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SandRidge Energy(SD) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section encompasses the company's unaudited financial statements, management's analysis of operations, and disclosures regarding market risks and internal controls Financial Statements (Unaudited) SandRidge Energy reported a net income of $35.0 million in Q1 2021, a turnaround from a $12.7 million net loss in Q1 2020, driven by an asset sale gain and lower expenses Condensed Consolidated Statements of Operations (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $33,623 | $40,329 | | Total Expenses | $(1,439) | $53,088 | | Income (Loss) from Operations | $35,062 | $(12,759) | | Net Income (Loss) | $35,043 | $(12,670) | | Diluted EPS | $0.94 | $(0.36) | Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $73,876 | $22,130 | | Total Current Assets | $98,399 | $50,812 | | Total Assets | $280,254 | $260,832 | | Total Liabilities | $116,928 | $132,766 | | Total Stockholders' Equity | $163,326 | $128,066 | Condensed Consolidated Statements of Cash Flows (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $14,331 | $18,103 | | Net cash provided by (used in) investing activities | $34,085 | $(4,463) | | Net cash provided by (used in) financing activities | $(167) | $(11,867) | | Net increase in cash | $48,249 | $1,773 | Note 5. Impairment No full cost ceiling impairment was recorded in Q1 2021, contrasting with an $8.0 million impairment in Q1 2020 due to lower natural gas prices - No full cost ceiling impairment was recorded in Q1 2021, compared to an $8.0 million impairment in Q1 202041 - The SEC prices used for the March 31, 2021 ceiling test were $40.01/Bbl for oil and $2.16/Mcf for natural gas42 Note 6. Acquisitions and Divestitures The company sold its North Park Basin assets for $47 million on February 5, 2021, recognizing a $19.7 million gain from the divestiture - The company sold its North Park Basin (NPB) assets on February 5, 2021, for a purchase price of $47 million, receiving net cash proceeds of $39.7 million43 - A gain of $19.7 million was recognized on the sale of the NPB assets43 Note 8. Long-Term Debt As of March 31, 2021, the company had a $20.0 million term loan outstanding under its $30.0 million credit facility and was in compliance with all financial covenants - The company has a $30.0 million credit facility, consisting of a $20.0 million term loan (fully drawn) and a $10.0 million revolving loan (undrawn) as of March 31, 202147 - The weighted average interest rate on the outstanding borrowings was approximately 2.6% during Q1 202148 - The company was in compliance with all financial covenants as of March 31, 2021, with a consolidated total net leverage ratio of (0.18) and an interest coverage ratio of 42.8651 Note 9. Commitments and Contingencies The company is a nominal defendant in pre-bankruptcy securities litigation, has exhausted insurance coverage, and cannot estimate potential material losses - The company is a nominal defendant in two securities litigation cases where claims against it were discharged in the 2016 bankruptcy545557 - As of October 2020, all remaining insurance coverage for the costs of indemnification has been exhausted57 - The company cannot determine the likelihood of an outcome or estimate a range of possible loss, but notes that such losses, if incurred, could be material58 Note 15. Subsequent Events Post-quarter, on April 22, 2021, the company acquired overriding royalty interest assets of SandRidge Mississippian Trust I for $4.9 million gross - On April 22, 2021, the company acquired the overriding royalty interest assets of SandRidge Mississippian Trust I for $4.9 million gross ($3.6 million net)86 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2021 performance to the NPB asset sale and a focus on maximizing free cash flow, leading to reduced expenses and improved liquidity despite lower revenues - The company's strategy for 2021 is to maximize free cash flow through cost control, disciplined capital allocation, and limiting capital projects to high-return opportunities94 - Following the sale of its North Park Basin assets on February 5, 2021, the company's principal focus is on its U.S. Mid-Continent assets8996 - On April 22, 2021, the company acquired the overriding royalty interest assets of SandRidge Mississippian Trust I for a net cost of $3.6 million96 Consolidated Results of Operations Q1 2021 total revenues decreased to $33.6 million due to lower production volumes, partially offset by higher commodity prices, while operating expenses significantly declined Production and Pricing (Q1 2021 vs Q1 2020) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Production (MBoe) | 1,641 | 2,567 | | Average Daily Production (MBoe/d) | 18.2 | 28.2 | | Average Oil Price ($/Bbl) | $53.99 | $42.01 | | Average NGL Price ($/Bbl) | $17.00 | $7.72 | | Average Natural Gas Price ($/Mcf) | $1.85 | $0.83 | | Average Total Price ($/Boe) | $20.49 | $15.64 | Operating Expenses per Boe (Q1 2021 vs Q1 2020) | Metric | Q1 2021 ($/Boe) | Q1 2020 ($/Boe) | | :--- | :--- | :--- | | Lease operating expenses | $4.85 | $6.09 | | Production, ad valorem, and other taxes | $1.33 | $1.25 | | Depreciation and depletion—oil and natural gas | $1.53 | $9.68 | - General and administrative expenses decreased by $3.4 million year-over-year due to reductions in force, lower IT costs, and reduced overhead from the sale of the corporate headquarters109 Liquidity and Capital Resources The company's liquidity significantly improved, with cash and cash equivalents reaching $73.9 million and working capital turning to a $39.8 million surplus due to asset sale proceeds - As of March 31, 2021, the company had $73.9 million in cash and cash equivalents and $10.0 million available under its revolving credit facility114 - Working capital improved to a surplus of $39.8 million at March 31, 2021, from a deficit of $18.1 million at December 31, 2020116 Capital Expenditures (Q1 2021 vs Q1 2020) | Category (in thousands) | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :--- | :--- | :--- | | Drilling, completion and capital workovers | $2,037 | $1,425 | | Leasehold and geophysical | $111 | $503 | | Total cash paid for capital expenditures | $3,153 | $5,452 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are commodity price volatility and interest rate risk on its $20.0 million variable-rate debt, with no open commodity derivative contracts - The most significant market risk is commodity price volatility. The company had no open commodity derivative contracts as of March 31, 2021130131 - The company is exposed to interest rate risk on its $20.0 million in outstanding variable-rate debt137 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021138 - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2021139 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered equity sales, and a list of exhibits filed with the report Legal Proceedings This section refers to Note 9 for details on the company's status as a nominal defendant in ongoing securities litigation with unestimable potential losses - The company directs readers to Note 9 for details on legal proceedings, where it is a nominal defendant in securities litigation14257 Risk Factors No material changes were reported to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - There have been no material changes to the risk factors previously discussed in the Company's 2020 Form 10-K144 Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company repurchased 4,121 shares of common stock from employees to satisfy tax withholding on vested stock awards - A total of 4,121 shares were repurchased in February 2021 at an average price of $4.73 per share. These were shares tendered by employees to satisfy tax withholding on vested stock awards146 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Key exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and XBRL interactive data files151