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Exploration & Production | Quarterly / Earnings Reports | Production | Third Quarter (3Q) Update

SandRidge Updates Production, Financials for 3Q

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SandRidge Updates Production, Financials for 3Q

SandRidge Energy, Inc. announced financial results for the quarter that ended September 30, 2014. The Company also filed restated results for quarterly periods in 2013 and 2014.

Eddie LeBlanc, SandRidge's Chief Financial Officer and Executive Vice-President, commented,"Today's release of financial results for the third quarter of 2014 complements our November 2014 operating results press release. As the result of discussions with the SEC, we are now accruing a portion of the annual CO2 under delivery penalty each quarter which we previously recorded at the end of each year. Restated financial statements are included in amended historic quarterly and annual reports we are filing today. Importantly, annual results and cash flows remain unchanged."

Key Financial Results

Third Quarter

  • Adjusted EBITDA, pro forma for divestitures and net of Noncontrolling Interest, was $225 million in the third quarter of 2014 compared to $160 million in the third quarter of 2013, 41% year-over-year growth.
  • Adjusted operating cash flow of $203 million for third quarter 2014 compared to $227 million in third quarter 2013.
  • Adjusted net income of $43.0 million, or $0.07 per diluted share, for third quarter 2014 compared to adjusted net income of $31.7 million, or $0.06 per diluted share, in third quarter 2013.

Nine Months

  • Adjusted EBITDA, pro forma for divestitures and net of Noncontrolling Interest, was $596 million in the first nine months of 2014 compared to $418 million in the first nine months of 2013, 42% year-over-year growth.
  • Adjusted operating cash flow of $509 million for first nine months of 2014 compared to $569 million in first nine months of 2013. Included in the first nine months of 2014 results is $70 million of cash paid to unwind hedges related to the Gulf of Mexico divestiture.
  • Adjusted net income of $109.2 million, or $0.19 per diluted share, for first nine months of 2014 compared to adjusted net income of $64.9 million, or $0.11 per diluted share, in first nine months of 2013.

Adjusted net income available to common stockholders, pro forma adjusted EBITDA and adjusted 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 7.

As previously discussed in a Form 8-K filed on November 4, 2014, the Company has been in discussions with the Securities and Exchange Commission regarding certain accounting matters. As a result of these discussions, the Company restated its 2013 Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014. For the three month periods ended, March 31, 2013 and 2014 and June 30, 2013 and 2014, an estimated CO2 under delivery shortfall penalty was recorded in each quarter. The effect of the restatement for 2013 is to transfer a portion of the annual CO2 under delivery shortfall penalty accrual that was previously recorded at year-end to the quarter-end periods within such year. The change in accounting treatment impacts the first, second and third quarters of 2013 by approximately $8 million of net income per quarter, while rendering no change to the 2013 annual net income. The first and second quarters of 2014 are also impacted by approximately $8 million of net income per quarter.

Additionally, the Company also revised the recording of the Century Plant construction contract to account for it under the full cost method of accounting rather than the completed contract method of accounting for the year ended 2012. This resulted in eliminating an equal amount of income and expense from the 2012 Condensed Consolidated Statements of Operations and had no impact on total assets, total liabilities, net income or retained earnings.

These restatements along with our Form 10-Q for the three month period ended September 30, 2014, which also included restated financial information related to the delivery shortfall penalty accrued for the three month period ended September 30, 2013, were filed on January 8, 2015.

James Bennett, SandRidge's Chief Executive Officer and President, stated, "As highlighted in our November third quarter operations update, we're expanding our low cost multilateral program and successfully extending our Mid-Continent resource base with Chester and Woodford production. Since the operating update, oil prices have fallen sharply; however, SandRidge is defensively positioned for 2015. We have an enviable hedge position on the vast majority of our liquids production, have no bond maturities until 2020 and at quarter end $1.4 billion of liquidity. Importantly, our Mid-Continent drilling program continues to generate commercial returns, even at current commodity prices. Given the market backdrop, we are high grading our development plans and are already reducing our rig count and capex levels. We anticipate announcing 2015 capital plans and full year guidance in February. Meanwhile, our teams are focused on continued well cost reductions, now further supported by likely lower service costs ahead."

Operational 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 nine-month periods ended September 30, 2014 and 2013: