falsedesktopSD2020-09-30000162828020015622{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☐\tAccelerated filer\t☑\nNon-accelerated filer\t☐\tSmaller reporting company\t☑\n\t\tEmerging growth company\t☐\n", "q10k_tbl_1": "PART I. FINANCIAL INFORMATION\t\t\nITEM 1.\tFinancial Statements (Unaudited):\t\n\tCondensed Consolidated Balance Sheets\t4\n\tCondensed Consolidated Statements of Operations\t5\n\tCondensed Consolidated Statement of Changes in Stockholders' Equity\t6\n\tCondensed Consolidated Statements of Cash Flows\t7\n\tNotes to Condensed Consolidated Financial Statements\t8\nITEM 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t23\nITEM 3.\tQuantitative and Qualitative Disclosures About Market Risk\t33\nITEM 4.\tControls and Procedures\t34\nPART II. OTHER INFORMATION\t\t\nITEM 1.\tLegal Proceedings\t35\nITEM 1A.\tRisk Factors\t36\nITEM 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t36\nITEM 3.\tDefaults upon Senior Securities\t36\nITEM 4.\tMine Safety Disclosures\t36\nITEM 5.\tOther Information\t36\nITEM 6.\tExhibits\t37\nSignature\t\t\n", "q10k_tbl_2": "\tSeptember 30 2020\tDecember 31 2019\nASSETS\t\t\nCurrent assets\t\t\nCash and cash equivalents\t11187\t4275\nRestricted cash - other\t1454\t1693\nAccounts receivable net\t16292\t28644\nDerivative contracts\t0\t114\nPrepaid expenses\t1105\t3342\nOther current assets\t80\t538\nTotal current assets\t30118\t38606\nOil and natural gas properties using full cost method of accounting\t\t\nProved\t1479664\t1484359\nUnproved\t18653\t24603\nLess: accumulated depreciation depletion and impairment\t(1367703)\t(1129622)\n\t130614\t379340\nOther property plant and equipment net\t104825\t188603\nOther assets\t564\t1140\nTotal assets\t266121\t607689\n", "q10k_tbl_3": "LIABILITIES AND STOCKHOLDERS' EQUITY\t\t\nCurrent liabilities\t\t\nAccounts payable and accrued expenses\t42449\t64937\nCurrent maturities of long-term debt\t12000\t0\nDerivative contracts\t3088\t0\nAsset retirement obligation\t22007\t22119\nOther current liabilities\t962\t1367\nTotal current liabilities\t80506\t88423\nLong-term debt\t0\t57500\nAsset retirement obligation\t53436\t52897\nOther long-term obligations\t4217\t6417\nTotal liabilities\t138159\t205237\nCommitments and contingencies (Note 9)\t\t\nStockholders' Equity\t\t\nCommon stock $0.001 par value; 250000 shares authorized; 35906 issued and outstanding at September 30 2020 and 35772 issued and outstanding at December 31 2019\t36\t36\nWarrants\t88520\t88520\nAdditional paid-in capital\t1061961\t1059253\nAccumulated deficit\t(1022555)\t(745357)\nTotal stockholders' equity\t127962\t402452\nTotal liabilities and stockholders' equity\t266121\t607689\n", "q10k_tbl_4": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t\t2020\t\t2019\t\t\t\t2020\t\t\t\t\t\t2019\t\t\nRevenues\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nOil natural gas and NGL\t\t27547\t\t58188\t\t\t\t84134\t\t\t\t\t\t206432\t\t\nOther\t\t129\t\t181\t\t\t\t526\t\t\t\t\t\t561\t\t\nTotal revenues\t\t27676\t\t58369\t\t\t\t84660\t\t\t\t\t\t206993\t\t\nExpenses\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nLease operating expenses\t\t8069\t\t23866\t\t\t\t32409\t\t\t\t\t\t71721\t\t\nProduction ad valorem and other taxes\t\t2333\t\t4346\t\t\t\t7386\t\t\t\t\t\t15303\t\t\nDepreciation and depletion - oil and natural gas\t\t7525\t\t38871\t\t\t\t45728\t\t\t\t\t\t114755\t\t\nDepreciation and amortization - other\t\t1698\t\t2981\t\t\t\t6071\t\t\t\t\t\t8910\t\t\nImpairment\t\t44043\t\t165507\t\t\t\t253797\t\t\t\t\t\t165507\t\t\nGeneral and administrative\t\t2493\t\t6238\t\t\t\t12290\t\t\t\t\t\t26261\t\t\nRestructuring expenses\t\t1199\t\t0\t\t\t\t1643\t\t\t\t\t\t0\t\t\nEmployee termination benefits\t\t3184\t\t0\t\t\t\t8431\t\t\t\t\t\t4465\t\t\n(Gain) loss on derivative contracts\t\t5299\t\t(1756)\t\t\t\t(7168)\t\t\t\t\t\t(1547)\t\t\nOther operating expense net\t\t(116)\t\t23\t\t\t\t269\t\t\t\t\t\t142\t\t\nTotal expenses\t\t75727\t\t240076\t\t\t\t360856\t\t\t\t\t\t405517\t\t\nLoss from operations\t\t(48051)\t\t(181707)\t\t\t\t(276196)\t\t\t\t\t\t(198524)\t\t\nOther income (expense)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nInterest expense net\t\t(569)\t\t(722)\t\t\t\t(1653)\t\t\t\t\t\t(2009)\t\t\nOther income (expense) net\t\t(129)\t\t827\t\t\t\t5\t\t\t\t\t\t370\t\t\nTotal other income (expense)\t\t(698)\t\t105\t\t\t\t(1648)\t\t\t\t\t\t(1639)\t\t\nLoss before income taxes\t\t(48749)\t\t(181602)\t\t\t\t(277844)\t\t\t\t\t\t(200163)\t\t\nIncome tax expense (benefit)\t\t0\t\t0\t\t\t\t(646)\t\t\t\t\t\t0\t\t\nNet loss\t\t(48749)\t\t(181602)\t\t\t\t(277198)\t\t\t\t\t\t(200163)\t\t\nLoss per share\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nBasic\t\t(1.36)\t\t(5.12)\t\t\t\t(7.78)\t\t\t\t\t\t(5.66)\t\t\nDiluted\t\t(1.36)\t\t(5.12)\t\t\t\t(7.78)\t\t\t\t\t\t(5.66)\t\t\nWeighted average number of common shares outstanding\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nBasic\t\t35783\t\t35491\t\t\t\t35649\t\t\t\t\t\t35390\t\t\nDiluted\t\t35783\t\t35491\t\t\t\t35649\t\t\t\t\t\t35390\t\t\n", "q10k_tbl_5": "\tCommon Stock\t\tWarrants\t\tAdditional Paid-In Capital\tAccumulated Deficit\tTotal\n\tShares\tAmount\tShares\tAmount\t\nNine Months Ended September 30 2020\t\t\t\t\t\t\t\nBalance at December 31 2019\t35772\t36\t6659\t88520\t1059253\t(745357)\t402452\nStock-based compensation\t0\t0\t0\t0\t185\t0\t185\nIssuance of common stock for general unsecured claims\t38\t0\t0\t0\t0\t0\t0\nIssuance of warrants for general unsecured claims\t0\t0\t47\t0\t0\t0\t0\nCash paid for tax withholdings on vested stock awards\t0\t0\t0\t0\t(1)\t0\t(1)\nNet loss\t0\t0\t0\t0\t0\t(12670)\t(12670)\nBalance at March 31 2020\t35810\t36\t6706\t88520\t1059437\t(758027)\t389966\nStock-based compensation\t0\t0\t0\t0\t583\t0\t583\nIssuance of stock awards net of cancellations\t55\t0\t0\t0\t0\t0\t0\nCash paid for tax withholdings on vested stock awards\t0\t0\t0\t0\t(1)\t0\t(1)\nNet loss\t0\t0\t0\t0\t\t(215779)\t(215779)\nBalance at June 30 2020\t35865\t36\t6706\t88520\t1060019\t(973806)\t174769\nStock-based compensation\t0\t0\t0\t0\t2004\t0\t2004\nIssuance of stock awards net of cancellations\t41\t0\t0\t0\t0\t0\t0\nCash paid for tax withholdings on vested stock awards\t0\t0\t0\t0\t(62)\t0\t(62)\nNet loss\t0\t0\t0\t0\t0\t(48749)\t(48749)\nBalance at September 30 2020\t35906\t36\t6706\t88520\t1061961\t(1022555)\t127962\n", "q10k_tbl_6": "\tCommon Stock\t\tWarrants\t\tAdditional Paid-In Capital\tAccumulated Deficit\tTotal\n\tShares\tAmount\tShares\tAmount\t\nNine Months Ended September 30 2019\t\t\t\t\t\t\t\nBalance at December 31 2018\t35687\t36\t6604\t88516\t1055164\t(295995)\t847721\nStock-based compensation\t0\t0\t0\t0\t1073\t0\t1073\nIssuance of warrants for general unsecured claims\t0\t0\t1\t2\t(2)\t0\t0\nCumulative effect of adoption of ASU 2016-02\t0\t0\t0\t0\t0\t(57)\t(57)\nNet loss\t0\t0\t0\t0\t0\t(5277)\t(5277)\nBalance at March 31 2019\t35687\t36\t6605\t88518\t1056235\t(301329)\t843460\nIssuance of stock awards net of cancellations\t75\t0\t0\t0\t0\t0\t0\nStock-based compensation\t0\t0\t0\t0\t2170\t0\t2170\nCash paid for whithholdings on vested stock awards\t0\t0\t0\t0\t(205)\t0\t(205)\nNet loss\t0\t0\t0\t0\t0\t(13284)\t(13284)\nBalance at June 30 2019\t35762\t36\t6605\t88518\t1058200\t(314613)\t832141\nCancellation of stock awards net of issuances\t(32)\t\t0\t0\t\t0\t0\nStock-based compensation\t0\t0\t0\t0\t862\t0\t862\nCash paid for tax withholdings on vested stock awards\t0\t0\t0\t0\t(157)\t0\t(157)\nNet loss\t0\t0\t0\t0\t0\t(181602)\t(181602)\nBalance at September 30 2019\t35730\t36\t6605\t88518\t1058905\t(496215)\t651244\n", "q10k_tbl_7": "\tNine Months Ended September 30\t\n\t2020\t2019\nCASH FLOWS FROM OPERATING ACTIVITIES\t\t\nNet loss\t(277198)\t(200163)\nAdjustments to reconcile net loss to net cash provided by operating activities\t\t\nProvision for doubtful accounts\t469\t(90)\nDepreciation depletion and amortization\t51799\t123665\nImpairment\t253797\t165507\nDebt issuance costs amortization\t477\t398\nWrite off of debt issuance costs\t0\t142\n(Gain) loss on derivative contracts\t(7168)\t(1547)\nCash received on settlement of derivative contracts\t11197\t5700\nLoss (gain) on sale of assets\t(100)\t0\nStock-based compensation\t2753\t3930\nOther\t114\t(119)\nChanges in operating assets and liabilities\t(8784)\t(1894)\nNet cash provided by operating activities\t27356\t95529\nCASH FLOWS FROM INVESTING ACTIVITIES\t\t\nCapital expenditures for property plant and equipment\t(8110)\t(170723)\nAcquisition of assets\t(3276)\t236\nProceeds from sale of assets\t37243\t1347\nNet cash provided by (used in) investing activities\t25857\t(169140)\nCASH FLOWS FROM FINANCING ACTIVITIES\t\t\nProceeds from borrowings\t39000\t170096\nRepayments of borrowings\t(84500)\t(108096)\nReduction of financing lease liability\t(977)\t(1034)\nDebt issuance costs\t0\t(910)\nCash paid for tax withholdings on vested stock awards\t(63)\t(362)\nNet cash provided by (used in) financing activities\t(46540)\t59694\nNET INCREASE (DECREASE) IN CASH CASH EQUIVALENTS and RESTRICTED CASH\t6673\t(13917)\nCASH CASH EQUIVALENTS and RESTRICTED CASH beginning of year\t5968\t19645\nCASH CASH EQUIVALENTS and RESTRICTED CASH end of period\t12641\t5728\nSupplemental Disclosure of Cash Flow Information\t\t\nCash paid for interest net of amounts capitalized\t(1271)\t(1446)\nCash received for income taxes\t616\t0\nSupplemental Disclosure of Noncash Investing and Financing Activities\t\t\nPurchase of PP&E in accounts payable\t683\t12790\nRight-of-use assets obtained in exchange for financing lease obligations\t67\t3237\nCarrying value of properties exchanged\t3890\t5384\n", "q10k_tbl_8": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\n(Gain) loss on commodity derivative contracts\t5299\t(1756)\t(7168)\t(1547)\t\t\t\t\t\t\nCash received on settlements\t619\t622\t11197\t5700\t\t\t\t\t\t\n", "q10k_tbl_9": "\tGross Amounts\tGross Amounts Offset\tAmounts Net of Offset\tFinancial Collateral\tNet Amount\nLiabilities\t\t\t\t\t\nDerivative contracts - current\t3915\t0\t3915\t0\t3915\nTotal\t3915\t0\t3915\t0\t3915\n", "q10k_tbl_10": "\tNotional (MMBtu)\tWeighted Average Fixed Price per Unit\nNatural Gas Price Swaps: October 2020\t1240000\t2.14\nNatural Gas Price Swaps: November 2020 - December 2020\t2135000\t2.54\nNatural Gas Price Swaps: January 2021 - December 2021\t10950000\t2.61\n", "q10k_tbl_11": "Type of Contract\tBalance Sheet Classification\tSeptember 30 2020\tDecember 31 2019\nDerivative assets\t\t\t\nOil price swaps\tDerivative contracts-current\t0\t114\nDerivative liabilities\t\t\t\nNatural gas price swaps\tDerivative contracts-current\t(3088)\t0\nNatural gas price swaps\tDerivative contracts-noncurrent\t(827)\t0\nTotal net derivative contracts\t\t(3915)\t114\n", "q10k_tbl_12": "\tSeptember 30 2020\tDecember 31 2019\nOil and natural gas properties\t\t\nProved\t1479664\t1484359\nUnproved\t18653\t24603\nTotal oil and natural gas properties\t1498317\t1508962\nLess accumulated depreciation depletion and impairment\t(1367703)\t(1129622)\nNet oil and natural gas properties\t130614\t379340\nLand\t200\t4400\nElectrical infrastructure\t121818\t126482\nOther non-oil and natural gas equipment\t1653\t12665\nBuildings and structures\t3603\t77148\nFinancing leases\t1298\t2109\nTotal\t128572\t222804\nLess accumulated depreciation and amortization\t(23747)\t(34201)\nOther property plant and equipment net\t104825\t188603\nTotal property plant and equipment net\t235439\t567943\n", "q10k_tbl_13": "\tSeptember 30 2020\tDecember 31 2019\nAccounts payable and other accrued expenses\t21398\t29423\nProduction payable\t9661\t22530\nPayroll and benefits\t3956\t7021\nTaxes payable\t6928\t4988\nDrilling advances\t477\t514\nAccrued interest\t29\t461\nTotal accounts payable and accrued expenses\t42449\t64937\n", "q10k_tbl_14": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t(In thousands)\t\t\t\t\t\t\nOil\t17071\t44072\t57279\t142846\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nNGL\t4983\t6362\t12508\t28886\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nNatural gas\t5493\t7754\t14347\t34700\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nOther\t129\t181\t526\t561\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nTotal revenues\t27676\t58369\t84660\t206993\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n", "q10k_tbl_15": "\tCash\tShare-Based Compensation (1)\tNumber of Shares\tTotal Employee Termination Benefits\nThree Months Ended September 30 2020\t\t\t\t\nExecutive Employee Termination Benefits\t1005\t1784\t159\t2789\nOther Employee Termination Benefits\t395\t0\t0\t395\n\t1400\t1784\t159\t3184\nThree Months Ended September 30 2019\t\t\t\t\nExecutive Employee Termination Benefits\t0\t0\t0\t0\nOther Employee Termination Benefits\t0\t0\t0\t0\n\t0\t0\t0\t0\nNine Months Ended September 30 2020\t\t\t\t\nExecutive Employee Termination Benefits\t1009\t1784\t159\t2793\nOther Employee Termination Benefits\t5598\t40\t4\t5638\n\t6607\t1824\t163\t8431\nNine Months Ended September 30 2019\t\t\t\t\nExecutive Employee Termination Benefits\t879\t478\t37\t1357\nOther Employee Termination Benefits\t2608\t500\t44\t3108\n\t3487\t978\t81\t4465\n", "q10k_tbl_16": "\tNet (Loss) Earnings\tWeighted Average Shares\t(Loss) Earnings Per Share\n\t(In thousands except per share amounts)\t\t\nThree Months Ended September 30 2020\t\t\t\nBasic loss per share\t(48749)\t35783\t(1.36)\nEffect of dilutive securities\t\t\t\nRestricted stock awards(1)\t0\t0\t\nPerformance share units(1)\t0\t0\t\nWarrants(1)\t0\t0\t\nStock options(1)\t0\t0\t\nDiluted loss per share\t(48749)\t35783\t(1.36)\nThree Months Ended September 30 2019\t\t\t\nBasic loss per share\t(181602)\t35491\t(5.12)\nEffect of dilutive securities\t\t\t\nRestricted stock awards(1)\t0\t0\t\nPerformance share units(1)\t0\t0\t\nWarrants(1)\t0\t0\t\nStock options(1)\t0\t0\t\nDiluted earnings per share\t(181602)\t35491\t(5.12)\nNine Months Ended September 30 2020\t\t\t\nBasic loss per share\t(277198)\t35649\t(7.78)\nEffect of dilutive securities\t\t\t\nRestricted stock awards(1)\t0\t0\t\nPerformance share units(1)\t0\t0\t\nWarrants(1)\t0\t0\t\nStock options(1)\t0\t0\t\nDiluted loss per share\t(277198)\t35649\t(7.78)\nNine Months Ended September 30 2019\t\t\t\nBasic loss per share\t(200163)\t35390\t(5.66)\nEffect of dilutive securities\t\t\t\nRestricted stock awards(1)\t0\t0\t\nPerformance share units(1)\t0\t0\t\nWarrants(1)\t0\t0\t\nDiluted loss per share\t(200163)\t35390\t(5.66)\n", "q10k_tbl_17": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNYMEX Oil (per Bbl)\t40.92\t56.44\t38.22\t57.10\nNYMEX Natural gas (per MMBtu)\t2.12\t2.33\t1.92\t2.56\n", "q10k_tbl_18": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nOil\t17071\t44072\t57279\t142846\nNGL\t4983\t6362\t12508\t28886\nNatural gas\t5493\t7754\t14347\t34700\nOther\t129\t181\t526\t561\nTotal revenues\t27676\t58369\t84660\t206993\n", "q10k_tbl_19": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nProduction data\t\t\t\t\nOil (MBbls)\t454\t835\t1656\t2668\nNGL (MBbls)\t646\t629\t2096\t2335\nNatural gas (MMcf)\t5686\t8318\t18078\t25414\nTotal volumes (MBoe)\t2048\t2850\t6765\t9239\nAverage daily total volumes (MBoe/d)\t22.3\t31.0\t24.7\t33.8\nAverage prices-as reported(1)\t\t\t\t\nOil (per Bbl)\t37.60\t52.78\t34.59\t53.54\nNGL (per Bbl)\t7.71\t10.11\t5.97\t12.37\nNatural gas (per Mcf)\t0.97\t0.93\t0.79\t1.37\nTotal (per Boe)\t13.45\t20.42\t12.44\t22.34\nAverage prices-including impact of derivative contract settlements\t\t\t\t\nOil (per Bbl)\t37.60\t53.53\t40.59\t53.77\nNGL (per Bbl)\t7.71\t10.11\t5.97\t12.37\nNatural gas (per Mcf)\t1.07\t0.93\t0.86\t1.57\nTotal (per Boe)\t13.76\t20.64\t14.09\t22.96\n", "q10k_tbl_20": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n\t2020\t\t2019\t\t2020\t\t2019\t\n\tProduction (MBoe)\t% of Total\tProduction (MBoe)\t% of Total\tProduction (MBoe)\t% of Total\tProduction (MBoe)\t% of Total\nMississippian Lime\t1719\t83.9%\t2213\t77.7%\t5566\t82.3%\t7331\t79.3%\nNW STACK\t126\t6.2%\t274\t9.6%\t447\t6.6%\t820\t8.9%\nNorth Park Basin\t203\t9.9%\t363\t12.7%\t752\t11.1%\t1088\t11.8%\nTotal\t2048\t100.0%\t2850\t100.0%\t6765\t100.0%\t9239\t100.0%\n", "q10k_tbl_21": "\tThree Months Ended September 30 2020\tNine Months Ended September 30 2020\n2019 oil natural gas and NGL revenues\t58188\t206432\nChange due to production volumes\t(10796)\t(30768)\nChange due to average prices\t(19845)\t(91530)\n2020 oil natural gas and NGL revenues\t27547\t84134\n", "q10k_tbl_22": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nLease operating expenses\t8069\t23866\t32409\t71721\nProduction ad valorem and other taxes\t2333\t4346\t7386\t15303\nDepreciation and depletion-oil and natural gas\t7525\t38871\t45728\t114755\nDepreciation and amortization-other\t1698\t2981\t6071\t8910\nTotal operating expenses\t19625\t70064\t91594\t210689\nLease operating expenses ($/Boe)\t3.94\t8.37\t4.79\t7.76\nProduction ad valorem and other taxes ($/Boe)\t1.14\t1.52\t1.09\t1.66\nDepreciation and depletion-oil and natural gas ($/Boe)\t3.67\t13.64\t6.76\t12.42\nProduction ad valorem and other taxes (% of oil natural gas and NGL revenue)\t8.5%\t7.5%\t8.8%\t7.4%\n", "q10k_tbl_23": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nGeneral and administrative\t2493\t6238\t12290\t26261\nRestructuring expenses\t1199\t0\t1643\t0\nEmployee termination benefits\t3184\t0\t8431\t4465\n(Gain) loss on derivative contracts\t5299\t(1756)\t(7168)\t(1547)\nOther operating expense\t(116)\t23\t269\t142\nTotal other operating expenses\t12059\t4505\t15465\t29321\n", "q10k_tbl_24": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nGain (loss) on commodity derivative contracts\t(5299)\t1756\t7168\t1547\nCash received on settlements\t619\t622\t11197\t5700\n", "q10k_tbl_25": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nOther income (expense)\t\t\t\t\nInterest expense net\t(569)\t(722)\t(1653)\t(2009)\nOther income (expense) net\t(129)\t827\t5\t370\nTotal other expense\t(698)\t105\t(1648)\t(1639)\n", "q10k_tbl_26": "\tNine Months Ended September 30\t\n\t2020\t2019\nCash flows provided by operating activities\t27356\t95529\nCash flows provided by (used in) investing activities\t25857\t(169140)\nCash flows provided by (used in) financing activities\t(46540)\t59694\nNet increase (decrease) in cash and cash equivalents\t6673\t(13917)\n", "q10k_tbl_27": "\tNine Months Ended September 30\t\n\t2020\t2019\nCapital Expenditures\t\t\nDrilling completion and capital workovers\t3306\t145715\nLeasehold and geophysical\t896\t3319\nOther - corporate\t0\t245\nCapital expenditures excluding acquisitions (on an accrual basis)\t4202\t149279\nAcquisitions\t3276\t(236)\nCapital expenditures including acquisitions\t7478\t149043\nChange in capital accruals(1)\t3908\t21444\nTotal cash paid for capital expenditures\t11386\t170487\n", "q10k_tbl_28": "\tNotional (MMBtu)\tWeighted Average Fixed Price per Unit\nNatural Gas Price Swaps: October 2020\t1240000\t2.14\nNatural Gas Price Swaps: November 2020 - December 2020\t2135000\t2.54\nNatural Gas Price Swaps: January 2021 - December 2021\t10950000\t2.61\n", "q10k_tbl_29": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nGain (loss) on commodity derivative contracts\t(5299)\t1756\t7168\t1547\nCash received on settlements\t619\t622\t11197\t5700\n", "q10k_tbl_30": "Period\tTotal Number of Shares Purchased(1)\tAverage Price Paid per Share\tTotal Number of Shares Purchased as Part of Publicly Announced Program\tMaximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in Millions)\nJuly 1 2020 - July 31 2020\t49984\t1.25\tN/A\tN/A\nAugust 1 2020 - August 31 2020\t0\t0\tN/A\tN/A\nSeptember 1 2020 - September 30 2020\t0\t0\tN/A\tN/A\nTotal\t49984\t\t0\t\n", "q10k_tbl_31": "\t\tIncorporated by Reference\t\t\t\t\nExhibit No.\tExhibit Description\tForm\tSEC File No.\tExhibit\tFiling Date\tFiled Herewith\n2.1\tAmended Joint Chapter 11 Plan of Reorganization of SandRidge Energy Inc. et al. dated September 19 2016\t8-A\t001-33784\t2.1\t10/4/2016\t\n3.1\tAmended and Restated Certificate of Incorporation of SandRidge Energy Inc.\t8-A\t001-33784\t3.1\t10/4/2016\t\n3.2\tAmended and Restated Bylaws of SandRidge Energy Inc.\t8-A\t001-33784\t3.2\t10/4/2016\t\n4.1\tCertificate of Designation of Series A Junior Participating Preferred Stock of Sandridge Energy Inc. and American Stock Transfer & Trust Company LLC\t8-A\t001-33784\t3.1\t7/2/2020\t\n10.4\tReal Estate Purchase and Sale Agreement dated May 15 2020 by and between Robinson Park LLC and SandRidge Realty LLC\t8-K\t001-33784\t10.1\t5/19/2020\t\n10.5\tTax Benefits Preservation Plan dated July 1 2020 between SandRidge Energy Inc. and American Stock Transfer & Trust Company LLC\t8-K\t001-33784\t4.1\t7/2/2020\t\n31.1\tSection 302 Certification-Chief Executive Officer\t\t\t\t\t*\n31.2\tSection 302 Certification-Chief Financial Officer\t\t\t\t\t*\n32.1\tSection 906 Certifications of Chief Executive Officer and Chief Financial Officer\t\t\t\t\t*\n101.INS\tXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.\t\t\t\t\t*\n101.SCH\tXBRL Taxonomy Extension Schema Document\t\t\t\t\t*\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document\t\t\t\t\t*\n101.DEF\tXBRL Taxonomy Extension Definition Document\t\t\t\t\t*\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document\t\t\t\t\t*\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document\t\t\t\t\t*\n104\tCover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\t\t\t\t\t*\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_4", "cf": "q10k_tbl_7"}None
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)
Delaware
20-8084793
(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 class
Trading Symbol
Name of each exchange on which registered
Common Stock, $.001 par value
SD
New 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. Yesþ 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.
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.
Oil and natural gas properties, using full cost method of accounting
Proved
1,479,664
1,484,359
Unproved
18,653
24,603
Less: accumulated depreciation, depletion and impairment
(1,367,703)
(1,129,622)
130,614
379,340
Other property, plant and equipment, net
104,825
188,603
Other assets
564
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 debt
12,000
—
Derivative contracts
3,088
—
Asset retirement obligation
22,007
22,119
Other current liabilities
962
1,367
Total current liabilities
80,506
88,423
Long-term debt
—
57,500
Asset retirement obligation
53,436
52,897
Other long-term obligations
4,217
6,417
Total liabilities
138,159
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
Warrants
88,520
88,520
Additional paid-in capital
1,061,961
1,059,253
Accumulated deficit
(1,022,555)
(745,357)
Total stockholders’ equity
127,962
402,452
Total liabilities and stockholders’ equity
$
266,121
$
607,689
The accompanying notes are an integral part of these condensed consolidated financial statements.
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
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 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 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.
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,
2020
2019
2020
2019
(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
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 2020
2,135,000
$
2.54
Natural Gas Price Swaps: January 2021 - December 2021
10,950,000
$
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.
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 Contract
Balance Sheet Classification
September 30, 2020
December 31, 2019
Derivative assets
Oil price swaps
Derivative contracts-current
$
—
$
114
Derivative liabilities
Natural gas price swaps
Derivative contracts-current
(3,088)
—
Natural gas price swaps
Derivative 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
Land
200
4,400
Electrical infrastructure
121,818
126,482
Other non-oil and natural gas equipment
1,653
12,665
Buildings and structures
3,603
77,148
Financing leases
1,298
2,109
Total
128,572
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.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(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.
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 payable
9,661
22,530
Payroll and benefits
3,956
7,021
Taxes payable
6,928
4,988
Drilling advances
477
514
Accrued interest
29
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.
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.
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 taxabl