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SD 2019-03-31

Part I. Financial Information

Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

Part II. Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 6. Exhibits

EX-10.3.7	sdq1201910q-ex1037spec.htm
EX-10.3.8	sdq1201910q-ex1038firs.htm
EX-31.1	sd10q33119-ex311ceocer.htm
EX-31.2	sd10q33119-ex312cfocer.htm
EX-32.1	sd10q33119-ex321sectio.htm

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PART I. Financial Information

ITEM 1. Financial Statements

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Nature of Business. SandRidge Energy, Inc. is an oil and natural gas exploration and production company headquartered in Oklahoma City, Oklahoma with principal focus on the acquisition, exploration and development of hydrocarbon resources in the United States. 

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly owned or majority owned subsidiaries, including its proportionate share of the Royalty Trusts. All significant intercompany accounts and transactions have been eliminated in consolidation.

Interim Financial Statements. The accompanying unaudited condensed consolidated financial statements and notes as of December 31, 2018 have been derived from and should be read in conjunction with the audited financial statements and notes contained in the Company’s 2018 Form 10-K. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. In the opinion of management, the financial statements include all adjustments, which consist of normal recurring adjustments unless otherwise disclosed, necessary to fairly state the Company’s unaudited condensed consolidated financial statements.  

Significant Accounting Policies. The unaudited condensed consolidated financial statements were prepared in accordance with the accounting policies stated in the 2018 Form 10-K as well as the items noted below.

Reclassifications. Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. These reclassifications have no effect on the Company’s previously reported results of operations.

Use of Estimates. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The more significant areas requiring the use of assumptions, judgments and estimates include: oil, natural gas and natural gas liquids (“NGL”) reserves; impairment tests of long-lived assets; depreciation, depletion and amortization; income taxes; valuation of derivative instruments; contingencies; and accrued revenue and related receivables. Although management believes these estimates are reasonable, actual results could differ significantly.

Recent Accounting Pronouncements Not Yet Adopted. The FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments,” which changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the currently required incurred loss approach with an expected loss model for instruments measured at amortized cost. The standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for the interim and annual periods beginning after December 31, 2018, and will be applied using a modified retrospective approach resulting in a cumulative effect adjustment to retained earnings upon adoption. The Company does not plan to early adopt and is currently evaluating the effect the guidance will have on its consolidated financial statements; however, the impact is not expected to be material.

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Topic 842 provides a number of practical expedients to assist with the transition to the new standard. The Company elected the 'package of practical expedients,' and therefore did not have to reassess prior conclusions about lease identification, lease classification and initial indirect costs. The Company also utilized the land easement practical expedient and short-term lease recognition exemption, under which leases with initial terms less than 12 months are not required to be presented on the balance sheet. Certain leases contain both lease and non-lease components. The Company elected the practical expedient to combine lease and non-lease components for asset classes including drilling rigs, compressors and various office equipment.

The Company determines if an arrangement is or contains a lease at inception. A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Lease liabilities are recognized based on the present value of the lease payments not yet paid over the lease term at January 1, 2019 for existing leases and at the commencement date for any new leases entered into subsequent to January 1, 2019. As most of the Company's leases do not provide an implicit rate, the Company's incremental borrowing rate was used as the discount rate when determining the present value of future payments. The ROU assets are recognized based on the lease liability plus any prepaid lease payments and excluding lease incentives and initial direct costs incurred for the same periods.  The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Adoption of this standard resulted in additional ROU lease assets and lease liabilities of approximately $2.3 million and $2.4 million, respectively, as of January 1, 2019, which did not materially impact the Company's consolidated financial statements. The difference between the net lease assets and liabilities was recognized as a cumulative-effect adjustment to the opening balance of retained earnings. Operating leases are included in other assets and other long-term obligations, and finance leases are included in other property, plant and equipment, and other long-term obligations on the accompanying condensed consolidated balance sheet as of March 31, 2019. The Company had no significant capital or operating leases with terms longer than 12 months at December 31, 2018. 

The Company has operating and financing leases for vehicles, drilling rigs and equipment, which are not significant to the consolidated financial statements as of and for the three-month period ended March 31, 2019. 

The components of lease costs recognized for the Company's ROU leases are shown below:

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						Three Months Ended March 31, 2019
Short-term lease cost (1)						$	4,909
Financing lease cost						297
Operating lease cost						58
Total lease cost						$	5,264

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1.$3.1 million of short-term lease cost was capitalized as part of oil and natural gas properties, and portions of these costs were reimbursed to the Company by other working interest owners.

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No employee termination benefits were paid during the three-month period ended March 31, 2019. The following table presents a summary of employee termination benefits for the three-month period ended March 31, 2018 which occurred before the change in composition of the current Board of Directors (in thousands):

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						Cash						Share-Based Compensation (3)						Number of Shares						Total Employee Termination Benefits
Three Months Ended March 31, 2018
Executive Employee Termination Benefits (1)						$	11,945					$	9,114					554						$	21,059
Other Employee Termination Benefits (2)						6,692						3,836						209						10,528
						$	18,637					$	12,950					763						$	31,587

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1.On February 8, 2018, the Company’s then current chief executive officer ("CEO"), James Bennett, separated employment from the Company, and on February 22, 2018, the Company’s then current chief financial officer ("CFO"), Julian Bott, also separated employment from the Company. As a result, the Company paid cash severance costs and incurred share-based compensation costs associated with these separations during the first quarter of 2018.

2.As a result of a reduction in workforce in the first quarter of 2018, certain employees received termination benefits including cash severance and accelerated share-based and incentive compensation upon separation of service from the Company.

3.Share-based compensation recognized in connection with the accelerated vesting of restricted stock awards and performance share units upon the departure of certain executives and the reduction in workforce in the first quarter of 2018 reflects the remaining unrecognized compensation expense associated with these awards at the date of termination. The unrecognized compensation expense was calculated using the grant date fair value for restricted stock awards and performance share units. One share of the Company’s common stock was issued per performance share unit.

See Note 13 for additional discussion of the Company’s share-based compensation awards.

The Company measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the levels of the fair value hierarchy noted below. The carrying values of cash, restricted cash, accounts receivable, prepaid expenses, certain other current assets and other assets, accounts payable and accrued expenses, other current liabilities and other long-term obligations included in the unaudited condensed consolidated balance sheets approximated fair value at March 31, 2019, and December 31, 2018. Additionally, the carrying amount of debt associated with borrowings outstanding under the credit facility approximates fair value as borrowings bear interest at variable rates. As a result, these financial assets and liabilities are not discussed below. The fair values of property, plant and equipment classified as assets held for sale and related impairments, which are calculated using Level 3 inputs, are discussed in Note 5.

Level 1			Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2			Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3			Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).

Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, considers the market for the Company’s financial assets and liabilities, the associated credit risk and other factors. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company had no financial assets or liabilities where fair value differed from carrying value classified in the fair

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value hierarchy as of March 31, 2019. The Company had assets classified in Level 2 of the hierarchy as of December 31, 2018, as described below.

Level 2 Fair Value Measurements

Commodity Derivative Contracts. The fair values of the Company’s oil and natural gas fixed price swaps are based upon inputs that are either readily available in the public market, such as oil and natural gas futures prices, volatility factors and discount rates, or can be corroborated from active markets. Fair value is determined through the use of a discounted cash flow model or option pricing model using the applicable inputs discussed above. The Company applies a weighted average credit default risk rating factor for its counterparties or gives effect to its credit default risk rating, as applicable, in determining the fair value of these derivative contracts. Credit default risk ratings are based on current published credit default swap rates.

Fair Value - Recurring Measurement Basis

The following table summarizes the Company’s assets measured at fair value on a recurring basis by the fair value hierarchy as of December 31, 2018 (in thousands):

December 31, 2018

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			Fair Value Measurements																														Netting(1)						Assets/Liabilities at Fair Value
			Level 1						Level 2						Level 3
Assets
Commodity derivative contracts			$	—					$	5,286					$	—					$	—					$	5,286
			$	—					$	5,286					$	—					$	—					$	5,286

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1.Represents the effect of netting assets and liabilities for counterparties with which the right of offset exists.

Transfers. The Company did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements during the three-month periods ended March 31, 2019 and 2018.

Property, plant and equipment consists of the following (in thousands): 

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			March 31, 2019						December 31, 2018
Oil and natural gas properties
Proved			$	1,344,552					$	1,269,091
Unproved			57,363						60,152
Total oil and natural gas properties			1,401,915						1,329,243
Less accumulated depreciation, depletion and impairment			(614,972)						(580,132)
Net oil and natural gas properties capitalized costs			786,943						749,111
Land			4,400						4,400
Electrical infrastructure			131,176						131,176
Other non-oil and natural gas equipment			13,410						13,458
Buildings and structures			77,148						77,148
Financing leases			1,727						—
Total			227,861						226,182
Less accumulated depreciation and amortization			(27,847)						(25,344)
Other property, plant and equipment, net			200,014						200,838
Total property, plant and equipment, net			$	986,957					$	949,949

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Accounts payable and accrued expenses consist of the following (in thousands):

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			March 31, 2019									December 31, 2018
Accounts payable and other accrued expenses			$	89,909								$	78,219
Payroll and benefits			10,712									12,891
Production payable			12,972									12,767
Taxes payable			4,569									5,350
Drilling advances			724									2,031
Accrued interest			550									539
Total accounts payable and accrued expenses			$	119,436								$	111,797

Credit Facility. The Company has a $600.0 million reserve-based revolving credit facility, which is subject to a $350.0 million borrowing base. This borrowing base is currently under evaluation by the Company and its lenders under the credit facility in connection with the scheduled spring redetermination. The next borrowing base redetermination after this is scheduled for October 1, 2019. The credit facility matures on March 31, 2020. Outstanding borrowings under the credit facility bear interest based on a pricing grid tied to borrowing base utilization of (a) LIBOR plus an applicable margin that varies from 3.00% to 4.00% per annum, or (b) the base rate plus an applicable margin that varies from 2.00% to 3.00% per annum. Interest on base rate borrowings is payable quarterly in arrears and interest on LIBOR borrowings is payable every one, two, three or six months, at the election of the Company. Quarterly, the Company pays commitment fees assessed at annual rates of 0.50% on any available portion of the credit facility. The Company has the right to prepay loans under the credit facility at any time without a prepayment penalty, other than customary “breakage” costs with respect to LIBOR loans.

The credit facility is secured by (i) first-priority mortgages on at least 95% of the PV-9 valuation of all proved reserves included in the most recently delivered reserve report of the Company, (ii) a first-priority perfected pledge of substantially all of the capital stock owned by each credit party and equity interests in the Royalty Trusts that are owned by a credit party and (iii) a first-priority perfected security interest in substantially all the cash, cash equivalents, deposits, securities and other similar accounts, and other tangible and intangible assets of the credit parties (including but not limited to as-extracted collateral, accounts receivable, inventory, equipment, general intangibles, investment property, intellectual property, real property and the proceeds of the foregoing).

As of the end of each fiscal quarter, the credit facility requires the Company to maintain (i) a maximum consolidated total net leverage ratio, measured as of the end of any fiscal quarter, of no greater than 3.50 to 1.00 and (ii) a minimum consolidated interest coverage ratio, measured as of the end of any fiscal quarter, of no less than 2.25 to 1.00. These financial covenants are subject to customary cure rights. The Company was in compliance with all applicable financial covenants under the credit facility as of March 31, 2019, as its consolidated total net leverage ratio was 0.06 and its consolidated interest coverage ratio was 80.20.

The credit facility contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments including dividends and other customary covenants. The Company was in compliance with these covenants as of March 31, 2019.

The credit facility includes events of default relating to customary matters, including, among other things, nonpayment of principal, interest or other amounts; violation of covenants; incorrectness of representations and warranties in any material

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respect; cross-payment default and cross acceleration with respect to indebtedness in an aggregate principal amount of $25.0 million or more; bankruptcy; judgments involving a liability of $25.0 million or more that are not paid; and ERISA events. Many events of default are subject to customary notice and cure periods.

The Company had $20.0 million outstanding under the credit facility at March 31, 2019, and $5.2 million in outstanding letters of credit, which reduce availability under the credit facility on a dollar-for-dollar basis.

Building Note. In February 2018, the Company fully repaid a note secured by a mortgage on the Company's downtown Oklahoma City real estate (the "Building Note") in the amount of $36.3 million, which was comprised of an initial principal amount of $35.0 million and $1.3 million in in-kind interest costs that were previously added to the principal. An unamortized premium of $1.2 million was recognized as a gain on extinguishment of debt in the unaudited condensed consolidated statement of operations for the three-month period ended March 31, 2018 in connection with the repayment.

Commodity Derivatives 

The Company is exposed to commodity price risk, which impacts the predictability of its cash flows from the sale of oil and natural gas. The Company, on occasion, has sought to manage this risk through the use of commodity derivative contracts, which allow the Company to limit its exposure to commodity price volatility on a portion of its forecasted oil and natural gas sales. The Company has not designated any of its derivative contracts as hedges for accounting purposes and records all derivative contracts at fair value with changes in derivative contract fair values recognized as gain or loss on derivative contracts in the unaudited condensed consolidated statements of operations. At March 31, 2019, the Company had no commodity derivative contracts in place. Historically, none of the Company’s commodity derivative contracts could be terminated prior to contractual maturity solely as a result of a downgrade in the credit rating of a party to the contract. Commodity derivative contracts are settled on a monthly basis, and the commodity derivative contract valuations are adjusted to the mark-to-market valuation on a quarterly basis. The Board and management of the Company are continuing to evaluate the futures market for oil and natural gas to mitigate exposure to adverse oil and natural gas price changes.

The following table summarizes derivative activity for the three-month periods ended March 31, 2019, and 2018 (in thousands):

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			Three Months Ended March 31,
			2019						2018
Loss on commodity derivative contracts			$	209					$	18,330
Cash (received) paid on settlements			$	(5,078)					$	6,119

Master Netting Agreements and the Right of Offset. Historically, the Company has had master netting agreements with all of its commodity derivative counterparties and has presented its derivative assets and liabilities with the same counterparty on a net basis in the unaudited condensed consolidated balance sheets. As a result of the netting provisions, the Company's maximum amount of loss under commodity derivative transactions due to credit risk was limited to the net amounts due from its counterparties. The Company is not required to post additional collateral under its commodity derivative contracts as all of the counterparties to the Company’s commodity derivative contracts shared in the collateral supporting the Company’s credit facility.

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The following table summarizes (i) the Company's commodity derivative contracts on a gross basis, (ii) the effects of netting assets and liabilities for which the right of offset exists based on master netting arrangements and (iii) for the Company’s net derivative liability positions, the applicable portion of shared collateral under the credit facility as of December 31, 2018 (in thousands):

December 31, 2018

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						Gross Amounts						Gross Amounts Offset						Amounts Net of Offset						Financial Collateral						Net Amount
Assets
Derivative contracts - current						$	5,286					$	—					$	5,286					$	—					$	5,286
Total						$	5,286					$	—					$	5,286					$	—					$	5,286

Fair Value of Derivatives 

The following table presents the fair value of the Company’s derivative contracts as of December 31, 2018, on a gross basis without regard to same-counterparty netting (in thousands):

Type of Contract

Balance Sheet Classification

December 31, 2018

Derivative assets

Natural gas price swaps

Derivative contracts-current

$

5,286

Total net derivative contracts

$

5,286

Legal Proceedings. As previously disclosed, on May 16, 2016, the Company and certain of its direct and indirect subsidiaries (collectively, the "Debtors") filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Bankruptcy Court confirmed the joint plan of organization (the "Plan") of the Debtors on September 9, 2016, and the Debtors subsequently emerged from bankruptcy on October 4, 2016.

Pursuant to the Plan, claims against the Company were discharged without recovery in each of the following consolidated cases (the “Cases”):

•In re SandRidge Energy, Inc. Securities Litigation, Case No. 5:12-cv-01341-LRW, USDC, Western District of Oklahoma

•Ivan Nibur, Lawrence Ross, Jase Luna, Matthew Willenbucher, and the Duane & Virginia Lanier Trust v. SandRidge Mississippian Trust I, et al., Case No. 5:15-cv-00634-SLP, USDC, Western District of Oklahoma

Although the Cases have not been dismissed against certain former officers and directors who remain defendants in the Cases, the Company remains as a nominal defendant in each of the Cases so that any of the respective plaintiffs may seek to recover proceeds from any applicable insurance policies or proceeds. In each of the Cases, to the extent liability exceeds the amount of available insurance proceeds, the Company may owe indemnity obligations to its former officers and/or directors who remain as defendants in such action. The Company indemnifies the SandRidge Mississippian Trust I and SandRidge Mississippian Trust II against losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and attorney’s fees and expenses arising out of certain legal matters. An estimate of probable losses associated with any of the Cases cannot be made at this time, however the Company believes that any potential liability with respect to the Cases will not be material. The Company has not established any liabilities relating to any of the Cases.

In addition to the matters described above, the Company is involved in various lawsuits, claims and proceedings which are being handled and defended by the Company in the ordinary course of business.

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For each interim reporting period, the Company estimates the effective tax rate expected for the full fiscal year and uses that estimated rate in providing for income taxes on a current year-to-date basis.

Deferred income taxes are provided to reflect the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Company’s deferred tax assets have been reduced by a valuation allowance due to a determination that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. The Company continues to closely monitor and weigh all available evidence, including both positive and negative, in making its determination whether to maintain a valuation allowance. As a result of the significant weight placed on the Company's cumulative negative earnings position, the Company continued to maintain a full valuation allowance against its net deferred tax asset at March 31, 2019. Thus, the Company had no federal income tax expense or benefit for the three-month periods ended March 31, 2019 and 2018, and an insignificant amount of state income tax expense for the three-month period ended March 31, 2018.

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The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted loss per share:

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			Net Loss						Weighted Average Shares						Loss Per Share
			(In thousands, except per share amounts)
Three Months Ended March 31, 2019
Basic loss per share			$	(5,277)					35,322						$	(0.15)
Effect of dilutive securities
Restricted stock awards(1)			—						—
Performance share units(1)			—						—
Warrants(1)			—						—
Stock options(1)			—						—
Diluted loss per share			$	(5,277)					35,322						$	(0.15)
Three Months Ended March 31, 2018
Basic loss per share			$	(40,894)					34,575						$	(1.18)
Effect of dilutive securities
Restricted stock awards(2)			—						—
Performance share units(3)			—						—
Warrants(2)			—						—
Diluted loss per share			$	(40,894)					34,575						$	(1.18)

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1.No incremental shares of potentially dilutive restricted stock awards, performance share units, warrants or stock options were included for the three-month period ended March 31, 2019, as their effect was antidilutive under the treasury stock method.

2.No incremental shares of potentially dilutive restricted stock awards or warrants were included for the three-month period ended March 31, 2018, as their effect was antidilutive under the treasury stock method.

3.Performance share units covering an insignificant amount of shares for the three-month period ended March 31, 2018, were excluded from the computation of loss per share because their effect would have been antidilutive.

See Note 13 for discussion of the Company’s share-based compensation awards.

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Share-Based Compensation

Omnibus Incentive Plan. The Company's Omnibus Incentive Plan became effective in October 2016. The Omnibus Incentive Plan authorizes the issuance of up to 4.6 million shares of SandRidge common stock to eligible persons including non-employee directors of the Company, employees of the Company or any of its affiliates, and certain consultants and advisers to the Company or any of its affiliates. The types of awards that may be granted under the Omnibus Incentive Plan include stock options, restricted stock, performance awards and other forms of awards granted or denominated in shares of the Company’s common stock, as well as certain cash-settled awards. At March 31, 2019, the Company had restricted stock awards and an immaterial amount of performance share units and stock options outstanding under the Omnibus Incentive Plan. At March 31, 2018, the Company also had performance units outstanding which vested in June 2018 with an aggregate intrinsic value of approximately $1.7 million.

Restricted Stock Awards. The Company’s restricted stock awards are equity-classified awards and are valued based upon the market value of the Company’s common stock on the date of grant. Outstanding restricted shares will generally vest over either a one-year period or three-year period. As of March 31, 2019, the Company had approximately 0.4 million unvested restricted shares outstanding at weighted average grant date fair value of $16.07, and unrecognized compensation cost related to these awards totaled $3.9 million. The remaining weighted average contractual period over which this compensation cost may be recognized is 2.1 years.

The following tables summarize share and incentive-based compensation for the three-month periods ended March 31, 2019, and 2018 (in thousands):

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						Recurring Compensation Expense(1)						Executive Terminations(2)						Reduction in Force(2)												Total
Three Months Ended March 31, 2019
Equity-classified awards:
Restricted stock awards						$	745					$	—					$	—											$	745
Performance share units						198						—						—												198
Stock options						130						—						—												130
Total share-based compensation expense						1,073						—						—												1,073
Less: Capitalized compensation expense						(77)						—						—												(77)
Share-based compensation expense, net						$	996					$	—					$	—											$	996
Three Months Ended March 31, 2018
Equity-classified awards:
Restricted stock awards						$	2,776					$	8,140					$	3,686											$	14,602
Performance share units						329						974						150												1,453
Total share-based compensation expense						3,105						9,114						3,836												16,055
Liability-classified awards:
Performance units						530						2,367						589												3,486
Total share and incentive-based compensation expense						3,635						11,481						4,425												19,541
Less: Capitalized compensation expense						(210)						—						—												(210)
Share and incentive-based compensation expense, net						$	3,425					$	11,481					$	4,425											$	19,331

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1.Recorded in general and administrative expense in the accompanying consolidated statements of operations.

2.Recorded in employee termination benefits in the accompanying consolidated statements of operations. Vesting for certain stock restricted stock awards, performance share units, and performance units was accelerated in connection with executive terminations and a reduction in force in the first quarter of 2018.

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The following table disaggregates the Company’s revenue by source for the three-month periods ended March 31, 2019 and 2018:

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															Three Months Ended March 31,
															2019						2018
Oil															$	43,159					$	53,335
NGL															13,111						16,389
Natural gas															16,778						17,242
Other															188						162
Total revenues															$	73,236					$	87,128

Oil, natural gas and NGL revenues. A majority of the Company’s revenues come from sales of oil, natural gas and NGLs and are recorded at a point in time when control of the oil, natural gas and NGL production passes to the customer at the inlet of the processing plant or pipeline, or the delivery point for onloading to a delivery truck. As the Company’s customers obtain control of the production prior to selling it to other end customers, the Company presents its revenues on a net basis, rather than on a gross basis.

Pricing for the Company’s oil, natural gas and NGL contracts is variable and is based on volumes sold multiplied by either an index price, net of deductions, or a percentage of the sales price obtained by the customer, which is also based on index prices. The transaction price is allocated on a pro-rata basis to each unit of oil, natural gas or NGL sold based on the terms of the contract. Oil, natural gas and NGL revenues are also recorded net of royalties, discounts and allowances, and transportation costs, as applicable. Taxes assessed by governmental authorities on oil, natural gas and NGL sales are presented separately from revenues and are included in production tax expense in the consolidated statements of operations.

Revenues Receivable. The Company records an asset in accounts receivable, net on its consolidated balance sheet for revenues receivable from contracts with customers at the end of each period. Pricing for revenues receivable is estimated using current month crude oil, natural gas and NGL prices, net of deductions. Revenues receivable are typically collected the month after the Company delivers the related production to its customers. As of March 31, 2019, and December 31, 2018, the Company had revenues receivable of $28.1 million and $31.8 million, respectively, and did not record any bad debt expense on revenues receivable during the three-month period ended March 31, 2019.

Practical expedients and exemptions. Most of the Company's contracts are short-term in nature with a contract term of one year or less. The Company generally expenses certain insignificant costs when incurred rather than recognizing them as an asset because the amortization period would have been one year or less. Additionally, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed. Payment terms are typically within 30 days of control being transferred.

Currently, the Company’s existing contracts do not contain financing components, but the Company has elected the practical expedient that allows financing components to be ignored if the difference between the performance and payment is less than one year for any future contracts that may contain financing components.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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