Consolidated Statements of Oper
Consolidated Statements of Operations (Income) (USD $) | |||
Share data in Thousands | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | 12 Months Ended
Dec. 31, 2006 |
Oil and Gas Revenue [Abstract] | |||
Natural gas and crude oil | $908,689,000 | $477,612,000 | $101,252,000 |
Natural Gas Midstream Revenue [Abstract] | |||
Drilling and services | 47,199,000 | 73,197,000 | 139,049,000 |
Midstream and marketing | 207,602,000 | 107,765,000 | 122,896,000 |
Other | 18,324,000 | 18,878,000 | 25,045,000 |
Total revenues | 1,181,814,000 | 677,452,000 | 388,242,000 |
Cost of Goods Sold, Oil and Gas [Abstract] | |||
Production | 159,004,000 | 106,192,000 | 35,149,000 |
Taxes Other than Income, Excise, Production and Property Taxes [Abstract] | |||
Production taxes | 30,594,000 | 19,557,000 | 4,654,000 |
Marketing and Advertising Expense [Abstract] | |||
Drilling and services | 26,186,000 | 44,211,000 | 98,436,000 |
Midstream and marketing | 186,655,000 | 94,253,000 | 115,076,000 |
Depreciation and Amortization [Abstract] | |||
Depreciation, depletion and amortization-natural gas and crude oil | 290,917,000 | 173,568,000 | 26,321,000 |
Depreciation, depletion and amortization-other | 70,448,000 | 53,541,000 | 29,305,000 |
Asset Impairment Charges [Abstract] | |||
Impairment | 1,867,497,000 | ||
General and Administrative Expense [Abstract] | |||
General and administrative | 109,372,000 | 61,780,000 | 55,634,000 |
Gain (Loss) on Disposition of Assets [Abstract] | |||
Gain on derivative contracts | (211,439,000) | (60,732,000) | (12,291,000) |
Gain on sale of assets | (9,273,000) | (1,777,000) | (1,023,000) |
Total expenses | 2,519,961,000 | 490,593,000 | 351,261,000 |
(Loss) income from operations | (1,338,147,000) | 186,859,000 | 36,981,000 |
Investment Income, Interest and Dividend [Abstract] | |||
Interest income | 3,569,000 | 4,694,000 | 991,000 |
Interest Expense [Abstract] | |||
Interest expense | (147,027,000) | (117,185,000) | (16,904,000) |
Minority Interest in Net Income (Loss) of Consolidated Entities [Abstract] | |||
Minority interest | (855,000) | 276,000 | (296,000) |
Income from equity investments | 1,398,000 | 4,372,000 | 967,000 |
Other Nonoperating Income (Expense) [Abstract] | |||
Other income, net | 1,454,000 | 729,000 | 118,000 |
Total other (expense) income | (141,461,000) | (107,114,000) | (15,124,000) |
(Loss) income before income tax (benefit) expense | (1,479,608,000) | 79,745,000 | 21,857,000 |
Income Tax Expense (Benefit) [Abstract] | |||
Income tax (benefit) expense | (38,328,000) | 29,524,000 | 6,236,000 |
Net (loss) income | (1,441,280,000) | 50,221,000 | 15,621,000 |
Preferred Stock Dividends and Other Adjustments [Abstract] | |||
Preferred stock dividends and accretion | 16,232,000 | 39,888,000 | 3,967,000 |
(Loss applicable) income available to common stockholders | (1,457,512,000) | 10,333,000 | 11,654,000 |
Income (Loss) before Extraordinary Items and Cumulative Effect of Change in Accounting Principle, Per Diluted Share [Abstract] | |||
Basic and Diluted Earnings Per Share, Net (loss) income | -9.26 | 0.46 | 0.21 |
Basic and Diluted Earnings Per Share, Preferred stock dividends | -0.1 | -0.37 | -0.05 |
Basic and diluted (loss) income per share (applicable) available to common stockholders | -9.36 | 0.09 | 0.16 |
Earnings Per Share, Basic, Other Disclosures [Abstract] | |||
Weighted average number of common shares outstanding, Basic | 155,619 | 108,828 | 73,727 |
Earnings Per Share, Diluted, Other Disclosures [Abstract] | |||
Weighted average number of common shares outstanding, Diluted | 155,619 | 110,041 | 74,664 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | ||
In Thousands | Dec. 31, 2008
| Dec. 31, 2007
|
Cash and Cash Equivalents, at Carrying Value [Abstract] | ||
Cash and cash equivalents | $636 | $63,135 |
Accounts receivable, net | ||
Receivables, Net, Current [Abstract] | ||
Trade | 102,746 | 94,741 |
Related parties | 6,327 | 20,018 |
Derivative Instruments and Hedges [Abstract] | ||
Derivative contracts | 201,111 | 21,958 |
Inventory, Net [Abstract] | ||
Inventories | 3,686 | 3,993 |
Deferred income taxes | 0 | 1,820 |
Other current assets | 41,407 | 20,787 |
Total current assets | 355,913 | 226,452 |
Property, Plant and Equipment, Gross [Abstract] | ||
Natural gas and crude oil properties, using full cost method of accounting | ||
Proved | 4,676,072 | 2,848,531 |
Unproved | 215,698 | 259,610 |
Less - accumulated depreciation, depletion and impairment | (2,369,840) | (230,974) |
Natural gas and crude oil properties, using full cost method of accounting, net | 2,521,930 | 2,877,167 |
Other property, plant and equipment, net | 653,629 | 460,243 |
Derivative Instruments and Hedges, Noncurrent [Abstract] | ||
Derivative contracts | 45,537 | 270 |
Long-term Investments [Abstract] | ||
Investments | 6,088 | 7,956 |
Restricted deposits | 32,843 | 31,660 |
Other assets | 39,118 | 26,818 |
Total assets | 3,655,058 | 3,630,566 |
Long-term Debt, Current [Abstract] | ||
Current maturities of long-term debt | 16,532 | 15,350 |
Accounts payable and accrued expenses | ||
Accounts Payable and Accrued Liabilities [Abstract] | ||
Trade | 366,337 | 215,497 |
Related parties | 230 | 395 |
Long-term Debt and Capital Lease Obligations, Current [Abstract] | ||
Derivative contracts | 5,106 | 0 |
Asset retirement obligation | 275 | 864 |
Billings in excess of costs incurred | 14,144 | 0 |
Total current liabilities | 402,624 | 232,106 |
Long-term Notes and Loans [Abstract] | ||
Long-term debt | 2,358,784 | 1,052,299 |
Other long-term obligations | 11,963 | 16,817 |
Derivative contracts | 3,639 | 0 |
Asset Retirement Obligations, Noncurrent [Abstract] | ||
Asset retirement obligation | 84,497 | 57,716 |
Deferred income taxes | 0 | 49,350 |
Total liabilities | 2,861,507 | 1,408,288 |
Minority Interest [Abstract] | ||
Minority interest | 30 | 4,672 |
Temporary Equity [Abstract] | ||
Redeemable convertible preferred stock, $0.001 par value, 2,625 shares authorized; no shares issued and outstanding at December 31, 2008 and 2,184 shares issued and outstanding at December 31, 2007 | 0 | 450,715 |
Stockholders' Equity [Abstract] | ||
Preferred stock, $0.001 par value; 47,375 shares authorized; no shares issued and outstanding in 2008 and 2007 | 0 | 0 |
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ||
Common stock, $0.001 par value, 400,000 shares authorized; 167,372 issued and 166,046 outstanding at December 31, 2008 and 143,299 issued and 141,843 outstanding at December 31, 2007 | 163 | 140 |
Additional Paid in Capital [Abstract] | ||
Additional paid-in capital | 2,170,986 | 1,686,113 |
Treasury stock, at cost | (19,332) | (18,578) |
Retained Earnings (Accumulated Deficit) [Abstract] | ||
(Accumulated deficit) retained earnings | (1,358,296) | 99,216 |
Total stockholders' equity | 793,521 | 1,766,891 |
Total liabilities and stockholders' equity | $3,655,058 | $3,630,566 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | ||
In Thousands | Dec. 31, 2008
| Dec. 31, 2007
|
Consolidated Balance Sheets (Parenthetical) | ||
Redeemable convertible preferred stock, par value | 0.001 | 0.001 |
Redeemable convertible preferred stock, shares authorized | 2,625 | 2,625 |
Redeemable convertible preferred stock, shares issued | 0 | 2,184 |
Redeemable convertible preferred stock, shares outstanding | 0 | 2,184 |
Preferred stock, par value | 0.001 | 0.001 |
Preferred stock, shares authorized | 47,375 | 47,375 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | 0.001 | 0.001 |
Common stock, shares authorized | 400,000 | 400,000 |
Common stock, shares issued | 167,372 | 143,299 |
Common stock, shares outstanding | 166,046 | 141,843 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | |||
In Thousands | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | 12 Months Ended
Dec. 31, 2006 |
Income (Loss) from Continuing Operations [Abstract] | |||
Net (loss) income | ($1,441,280) | $50,221 | $15,621 |
Adjustment for Amortization [Abstract] | |||
Provision for doubtful accounts | 1,748 | 2,528 | |
Depreciation, depletion and amortization | 361,365 | 227,109 | 55,626 |
Impairment | 1,867,497 | ||
Amortization of Financing Costs and Discounts [Abstract] | |||
Debt issuance cost amortization | 5,623 | 15,998 | 299 |
Deferred Income Taxes and Tax Credits [Abstract] | |||
Deferred income taxes | (47,530) | 28,923 | 348 |
Asset Impairment Charges [Abstract] | |||
Provision for inventory obsolescence | 203 | ||
Unrealized Gain (Loss) on Derivatives and Commodity Contracts [Abstract] | |||
Unrealized (gain) loss on derivative contracts | (215,675) | (26,238) | 1,878 |
Gain (Loss) on Sale of Property Plant Equipment [Abstract] | |||
Gain on sale of assets | (9,273) | (1,777) | (1,023) |
Interest income-restricted deposits | (402) | (1,354) | (151) |
Income (Loss) from Equity Method Investments, Net of Dividends or Distributions [Abstract] | |||
Income from equity investments | (1,398) | (4,372) | (956) |
Share-based Compensation [Abstract] | |||
Stock-based compensation | 18,784 | 7,202 | 8,792 |
Minority interest | 855 | (276) | 296 |
Increase (Decrease) in Receivables [Abstract] | |||
Receivables | 3,735 | (19,061) | (2,648) |
Increase (Decrease) in Inventories [Abstract] | |||
Inventories | 307 | (1,730) | (938) |
Other current assets | (20,603) | 12,374 | (22,238) |
Increase (Decrease) in Employee Related Liabilities [Abstract] | |||
Other assets and liabilities, net | 127 | (5,069) | (2,131) |
Accounts payable and accrued expenses | 41,165 | 75,299 | 12,046 |
Billings in excess of costs | 14,144 | ||
Net cash provided by operating activities | 579,189 | 357,452 | 67,349 |
Payments to Acquire Productive Assets [Abstract] | |||
Capital expenditures for property, plant and equipment | (2,058,415) | (1,280,848) | (306,541) |
Payments to Acquire Businesses, Net of Cash Acquired [Abstract] | |||
Acquisitions of assets, net of cash received of $0, $0 and $21,100 | (116,650) | (1,054,075) | |
Proceeds from Sale of Property, Plant, and Equipment [Abstract] | |||
Proceeds from sale of assets | 158,781 | 9,034 | 19,742 |
Proceeds from sale of investments | 2,373 | ||
Proceeds from Sale of Water and Waste Water Systems [Abstract] | |||
Contributions on equity investments | (1,528) | (3,388) | |
Loans to equity investee | (7,500) | ||
Payments for (Proceeds from) Investments [Abstract] | |||
Refunds of restricted deposits | 10,328 | ||
Fundings of restricted deposits | (781) | (7,445) | (1,051) |
Restricted cash | 2,373 | ||
Net cash used in investing activities | (1,909,443) | (1,385,581) | (1,340,567) |
Proceeds from Issuance of Long-term Debt [Abstract] | |||
Proceeds from borrowings | 3,252,209 | 1,331,541 | 1,261,910 |
Repayments of Long-term Debt [Abstract] | |||
Repayments of borrowings | (1,944,542) | (1,332,219) | (518,870) |
Payments of Ordinary Dividends [Abstract] | |||
Dividends paid-preferred | (17,552) | (33,321) | |
Proceeds from (Payments to) Minority Shareholders [Abstract] | |||
Minority interest distributions | (5,497) | (144) | (618) |
Proceeds from Issuance or Sale of Equity [Abstract] | |||
Proceeds from issuance of common stock | 1,114,660 | 100,776 | |
Proceeds from issuance of redeemable convertible preferred stock | 439,486 | ||
Stock-based compensation excess tax benefit | 4,594 | ||
Payments for Repurchase of Equity [Abstract] | |||
Purchase of treasury stock | (3,553) | (1,661) | (500) |
Payments of Financing Costs [Abstract] | |||
Debt issuance costs | (17,904) | (26,540) | (15,749) |
Net cash provided by financing activities | 1,267,755 | 1,052,316 | 1,266,435 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (62,499) | 24,187 | (6,783) |
CASH AND CASH EQUIVALENTS, beginning of year | 63,135 | 38,948 | 45,731 |
CASH AND CASH EQUIVALENTS, end of year | 636 | 63,135 | 38,948 |
Income Taxes Paid, Net [Abstract] | |||
Cash paid for interest, net of amounts capitalized | 131,183 | 83,567 | 15,079 |
Cash paid for income taxes | 2,191 | 2,371 | 1,599 |
Schedule of Conversions of Stock [Text Block] | |||
Accrued capital expenditures | 119,432 | ||
Redeemable convertible preferred stock dividends, net of dividends paid | 8,956 | ||
Conversion of Stock [Table] | |||
Insurance premiums financed | 1,496 | 5,023 | |
Conversion of Stock [Line Items] | |||
Accretion on redeemable convertible preferred stock | 7,636 | 1,421 | 157 |
Common stock issued in connection with acquisitions | 236,284 | ||
Assumption of restricted deposits and notes payable in connection with acquisition | $313,628 |
1_Consolidated Statements of Ca
Consolidated Statements of Cash Flows (Parenthetical) (USD $) | |||
In Thousands | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | 12 Months Ended
Dec. 31, 2006 |
Consolidated Statements of Cash Flows (Parenthetical) | |||
Cash received on acquisitions of assets | $0 | $0 | $21,100 |
Statement of Shareholders' Equi
Statement of Shareholders' Equity and Other Comprehensive Income (USD $) | ||||||
In Thousands | Common Stock
| Additional Paid-in Capital
| Treasury Stock
| Retained Earnings (Accumulated Deficit)
| Deferred Compensation
| Total
|
Beginning Balance at Dec. 31, 2005 | $73 | $243,920 | ($17,335) | $77,229 | ($14,885) | $289,002 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock offering | 3,343 | 3,343 | ||||
Change in accounting principle for stock-based compensation | (14,885) | 14,885 | ||||
Issuance of stock in acquisitions | 13 | 236,271 | 236,284 | |||
Stock offering, net of offering costs | 6 | 97,427 | 97,433 | |||
Accretion on redeemable convertible preferred stock | (157) | (157) | ||||
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures [Abstract] | ||||||
Purchase of treasury stock | (500) | (500) | ||||
Stock-based compensation | 8,792 | 8,792 | ||||
Net Income (Loss) [Abstract] | ||||||
Net (loss) income | 15,621 | 15,621 | ||||
Ending Balance at Dec. 31, 2006 | 92 | 574,868 | (17,835) | 92,693 | 649,818 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock offering, net of offering costs | 50 | 1,113,314 | 1,113,364 | |||
Conversion of common stock to redeemable convertible preferred stock | (1) | (9,650) | (9,651) | |||
Accretion on redeemable convertible preferred stock | (1,421) | (1,421) | ||||
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures [Abstract] | ||||||
Purchase of treasury stock | (1) | (1,660) | (1,661) | |||
Common stock issued under retirement plans | 379 | 917 | 1,296 | |||
Stock-based compensation | 7,202 | 7,202 | ||||
Net Income (Loss) [Abstract] | ||||||
Net (loss) income | 50,221 | 50,221 | ||||
Redeemable convertible preferred stock dividends | (42,277) | (42,277) | ||||
Ending Balance at Dec. 31, 2007 | 140 | 1,686,113 | (18,578) | 99,216 | 1,766,891 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Accretion on redeemable convertible preferred stock | (7,636) | (7,636) | ||||
Conversion of redeemable convertible preferred stock to common stock | 23 | 458,328 | 458,351 | |||
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures [Abstract] | ||||||
Purchase of treasury stock | (3,553) | (3,553) | ||||
Common stock issued under retirement plans | 3,167 | 2,799 | 5,966 | |||
Stock-based compensation | 18,784 | 18,784 | ||||
Adjustments to Additional Paid in Capital [Abstract] | ||||||
Stock-based compensation excess tax benefit | 4,594 | 4,594 | ||||
Net Income (Loss) [Abstract] | ||||||
Net (loss) income | (1,441,280) | (1,441,280) | ||||
Redeemable convertible preferred stock dividends | (8,596) | (8,596) | ||||
Ending Balance at Dec. 31, 2008 | $163 | $2,170,986 | ($19,332) | ($1,358,296) | $793,521 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) (USD $) | ||
In Millions | 1/1/2007 - 12/31/2007
| 1/1/2006 - 12/31/2006
|
Consolidated Statements of Changes in Stockholders Equity (Parenthetical) | ||
Offering costs of stock | $4 | $4 |
Document and Entity Information
Document and Entity Information (USD $) | |
In Billions, except Share data | 12 Months Ended
Dec. 31, 2008 |
Document and Entity Information | |
Entity Registrant Name | SANDRIDGE ENERGY, INC. |
Entity Central Index Key | 0001349436 |
Document Type | 10-K |
Document Period End Date | 2008-12-31 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | No |
Entity Filer Category | Large Accelerated Filer |
Entity Public Float | $8 |
Entity Common Stock, Shares Outstanding (actual number of shares) | 167,625,519 |
Notes to Consolidated Financial
Notes to Consolidated Financial Statements | |
12 Months Ended
Dec. 31, 2008 | |
Financial Notes | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Nature of Business.SandRidge Energy, Inc. (successor to Riata Energy, Inc.) and its subsidiaries (collectively, the Company or SandRidge) is an independent natural gas and oil company concentrating on exploration, development and production activities. The Company also owns and operates natural gas gathering and treating facilities and CO2 treating and transportation facilities and has marketing and tertiary oil recovery operations. In addition, Lariat Services, Inc. (Lariat), a wholly owned subsidiary, owns and operates drilling rigs and a related oil field services business. The Companys primary exploration, development and production areas are concentrated in West Texas. The Company also operates interests in the Mid-Continent, the Cotton Valley Trend in East Texas, the Gulf Coast and the Gulf of Mexico. Principles of Consolidation.The consolidated financial statements include the accounts of SandRidge Energy, Inc. and its wholly owned or majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Reclassifications.Certain reclassifications have been made to prior period financial statements to conform to current period presentation. Use of Estimates.The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates. Estimates of natural gas and crude oil reserves and their values, future production rates and future costs and expenses are inherently uncertain for numerous reasons, including many factors beyond the Companys control. Reservoir engineering is a subjective process of estimating underground accumulations of natural gas and crude oil that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of data available and of engineering and geological interpretation and judgment. In addition, estimates of reserves may be revised based on actual production, results of subsequent exploration and development activities, prevailing commodity prices, operating costs and other factors. These revisions may be material and could materially affect the Companys future depletion, depreciation and amortization expenses. The Companys revenue, profitability and future growth are substantially dependent upon the prevailing and future prices for natural gas and crude oil, each of which depend on numerous factors beyond the Companys control such as economic conditions, regulatory developments and competition from other energy sources. The energy markets historically have been volatile and natural gas and crude oil prices may be subject to significant fluctuations in the future. A substantial or extended decline in natural gas and crude oil prices cou |
Acquisitions and Dispositions | 2. Acquisitions and Dispositions 2006 Acquisitions and Dispositions The Company closed the following acquisitions in 2006: In March 2006, the Company acquired from an executive officer and director an additional 12.5% interest in PetroSource Energy Company, LLC (PetroSource), a consolidated subsidiary. The acquisition consisted of the retirement of subordinated debt of approximately $1.0million and a $4.5million cash payment for the ownership interest acquired for a total acquisition price of approximately $5.5million. In May 2006, the Company purchased certain leases in developed and undeveloped properties from an oil and gas company. The purchase price was approximately $40.9million in cash. The cash consideration was paid in July 2006. In May 2006, the Company purchased several natural gas and crude oil properties from an oil and gas company. The purchase price was approximately $12.9million, comprised of $8.2million in cash, and 251,351shares of Company common stock, valued at $4.7million. The cash and equity consideration were paid in July 2006. In June 2006, the Company purchased certain producing well interests from an executive officer and director. The purchase price was approximately $9.0million in cash. In June 2006, the Company acquired the remaining 1% interest in PetroSource from an oil and gas company. The purchase price was 27,749shares of Company common stock, valued at $0.5million. As a result of this acquisition, the Company became the 100% owner of PetroSource. The 2006 acquisitions described above were financed with approximately $63.7million in cash and the issuance of 279,100shares of common stock with an aggregate value of approximately $5.1million. Details are set forth below for each of the acquisition transactions (in thousands): Consideration Paid Addition to Change in Retirement Common Property, Plant Minority of Subordinated Stock No. Common Acquisition Transaction Equipment Interest Debt(1) of Shares Stock Cash PetroSource additional interests $ 2,116 $ (2,370 ) $ (1,003 ) $ $ 5,489 Purchased leases 40,960 40,960 Natural gas and crude oil properties 12,850 251 4,650 8,200 Producing well interest from executive officer and director 9,000 9,000 PetroSource additional interest (remaining 1% interest) 85 (393 ) 28 478 Totals $ 65,011 $ (2,763 ) $ (1,003 ) 279 $ 5,128 $ 63,649 (1) Includes retirement of subor |
Fair Value Measurements | 3. Fair Value Measurements Effective January1, 2008, the Company implemented SFASNo.157 for its financial assets and liabilities measured on a recurring basis. SFASNo.157 applies to all financial assets and liabilities that are measured and reported on a fair value basis. In February 2008, the FASB issued FSP157-2, which delayed the effective date of SFASNo.157 by one year for certain nonfinancial assets and liabilities. As defined in SFASNo.157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFASNo.157 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair measurements. SFASNo.157 requires fair value measurements to be classified and disclosed in one of the following categories: Level1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level2: 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. Level3: Measured based on prices or valuation models that required inputs that are both significant to the fair value measurement and less observable for objective sources (i.e., supported by little or no market activity). As required by SFASNo.157, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Companys 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, takes into account the market for the Companys financial assets and liabilities, the associated credit risk and other factors as required under SFASNo.157. 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. As required by SFASNo.157, the Company has classified its derivative contracts into one of three levels based upon the data relied upon to determine the fair value. The fair values of the Companys natural gas and crude oil swaps, crude oil collars and interest rate swap are based upon quotes obtained from counterparties to the derivative contracts. The Company reviews other readily available market prices for its derivative contracts as there is an active market for these contracts; however, the Company does not have access to specific valuation models used by the counterparties. Included in these models are discount factors that the Company must estimate in its calculation. Additionally, the Company applies a credit default risk rating factor for its counterparties in determining the fair value of its derivative contracts. Based on the inputs for the fair value measurement, the Company cl |
Accounts Receivable | 4. Accounts Receivable A summary of trade accounts receivable is as follows (in thousands): December31, 2008 2007 Natural gas and crude oil sales $ 72,266 $ 72,393 Natural gas and oil services 20,476 6,622 Joint interest billing 13,816 17,874 Other 62 90 106,620 96,979 Less allowance for doubtful accounts (3,874 ) (2,238 ) Total trade accounts receivable, net $ 102,746 $ 94,741 The following table shows the balance in the allowance for doubtful accounts and activity for the years ended December31, 2006, 2007 and 2008 (in thousands). Additions Balance at Charged to Balance at Beginning Costs and End of Allowance for Doubtful Accounts of Period Expenses Deductions(1) Period Year ended December31, 2006 $ 851 $ 2,528 $ (354 ) $ 3,025 Year ended December31, 2007 $ 3,025 $ $ (787 ) $ 2,238 Year ended December31, 2008 $ 2,238 $ 1,748 $ (112 ) $ 3,874 (1) Deductions represent the write-off of receivables. The Companys customer, SemGroup, L.P. and certain of its subsidiaries (collectively, SemGroup), filed for bankruptcy on July22, 2008. During the third quarter of 2008, the Company established an allowance in the amount of $1.5million for all amounts due from SemGroup. |
Other Current Assets | 5. Other Current Assets Other current assets consist of the following (in thousands): December31, 2008 2007 Prepaid insurance $ 9,374 $ 9,379 Prepaid drilling 2,657 5,924 Materials and supplies 155 4,751 Deposits 26,806 60 Other 2,415 673 Total other current assets $ 41,407 $ 20,787 |
Property, Plant and Equipment | 6. Property, Plant and Equipment Property, plant and equipment consists of the following (in thousands): December31, 2008 2007 Natural gas and crude oil properties: Proved $ 4,676,072 $ 2,848,531 Unproved 215,698 259,610 Total natural gas and crude oil properties 4,891,770 3,108,141 Less accumulated depreciation, depletion and impairment(1) (2,369,840 ) (230,974 ) Net natural gas and crude oil properties capitalized costs 2,521,930 2,877,167 Land 11,250 1,149 Non natural gas and crude oil equipment 764,792 539,893 Buildings and structures 71,859 38,288 Total 847,901 579,330 Less accumulated depreciation, depletion and amortization (194,272 ) (119,087 ) Net capitalized costs 653,629 460,243 Total property, plant and equipment $ 3,175,559 $ 3,337,410 (1) Includes ceiling limitation impairment charge of $1,855.0million at December31, 2008. The amount of capitalized interest included in the above non natural gas and crude oil equipment balance at December31, 2008 and 2007 was approximately $3.8million and $3.4million, respectively. In July 2007, the Company purchased property to serve as its corporate headquarters. The 3.51-acre site contains four buildings and is located in downtown Oklahoma City, Oklahoma. The purchase price was approximately $29.5million in cash. In May 2008, the Company completed the sale of all of its assets located in the Piceance Basin of Colorado. See Note2. The average composite rates used for depreciation, depletion and amortization were $2.82 per Mcfe in 2008, $2.64 per Mcfe in 2007 and $1.68 per Mcfe in 2006. Costs Excluded from Amortization Costs associated with unproved properties of $215.7million as of December31, 2008 were excluded from amounts subject to amortization. The following table summarizes the costs related to unproved properties which have been excluded from natural gas and crude oil properties being amortized at December31, 2008 and the year in which they were incurred: Excluded Costs at Year Cost Incurred December31, 2006 2007 2008 2008 Property acquisition $ 179,888 $ $ 35,810 $ 215,698 Exploration Development Capitalized interest Total costs incurred $ 179,888 $ $ 35,810 $ 215,698 The Com |
Investment in Affiliated Companies | 7. Investment in Affiliated Companies The Company accounts for certain investments under the equity method when the Company owns more than 20% and has significant influence, but does not control the investee company. The Companys equity method investments include the following: Grey Ranch, L.P.Grey Ranch, L.P. (Grey Ranch) is primarily engaged in treating and transportation of natural gas. The Company purchased its investment during 2003. At December31, 2008 and 2007, the Company owned 50% of Grey Ranch and had approximately $6.1million and $4.2million, respectively, recorded in the consolidated balance sheets relating to this investment. Larclay, L.P.The Company and Clayton Williams Energy, Inc. (CWEI) each own a 50% interest in Larclay, L.P. (Larclay), a limited partnership formed to acquire drilling rigs and provide land drilling services. The Company serves as the operations manager of the partnership. CWEI was responsible for securing financing and the purchase of the rigs. The partnership financed the acquisition cost of the rigs with a loan from a third party, secured by the purchased rigs, and a loan from CWEI. In addition, CWEI has guaranteed a portion of the third party debt. As a result of current economic conditions and the resulting on-going cash shortfalls experienced by Larclay, the Company recorded an impairment for its investment in Larclay as of December31, 2008. See Note8 for a discussion of impairment. At December31, 2007, the Company had approximately $3.8million included in the consolidated balance sheets relating to this investment. |
Impairment | 8. Impairment Full Cost Ceiling Limitation.Under the full cost method of accounting, the net book value of oil and gas properties, less related deferred income taxes, may not exceed a calculated ceiling. The ceiling limitation is the discounted estimated after-tax future net revenue from proved natural gas and crude oil properties, excluding future cash outflows associated with settling asset retirement obligations included in the net book value of natural gas and crude oil properties, plus the cost of properties not subject to amortization. In calculating future net revenues, prices and costs used are those as of the end of the appropriate period. These prices are not changed except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts. The Company has entered into various commodity derivative contracts; however, these derivative contracts are not accounted for as cash flow hedges. Accordingly, the effect of these derivative contracts has not been considered in calculating the full cost ceiling limitation as of December31, 2008. The net book value, less related deferred tax liabilities, is compared to the ceiling limitation on a quarterly and annual basis. Any excess of the net book value, less related deferred taxes, is written off as an expense. An expense recorded in one period may not be reversed in a subsequent period even though higher natural gas and crude oil prices may have increased the ceiling limitation in the subsequent period. During the fourth quarter of 2008, the Company reduced the carrying value of its oil and gas properties by $1,855.0million due to the full cost ceiling limitations. The after-tax effect of this reduction in 2008 was $1,677.5million. Larclay, L.P.Lariat and CWEI each own a 50% interest in Larclay, a limited partnership formed in 2006 to acquire drilling rigs and provide land drilling services. At December31, 2008, Lariats investment in Larclay was $4.8million. During 2008, Larclay experienced cash shortfalls as a result of its principal payments due pursuant to its rig loan agreement. As permitted under the Larclay partnership agreement, Lariat provided loans to Larclay to offset the cash shortfalls. At December31, 2008, the notes outstanding to Larclay and related interest receivable were $7.5million and $0.2million, respectively. With the significant decline in natural gas and crude oil prices in the fourth quarter of 2008, the demand for Larclays drilling rigs and land drilling services has decreased. Due to current economic conditions, current natural gas and crude oil prices and the continued cash shortfalls for Larclay, Lariat has fully impaired both the investment in and notes receivable due from Larclay as of December31, 2008. This resulted in an impairment expense of approximately $12.5million included in the consolidated statement of operations. |
Restricted Deposits | 9. Restricted Deposits Restricted deposits represent bank trust and escrow accounts required by the Minerals Management Service of the United States Department of the Interior, surety bond underwriters, purchase agreements or other settlement agreements to satisfy the Companys eventual responsibility to plug and abandon wells and remove structures when certain offshore fields are no longer in use. These restricted deposits relate to properties acquired as part of the NEG acquisition in November 2006. See Note2. One of the agreements requires the Company to deposit additional funds in an escrow account equal to 10% of the net proceeds, as defined, from certain of its offshore properties. In 2007, the Company was released from obligations under two of the escrow agreements. As a result, funds totaling $10.3million were released from escrow accounts and returned to the Company. During 2008 and 2007, the Company deposited approximately $0.8million and $7.4million, respectively, in escrow accounts. |
Accounts Payable and Accrued Expenses | 10. Accounts Payable and Accrued Expenses Trade accounts payable and accrued expenses consist of the following (in thousands): December31, 2008 2007 Accounts payable $ 302,407 $ 154,423 Redeemable convertible preferred stock dividends 8,956 Payroll and benefits 20,703 15,690 Drilling advances 4,074 5,817 Settlement agreementcurrent (See Note12) 5,000 5,000 Accrued interest 26,790 24,201 Other 7,363 1,410 Total trade accounts payable and accrued expenses $ 366,337 $ 215,497 |
Billings in Excess of Costs Incurred | 11. Billings in Excess of Costs Incurred In June 2008, the Company entered into an agreement with a subsidiary of Occidental Petroleum Corporation (Occidental) to construct a CO2 treating plant (the Century Plant) and associated compression and pipeline facilities for $800.0million. Occidental will pay a minimum of 100% of the contract price, plus any subsequent agreed-upon revisions, to the Company through periodic cost reimbursements based upon the percentage of the project completed. Upon start-up, the Century Plant, located in Pecos County, Texas, will be owned and operated by Occidental for the purpose of separating and removing CO2 from delivered natural gas. The Company will deliver high CO2 natural gas to the Century Plant. Pursuant to a 30-year treating agreement executed simultaneously with the construction agreement, Occidental will remove CO2 from the Companys delivered natural gas. The Company will retain all methane gas from the Century Plant and its other existing plants. The Company accounts for construction of the Century Plant using the completed-contract method, under which contract revenues and costs are recognized when work under the contract is completed or substantially completed. In the interim, costs incurred on and billings related to contracts in process are accumulated on the balance sheet. Provisions for a contract loss are recognized when it is determined that a loss will be incurred. During 2008, the Company issued and received payment for progress billings totaling $112.0million. Billings in excess of costs incurred during 2008 were $14.1million and were reported as a current liability in the consolidated balance sheet at December31, 2008. |
Long-Term Debt | 12. Long-Term Debt Long-term obligations consist of the following (in thousands): December31, 2008 2007 Senior credit facility $ 573,457 $ Other notes payable: Drilling rig fleet and related crude oil field services equipment 33,030 47,836 Mortgage 18,829 19,651 Other equipment and vehicles 162 8.625%Senior Term Loan 650,000 Senior Floating Rate Term Loan 350,000 8.625%Senior Notes due 2015 650,000 Senior Floating Rate Notes due 2014 350,000 8.0%Senior Notes due 2018 750,000 Total debt 2,375,316 1,067,649 Less: Current maturities of long-term debt 16,532 15,350 Long-term debt $ 2,358,784 $ 1,052,299 Senior Credit Facility.On November21, 2006, the Company entered into a $750.0million senior secured revolving credit facility (the senior credit facility). As discussed further below, the borrowing base has been increased and was $1.1billion at December31, 2008. The senior credit facility matures on November21, 2011 and is available to be drawn on and repaid without restriction so long as the Company is in compliance with its terms, including certain financial covenants. The senior credit facility contains various covenants that limit the ability of the Company and certain of its subsidiaries to grant certain liens; make certain loans and investments; make distributions; redeem stock; redeem or prepay debt; merge or consolidate with or into a third party; or engage in certain asset dispositions, including a sale of all or substantially all of the Companys assets. Additionally, the senior credit facility limits the ability of the Company and certain of its subsidiaries to incur additional indebtedness with certain exceptions, including under the senior notes. The senior credit facility also contains financial covenants, including maintenance of agreed upon levels for the (i)ratio of total funded debt to EBITDAX (as defined in the senior credit facility), which may not exceed 4.5:1.0 calculated using the last four completed fiscal quarters, (ii)ratio of EBITDAX to interest expense plus current maturities of long-term debt, which must be at least 2.5:1.0 calculated using the last four completed fiscal quarters, and (iii)current ratio, which must be at least 1.0:1.0. In the current ratio calculation, as defined in the senior credit facility, any amounts available to be drawn under the senior credit facility are included in current assets, and unrealized assets and liabilities resulting from mark-to-market adjustments on the Companys derivative contracts are disregarded. As of December31, 2008, the Company was in compliance with all of the financial covenants under the senior credit facility. The obligations under the senior credit facility are guaranteed by certain Company subsidiaries. Addition |
Other Long-Term Obligations | 13. Other Long-Term Obligations The Company has recorded a long-term obligation for amounts to be paid under a settlement agreement with Conoco, Inc. entered into in January 2007. The Company agreed to pay approximately $25.0million plus interest, payable in $5.0million increments on April1, 2007, July1, 2008, July1, 2009, July1, 2010 and July1, 2011. The payment made on July1, 2008 was included in accounts payable-trade in the consolidated balance sheet as of December31, 2007, and the payment to be made on July1, 2009 has been included in accounts payable-trade in the consolidated balance sheet as of December31, 2008. The non-current unpaid settlement amounts of $10.0million and $15.0million have been included in other long-term obligations in the consolidated balance sheets as of December31, 2008 and December31, 2007, respectively. |
Derivatives | 14. Derivatives The Company has entered into various derivative contracts including fixed price swaps, collars and basis swaps with counterparties. The contracts expire on various dates through December31, 2011. A counterparty to one of the Companys derivative contracts, Lehman Brothers, declared bankruptcy on October3, 2008. Due to Lehman Brothers bankruptcy and the declaration of bankruptcy by its parent, Lehman Brothers Holdings, Inc., on September15, 2008, the Company has not assigned any value to this derivative contract as of December31, 2008. At December31, 2008, the Companys open natural gas and crude oil commodity derivative contracts consisted of the following: Natural Gas Notional Weighted Avg. Period and Type of Contract (MMcf)(1) Fixed Price January 2009 March 2009 Price swap contracts 20,700 $ 9.14 Basis swap contracts 15,300 $ (0.74 ) April 2009 June 2009 Price swap contracts 20,930 $ 7.96 Basis swap contracts 15,470 $ (0.74 ) July 2009 September 2009 Price swap contracts 18,710 $ 8.09 Basis swap contracts 15,640 $ (0.74 ) October 2009 December 2009 Price swap contracts 18,400 $ 8.54 Basis swap contracts 15,640 $ (0.74 ) January 2010 March 2010 Price swap contracts 16,875 $ 8.08 Basis swap contracts 14,400 $ (0.73 ) April 2010 June 2010 Price swap contracts 17,063 $ 7.38 Basis swap contracts 14,560 $ (0.73 ) July 2010 September 2010 Price swap contracts 17,250 $ 7.61 Basis swap contracts 14,720 $ (0.73 ) October 2010 December 2010 Price swap contracts 17,250 $ 8.03 Basis swap contracts 14,720 $ (0.73 ) January 2011 March 2011 Basis swap contracts 1,350 $ (0.47 ) April 2011 June 2011 Basis swap contracts 1,365 $ (0.47 ) July 2011 September 2011 Basis swap contracts 1,380 $ (0.47 ) October 2011 December 2011 Basis swap contracts 1,380 $ (0.47 ) (1) Assumes ratio of 1:1 for Mcf to MMBtu and excludes a total notional of 7,300MMcf from 2009 for the Lehman Brothers basis swap contract. Crude Oil Notional Weighted Avg. Period and Type of Contract (in MBbls) Fixed Price January 2009 March 2009 Price swap contracts 45 $ 126.38 April 2009 June 2009 Price swap contracts 46 $ 126. |
Retirement and Deferred Compensation Plans | 15. Retirement and Deferred Compensation Plans Retirement Plan.The Company maintains a 401(k) retirement plan for its employees. Under the plan, eligible employees may elect to defer a portion of their earnings up to the maximum allowed by regulations promulgated by the Internal Revenue Service. Prior to August 2006, the Company made matching contributions equal to 50% on the first 6% of employee deferred wages. The Company modified the 401(k) retirement plan in August 2006 to change the matching contributions to equal a match of 100% on the first 15% of employee deferred wages. The plan was also modified to make the matching contributions payable in Company common stock. Accrued payables for the employer matching contribution in the amounts of $0.3million and $5.2million are reflected in the consolidated balance sheets as of December31, 2008 and 2007, respectively. In February 2008, the Company satisfied its matching obligation related to employees contributions made in 2007 through a transfer of treasury stock. During June 2007, the Company satisfied its matching obligation related to employees contributions made in 2006 through a transfer of treasury stock. See Note20. For 2008, 2007 and 2006, retirement plan expense was approximately $7.8million, $4.9million and $1.5million, respectively. Deferred Compensation Plan.Effective February1, 2007 the Company established a non-qualified deferred compensation plan that allows eligible highly compensated employees to elect to defer income in excess of the IRA annual limitations on qualified 401(k) retirement plans. The 2008 annual 401(k) deferral limit for employees under age50 was $15,500. Employees turning age50 or over in 2008 could defer up to $20,500. The Company makes matching contributions on non-qualified contributions up to a maximum of 15% of employee gross earnings. Accrued payables for the employer matching contribution in the amounts of $0.1million and $0.8million were included in the consolidated balance sheets as of December31, 2008 and 2007, respectively. In July 2008, the Company satisfied its matching obligation related to employees contributions made in 2007 and first quarter of 2008 through a transfer of treasury stock. See Note20. For 2008 and 2007, deferred compensation expense was approximately $2.3million and $0.6million, respectively. |
Income Taxes | 16. Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. As of December31, 2008, the Company had recorded a full valuation allowance against its net deferred tax asset. Significant components of the Companys deferred tax assets and liabilities are as follows (in thousands): December31, 2008 2007 Deferred tax liabilities: Derivative contracts $ 85,645 $ 8,002 Investment in partnerships 933 Property, plant equipment 45,537 Total deferred tax liabilities 85,645 54,472 Deferred tax assets: Property, plant and equipment 559,946 Allowance for doubtful accounts 1,414 1,744 Net operating loss carryforwards-acquired 1,622 2,397 Investment in and notes receivable from partnerships 1,880 Stock-based compensation 6,691 961 Minimum tax credit carryforward 1,297 528 Other 2,870 1,312 Total deferred tax assets 575,720 6,942 Valuation allowance (490,075 ) Net deferred tax liability $ $ 47,530 The provisions for income taxes consisted of the following components for the years ended December 31 (inthousands): 2008 2007 2006 Current: Federal $ 4,537 $ $ 3,235 State 4,665 601 2,653 9,202 601 5,888 Deferred: Federal (46,180 ) 28,121 345 State (1,350 ) 802 3 (47,530 ) 28,923 348 Total (benefit) provision for income taxes $ (38,328 ) $ 29,524 $ 6,236 A reconciliation of the provision for income taxes at the statutory federal tax rates to the Companys actual provision for income taxes is as follows for the years ended December 31 (in thousands): 2008 2007 2006 Computed at federal statutory rates $ (517,863 ) $ 27,911 $ 7,650 State taxes, net of federal benefit (12,153 ) 912 1,724 Nondeductible |
Earnings (Loss) Per Share | 17. Earnings (Loss) Per Share Basic earnings per share are computed using the weighted average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted average shares outstanding during the year, but also include the dilutive effect of awards of restricted stock. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share for the years ended December 31 (in thousands). 2008 2007 2006 Weighted average basic common shares outstanding 155,619 108,828 73,727 Effect of dilutive securities: Restricted stock 1,213 937 Weighted average diluted common and potential common shares outstanding 155,619 110,041 74,664 For the year ended December31, 2008, restricted stock awards covering approximately 3.0million shares were excluded from the computation of net loss per share because their effect would have been antidilutive. In computing diluted earnings per share, the Company evaluated the if-converted method with respect to its outstanding redeemable convertible preferred stock. Under this method, the Company assumes the conversion of the preferred stock to common stock and determines if this is more dilutive than including the preferred stock dividends (paid and unpaid) in the computation of income available to common stockholders. The Company determined the if-converted method is not more dilutive and has included preferred stock dividends in the determination of income available to common stockholders for the years ended December31, 2008 and 2007. |
Commitments and Contingencies | 18. Commitments and Contingencies Operating Leases.The Company has obligations under noncancelable operating leases, primarily for the use of office space. Total rental expense under operating leases for the years ended December31, 2008, 2007 and 2006 was approximately $2.4million, $2.3million and $1.1million, respectively. Future minimum lease payments under noncancelable operating leases (with initial lease terms in excess of one year) as of December31, 2008 are as follows (in thousands): Years ending December 31: 2009 $ 1,083 2010 239 2011 224 2012 113 2013 116 Thereafter 48 $ 1,823 Rig Commitments.The Company has contracts with third-party drilling rig operators for the use of their rigs at specified day rates. These commitments are not recorded in the consolidated balance sheets. Minimum future commitments as of December31, 2008 are $15.8million for 2009 and $1.2million for 2010. Firm Transportation.The Company has subscribed firm gas transportation service under two Transportation Service Agreements (TSA). The TSA terms run through 2012 on the Oasis Pipeline and through 2018 on the Midcontinent Express Pipeline. These commitments are not recorded in the consolidated balance sheets. Under the terms of the TSAs, the Company is obligated to pay a demand charge and in exchange, obtains the right to flow natural gas production through these pipelines to more competitive marketing areas. The amounts of the required payments for firm transportation as of December31, 2008 were as follows (in thousands): Years ending December 31: 2009 $ 22,810 2010 36,195 2011 31,320 2012 31,406 2013 25,392 Thereafter 84,688 $ 231,811 Litigation.The Company is a defendant in lawsuits from time to time in the normal course of business. In managements opinion, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on the financial condition, operations or cash flows of the Company. Loan to Equity Investee.The Company, through its subsidiary Lariat, has entered into a revolving promissory note with Larclay for an aggregate principal amount of up to $15.0million. See Notes8 and 21. |
Redeemable Convertible Preferred Stock | 19. Redeemable Convertible Preferred Stock In November 2006, the Company sold 2,136,667shares of redeemable convertible preferred stock to finance a portion of the NEG acquisition and received net proceeds of approximately $439.5million after deducting offering expenses of approximately $9.3million. Each holder of redeemable convertible preferred stock was entitled to quarterly cash dividends at the annual rate of 7.75% of the accreted value, or $210 per share, of their redeemable convertible preferred stock. Each share of redeemable convertible preferred stock was initially convertible into ten shares, and ultimately convertible into 10.2shares, of common stock at the option of the holder, subject to certain anti-dilution adjustments. A summary of dividends declared and paid on the redeemable convertible preferred stock is as follows (in thousands, except per share data): Dividends Declared Dividend Period per Share Total Payment Date January31, 2007 November 21, 2006 February 1, 2007 $ 3.21 $ 6,859 February 15, 2007 May8, 2007 February 2, 2007 May 1, 2007 3.97 8,550 May 15, 2007 June8, 2007 May 2, 2007 August 1, 2007 4.10 8,956 August 15, 2007 September24, 2007 August 2, 2007 November 1, 2007 4.10 8,956 November 15, 2007 December16, 2007 November 2, 2007 February 1, 2008 4.10 8,956 February 15, 2008 March7, 2008 February 2, 2008 May 1, 2008 4.01 8,095 (1) May7, 2008 May 2, 2008 May 7, 2008 4.01 501 May 7, 2008 (1) Includes $0.6million of prorated dividends paid to holders of redeemable convertible preferred shares at the time their shares converted to common stock in March 2008. The remaining dividends of $7.5million were paid during May 2008. On March30, 2007, certain holders of the Companys common units (consisting of shares of common stock and a warrant to purchase redeemable convertible preferred stock upon the surrender of common stock) exercised warrants to purchase redeemable convertible preferred stock. The holders converted 526,316shares of common stock into 47,619shares of redeemable convertible preferred stock. During March 2008, holders of 339,823shares of the Companys redeemable convertible preferred stock elected to convert those shares into 3,465,593shares of the Companys common stock. Additionally, during May2008, the Company converted the remaining outstanding 1,844,464shares of its redeemable convertible preferred stock into 18,810,260shares of its common stock as permitted under the terms of the redeemable convertible preferred stock. These conversions resulted in increases to additional paid-in capital totaling $452.2million, which represents the difference between the par value of the common stock issued and the carrying value of the redeemable convertible shares converted. The Company also recorded charges to retained earnings totaling $7.2mil |
Stockholders' Equity | 20. Stockholders Equity The following table presents information regarding SandRidges common stock (in thousands): December31, 2008 2007 Shares authorized 400,000 400,000 Shares outstanding at end of period 166,046 141,843 Shares held in treasury 1,326 1,456 The Company is authorized to issue 50,000,000shares of preferred stock, $0.001par value, of which 2,625,000shares are designated as redeemable convertible preferred stock. As of December31, 2007, there were 2,184,286shares of redeemable convertible preferred stock outstanding and no other shares of preferred stock were outstanding. All shares of redeemable convertible preferred stock outstanding were converted to shares of the Companys common stock during 2008. See Note19. There were no shares of preferred stock outstanding as of December31, 2008. Common Stock Issuance.In January 2006, the Company issued 239,630shares of common stock upon exercise of an over-allotment option related to a December 2005 private placement of its common stock. The Company issued these shares at a price of $15.00 per share after deducting the purchasers fee of $0.3million. The Company received net proceeds from the sale of approximately $3.3million. In November 2006, the Company sold 5.3million common units (consisting of shares of common stock, $18.00 per share, and a warrant, $1.00 per share, to purchase convertible preferred stock upon the surrender of the common stock) as part of the NEG acquisition and received net proceeds from this sale of approximately $97.4million after deducting the offering expenses of approximately $3.9million. See Note2. In March 2007, the Company sold approximately 17.8million shares of common stock for net proceeds of $318.7million after deducting offering expenses of approximately $1.4million. The stock was sold in private sales to various investors including the Companys Chairman and Chief Executive Officer, who invested $61.4million in exchange for approximately 3.4million shares of common stock. On November9, 2007, the Company completed the initial public offering of its common stock. The Company sold 32,379,500shares of its common stock, including 4,710,000shares sold directly to an entity controlled by the Companys Chairman and Chief Executive Officer, at a price of $26.00 per share. After deducting underwriting discounts of approximately $44.0million and offering expenses of approximately $3.1million, the Company received net proceeds of approximately $794.7million. The Company used the net proceeds from the offering as follows (in millions): Repayment of outstanding balance and accrued interest on senior credit facility $ 515.9 Repayment of note payable and accrued interest incurred in connection with recent acquisition 49.1 Excess cash to fund future capital expenditures 229.7 Total $ 794.7 During March 2008, the Company issued 3,465,593shares of common stock upon the conversion of 339,823shares of its redeemable conve |
Related Party Transactions | 21. Related Party Transactions During the ordinary course of business, the Company has transactions with certain shareholders and other related parties. These transactions primarily consist of purchases of drilling equipment and sales of oil field service supplies. Following is a summary of significant transactions with related parties for the years ended December 31 (in thousands): 2008 2007 2006 Sales to and reimbursements from related parties $ 90,170 $ 118,631 $ 14,102 Purchases of services from related parties $ 59,951 $ 77,555 $ 4,811 In August 2006, the Company sold various non-energy related assets to the Companys former President and Chief Operating Officer for approximately $6.1million in cash. The sale transaction resulted in a $0.8million gain recognized in earnings by the Company in August 2006. The gain is included in gain on sale of assets in the consolidated statements of operations. In September 2006, the Company entered into a facilities lease with a company owned by a member of its Board of Directors. The Company believes that the payments to be made under this lease are at fair market rates. Rent expense related to the lease totaled $1.4 million, $1.3million and $0.3million for the years ended December31, 2008, 2007 and 2006, respectively. The lease extends to August 2009. In May 2007, the Company purchased leasehold acreage from a partnership controlled by a director. The purchase price was approximately $8.3million in cash. In June 2007, the Company purchased certain producing well interests from a director. The purchase price was approximately $3.5million in cash. In October 2008, the Company purchased certain working interests and related reserves in company wells owned by its Chairman and Chief Executive Officer and certain of his affiliates. The purchase price was approximately $67.3million. See Note2. Larclay, L.P.Lariat and CWEI each own a 50% interest in Larclay. Larclay currently owns twelve rigs, one of which has not yet been assembled. Larclay financed the acquisition cost of its twelve rigs with a loan from a third party, secured by the purchased rigs, and a loan from CWEI. In addition, CWEI has guaranteed a portion of the third party debt. Lariat operates the rigs owned by the partnership. If Larclay has an operating shortfall, Lariat and CWEI are obligated to provide loans to the partnership. In April 2008, Lariat and CWEI each made loans of $2.5million to Larclay under promissory notes. The notes bear interest at a floating rate based on a LIBOR average plus 3.25% (5.1875% at December31, 2008)as provided in the Larclay partnership agreement. In June 2008, Larclay executed a $15.0million revolving promissory note with each Lariat and CWEI. Amounts drawn under each revolving promissory note bear interest at a floating rate based on a LIBOR average plus 3.25% (5.1875% at December31, 2008)as provided in the Larclay partnership agreement. Lariat advanced $5.0million to Larclay under th |
Subsequent Events | 22. Subsequent Events Private Placement of Convertible Perpetual Preferred Stock.In January 2009, the Company commenced and completed a private placement of 2,650,000shares of a new series of 8.5% convertible perpetual preferred stock to qualified institutional buyers eligible under Rule144A under the Securities Act. Net proceeds from the offering were approximately $243.9million after applying a discount to the purchase price of the stock and deducting offering expenses of approximately $8.0million. The Company will use the net proceeds of the offering to repay outstanding borrowings under its senior credit facility and for general corporate purposes. Marketing of Midstream Assets.In January 2009, the Company announced its intent to offer for sale certain of its gas gathering and related assets located in the WTO. The carrying value of these assets was $228.8million at December31, 2008. This process is ongoing as of the date of this filing. |
Industry Segment Information | 23. Industry Segment Information The Company operates in four related business segments: exploration and production, drilling and oil field services, midstream gas services and other ancillary business activities. These segments represent the Companys four main business units, each offering different products and services. The exploration and production segment is engaged in the development, acquisition and production of natural gas and crude oil properties. The drilling and oil field services segment is engaged in the land contract drilling of natural gas and crude oil wells. The midstream gas services segment is engaged in the purchasing, gathering, processing and treating of natural gas. The other segment includes transporting CO2 to market for use in tertiary oil recovery operations by the Company and third parties and other miscellaneous operations. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (Note1). Management evaluates the performance of the Companys business segments based on operating income (loss), which is defined as segment operating revenues less operating expenses and depreciation, depletion, amortization and impairment. Summarized financial information concerning the Companys segments is shown in the following table (in thousands): 2008 2007 2006 Revenues: Exploration and production $ 912,716 $ 479,321 $ 106,990 Elimination of inter-segment revenue 220 574 577 Exploration and production, net of inter-segment revenue 912,496 478,747 106,413 Drilling and oil field services 434,963 261,818 211,055 Elimination of inter-segment revenue 387,972 188,616 72,398 Drilling and oil field services, net of inter-segment revenue 46,991 73,202 138,657 Midstream gas services 688,071 285,065 192,960 Elimination of inter-segment revenue 483,933 177,487 70,068 Midstream gas services, net of inter-segment revenues 204,138 107,578 122,892 Other 22,791 29,286 21,411 Elimination of inter-segment revenue 4,602 11,361 1,131 Other, net of inter-segment revenue 18,189 17,925 20,280 Total revenues $ 1,181,814 $ 677,452 $ 388,242 Operating (loss) income: Exploration and production $ (1,263,249 ) $ 198,913 $ 17,069 Drilling and oil field services (5,393 ) 10,473 32,9 |
Condensed Consolidating Financial Information | 24. Condensed Consolidating Financial Information The Company is providing condensed consolidating financial information for its subsidiaries that are guarantors of its public debt. Subsidiary guarantors are wholly owned and have, jointly and severally, unconditionally guaranteed on an unsecured basis the Companys 8.625%Senior Notes due 2015, Senior Floating Rate Notes due 2014 and 8.0%Senior Notes due 2018. The subsidiary guarantees (i)rank equally in right of payment with all of the existing and future senior debt of the subsidiary guarantors; (ii)rank senior to all of the existing and future subordinated debt of the subsidiary guarantors; (iii)are effectively subordinated in right of payment to any existing or future secured obligations of the subsidiary guarantors to the extent of the value of the assets securing such obligations; and (iv)are structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors who are not themselves guarantors. The Company has not presented separate financial and narrative information for each of the subsidiary guarantors because it believes that such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the guarantees. The following condensed consolidating financial information represents the financial information of SandRidge Energy, Inc. and its wholly owned subsidiary guarantors, prepared on the equity basis of accounting. The non-guarantor subsidiaries are minor and, therefore, not presented separately. The information is presented in accordance with the requirements of Rule3-10 under the SECs RegulationS-X. The financial information may not necessarily be indicative of the financial position, results of operations, or cash flows had the subsidiary guarantors operated as independent entities. Condensed Consolidating Balance Sheet December31, 2008 December31, 2007 Parent Guarantor Parent Guarantor Company Subsidiaries Eliminations Consolidated Company Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 18 $ 618 $ $ 636 $ 62,967 $ 168 $ $ 63,135 Accounts and notes receivable, net 863,129 66,463 (820,519 ) 109,073 557,527 85,947 (528,715 ) 114,759 Derivative contracts 201,111 201,111 21,958 21,958 Other current assets 3,194 41,899 45,093 5,936 20,664 26,600 Total current assets 1,067,452 |
Supplemental Information on Oil and Gas Producing Activities (Unaudited) | 25. Supplemental Information on Oil and Gas Producing Activities (Unaudited) The Supplementary Information on Oil and Gas Producing Activities is presented as required by SFASNo.69, Disclosures about Oil and Gas Producing Activities. The supplemental information includes capitalized costs related to crude oil and gas producing activities; costs incurred for the acquisition of oil and gas producing activities, exploration and development activities; and the results of operations from oil and gas producing activities. Supplemental information is also provided for per unit production costs; oil and gas production and average sales prices; the estimated quantities of proved oil and gas reserves; the standardized measure of discounted future net cash flows associated with proved oil and gas reserves; and a summary of the changes in the standardized measure of discounted future net cash flows associated with proved oil and gas reserves. SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements(Continued) The Companys capitalized costs consisted of the following (in thousands): Capitalized Costs Related to Oil and Gas Producing Activities December31, 2008 2007 2006 Natural gas and crude oil properties: Proved $ 4,676,072 $ 2,848,531 $ 1,636,832 Unproved 215,698 259,610 282,374 Total natural gas and crude oil properties 4,891,770 3,108,141 1,919,206 Less accumulated depreciation and depletion (2,369,840 ) (230,974 ) (60,752 ) Net natural gas and crude oil properties capitalized costs $ 2,521,930 $ 2,877,167 $ 1,858,454 Costs Incurred in Property Acquisition, Exploration and Development Activities 2008 2007 2006 Acquisitions of properties: Proved $ 366,275 $ 303,282 $ 1,311,029 Unproved 16,982 268,839 Exploration(1) 391,672 361,973 18,612 Development 1,132,078 485,348 115,153 Total cost incurred $ 1,907,007 $ 1,150,603 $ 1,713,633 (1) 2008 and 2007 amounts include seismic costs of $68.8million and $38.6million, respectively. 2008 amount also includes pipe inventory costs of $47.2million. SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements(Continued) The Companys results of operations from oil and gas producing activities for each of the years 2008, 2007 and 2006 are shown in the following table (in thousands): Results of Operations for Oil and Gas Producing Activities For the Year Ended December31, 2006 Revenues $ |
Quarterly Financial Results (Unaudited) | 26. Quarterly Financial Results (Unaudited) The Companys operating results for each quarter of 2008 and 2007 are summarized below (in thousands, except per share data). First Second Third Fourth Quarter Quarter Quarter Quarter 2008: Total revenues $ 269,086 $ 378,050 $ 334,023 $ 200,655 (Loss) income from operations $ (62,811 ) $ (11,795 ) $ 401,287 $ (1,664,828 ) Net (loss) income $ (56,625 ) $ (20,343 ) $ 230,346 $ (1,594,658 ) (Loss) income (applicable) available to common stockholders $ (66,207 ) $ (26,993 ) $ 230,346 $ (1,594,658 ) Net (loss) income per share (applicable) available to common stockholders(1): Basic $ (0.47 ) $ (0.17 ) $ 1.41 $ (9.78 ) Diluted $ (0.47 ) $ (0.17 ) $ 1.40 $ (9.78 ) 2007: Total revenues $ 149,064 $ 159,063 $ 153,648 $ 215,677 Income from operations $ 3,468 $ 75,160 $ 59,716 $ 48,515 Net (loss) income $ (19,493 ) $ 34,564 $ 20,920 $ 14,230 (Loss) income available (applicable) to common stockholders $ (28,459 ) $ 22,270 $ 11,607 $ 4,915 Basic and diluted: Net (loss) income per share (applicable) available to common stockholders(1) $ (0.31 ) $ 0.21 $ 0.11 $ 0.04 (1) Income (loss) available (applicable) to common stockholders for each quarter is computed using the weighted-average number of shares outstanding during the quarter, while earnings per share for the fiscal year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of income (loss) available (applicable) to common stockholders for each of the four quarters may not equal the fiscal year amount. |