SandRidge Energy(SD) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited statements show a Q1 net loss of $5.3 million, a significant improvement from the prior year's $40.9 million loss Condensed Consolidated Balance Sheets Total assets grew to $1.05 billion while total liabilities increased to $208.1 million, slightly reducing stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $63,767 | $73,327 | | Total Assets | $1,051,544 | $1,024,338 | | Total Current Liabilities | $164,820 | $137,190 | | Total Liabilities | $208,084 | $176,617 | | Total Stockholders' Equity | $843,460 | $847,721 | Condensed Consolidated Statements of Operations The company's Q1 net loss narrowed to $5.3 million from $40.9 million YoY, driven by significantly lower operating expenses Q1 Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total Revenues | $73,236 | $87,128 | | Total Expenses | $77,497 | $129,095 | | Employee termination benefits | $0 | $31,587 | | Loss on derivative contracts | $209 | $18,330 | | Loss from Operations | ($4,261) | ($41,967) | | Net Loss | ($5,277) | ($40,894) | | Loss Per Share (Basic & Diluted) | ($0.15) | ($1.18) | Condensed Consolidated Statements of Cash Flows Operating cash flow remained stable at $31.6 million, while financing activities shifted to net borrowings, reducing the net decrease in cash Q1 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $31,570 | $30,407 | | Net cash used in investing activities | ($61,587) | ($64,572) | | Net cash provided by (used in) financing activities | $19,707 | ($37,965) | | Net Decrease in Cash | ($10,310) | ($72,130) | Notes to Condensed Consolidated Financial Statements Key disclosures include the adoption of a new lease standard, the absence of commodity derivatives, and details on prior-year termination benefits - The company adopted the new lease standard (ASU 2016-02) on January 1, 2019, resulting in the recognition of approximately $2.3 million in right-of-use lease assets and $2.4 million in lease liabilities[25][28] - As of March 31, 2019, the company had no commodity derivative contracts in place[52] - In Q1 2018, the company incurred $31.6 million in employee termination benefits related to executive separations and a reduction in workforce; no such costs were incurred in Q1 2019[32][35] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses lower revenues due to commodity prices, a narrowed net loss, and a 2019 capital budget of $160-$180 million Overview and Outlook The 2019 strategy focuses on developing key assets with a $160-$180 million capital budget, anticipating a 5-6% production decline - The 2019 capital budget is set between $160.0 million and $180.0 million, with the majority designated for drilling and completion activities[89] - Based on 2019 capital plans, production is estimated to decline by 5%-6% compared to the full year 2018[89] - Operational activity in Q1 2019 included drilling 12 gross wells (6.9 net), slightly up from 11 gross wells (6.4 net) in Q1 2018[85] Consolidated Results of Operations Q1 revenues fell 16.0% due to lower prices, but total expenses dropped significantly, driven by reduced G&A and derivative losses Q1 Production Volumes (MBoe) | Area | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Mississippian Lime | 2,650 | 2,607 | | NW STACK | 236 | 273 | | North Park Basin | 275 | 213 | | Permian Basin | — | 114 | | Total | 3,161 | 3,207 | Q1 Average Realized Prices (per Boe) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Oil (per Bbl) | $50.84 | $57.60 | | NGL (per Bbl) | $14.98 | $23.41 | | Natural gas (per Mcf) | $1.95 | $1.82 | | Total (per Boe) | $23.11 | $27.12 | - General and administrative expenses decreased by $3.7 million (27.4%) YoY, primarily due to lower compensation costs following a 2018 reduction in force[100] Liquidity and Capital Resources Liquidity is supported by a $350.0 million credit facility, though the working capital deficit increased to $101.1 million - As of March 31, 2019, the company had $7.4 million in cash and cash equivalents, with $20.0 million drawn on its $350.0 million credit facility[106] - The working capital deficit increased to $101.1 million at March 31, 2019, from $63.9 million at December 31, 2018, largely because borrowings on the credit facility became current liabilities[108] Capital Expenditures (Accrual Basis, in thousands) | Category | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Drilling and completion | $70,232 | $35,345 | | Leasehold and geophysical | $1,069 | $1,977 | | Total (excl. acquisitions) | $71,444 | $37,269 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are commodity price volatility and interest rate changes on its variable-rate debt - The company's primary market risk stems from volatile prices for oil, natural gas, and NGLs[128] - As of March 31, 2019, the company had no commodity derivative contracts outstanding[129] - The company is exposed to interest rate risk through its credit facility, with $20 million in variable rate debt outstanding at the end of the quarter[133] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2019[134][135] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[136] PART II. OTHER INFORMATION Legal Proceedings Following its 2016 emergence from bankruptcy, the company remains a nominal defendant in certain cases but expects no material liability - The company emerged from Chapter 11 bankruptcy on October 4, 2016[139] - The company remains a nominal defendant in certain legal cases to facilitate potential recovery from insurance policies, but does not expect any material liability[140] Risk Factors No material changes were reported to the risk factors disclosed in the company's 2018 Annual Report on Form 10-K - There were no material changes to the risk factors previously disclosed in the company's 2018 Form 10-K[142] Other Items The company reported no unregistered sales of equity securities or defaults upon senior securities during the period - The company reported no unregistered sales of equity securities or use of proceeds for the period[143] - There were no defaults upon senior securities during the period[144]