Company Quick10K Filing
⚲
SandRidge Energy
Financials
Price5.46 EPS-4
Shares36 P/E-1
MCap195 P/FCF2
Net Debt56 EBIT-146
TEV251 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
Filings
10-Q 2020-09-30 Filed 2020-11-05
10-Q 2020-06-30 Filed 2020-08-07
10-Q 2020-03-31 Filed 2020-05-19
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-05
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-03
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-12-31 Filed 2015-01-08
10-Q 2013-09-30 Filed 2013-11-06
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-03-01
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-06
10-Q 2012-03-31 Filed 2012-05-07
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-07
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-09
10-K 2010-12-31 Filed 2011-02-28
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-01
Reports
8-K 2020-11-24
8-K 2020-11-04
8-K 2020-09-10
8-K 2020-08-31
8-K 2020-08-05
8-K 2020-07-30
8-K 2020-07-01
8-K 2020-07-01
8-K 2020-06-05
8-K 2020-05-18
8-K 2020-05-15
8-K 2020-05-08
8-K 2020-04-14
8-K 2020-04-06
8-K 2020-04-05
8-K 2020-02-26
8-K 2020-02-04
8-K 2019-12-12
8-K 2019-11-12
8-K 2019-08-07
8-K 2019-06-21
8-K 2019-05-30
8-K 2019-05-23
8-K 2019-05-08
8-K 2019-05-08
8-K 2019-05-07
8-K 2019-04-03
8-K 2019-03-25
8-K 2019-03-04
8-K 2019-01-28
8-K 2018-11-07
8-K 2018-09-17
8-K 2018-09-10
8-K 2018-08-08
8-K 2018-06-19
8-K 2018-06-18
8-K 2018-06-15
8-K 2018-06-11
8-K 2018-06-06
8-K 2018-06-05
8-K 2018-06-04
8-K 2018-05-29
8-K 2018-05-22
8-K 2018-05-07
8-K 2018-05-07
8-K 2018-04-16
8-K 2018-04-09
8-K 2018-03-10
8-K 2018-02-21
8-K 2018-02-08
8-K 2018-01-22

SD 10Q Quarterly Report

Content
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 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Exhibits
EX-31.1 ex311ceo302certificati.htm
EX-31.2 ex312cfo302certificati.htm
EX-32.1 ex321section906certifi.htm

SandRidge Energy Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
10.07.54.92.4-0.2-2.72012201420172020
Assets, Equity
 1.71.20.70.3-0.2-0.72012201420172020
Rev, G Profit, Net Income
 2.21.61.10.5-0.0-0.62012201420172020
Ops, Inv, Fin
sd-20200930
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-33784

SANDRIDGE ENERGY, INC.
(Exact name of registrant as specified in its charter)

Delaware20-8084793
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
123 Robert S. Kerr Avenue
Oklahoma City, Oklahoma
73102
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (405) 429-5500
Former name, former address and former fiscal year, if changed since last report: Not applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.001 par valueSDNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer☑
Non-accelerated filer
☐

Smaller reporting company☑
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐    No þ
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☑ No o

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of the close of business on October 29, 2020, was 35,928,429.


Table of Contents
References in this report to the “Company,” “SandRidge,” “we,” “our,” and “us” mean SandRidge Energy, Inc., including its consolidated subsidiaries and its proportionately consolidated share of each of SandRidge Mississippian Trust I and SandRidge Mississippian Trust II, (collectively, the “Royalty Trusts”).

DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) of the Company includes “forward-looking statements” as defined by the SEC. These forward-looking statements may include projections and estimates concerning our capital expenditures, liquidity, capital resources and debt profile, the timing and success of specific projects, the potential impact of the COVID-19 pandemic on the Company's business, the potential impact of international negotiations on the supply and demand of oil and gas, outcomes and effects of litigation, claims and disputes, elements of our business strategy, compliance with governmental regulation of the oil and natural gas industry, including environmental regulations, acquisitions and divestitures and the potential effects on our financial condition and other statements concerning our operations, financial performance and financial condition.

Forward-looking statements are generally accompanied by words such as “estimate,” “assume,” “target,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal,” “should,” “intend” or other words that convey the uncertainty of future events or outcomes. These forward-looking statements are based on certain assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected. The Company disclaims any obligation to update or revise these forward-looking statements unless required by law, and it cautions readers not to rely on them unduly. While we consider these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties relating to, among other matters, the risks and uncertainties discussed in “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”) and in Item 1A of this Quarterly Report.



Table of Contents
SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
FORM 10-Q
Quarter Ended September 30, 2020

INDEX

ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.


Table of Contents
PART I. Financial Information

ITEM 1. Financial Statements

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except per share data) 
September 30,
2020		December 31, 2019
ASSETS
Current assets
Cash and cash equivalents$11,187 $4,275 
Restricted cash - other1,454 1,693 
Accounts receivable, net16,292 28,644 
Derivative contracts— 114 
Prepaid expenses1,105 3,342 
Other current assets80 538 
Total current assets30,118 38,606 
Oil and natural gas properties, using full cost method of accounting
Proved1,479,664 1,484,359 
Unproved18,653 24,603 
Less: accumulated depreciation, depletion and impairment(1,367,703)(1,129,622)
130,614 379,340 
Other property, plant and equipment, net104,825 188,603 
Other assets564 1,140 
Total assets$266,121 $607,689 

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses$42,449 $64,937 
Current maturities of long-term debt12,000 — 
Derivative contracts3,088 — 
Asset retirement obligation22,007 22,119 
Other current liabilities962 1,367 
Total current liabilities80,506 88,423 
Long-term debt— 57,500 
Asset retirement obligation53,436 52,897 
Other long-term obligations4,217 6,417 
Total liabilities138,159 205,237 
Commitments and contingencies (Note 9)
Stockholders’ Equity
Common stock, $0.001 par value; 250,000 shares authorized; 35,906 issued and outstanding at September 30, 2020 and 35,772 issued and outstanding at December 31, 2019
36 36 
Warrants88,520 88,520 
Additional paid-in capital1,061,961 1,059,253 
Accumulated deficit(1,022,555)(745,357)
Total stockholders’ equity127,962 402,452 
Total liabilities and stockholders’ equity$266,121 $607,689 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents    
SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues
Oil, natural gas and NGL$27,547 $58,188 $84,134 $206,432 
Other129 181 526 561 
Total revenues27,676 58,369 84,660 206,993 
Expenses
Lease operating expenses8,069 23,866 32,409 71,721 
Production, ad valorem, and other taxes2,333 4,346 7,386 15,303 
Depreciation and depletion — oil and natural gas7,525 38,871 45,728 114,755 
Depreciation and amortization — other1,698 2,981 6,071 8,910 
Impairment44,043 165,507 253,797 165,507 
General and administrative2,493 6,238 12,290 26,261 
Restructuring expenses1,199 — 1,643 — 
Employee termination benefits3,184 — 8,431 4,465 
(Gain) loss on derivative contracts5,299 (1,756)(7,168)(1,547)
Other operating expense, net(116)23 269 142 
Total expenses75,727 240,076 360,856 405,517 
Loss from operations(48,051)(181,707)(276,196)(198,524)
Other income (expense)
Interest expense, net(569)(722)(1,653)(2,009)
Other income (expense), net(129)827 5 370 
Total other income (expense)(698)105 (1,648)(1,639)
Loss before income taxes(48,749)(181,602)(277,844)(200,163)
Income tax expense (benefit)— — (646)— 
Net loss$(48,749)$(181,602)$(277,198)$(200,163)
Loss per share
Basic$(1.36)$(5.12)$(7.78)$(5.66)
Diluted$(1.36)$(5.12)$(7.78)$(5.66)
Weighted average number of common shares outstanding
Basic35,783 35,491 35,649 35,390 
Diluted35,783 35,491 35,649 35,390 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands) 
Common Stock
Warrants
Additional Paid-In Capital
Accumulated Deficit
Total
Shares
Amount
Shares
Amount
Nine Months Ended September 30, 2020
Balance at December 31, 2019
35,772 $36 6,659 $88,520 $1,059,253 $(745,357)$402,452 
Stock-based compensation
— — — — 185 — 185 
Issuance of common stock for general unsecured claims
38 — — — — — — 
Issuance of warrants for general unsecured claims
— — 47 — — — — 
Cash paid for tax withholdings on vested stock awards
— — — — (1)— (1)
Net loss
— — — — — (12,670)(12,670)
Balance at March 31, 202035,810 $36 6,706 $88,520 $1,059,437 $(758,027)$389,966 
Stock-based compensation— — — — 583 — 583 
Issuance of stock awards, net of
cancellations
55 — — — — — — 
Cash paid for tax withholdings on vested
stock awards		— — — — (1)— (1)
Net loss— — — — (215,779)(215,779)
Balance at June 30, 202035,865 $36 6,706 $88,520 $1,060,019 $(973,806)$174,769 
Stock-based compensation
— — — — 2,004 — 2,004 
Issuance of stock awards, net of cancellations
41 — — — — — — 
Cash paid for tax withholdings on vested stock awards
— — — — (62)— (62)
Net loss
— — — — — (48,749)(48,749)
Balance at September 30, 2020
35,906 36 6,706 88,520 1,061,961 (1,022,555)127,962 



Common Stock
Warrants
Additional Paid-In Capital
Accumulated Deficit
Total
Shares
Amount
Shares
Amount
Nine Months Ended September 30, 2019
Balance at December 31, 201835,687 $36 6,604 $88,516 $1,055,164 $(295,995)$847,721 
Stock-based compensation
— — — — 1,073 — 1,073 
Issuance of warrants for general unsecured claims
— — 1 2 (2)— — 
Cumulative effect of adoption of
ASU 2016-02
— — — — — (57)(57)
Net loss
— — — — — (5,277)(5,277)
Balance at March 31, 201935,687 $36 6,605 $88,518 $1,056,235 $(301,329)$843,460 
Issuance of stock awards, net of
cancellations
75 — — — — — — 
Stock-based compensation— — — — 2,170 — 2,170 
Cash paid for whithholdings on vested
stock awards
— — — — (205)— (205)
Net loss— — — — — (13,284)(13,284)
Balance at June 30, 201935,762 $36 6,605 $88,518 $1,058,200 $(314,613)$832,141 
Cancellation of stock awards, net of issuances
(32)— — — — 
Stock-based compensation
— — — — 862 — 862 
Cash paid for tax withholdings on vested stock awards
— — — — (157)— (157)
Net loss
— — — — — (181,602)(181,602)
Balance at September 30, 2019
35,730 36 6,605 88,518 1,058,905 (496,215)651,244 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Nine Months Ended September 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(277,198)$(200,163)
Adjustments to reconcile net loss to net cash provided by operating activities
Provision for doubtful accounts469 (90)
Depreciation, depletion, and amortization51,799 123,665 
Impairment253,797 165,507 
Debt issuance costs amortization477 398 
Write off of debt issuance costs— 142 
(Gain) loss on derivative contracts(7,168)(1,547)
Cash received on settlement of derivative contracts11,197 5,700 
Loss (gain) on sale of assets(100)— 
Stock-based compensation2,753 3,930 
Other114 (119)
Changes in operating assets and liabilities(8,784)(1,894)
Net cash provided by operating activities27,356 95,529 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for property, plant and equipment(8,110)(170,723)
Acquisition of assets(3,276)236 
Proceeds from sale of assets37,243 1,347 
Net cash provided by (used in) investing activities25,857 (169,140)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings39,000 170,096 
Repayments of borrowings(84,500)(108,096)
Reduction of financing lease liability(977)(1034)
Debt issuance costs— (910)
Cash paid for tax withholdings on vested stock awards(63)(362)
Net cash provided by (used in) financing activities(46,540)59,694 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS and RESTRICTED CASH6,673 (13,917)
CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of year5,968 19,645 
CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of period$12,641 $5,728 
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized$(1,271)$(1,446)
Cash received for income taxes$616 $— 
Supplemental Disclosure of Noncash Investing and Financing Activities
Purchase of PP&E in accounts payable$683 $12,790 
Right-of-use assets obtained in exchange for financing lease obligations$67 $3,237 
Carrying value of properties exchanged$3,890 $5,384 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

Nature of Business. SandRidge Energy, Inc. is an oil and natural gas acquisition, development and production company headquartered in Oklahoma City, Oklahoma with a principal focus on developing and producing 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 intercompany accounts and transactions have been eliminated in consolidation.

Interim Financial Statements. The accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes contained in the Company’s 2019 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 2019 Form 10-K as well as the items noted below.

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; the carrying value of unproved oil and natural gas properties and other property, plant and equipment; depreciation, depletion and amortization; asset retirement obligations; determinations of significant alterations to the full cost pool and related estimates of fair value used to allocate the full cost pool net book value to divested properties, as necessary; valuation allowances for deferred tax assets; income taxes; valuation of derivative instruments; contingencies; and accrued revenue and related receivables. Although management believes the estimates used in the areas noted above are reasonable, actual results could differ significantly.

Going Concern Consideration. The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company previously disclosed circumstances that gave rise to substantial doubt about the Company’s ability to continue as a going concern. Those conditions were resolved as a result of the Company executing previously disclosed initiatives. These initiatives include reducing our 2020 capital expenditures, personnel and non-personnel cost reductions and the sale of the company headquarters for net proceeds of $35.4 million.

Recently Adopted Accounting Pronouncements. Accounting Standards Updates ("ASU") 2016-13 - In March 2016, 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 replaced the previously required incurred loss approach with an expected loss model for instruments measured at amortized cost. The company adopted this ASU on January 1, 2020 using a modified retrospective approach; however, the impact was not material upon adoption.

Recent Accounting Pronouncements Not Yet Adopted. ASU 2020-04 - In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), to facilitate the effects of reference rate reform on financial reporting. This ASU provides optional practical expedients and exceptions for applying US GAAP provisions to contracts, hedging relationships, and other transactions that reference LIBOR, or other reference rates expected to be discontinued because of reference rate reform, if certain criteria are met. The provisions of this ASU do not apply to contract modifications made and hedging transactions entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in ASU 2020-04 are effective, for all entities, as of March 12, 2020 through December 31, 2022. The Company is currently reviewing the potential impact of the upcoming LIBOR reference rate change on its current contracts and hedging relationships and will determine the applicable provisions of ASU 2020-04.

ASU 2019-12 - In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which simplifies various aspects of accounting for income taxes, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax laws, and year-to-date loss limitation in interim-period tax accounting. The standard is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted, and will be applied on a prospective basis. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

2. Fair Value Measurements

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 September 30, 2020, and December 31, 2019. 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. No other adjustments to fair value were required for other property, plant and equipment for the three and nine-month periods ended September 30, 2020 and 2019.

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2Quoted 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 3Measurement 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 assets classified in Level 2 of the hierarchy as of September 30, 2020 and December 31, 2019, 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.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Fair Value - Recurring Measurement Basis

The following tables summarize the Company’s assets measured at fair value on a recurring basis by the fair value hierarchy (in thousands):

September 30, 2020

Fair Value Measurements
Netting(1)
Assets/Liabilities at Fair Value
Level 1
Level 2
Level 3
Liabilities
Commodity derivative contracts$— $3,915 $— $— $3,915 

December 31, 2019
Fair Value Measurements
Netting(1)
Assets/Liabilities at Fair Value
Level 1
Level 2
Level 3
Assets
Commodity derivative contracts
$— $114 $— $— $114 
$— $114 $— $— $114 
____________________
(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 and nine-month periods ended September 30, 2020 and 2019.


3. Derivatives

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. On occasion, the Company has attempted to manage this risk on a portion of its forecasted oil or natural gas production sales through the use of commodity derivative contracts. The Company has not designated any of its derivative contracts as hedges for accounting purposes. All derivative contracts are recorded at fair value with changes in derivative contract fair values recognized as gain or loss on derivative contracts in the condensed consolidated statements of operations. None of the Company’s commodity derivative contracts may 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 following table summarizes derivative activity for the three and nine-month periods ended September 30, 2020, and 2019 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(Gain) loss on commodity derivative contracts$5,299 $(1,756)$(7,168)$(1,547)
Cash received on settlements$619 $622 $11,197 $5,700 

Master Netting Agreements and the Right of Offset. The Company has 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 is limited to the net amounts due from its counterparties. As of September 30, 2020, the counterparties to the Company's open commodity derivative contracts consisted of three financial
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
institutions, all of which are also lenders under the Company's credit facility. 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 share in the collateral supporting the Company’s credit facility.

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 September 30, 2020 and December 31, 2019 (in thousands):


September 30, 2020
Gross Amounts
Gross Amounts Offset
Amounts Net of Offset
Financial Collateral
Net Amount
Liabilities
Derivative contracts - current
$3,915 $— $3,915 $— $3,915 
Total
$3,915 $— $3,915 $— $3,915 

December 31, 2019
Gross Amounts
Gross Amounts Offset
Amounts Net of Offset
Financial Collateral
Net Amount
Assets
Derivative contracts - current
$114 $— $114 $— $114 
Total
$114 $— $114 $— $114 

At September 30, 2020, the Company's open derivative contracts consisted of natural gas commodity derivative contracts under which we will receive a fixed price for the contract and pay a floating market price to the counterparty over a specified period for a contracted volume. These commodity derivative contracts consisted of the following:

Notional (MMBtu)Weighted Average Fixed Price per Unit
Natural Gas Price Swaps: October 2020 1,240,000 $2.14 
Natural Gas Price Swaps: November 2020 - December 20202,135,000 $2.54 
Natural Gas Price Swaps: January 2021 - December 202110,950,000 $2.61 

Because we have not designated any of our derivative contracts as hedges for accounting purposes, changes in the fair value of our derivative contracts are recognized as gains and losses in current period earnings. As a result, our current period earnings may be significantly affected by changes in the fair value of our commodity derivative contracts. Changes in fair value are principally measured based on a comparison of future prices to the contract price at the period-end.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Fair Value of Derivatives 

The following table presents the fair value of the Company’s derivative contracts as of September 30, 2020 and December 31, 2019, on a gross basis without regard to same counterparty netting (in thousands):

Type of ContractBalance Sheet ClassificationSeptember 30,
2020		December 31, 2019
Derivative assets
   Oil price swapsDerivative contracts-current$— $114 
Derivative liabilities
   Natural gas price swapsDerivative contracts-current(3,088)— 
   Natural gas price swapsDerivative contracts-noncurrent(827)— 
Total net derivative contracts$(3,915)$114 

See Note 2 for additional discussion of the fair value measurement of the Company’s derivative contracts.


4. Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands): 
September 30,
2020		December 31, 2019
Oil and natural gas properties
Proved
$1,479,664 $1,484,359 
Unproved
18,653 24,603 
Total oil and natural gas properties
1,498,317 1,508,962 
Less accumulated depreciation, depletion and impairment
(1,367,703)(1,129,622)
Net oil and natural gas properties
130,614 379,340 
Land200 4,400 
Electrical infrastructure121,818 126,482 
Other non-oil and natural gas equipment1,653 12,665 
Buildings and structures3,603 77,148 
Financing leases1,298 2,109 
Total128,572 222,804 
Less accumulated depreciation and amortization
(23,747)(34,201)
Other property, plant and equipment, net
104,825 188,603 
Total property, plant and equipment, net
$235,439 $567,943 

See Note 5 for discussion of impairment of property, plant and equipment, and Note 6 for discussion of the sale of the Company's headquarters in Oklahoma City, OK, which is included in buildings and structures in the table above as of December 31, 2019.



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(Unaudited)
5. Impairment

The Company assesses the need to impair its oil and gas properties during its quarterly full cost pool ceiling limitation calculation. The Company analyzes various property, plant and equipment for impairment when certain triggering events occur by comparing the carrying values of the assets to their estimated fair values. The full cost pool ceiling limitation and estimated fair values of other assets were determined in accordance with the policies discussed in Note 1.

In the three-month period ended September 30, 2020, we recorded a total impairment charge of $44.0 million, which related to the full cost ceiling limitation impairment charge.

In the nine-month period ended September 30, 2020, we recorded a total impairment charge of $253.8 million, which included a full cost ceiling limitation impairment charge of $215.8 million, and an asset impairment charge of $38.0 million.

The ceiling limitation impairment charges recorded in the nine-month period ended September 30, 2020 resulted from various factors, including a decrease in proved reserve value driven by a significant decline in the trailing twelve-month weighted average oil and natural gas prices in the first, second and third quarters of 2020. No impairment was recorded for the three and nine-month periods ended September 30, 2019.

Calculation of the full cost ceiling test is based on, among other factors, average prices for the trailing twelve-month period determined by reference to the first-day-of-the-month index prices ("SEC prices") as adjusted for price differentials and other contractual arrangements. The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at September 30, 2020 were $43.40 per barrel of oil and $1.97 per Mcf of natural gas, before price differential adjustments. The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at June 30, 2020 were $47.17 per barrel of oil and $2.07 per Mcf of natural gas, before price differential adjustments.

The asset impairment charge of $38.0 million recorded in the nine-month period ended September 30, 2020 resulted from writing down of the net carrying amount of the office headquarters building assets to their estimated fair value less estimated costs to sell the building. In May 2020, the Company entered into an agreement for the sale of its corporate headquarters building located in Oklahoma City, OK. The building sale closed on August 31, 2020.

In accordance with the applicable accounting guidance, FASB ASC 360-10-45-9, the Company reclassified its corporate headquarters building net carrying amount from Other property, plant and equipment, net, to Assets held for sale on the Condensed Consolidated Balance Sheets at June 30, 2020. The Company also reclassified the liabilities associated with the corporate headquarters building from Accounts payable and accrued expenses to Liabilities held for sale on the Condensed Consolidated Balance Sheets at June 30, 2020. Further, the Company recorded an impairment charge of $38.0 million in the three-month period ended June 30, 2020 to write down the net carrying amount of the office headquarters building assets to their estimated fair value less estimated costs to sell the building. No impairment charges were recorded for the corporate headquarters building assets in the three and nine-month periods ended September 30, 2019.

Prior to the sale of the corporate headquarters building, the carrying amount of the building was assessed for recoverability and impairment using undiscounted cash flow measures of the consolidated Company as prescribed under ASC 360-10-35, rather than fair value as prescribed under ASC 360-10-45-9.


6. Acquisitions and Disposal of Assets

On August 31, 2020, the Company closed on the previously announced sale of its corporate headquarters building located in Oklahoma City, OK, for net proceeds of approximately $35.4 million.

On September 10, 2020, the Company acquired all of the overriding royalty interests held by SandRidge Mississippian Royalty Trust II ("the Trust") for a net purchase price of $3.3 million, given our 37.6% ownership of the Trust. The Company accounted for this transaction as an asset acquisition and allocated the purchase price of the acquisition plus the transactions costs to oil and gas properties.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
7. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):
September 30,
2020		December 31, 2019
Accounts payable and other accrued expenses$21,398 $29,423 
Production payable9,661 22,530 
Payroll and benefits3,956 7,021 
Taxes payable6,928 4,988 
Drilling advances477 514 
Accrued interest29 461 
Total accounts payable and accrued expenses$42,449 $64,937 



8. Debt

Credit Facility.

As of September 30, 2020, the Company had a borrowing base of $75.0 million under its credit facility, with $12.0 million outstanding and $4.3 million in outstanding letters of credit, which reduces availability under the credit facility on a dollar-for-dollar basis. This leaves $58.7 million available to be drawn under the credit facility. The next borrowing base redetermination is expected to occur during the fourth quarter of 2020. The credit facility matures on April 1, 2021.

The interest rate on outstanding borrowings under the credit facility was determined by a pricing grid tied to borrowing base utilization of (a) LIBOR plus an applicable margin that varies from 2.00% to 3.00% per annum, or (b) the base rate plus an applicable margin that varies from 1.00% to 2.00% 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. During the three and nine-month periods ended September 30, 2020, the weighted average interest rate paid for borrowings outstanding under the credit facility was approximately 2.9% and 3.2%, respectively.

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 85% 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).

The credit facility includes events of default and certain customary affirmative and negative covenants. The Company must also continue to maintain certain financial covenants including (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. As of September 30, 2020, the Company was in compliance with all applicable covenants and had a consolidated total net leverage ratio of -0.01 and consolidated interest coverage ratio of 27.13.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
9. Commitments and Contingencies

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; and

•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

The lead plaintiffs in both In re SandRidge Energy, Inc. Securities Litigation and Lanier Trust assert claims on behalf of themselves and (i) in In re SandRidge Energy, Inc. Securities Litigation, a class of all purchasers of SandRidge common stock from February 24, 2011 and November 8, 2012 under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and (ii) in Lanier Trust, a putative class of purchasers of SandRidge Mississippian Trust I and SandRidge Mississippian Trust II common units between April 7, 2011 and November 8, 2012 under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, both based on allegations that defendants, which include certain former officers of the Company and the SandRidge Mississippian Trust I, made misrepresentations or omissions concerning various topics including the performance of wells operated by the Company in the Mississippian region.

Discovery in each of the Cases closed on June 19, 2019. Following a hearing on class certification in each of the Cases on September 6, 2019, the court granted class certification in In re SandRidge Energy, Inc. Securities Litigation on September 30, 2019. The motion for class certification in Lanier Trust remains pending. On April 2, 2020, the individual defendants and SandRidge Mississippian Trust I filed motions for summary judgment seeking the dismissal of all claims asserted against them in the Lanier Trust matter. On the same date, the individual defendants filed motions for summary judgment seeking the dismissal of all claims asserted against them In re SandRidge Energy, Inc. Securities Litigation. The motions remain pending.

In each of the Cases, lead plaintiffs seek to recover unspecified damages, interest, costs and expenses incurred in the litigation on behalf of themselves and class members. Although the claims against the Company in each Case have been discharged pursuant to the Plan, the Company remains a nominal defendant. The Company also owes indemnity obligations and/or the obligation to advance legal fees to certain former officers who remain as defendants in each action. The Company may also be contractually obligated to indemnify two former officers who are defendants and the SandRidge Mississippian Trust I against losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and attorney’s fees and expenses, which it is required to advance, arising out of the Cases. Such indemnification is not covered by insurance with respect to the Trust. As of October 2020, we have exhausted all remaining insurance coverage for the costs of indemnification and expect no further reimbursements.

In light of the status of the Cases, and the facts, circumstances and legal theories relating thereto, the Company is not able to determine the likelihood of an outcome in either case or provide an estimate of any reasonably possible loss or range of possible loss related thereto. However, considering the exhaustion of insurance coverage available to the Company, such losses, if incurred, could be material. The Company has not established any liabilities relating to the Cases and believes that the plaintiffs’ claims are without merit. The Company intends to continue to vigorously defend against the Cases in its capacity as a nominal defendant.

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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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
10. Income Taxes

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 September 30, 2020. As a result, the Company had no federal or state income tax expense and recorded an insignificant income tax benefit for the nine-month period ended September 30, 2020. The benefit is related to previously sequestered alternative minimum tax (AMT) refund amounts released to the Company during the current quarter. The Company has no remaining AMT credits to be refunded. The Company had no federal or state income tax expense or benefit for the nine-month period ended September 30, 2019.

Internal Revenue Code (“IRC”) Section 382 addresses company ownership changes and specifically limits the utilization of certain deductions and other tax attributes on an annual basis following an ownership change. As a result of the Chapter 11 reorganization and related transactions, the Company experienced an ownership change within the meaning of IRC Section 382 during 2016 that subjected certain of the Company’s tax attributes, including net operating losses ("NOLs"), to an IRC Section 382 limitation. This limitation has not resulted in cash taxes for any period subsequent to the ownership change. Since the 2016 ownership change, the Company has generated additional NOLs and other tax attributes that are not currently subject to an IRC Section 382 limitation. The Company's ability to use NOLs and other tax attributes to reduce taxable income and income taxes could be materially impacted by a future IRC 382 ownership change. Future transactions involving the Company's stock, including those outside of the Company's control, could cause an IRC 382 ownership change resulting in a limitation on tax attributes currently not limited and a more restrictive limitation on tax attributes currently subject to the previous IRC 382 limitation. On July 1, 2020, the Company entered into a Tax Benefits Preservation Plan (defined below) to protect shareholder value against a possible limitation on the Company's ability to use its NOLs. See Note 15 for more information.

The Company’s only taxing jurisdiction is the United States (federal and state). The Company’s tax years 2016 to present remain open for federal examination. Additionally, tax years 2005 through 2015 remain subject to examination for determining the amount of remaining federal net operating loss and other carryforwards. The number of years open for state tax audits varies, depending on the state, but are generally from three to five years.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act provides relief to corporate taxpayers by permitting a five year carryback of 2018-2020 NOLs, removing the 80% limitation on the carryback of those NOLs, increasing the Section 163(j) 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerates refunds for minimum tax credit carryforwards, along with a few other provisions. During the nine months ended September 30, 2020, no