Like every oil and gas company, Oklahoma City’s SandRidge Energy is dealing with low market prices and the impact of the downturn on the company’s financial stability.
While company leaders expressed confidence and optimism in their recent quarterly financial report, at the same time they suggested they will consider merger possibilities should they arise. But specifics of any such possible mergers were not revealed or discussed.
“With respect to the third quarter, we were impacted by challenging hydrocarbon prices and historically high price differentials that, when combined, significantly impacted our results,” said Paul McKinney, President and CEO. ” We responded to these changes by continuing to reduce our cost structure, focused on the efficient execution of our work programs and began reducing our capital spending plans for the rest of the year.”
McKinney, the former Yuma Energy leader who joined SandRidge in January 2019 told investors and analysts his leadership team is continuing to evaluate opportunities in the market, including distressed asset acquisition and merger opportunities.
“. We look for and evaluate investment opportunities as a normal course of business to identify those that can generate the highest returns for our shareholders. This includes not only mergers and acquisitions, but also internal drilling opportunities, workovers, asset sales, buybacks, and dividends,” he explained.
McKinney said the company has to consider the long-term impact of a share repurchase program and its affect on the company’s liquidity.
SandRidge posted a net loss of $182 million in the third quarter compared to $12 million net income in the same quarter 2018.
SandRidge Chief Financial Officer Mike Johnson admitting it was a “challenging and volatile commodity price environment” as the company saw quarter-over-quarter and year-over-year reductions to the prices received for oil, natural gas and natural gas liquids production.
He blamed the net loss on a ceiling test write-down.
“The noncash ceiling test impairment was $166 million and was driven primarily by lower commodity prices required for estimating our proved reserves.”
The company has some money-saving steps in mind.
“To preserve liquidity, we have further reduced planned capital spending during the remainder of 2019. We expect to spend approximately $15 million in the fourth quarter, primarily on North Park infrastructure projects,” said Johnson, referring to the company’s Colorado drilling efforts.
The company drew $50 million from its credit facility in the third quarter which was more than leadership predicted at the start of the year.
“We will be working with our bank group later this month to redetermine our borrowing base. And as we plan for 2020 capital spending with the possible exception of executing on accretive M&A opportunities, our focus will be on preserving liquidity by managing and targeting high-return capital projects,” said Johnson.