Nov. 5, 2009 (PR Newswire) -- OKLAHOMA CITY, Nov. 5 /PRNewswire-FirstCall/ -- SandRidge Energy, Inc. (NYSE: SD) today announced financial and operational results for the quarter and nine months ended September 30, 2009.
Financial Highlights
Third Quarter
-- Adjusted net income available to common stockholders (which excludes
non-cash asset impairments, unrealized gains or losses on derivative
contracts and gains or losses on the sale of assets) of $28.0 million,
or $0.16 per share, in third quarter 2009 compared to adjusted net
income available to common stockholders of $27.1 million, or $0.17 per
share, in third quarter 2008
-- Adjusted EBITDA of $130.9 million compared to $178.2 million in third
quarter 2008
-- Operating cash flow of $85.6 million compared to $137.2 million in third
quarter 2008
-- Net loss applicable to common stockholders of $104.1 million, or $0.58
per share fully diluted, compared to net income available to common
stockholders of $230.3 million, or $1.40 per share fully diluted, in
third quarter 2008
-- No borrowings outstanding under credit facility at September 30, 2009
First Nine Months
-- Adjusted net income available to common stockholders (which excludes
non-cash asset impairments, unrealized gains or losses on derivative
contracts and gains or losses on the sale of assets) of $112.8 million,
or $0.66 per share, in the first nine months of 2009 compared to
adjusted net income available to common stockholders of $82.1 million,
or $0.54 per share, in the first nine months of 2008
-- Adjusted EBITDA of $433.8 million compared to $521.1 million in the
first nine months of 2008
-- Operating cash flow of $304.8 million compared to $425.6 million in the
first nine months of 2008
-- Net loss applicable to common stockholders of $1.35 billion, or $7.85
per share fully diluted, compared to net income available to common
stockholders of $137.1 million, or $0.89 per share fully diluted, in the
first nine months of 2008
Operational Update and Guidance
-- Production growth of approximately 9% in the first nine months of 2009
compared to the first nine months of 2008
-- 2009 net production guidance revised to reflect approximately 4% growth
from 2008
-- Initial 2010 net production guidance of 120 Bcfe, an increase of
approximately 15% over expected 2009 production, with estimated capital
expenditures of $750 million
-- CO2 treating capacity increased by 60 MMcf per day from second quarter
2009 to 375 MMcf per day currently, with an additional 400 MMcf per day
available mid-2010 upon start up of Century Plant Phase 1
-- Rig count increased to 9 rigs currently from low of 4 rigs during third
quarter 2009
Adjusted net 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 8.
Tom L. Ward, Chief Executive Officer of SandRidge, commented, "SandRidge's catalyst for growth is CO2 treating capacity to develop the Warwick Thrust reservoir. We grew production 58% in 2008 due to increased access to CO2 treating capacity. Since filling the CO2 plants to capacity of 315 MMcf per day in the second quarter of this year, we have been able to keep the plants full by running four to five rigs due to the prolific nature of the Warwick Thrust. As a result of work performed over the summer at our Grey Ranch Plant, we have increased our CO2 treating capacity to 375 MMcf per day currently. The Century Plant will give us the ability to grow as we did in 2008 on a much larger scale and at lower cost. With the recent capacity increase at our legacy plants, we began to increase our rig count in the fourth quarter of 2009 and will continue into 2010 as we prepare for the Century Plant. We currently have 9 rigs active and expect to be running approximately 26 rigs by mid-year 2010. The majority of these rigs will be used to develop the Warwick Thrust in the Pinon Field. We are also initiating our exploration program in the West Texas Overthrust outside of Pinon. We have identified 20 structures and plan to test six of them in 2010. Based upon our seismic interpretation, these structures are similar in size and characteristics to Pinon. Our 2010 capital expenditure plan of approximately $750 million is expected to result in 2010 production of approximately 120 Bcfe, roughly 15% growth from 2009 assuming no additional production from our exploration program.
"So far in 2009 our notable accomplishments include enhancing our balance sheet strength through a series of transactions including issuances of convertible preferred stock, common stock, and high yield notes and monetizing non-strategic assets. This, combined with a disciplined reduced capital expenditure program for 2009, has resulted in zero borrowings from our $985 million revolver at the end of the third quarter. Our hedges have provided a net realized price of $7.51 per Mcfe for the first nine months of 2009. We expect that our full-year 2009 production will grow 4% over fiscal 2008, even though we have deferred 5 Bcf through shut-ins and reduced drilling."
Information regarding the company's production, pricing, costs and earnings is presented below:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ----------------
2009 2008 2009 2008
------- ------- ------- ------
Production:
Natural gas (MMcf) 20,897 22,209 67,583 63,097
Crude oil (MBbl)(1) 723 521 2,163 1,751
Natural gas equivalent (MMcfe) 25,235 25,335 80,561 73,603
Daily production (MMcfed) 274 275 295 269
Average price per unit:
Realized natural gas price per Mcf -
as reported $2.82 $9.04 $3.23 $9.09
Realized impact of derivatives per
Mcf 3.85 (0.95) 3.95 (0.99)
------ ------- ------ ------
Net realized price per Mcf $6.67 $8.09 $7.18 $8.10
====== ======= ====== ======
Realized crude oil price per barrel
- as reported (1) $62.76 $112.24 $51.02 $104.73
Realized impact of derivatives per
barrel (1) 3.71 (12.05) 4.38 (9.07)
------ ------- ------ ------
Net realized price per barrel (1) $66.47 $100.19 $55.40 $95.66
====== ======= ====== ======
Realized price per Mcfe - as reported $4.14 $10.23 $4.08 $10.28
====== ======= ====== ======
Net realized price per Mcfe -
including impact of derivatives per
Mcfe $7.43 $9.15 $7.51 $9.22
====== ======= ====== ======
Average cost per Mcfe:
Lease operating $1.64 $1.62 $1.59 $1.57
Production taxes 0.04 0.27 0.04 0.40
General and administrative:
General and administrative,
excluding stock-based
compensation 0.75 0.88 0.75 0.84
Stock-based compensation 0.24 0.28 0.21 0.19
Depletion 1.31 2.84 1.58 2.84
Lease operating cost per Mcfe:
Excluding offshore and tertiary
recovery $1.46 $1.42 $1.43 $1.37
Offshore operations 3.88 4.35 3.04 3.74
Tertiary recovery operations 4.05 11.67 8.57 11.28
Earnings per share:
(Loss) income per share (applicable)
available to common stockholders
Basic $(0.58) $1.41 $(7.85) $0.90
Diluted (0.58) 1.40 (7.85) 0.89
Adjusted net income per share
available to common stockholders 0.16 0.17 0.66 0.54
Weighted average number of common
shares outstanding (thousands)
Basic 178,069 163,020 171,902 153,125
Diluted 178,069 164,554 171,902 154,489
(1) Includes NGLs
Discussion of Financial Results
The company reported a net loss applicable to stockholders during the third quarter and first nine months of 2009 as a result of depressed natural gas and crude oil prices. Natural gas and crude oil revenue for the third quarter of 2009 decreased 59.7% compared to the same period in 2008. Natural gas and crude oil revenues for the first nine months of 2009 were 56.6% lower than the comparable period in 2008. Also contributing significantly to the loss applicable to stockholders during the first nine months of 2009 was a first quarter $1.3 billion non-cash full cost ceiling impairment.
Production, Pricing and Operating Costs
Natural gas and crude oil production for the third quarter and first nine months of 2009 was 25.2 Bcfe and 80.6 Bcfe, respectively, compared to 25.3 Bcfe and 73.6 Bcfe, respectively, for the comparable periods of 2008. Lower average commodity prices received during the 2009 periods resulted in natural gas and crude oil revenues of $104.3 million for the third quarter of 2009 compared to $259.1 million for the same period in 2008. Revenues for the first nine months of 2009 declined to $328.6 million from $756.8 million for the first nine months of 2008.
The average price received, excluding the impact of derivative contract settlements, for natural gas decreased 68.8% to $2.82 per Mcf for the third quarter of 2009 compared to $9.04 per Mcf for the third quarter of 2008 and 64.5% to $3.23 per Mcf for the first nine months of 2009 compared to $9.09 for the same period in 2008. Additionally, average prices received, excluding the impact of derivative contract settlements, for crude oil production in the third quarter of 2009 decreased 44.1% to $62.76 per barrel compared to $112.24 in the third quarter of 2008, and decreased 51.3% to $51.02 per barrel for the first nine months of 2009 compared to $104.73 for the first nine months of 2008.
Total production expense increased slightly to $41.4 million for the third quarter of 2009 from $41.1 million for the third quarter of 2008 and to $128.4 million for the first nine months of 2009 from $115.5 million for the first nine months of 2008. The increase in expenses for the nine month period was due to an increase in the number of wells operated and volumes produced during the 2009 period compared to the 2008 period.
Gains (Losses) on Commodity Derivative Contracts
The company enters into natural gas and crude oil swaps and basis swaps for a portion of its production in order to stabilize future cash inflows for planning purposes. The company incurred a net $47.9 million loss ($130.9 million unrealized loss and $83.0 million realized gain) on commodity derivative contracts for the third quarter of 2009 compared to a $292.5 million gain ($319.8 million unrealized gain and $27.3 million realized loss) for the same period in 2008. For the first nine months of 2009, the company recorded a net gain of $139.7 million ($136.5 million unrealized loss and $276.2 million realized gain) on commodity derivative contracts. This compares to a $4.1 million net loss ($73.9 million unrealized gain and $78.0 million realized loss) for same period in 2008.
Drilling Activities
The company continued to operate a reduced number of rigs on its properties during the third quarter of 2009. At September 30, 2009, the company had 8 rigs operating compared to 17 at December 31, 2008 and a high of 47 rigs operating in the second quarter of 2008. The company averaged 6 rigs operating during the third quarter of 2009 and drilled 29 wells. The company drilled a total of 94 wells during the first nine months of 2009. A total of 25 gross (23 net) operated wells were completed and brought on production throughout the third quarter of 2009 bringing the total number of operated wells completed and brought on production during 2009 to 116 gross (107 net). Currently, SandRidge has 9 rigs operating, of which 5 are drilling in the Pinon Field area of the West Texas Overthrust ("WTO").
CO2 Treating Capacity and Century Plant Update
The company has increased its CO2 treating capacity in the WTO by 60 MMcf per day to 375 MMcf per day currently from 315 MMcf per day at the end of the second quarter. Approximately 50 MMcf per day of the capacity increase resulted from equipment upgrades at the company-owned Grey Ranch Plant. The additional 10 MMcf per day of treating capacity resulted from upgrades at the Mitchell Plant.
Construction of the Century Plant, located in Pecos County, Texas, remains on schedule with anticipated start up of Phase 1 in July 2010. Century Plant Phase 1 will add approximately 400 MMcf per day of CO2 treating capacity, giving the company access to total CO2 treating capacity in the WTO of approximately 775 MMcf per day. Century Plant Phase 2 is expected to come on line in 2011, increasing access to total CO2 treating capacity to over 1 Bcf per day.
Exploration Update
Exploration efforts during the third quarter continued to focus on the integration of approximately 1,300 square miles of 3-D seismic data and evolving sub-surface geologic models. Six of 20 leads have been identified as drill-ready prospects for 2010 by the company's exploration teams. The first two wells of the company's exploratory program will begin drilling during the first quarter of 2010 and will test structural prospects on the east and west sides of SandRidge's extensive acreage position (approximately 650,000 acres) in the WTO. The company plans to test the rest of the identified structures over the next two to three years.
Capital Expenditures
The table below summarizes the company's capital expenditures for the three and nine-month periods ended September 30, 2009 and 2008:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -------------------
2009 2008 2009 2008
------- --------- -------- ----------
(in thousands)
Drilling and production
WTO $33,213 $261,056 $196,456 $750,883
Non-WTO (excluding tertiary) 37,976 118,139 145,394 273,330
Tertiary 1,046 9,395 12,205 18,764
------- -------- -------- ----------
72,235 388,590 354,055 1,042,977
Leasehold and seismic
WTO 1,557 116,350 9,689 232,940
Non-WTO (excluding tertiary) 3,928 62,228 9,934 104,472
Tertiary - 3 - 87
------- -------- -------- ----------
5,485 178,581 19,623 337,499
Pipe inventory 9,554 32,920 96,265 32,920
Total exploration and
development 87,274 600,091 469,943 1,413,396
------- -------- -------- ----------
Drilling and oil field services 569 15,049 2,770 50,840
Midstream 2,500 40,696 43,788 110,125
Other - general 7,374 19,218 25,700 34,994
------- -------- -------- ----------
Total capital expenditures $97,717 $675,054 $542,201 $1,609,355
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The company's capital expenditures in the third quarter of 2009 totaled $97.7 million and were 85.5% lower than capital expenditures incurred for the same period in 2008 due to the company's decreased drilling activities. Capital expenditures for the first nine months of 2009 were 66.3% lower than the comparable period in 2008.
Derivative Contracts
The table below sets forth the company's natural gas price and basis swaps and crude oil swaps through 2013 as of November 3, 2009. Current natural gas and crude oil derivative contracts excluding basis swaps account for 77% of anticipated production for 2009 at $8.59 per Mcfe, and 67% of anticipated production for 2010 at $7.70 per Mcfe. Since August 4, 2009, the company has entered only into additional natural gas basis swaps for 2013, which are included below.
