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 2020-03-31 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-Q 2013-12-31 Filed 2015-01-08
10-K 2013-12-31 Filed 2014-02-28
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 2020-07-30 Officers
8-K 2020-07-01 Enter Agreement, Shareholder Rights, Amend Bylaw, Regulation FD, Exhibits
8-K 2020-07-01 Officers, Exhibits
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 2020-03-31

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-20200331
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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 March 31, 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 May 12, 2020, was 35,779,494.


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 including the ability to continue as a going concern, 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 March 31, 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) 
March 31,
2020		December 31, 2019
ASSETS
Current assets
Cash and cash equivalents$6,287  $4,275  
Restricted cash - other1,454  1,693  
Accounts receivable, net21,039  28,644  
Derivative contracts6,253  114  
Prepaid expenses3,096  3,342  
Other current assets527  538  
Total current assets38,656  38,606  
Oil and natural gas properties, using full cost method of accounting
Proved1,487,721  1,484,359  
Unproved24,298  24,603  
Less: accumulated depreciation, depletion and impairment(1,160,486) (1,129,622) 
351,533  379,340  
Other property, plant and equipment, net181,851  188,603  
Other assets953  1,140  
Total assets$572,993  $607,689  

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses$55,033  $64,937  
Asset retirement obligation21,728  22,119  
Other current liabilities1,252  1,367  
Total current liabilities78,013  88,423  
Long-term debt46,000  57,500  
Asset retirement obligation52,115  52,897  
Other long-term obligations6,899  6,417  
Total liabilities183,027  205,237  
Commitments and contingencies (Note 8)
Stockholders’ Equity
Common stock, $0.001 par value; 250,000 shares authorized; 35,810 issued and outstanding at March 31, 2020 and 35,772 issued and outstanding at December 31, 2019
36  36  
Warrants88,520  88,520  
Additional paid-in capital1,059,437  1,059,253  
Accumulated deficit(758,027) (745,357) 
Total stockholders’ equity389,966  402,452  
Total liabilities and stockholders’ equity$572,993  $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 March 31,
20202019
Revenues
Oil, natural gas and NGL$40,139  $73,048  
Other190  188  
Total revenues40,329  73,236  
Expenses
Lease operating expenses15,642  22,779  
Production, ad valorem, and other taxes3,199  5,080  
Depreciation and depletion — oil and natural gas24,855  36,465  
Depreciation and amortization — other2,634  2,943  
Impairment7,970  —  
General and administrative5,483  9,939  
Employee termination benefits3,254  —  
(Gain) loss on derivative contracts(10,226) 209  
Other operating expense277  82  
Total expenses53,088  77,497  
Loss from operations(12,759) (4,261) 
Other (expense) income
Interest expense, net(637) (585) 
Other income (expense), net76  (431) 
Total other expense(561) (1,016) 
Loss before income taxes(13,320) (5,277) 
Income tax benefit(650) —  
Net loss$(12,670) $(5,277) 
Loss per share
Basic$(0.36) $(0.15) 
Diluted$(0.36) $(0.15) 
Weighted average number of common shares outstanding
Basic35,551  35,322  
Diluted35,551  35,322  

The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Table of Contents
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
Three Months Ended March 31, 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, 2020
35,810  $36  6,706  $88,520  $1,059,437  $(758,027) $389,966  

Common Stock
Warrants
Additional Paid-In Capital
Accumulated Deficit
Total
Shares
Amount
Shares
Amount
Three Months Ended March 31, 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, 2019
35,687  $36  6,605  $88,518  $1,056,235  $(301,329) $843,460  

The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Table of Contents
SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended March 31,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(12,670) $(5,277) 
Adjustments to reconcile net loss to net cash provided by operating activities
Provision for doubtful accounts283  72  
Depreciation, depletion, and amortization27,489  39,408  
Impairment7,970  —  
Debt issuance costs amortization159  117  
(Gain) loss on derivative contracts(10,226) 209  
Cash received on settlement of derivative contracts4,087  5,078  
Stock-based compensation169  996  
Other156  (35) 
Changes in operating assets and liabilities686  (8,998) 
Net cash provided by operating activities18,103  31,570  
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for property, plant and equipment(5,452) (62,254) 
Acquisition of assets—  326  
Proceeds from sale of assets989  341  
Net cash used in investing activities(4,463) (61,587) 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings21,000  39,596  
Repayments of borrowings(32,500) (19,596) 
Reduction of financing lease liability(366) (293) 
Cash paid for tax withholdings on vested stock awards(1) —  
Net cash (used in) provided by financing activities(11,867) 19,707  
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS and RESTRICTED CASH1,773  (10,310) 
CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of year5,968  19,645  
CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of period$7,741  $9,335  
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized$(540) $(408) 
Cash received for income taxes$616  $—  
Supplemental Disclosure of Noncash Investing and Financing Activities
Purchase of PP&E in accounts payable$1,066  $43,425  
Right-of-use assets obtained in exchange for financing lease obligations$67  $1,992  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

Nature of Business. SandRidge Energy, Inc. is an oil and natural gas exploration and production company headquartered in Oklahoma City, Oklahoma with a 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 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 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.

As of March 31, 2020, the Company had $46.0 million outstanding under its credit facility and $2.9 million in outstanding letters of credit, which reduces availability under the restated credit facility on a dollar-for-dollar basis. The Company's credit facility had a total capacity of $600.0 million with a borrowing base of $225.0 million, which was subsequently reduced to $75.0 million during the April 2020 redetermination. The credit facility matures on April 1, 2021. The Company projects that it will not have sufficient cash on hand or available liquidity to repay such debt on the maturity date. These conditions and events raise substantial doubt about the Company's ability to continue as a going concern. Management’s plans to repay the outstanding credit facility borrowings at or before maturity include using the proceeds from the planned sale of the Company's headquarters. The Company has concluded that management’s plans are probable of being achieved to alleviate substantial doubt about the Company’s ability to continue as a going concern.

Recent Accounting Pronouncements. 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Recent Accounting Pronouncements Not Yet Adopted. 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 March 31, 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. The fair value of our oil and natural gas properties,is calculated using Level 3 inputs, which are discussed in Note 5. No other adjustments to fair value were required for other property, plant and equipment for the three-month periods ended March 31, 2020 or March 31, 2019.

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 assets classified in Level 2 of the hierarchy as of March 31, 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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(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):

March 31, 2020

Fair Value Measurements
Netting(1)
Assets/Liabilities at Fair Value
Level 1
Level 2
Level 3
Assets
Commodity derivative contracts
$—  $6,253  $—  —  $6,253  
$—  $6,253  $—  $—  $6,253  

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-month periods ended March 31, 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-month periods ended March 31, 2020, and 2019 (in thousands):
Three Months Ended March 31,
20202019
(Gain) loss on commodity derivative contracts$(10,226) $209  
Cash received on settlements$(4,087) $(5,078) 

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
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
March 31, 2020, the counterparties to the Company's open commodity derivative contracts consisted of two financial institutions, both 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 March 31, 2020 and December 31, 2019 (in thousands):

March 31, 2020

Gross Amounts
Gross Amounts Offset
Amounts Net of Offset
Financial Collateral
Net Amount
Assets
Derivative contracts - current
$6,253  $—  $6,253  $—  $6,253  
Total
$6,253  $—  $6,253  $—  $6,253  

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 March 31, 2020, the Company's open derivative contracts consisted of the following:

Oil Price Swaps

Notional (MBbls)Weighted Average Fixed Price
April 2020 - June 2020182  $60.00  

Fair Value of Derivatives 

The following table presents the fair value of the Company’s derivative contracts as of March 31, 2020 and December 31, 2019, on a gross basis without regard to same-counterparty netting (in thousands):
Type of Contract
Balance Sheet Classification
March 31,
2020		December 31, 2019
Derivative assets
Oil price swaps
Derivative contracts-current$6,253  $114  
Total net derivative contracts$6,253  $114  

See Note 2 for additional discussion of the fair value measurement of the Company’s derivative contracts.
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(Unaudited)
4. Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands): 
March 31,
2020		December 31, 2019
Oil and natural gas properties
Proved
$1,487,721  $1,484,359  
Unproved
24,298  24,603  
Total oil and natural gas properties
1,512,019  1,508,962  
Less accumulated depreciation, depletion and impairment
(1,160,486) (1,129,622) 
Net oil and natural gas properties
351,533  379,340  
Land4,400  4,400  
Electrical infrastructure121,818  126,482  
Other non-oil and natural gas equipment11,553  12,665  
Buildings and structures77,148  77,148  
Financing leases1,847  2,109  
Total216,766  222,804  
Less accumulated depreciation and amortization
(34,915) (34,201) 
Other property, plant and equipment, net
181,851  188,603  
Total property, plant and equipment, net
$533,384  $567,943  

See Note 5 for discussion of impairment of other property, plant and equipment, and Note 14 for discussion of subsequent events involving the Company's headquarters in Oklahoma City, OK, which is included in buildings and structures in the table above.

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.

We recorded a full cost ceiling limitation impairment of $8.0 million for the three-month period ended March 31, 2020, which resulted from various factors including a decrease in the trailing twelve-month weighted average natural gas price in the first quarter of 2020. No impairment was recorded for the three-month period ended March 31, 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 March 31, 2020 were $55.77 per barrel of oil and $2.30 per Mcf of natural gas, before price differential adjustments.


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6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):
March 31,
2020		December 31, 2019
Accounts payable and other accrued expenses
$21,313  $29,423  
Production payable19,415  22,530  
Payroll and benefits8,288  7,021  
Taxes payable5,167  4,988  
Drilling advances514  514  
Accrued interest336  461  
Total accounts payable and accrued expenses
$55,033  $64,937  

7. Debt

Credit Facility.

As of March 31, 2020, the Company had $46.0 million outstanding under its credit facility and $2.9 million in outstanding letters of credit, which reduces availability under the restated credit facility on a dollar-for-dollar basis. The Company's credit facility had a total capacity of $600.0 million with a borrowing base of $225.0 million, which was subsequently reduced to $75.0 million during the April 2020 redetermination. 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-month period ended March 31, 2020, the weighted average interest rate paid for borrowings outstanding under the credit facility was approximately 3.7%.

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 March 31, 2020, the Company was in compliance with all applicable covenants and had a consolidated total net leverage ratio of 0.34 and consolidated interest coverage ratio of 29.61.
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8. 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. 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 in each of the Cases to the extent necessary to allow recovery from applicable insurance policies or proceeds. In addition, the Company 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 the SandRidge Mississippian Trust I against losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and attorney’s fees and expenses, arising out of the Cases, and such indemnification is not covered by insurance.

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 erosion 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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(Unaudited)
9. 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 March 31, 2020. As a result, the Company had no federal or state income tax expense and recorded an insignificant income tax benefit for the three-month period ended March 31, 2020. The benefit is related to previously sequestered prior year 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 three-month periods ended March 31, 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.

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. Enactment of the CARES Act did not have a material impact on the Company's tax provision during the three-months ended March 31, 2020.
        
10. Equity

Common Stock, Performance Share Units, and Stock Options. At March 31, 2020, the Company had approximately 35.8 million shares of common stock, par value $0.001 per share, issued and outstanding, including 0.2 million shares of unvested restricted stock awards, 0.2 million unvested stock options, 0.1 million unvested performance share units, and 250.0 million shares of common stock authorized.

Warrants. The Company has issued approximately 4.7 million Series A warrants and 2.0 million Series B warrants that are exercisable until October 4, 2022 for one share of common stock per warrant at initial exercise prices of $41.34 and $42.03 per share, respectively, subject to adjustments pursuant to the terms of the warrants, to certain holders of general unsecured claims as defined in the Plan. The warrants contain customary anti-dilution adjustments in the event of any stock split, reverse stock split, reclassification, stock dividend or other distributions. 


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11. Revenues

The following table disaggregates the Company’s revenue by source for the three-month periods ended March 31, 2020 and 2019:
Three Months Ended March 31,
20202019
(In thousands)
Oil
$28,654  $43,159  
NGL
5,934  13,111  
Natural gas
5,551  16,778  
Other
190  188  
Total revenues
$40,329  $73,236  

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 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, ad valorem, and other 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, 2020, and December 31, 2019, the Company had revenues receivable of $14.0 million and $22.3 million, respectively, and did not record any bad debt expense on revenues receivable during the three-month periods ended March 31, 2020.

12.