boe, and $5.4 million, or $2.09 per boe
• Decreased LOE year-over-year by 31% to $15.6 million, or $6.09 per boe
• Reduced borrowings under the Company's credit facility to $46 million at quarter end from $57.5 million at 2019 year end

Building Sale - Corporate HQ

On May 15, 2020, the Company signed an agreement to sell its corporate headquarters in Oklahoma City for $35.5 million. The sale is expected to close in the third quarter of 2020.

Subsequent Key Events

Due to the uncertainties presented by COVID-19 and recent steep downdraft in commodity prices, the Company implemented several proactive initiatives to optimize its cash flow, including:

• Corporate personnel reductions and other cost management efforts that will lower Adjusted G&A expense to the new 2020 guidance of $11 - $15 million (down from the 2019 actual of $29 million and the prior 2020 guidance of $18 - $20 million provided in February 2020)
• Field personnel reductions and other operational measures that will lower LOE to the new 2020 guidance of $48 - $54 million (down from the 2019 actual of $91 million and the prior 2020 guidance of $72 - $78 million provided in February 2020)
• Reduced planned capital expenditures for 2020 to $4 - $9 million (down from the 2019 actual of $162 million and the prior 2020 guidance of $25 - $30 million provided in February 2020)
• A comprehensive well review to optimize cash flow in the current low commodity price environment
• The execution of 30,000 MMBtu/d gas hedges for May through October, 2020 at $2.11 per MMBtu and a further 10,000 MMBtu/d gas hedges for July through October of this year at $2.23 per MMBtu

Initiatives Related to Liquidity

The Company completed its semi-annual borrowing base redetermination at $75 million under its revolving credit facility in April 2020. It also signed an agreement to sell its corporate headquarters for $35.5 million in May 2020.

Given the anticipated third quarter proceeds from the May 2020 agreement to sell its corporate headquarters for $35.5 million as well as the expected increased cash flow from the recently implemented cost and capex initiatives, together with other levers available to the Company, management believes the Company will have sufficient funds or access to other capital to operate as a going concern in the current challenging commodity price environment.

Initiatives Related to Management

The Company appointed Carl F. Giesler, Jr. President and CEO in April 2020. It also announced a reduction in the size of its executive team that will occur in July 2020.

Carl Giesler, President and CEO, commented, "With the onset of the COVID-19 pandemic, we initiated work-from-home policies and other best practices, in line with federal, state and local guidelines, to ensure the health and continued productivity of our employees. Additionally, with the sharp downturn in commodity prices, we took swift measures to maximize the cash flow and liquidity of our business. We implemented steep decreases in personnel and other savings measures, and we sharply curtailed planned capex for the year. We will only spend capital required for safety or mechanical integrity or for low spend, quick payback cash flow enhancing "small ball" workovers and other projects. We believe our cost savings initiatives coupled with our restricted planned capex should enable us to generate positive operational free cash flow even in this historically challenged commodity price environment.

"We would be remiss not to highlight the truly remarkable effort of our employees. We anticipate production for 2020 to remain close to prior guidance despite substantial reductions to our expected G&A, LOE and capex for the year. Additionally, we have continued our streak of no recordable incidents for 21 months. These feats would not be possible without their hard work, focus and professionalism in spite of the hardships and challenges from COVID-19 and the recent significant changes to our organization."

Financial Results

For the first quarter, the Company reported a net loss of $13 million, or $0.36 per share, and net cash provided by operating activities of $18 million. After adjusting for certain items, the Company's adjusted net loss amounted to $7 million, or $0.21 per share, operating cash flow totaled $17 million and adjusted EBITDA was $20 million for the quarter. The Company defines and reconciles adjusted net income, adjusted EBITDA and other non-GAAP financial measures to the most directly comparable GAAP measure in supporting tables at the conclusion of this press release beginning on page 11.

Operational Results and Activity

Production totaled 2.6 MMBoe (27% oil, 30% NGLs and 43% natural gas) for the quarter.

North Park Basin Asset in Jackson County, Colorado

Net production for North Park Basin totaled 328 MBo (3.6 MBopd) during the quarter.      

Mid-Continent Assets in Oklahoma and Kansas

Production in the Mississippian totaled 2.1 MMBoe (22.9 MBoepd, 14% oil) and 178 MBoe (2.0 MBoepd, 34% oil) in the Northwest STACK during the quarter.

2020 Revised Capital Expenditures and Operational Guidance

In 2020, the Company plans to spend $4 - $9 million in total capital expenditures. Total production for 2020 is projected to be 7.1 - 8.2 MMBoe given current commodity prices and the outlook for prices for the remainder of the year. The year over year production decline is expected to primarily be driven by natural decline rates and permanent well shut-ins, as well as temporary well shut-ins that can be quickly reactivated as prices justify.  Other operational guidance detail can be found on the "Revised 2020 Operational and Capital Expenditure Guidance" table below.  With this plan, the Company intends to reduce debt and maintain a manageable balance sheet.

Liquidity and Capital Structure

As of May 12, 2020, the Company's total liquidity was $26 million, based on $2 million of cash and $24 million available under its credit facility, net of outstanding letters of credit. The Company currently has $48 million drawn on the facility. Additionally, on that date, the Company's oil and gas hedges had a mark-to-market value of $5 million.