SANDRIDGE ENERGY INC - FORM 8-K/A - EX-99.2 - PRO FORMA FINANCIAL INFORMATION.

Attached files

file	filename
8-K/A - FORM 8-K AMENDMENT NO. 1 - SANDRIDGE ENERGY INC	d8ka.htm
EX-99.1 - FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. - SANDRIDGE ENERGY INC	dex991.htm
EX-23.1 - CONSENT OF PRICEWATERHOUSECOOPERS LLP. - SANDRIDGE ENERGY INC	dex231.htm

Exhibit 99.2

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On December 21, 2009, SandRidge Energy, Inc. (“SandRidge” or “the Company”) purchased oil and natural gas properties located in the Permian Basin (“Acquired Properties”) from Forest Oil Corporation and one of its subsidiaries for $800.0 million, subject to certain purchase price and post-closing adjustments. The assets consist primarily of six operated areas in the Central Basin Platform and greater Permian Basin of west Texas and eastern New Mexico. The acquisition was financed with proceeds from the issuance of 8.75% Senior Notes due 2020, the placement of 2,000,000 new shares of 6.0% convertible perpetual preferred stock, and the public offering of 25,600,000 shares of the Company’s common stock (collectively referred to as the “financing transactions”).

The accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2009 was based on the unaudited balance sheet of the Company as of September 30, 2009 and includes pro forma adjustments to give effect to the acquisition and the financing transactions as if they had occurred on September 30, 2009.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2008 and the nine months ended September 30, 2009 were based on the audited statement of operations of the Company for the year ended December 31, 2008 and the unaudited statement of operations of the Company for the nine months ended September 30, 2009, respectively, and include pro forma adjustments to give effect to the acquisition and the financing transactions as if they had occurred on January 1, 2008.

These unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and are not necessarily indicative of the results that actually would have occurred had the transaction been in effect on the dates or for the periods indicated, or of results that may occur in the future. These unaudited pro forma condensed combined financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, the Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 and the audited Statements of Revenues and Direct Operating Expenses for the Acquired Properties filed as exhibits to this report.

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2009


	Historical			Pro Forma Adjustments			Pro Forma
	(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	14,642		$	54,802	(a)	$	69,444
Accounts receivable, net:
Trade		80,328			—			80,328
Related parties		257			—			257
Derivative contracts		129,453			—			129,453
Inventories		3,405			—			3,405
Other current assets		32,358			—			32,358

Total current assets		260,443			54,802			315,245

Natural gas and crude oil properties, using full cost method of accounting
Proved		5,064,490			754,185	(b)		5,818,675
Unproved		229,687			52,246	(b)		281,933
Less: accumulated depreciation, depletion and impairment		(3,792,437	)		—			(3,792,437	)

		1,501,740			806,431			2,308,171


Other property, plant and equipment, net		462,487			—			462,487
Investments		9,158			—			9,158
Restricted deposits		32,872			—			32,872
Other assets		44,268			9,500	(c)		53,768

Total assets	$	2,310,968		$	870,733		$	3,181,701


LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	13,925		$	—		$	13,925
Accounts payable and accrued expenses:
Trade		230,506			—			230,506
Related parties		155			—			155
Derivative contracts		7,223			—			7,223
Asset retirement obligation		2,077			—	(b)		2,077
Billings in excess of costs incurred		5,141			—			5,141

Total current liabilities		259,027			—			259,027

Long-term debt		2,126,286			442,571	(c)		2,568,857
Other long-term obligations		6,967			—			6,967
Derivative contracts		21,640			—			21,640
Asset retirement obligation		88,033			11,357	(b)		99,390

Total liabilities		2,501,953			453,928			2,955,881


Commitments and contingencies

Equity:
SandRidge Energy, Inc. stockholders’ equity:
Preferred stock, $0.001 par value, 50,000 shares authorized:
8.5% Convertible perpetual preferred stock; 2,650 issued and outstanding; aggregate liquidation preference of $265,000		3			—			3
6.0% Convertible perpetual preferred stock; no shares issued and outstanding (historical); 2,000 issued and outstanding (pro forma)		—			2	(d)		2
Common stock, $0.001 par value; 400,000 shares authorized; 184,986 issued and 183,524 outstanding (historical); 210,586 issued and 209,124 outstanding (pro forma)		178			26	(e)		204
Additional paid-in capital		2,537,690			417,032	(d)(e)		2,954,722
Treasury stock, at cost		(20,427	)		—			(20,427	)
Accumulated deficit		(2,708,459	)		(255	) (f)		(2,708,714	)

Total SandRidge Energy, Inc. stockholders’ (deficit) equity		(191,015	)		416,805			225,790
Noncontrolling interest		30			—			30

Total (deficit) equity		(190,985	)		416,805			225,820

Total liabilities and equity	$	2,310,968		$	870,733		$	3,181,701

The accompanying notes are an integral part of these financial statements.

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2008


	Historical			Acquired Properties Historical (g)			Pro Forma Adjustments			Pro Forma
	(In Thousands, Except Per Share Amounts)

Revenues:
Natural gas and crude oil	$	908,689		$	192,020		$	—		$	1,100,709
Drilling and services		47,199			—			—			47,199
Midstream and marketing		207,602			—			—			207,602
Other		18,324			—			—			18,324

Total revenues		1,181,814			192,020			—			1,373,834

Expenses:
Production		159,004			28,795			—			187,799
Production taxes		30,594			9,687			—			40,281
Drilling and services		26,186			—			—			26,186
Midstream and marketing		186,655			—			—			186,655
Depreciation and depletion – natural gas and crude oil		290,917			—			48,788	(h)		339,705
Depreciation, depletion and amortization – other		70,448			—			—			70,448
Impairment		1,867,497			—			—	(i)		1,867,497
General and administrative		109,372			—			—			109,372
Gain on derivative contracts		(211,439	)		—			—			(211,439	)
Gain on sale of assets		(9,273	)		—			—			(9,273	)

Total expenses		2,519,961			38,482			48,788			2,607,231

(Loss) income from operations		(1,338,147	)		153,538			(48,788	)		(1,233,397	)


Other income (expense):
Interest income		3,569			—			—			3,569
Interest expense		(147,027	)		—			(41,242	) (j)		(188,269	)
Income from equity investments		1,398			—			—			1,398
Other income, net		1,454			—			—			1,454

Total other (expense) income		(140,606	)		—			(41,242	)		(181,848	)

(Loss) income before income tax (benefit) expense		(1,478,753	)		153,538			(90,030	)		(1,415,245	)
Income tax (benefit) expense		(38,328	)		—			—	(k)		(38,328	)

Net (loss) income		(1,440,425	)		153,538			(90,030	)		(1,376,917	)
Less: net income attributable to noncontrolling interest		855			—			—			855

Net (loss) income (applicable) attributable to SandRidge Energy, Inc.		(1,441,280	)		153,538			(90,030	)		(1,377,772	)
Preferred stock dividends and accretion		16,232			—			12,000	(l)		28,232

(Loss) income (applicable) available to SandRidge Energy, Inc. common stockholders	$	(1,457,512	)	$	153,538		$	(102,030	)	$	(1,406,004	)


(Loss) income per share (applicable) available to SandRidge Energy, Inc. common stockholders:
Basic	$	(9.36	)							$	(7.76	)

Diluted	$	(9.36	)							$	(7.76	)


Weighted average number of SandRidge Energy, Inc. common shares outstanding:
Basic		155,619			25,600	(e)					181,219

Diluted		155,619			25,600	(e)					181,219

The accompanying notes are an integral part of these financial statements.

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009


	Historical			Acquired Properties Historical (g)			Pro Forma Adjustments			Pro Forma
	(In Thousands, Except Per Share Amounts)

Revenues:
Natural gas and crude oil	$	328,628		$	64,351		$	—		$	392,979
Drilling and services		17,449			—			—			17,449
Midstream and marketing		62,051			—			—			62,051
Other		19,839			—			—			19,839

Total revenues		427,967			64,351			—			492,318

Expenses:
Production		128,379			18,280			—			146,659
Production taxes		3,153			2,488			—			5,641
Drilling and services		21,697			—			—			21,697
Midstream and marketing		56,702			—			—			56,702
Depreciation and depletion – natural gas and crude oil		127,503			—			23,473	(h)		150,976
Depreciation, depletion and amortization – other		38,851			—			—			38,851
Impairment		1,304,418			—			—	(i)		1,304,418
General and administrative		77,123			—			—			77,123
Gain on derivative contracts		(139,722	)		—			—			(139,722	)
Loss on sale of assets		26,359			—			—			26,359

Total expenses		1,644,463			20,768			23,473			1,688,704

(Loss) income from operations		(1,216,496	)		43,583			(23,473	)		(1,196,386	)


Other income (expense):
Interest income		287			—			—			287
Interest expense		(136,368	)		—			(30,990	) (j)		(167,358	)
Income from equity investments		1,027			—			—			1,027
Other income, net		100			—			—			100

Total other (expense) income		(134,954	)		—			(30,990	)		(165,944	)

(Loss) income before income tax benefit		(1,351,450	)		43,583			(54,463	)		(1,362,330	)
Income tax benefit		(4,114	)		—			—	(k)		(4,114	)

Net (loss) income		(1,347,336	)		43,583			(54,463	)		(1,358,216	)
Less: net income attributable to noncontrolling interest		11			—			—			11

Net (loss) income (applicable) attributable to SandRidge Energy, Inc.		(1,347,347	)		43,583			(54,463	)		(1,358,227	)
Preferred stock dividends and accretion		2,816			—			9,000	(l)		11,816

(Loss) income (applicable) available to SandRidge Energy, Inc. common stockholders	$	(1,350,163	)	$	43,583		$	(63,463	)	$	(1,370,043	)


(Loss) income per share (applicable) available to SandRidge Energy, Inc. common stockholders:
Basic	$	(7.85	)							$	(6.94	)

Diluted	$	(7.85	)							$	(6.94	)


Weighted average number of SandRidge Energy, Inc. common shares outstanding:
Basic		171,902			25,600	(e)					197,502

Diluted		171,902			25,600	(e)					197,502

The accompanying notes are an integral part of these financial statements.

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(UNAUDITED)

1.	Basis of Presentation

The historical financial information is derived from the historical consolidated financial statements of SandRidge and the historical statements of revenues and direct operating expenses of the Acquired Properties. The unaudited pro forma condensed combined balance sheet as of September 30, 2009 has been prepared as if the acquisition had taken place on September 30, 2009. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2008 and for the nine months ended September 30, 2009 assume that the acquisition occurred on January 1, 2008.

2.	Pro Forma Adjustments

The following adjustments were made in the preparation of the unaudited pro forma condensed combined financial statements.

(a)	Adjustment to cash reflects the following (in thousands):


Proceeds from December 2009 registered underwritten public offering of common stock	$	226,560
Offering costs		(9,400	)

Net cash proceeds	$	217,160


Proceeds from December 2009 sale of unsecured 8.75% Senior Notes due 2020	$	442,571
Debt issuance costs		(9,500	)

Net cash proceeds	$	433,071


Proceeds from December 2009 private placement of 6.0% Convertible Perpetual Preferred Stock	$	200,000
Offering costs		(100	)

Net cash proceeds	$	199,900


Original purchase price of assets	$	800,000
Purchase price adjustments		(4,926	)

Total cash purchase price	$	795,074


Transaction costs		(255	)

Total pro forma cash adjustments	$	54,802

(b)	Adjustment to natural gas and crude oil properties reflects the estimated preliminary purchase price allocation of the Forest acquisition, including proved and unproved properties, as follows (in thousands):


Proved natural gas and crude oil properties	$	754,185
Unproved natural gas and crude oil properties		52,246
Asset Retirement Obligation ⁽¹⁾		(11,357	)

Total cash purchase price	$	795,074

⁽¹⁾	Entire asset retirement obligation classified as long-term liability.

(c)	Adjustment to record the December 2009 sale of $450.0 million unsecured 8.75% Senior Notes due 2020. Proceeds from the offering were approximately $433.1 million after deducting debt issuance costs of approximately $9.5 million and an offering discount of approximately $7.4 million.

(d)	Adjustment to record the December 2009 private placement of 2,000,000 shares of 6.0% convertible perpetual preferred stock. Proceeds from the placement were approximately $199.9 million after deducting offering expenses of approximately $0.1 million.

(e)	Adjustment to record the December 2009 underwritten offering of 25,600,000 shares of Company common stock. Proceeds from the offering were approximately $217.2 million after deducting offering expenses of approximately $9.4 million.

(f)	Adjustment to accumulated deficit reflects the effects of costs incurred in conjunction with the Forest acquisition that have been expensed.

(g)	Adjustment to recognize revenues and direct operating expenses of the Acquired Properties for the year ended December 31, 2008 and the nine months ended September 30, 2009.

(h)	Adjustment to recognize accretion of asset retirement obligation as well as depreciation and depletion attributable to the Acquired Properties, using the unit of production method under the full cost method of accounting, as if the acquisition had taken place on January 1, 2008.

(i)

The Company estimates it would have incurred additional impairments from full cost ceiling limitations of approximately $294.0 million and $32.0 million for the year ended December 31, 2008 and the nine months ended September 30, 2009, respectively, had the acquisition occurred on January 1, 2008. Such additional estimated pro forma impairment amounts have not been reflected in the pro forma statements of operations due to their non-recurring nature. There was no such impairment estimated as of September 30, 2009 had the acquisition occurred on that date.

(j)	Adjustment to recognize discount and offering cost amortization and interest expense associated with 8.75% Senior Notes due 2020.

(k)	There was no adjustment for pro forma income tax provision due to a full valuation allowance established against the Company’s net deferred tax asset.

(l)	Adjustment to recognize additional dividends associated with the Company’s 6.0% convertible perpetual preferred stock.

3.	Supplemental Pro Forma Combined Oil and Gas Reserve and Standardized Measure Information (Unaudited)

The following unaudited supplemental pro forma oil and natural gas reserve tables present how the combined oil and gas reserve and standardized measure information of SandRidge and the Acquired Properties may have appeared had the properties been acquired on January 1, 2008. The Supplemental Pro Forma Combined Oil and Gas Reserve and Standardized Measure Information is for illustrative purposes only.

Estimated Pro Forma Combined Quantities of Proved Reserves


	SandRidge Historical				Acquired Properties				Total Pro Forma
	Oil ⁽¹⁾ (MBbls)		Gas (MMcf)		Oil ⁽¹⁾ (MBbls)		Gas (MMcf)		Oil ⁽¹⁾ (MBbls)		Gas (MMcf)

Proved Reserves
As of December 31, 2007	36,527		1,297,029		30,814		117,661		67,341		1,414,690
Revisions of previous estimates	6,738		412,155		(4,409	)	13,698		2,329		425,853
Acquisition of new reserves	513		38,008		—		—		513		38,008
Extensions and discoveries	1,728		241,596		3,869		19,304		5,597		260,900
Sales of reserves in place	(8	)	(1,750	)	—		—		(8	)	(1,750	)
Production	(2,334	)	(87,402	)	(1,788	)	(7,268	)	(4,122	)	(94,670	)

As of December 31, 2008	43,164		1,899,636		28,486		143,395		71,650		2,043,031


Proved developed as of December 31, 2007	12,532		590,358		23,853		93,895		36,385		684,253

Proved developed as of December 31, 2008	15,342		851,357		21,966		76,037		37,308		927,394

⁽¹⁾	Includes NGLs

Pro Forma Combined Standardized Measure of Discounted Future Net Cash Flows


	Year Ended December 31, 2008
	SandRidge Historical			Acquired Properties			Pro Forma Adjustments ⁽²⁾			Pro Forma
	(In Thousands)

Future cash inflows from production⁽¹⁾	$	11,092,154		$	1,627,991		$	—		$	12,720,145
Future production costs		(3,887,553	)		(493,982	)		—			(4,381,535	)
Future development costs		(2,153,506	)		(153,833	)		—			(2,307,339	)
Future income tax expenses		(399,014	)		—			(93,128	)		(492,142	)

Undiscounted future net cash flows		4,652,081			980,176			(93,128	)		5,539,129
10% annual discount		(2,431,505	)		(567,590	)		60,610			(2,938,485	)

Standardized measure of discounted future net cash flows	$	2,220,576		$	412,586		$	(32,518	)	$	2,600,644

⁽¹⁾

Calculated using period end oil and gas prices, adjusted for transportation fees and regional price differentials. NYMEX gas price was $5.71 per mcf. West Texas Intermediate oil price of $41.00 per barrel used for SandRidge Historical. Equivalent NYMEX oil price of $44.60 per barrel used for Acquired Properties.

⁽²⁾	Pro forma adjustments represent effects of income tax on the undiscounted and discounted future net cash flows associated with the Acquired Properties. Corporate income taxes were not allocated to the Acquired Properties on a historical basis.

Changes in the Pro Forma Combined Standardized Measure of Discounted Future Net Cash Flows


	Year Ended December 31, 2008
	SandRidge Historical			Acquired Properties			Pro Forma Adjustments ⁽¹⁾			Pro Forma
	(In Thousands)

Standardized measure at December 31, 2007	$	2,718,537		$	999,827		$	(263,266	)	$	3,455,098
Revenues less production and other costs		(719,091	)		(153,538	)		—			(872,629	)
Net changes in prices, production and other costs		(1,747,962	)		(435,455	)		—			(2,183,417	)
Net development costs incurred		1,132,078			40,170			—			1,172,248
Net changes in future development costs		(1,152,018	)		(9,084	)		—			(1,161,102	)
Extensions and discoveries		227,874			(6,509	)		—			221,365
Revisions of previous quantity estimates		757,939			(26,301	)		—			731,638
Accretion of discount		168,811			99,983			—			268,794
Net change in income taxes		794,001			—			230,748			1,024,749
Purchases of reserves in place		47,767			—			—			47,767
Sales of reserves in place		(2,076	)		—			—			(2,076	)
Timing differences and other		(5,284	)		(96,507	)		—			(101,791	)

Standardized measure at December 31, 2008	$	2,220,576		$	412,586		$	(32,518	)	$	2,600,644

⁽¹⁾	Pro forma adjustments represent effects of the net change in income tax on the discounted future net cash flows associated with the Acquired Properties. Corporate income taxes were not allocated to the Acquired Properties on a historical basis.

SANDRIDGE ENERGY INC - FORM 8-K/A - EX-99.2 - PRO FORMA FINANCIAL INFORMATION. - March 8, 2010

Attached files

SANDRIDGE ENERGY INC Reports