Oklahoma City-based SandRidge Energy Corporation reported a net loss of $8 million, or $0.25 per share, and net cash provided by operating activities of $44 million for the third quarter of 2017, according to a company press release issued Wednesday.
When adjusting reported amounts for items that are typically excluded by the investment community on the basis that such items affect the comparability of results, SandRidge’s adjusted net income amounted to $12 million, or $0.35 per share, and operating cash flow totaled $46 million. Earnings before interest, income taxes, depreciation, depletion, and amortization, adjusted for certain other items for the third quarter was $42 million.
Production for the third quarter was 3.6 MMBoe (27% oil, 23% NGLs and 50% natural gas). The Company’s Mid-Continent assets produced approximately 93% of total production, with its North Park Basin and Permian assets making up the balance. As more NW STACK and North Park wells are brought to sales, oil is expected to become a larger percentage of total production. During this quarter, the company averaged two rigs in the NW STACK targeting the Meramec and one rig targeting multiple benches of the Niobrara in the North Park Basin.
“As we near the end of the year, we remain committed to our strategy of balance sheet preservation and cost reduction while prudently developing our assets,” said James Bennett, President and CEO. “In Oklahoma’s NW STACK, successful Meramec drilling above horizontal Osage production demonstrates stacked pay and supports future development of the deeper Osage zone. In Colorado’s North Park Basin, recent drilling confirms production from all four Niobrara benches, proving additional zones and increasing our future drilling inventory.”
“Our previously announced Drilling Participation Agreement will fund continued delineation of the NW STACK, allowing for capital reallocation toward a growing opportunity set in the North Park Basin,” said Bennett. “Ongoing success with our cost reduction initiatives is reflected in our updated LOE and G&A guidance, which reduces cash costs another $7 million this year. As we prepare our 2018 budget, our undivided focus will be directed toward returns on capital and resource value creation, supported by our strategic emphasis on oil-weighted development.”
NW STACK highlights include the extension of Meramec production south into Dewey County and the confirmation of stacked pay. The Regina 1915 1-18H SRL is SandRidge’s first Meramec well drilled in Dewey County. Producing a 30-day initial production of 598 Boe per day (71% oil), this well extends the company’s production and resource potential beyond Major, Woodward and Garfield counties. In Major County, SandRidge confirmed Meramec/Osage stacked pay by drilling a Meramec well above existing horizontal Osage production. The Audra Claire 2015 1-24H, producing a 30-day initial production of 397 Boe per day (88% oil) from the Meramec, supports stacked pay potential in the NW STACK. As part of the company’s strategy to initially develop the Meramec, this spacing test supports future development of the Osage.
SandRidge will spend approximately $15 million in the fourth quarter completing wells drilled in the third quarter and running two rigs under the Drilling Participation Agreement. The two rigs will continue to target the Meramec where drilling and completion costs are $4.4 million and $6.5 million, respectively.
The company previously announced it executed a $200 million development agreement with a private investment fund to develop SandRidge Meramec operated wells primarily in Major and Woodward Counties. Under the Drilling Participation Agreement, the investment fund will finance $100 million for its share of drilling and completion costs, receiving a wellbore-only working interest.
SandRidge also completed and brought online two Niobrara wells — the Grizzly 2-1H36 and Grizzly 4-1H36. These wells confirm that the company is now producing in all four Niobrara benches which expands SandRidge’s oil resource value.
The company captured efficiencies with drilling of the Grizzly wells finalized in 12 days. Four additional wells were drilled in less than 14 days each as part of a recent 80 acre spacing test. These efficiencies have led to a reduction in drilling and completion costs of $6.7 million, compared to $7.2 million where full rig mobilization is required.
SandRidge will spend $34 million in the fourth quarter completing wells drilled in the third quarter and running one rig drilling Niobrara wells. The company’s 2017 drilling program will hold over 105,000 acres by production or federal unit, which represents 85% of its current 123,000 net acre position. Nearly $13 million will be invested to construct central tank batteries and infrastructure in support of production brought online in 2017 into 2018.