1. business and industrial
2. energy
3. natural gas

2015 IPAA
OGIS NEW YORK
MONDAY, APRIL 20, 2015
1
DISCLAIMER
Forward Looking Statement
This presentation includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements express a belief, expectation or intention and are generally accompanied by words that convey
projected future events or outcomes. The forward-looking statements include statements about the company’s corporate strategies, future operations, development
plans and appraisal programs, and projections and estimates of our drilling inventory and locations, production, reserves, rates of return, projected capital
expenditures and other costs, efficiency initiative outcomes, infrastructure utilization and investment, liquidity, debt maturities, capital structure, asset sales, price
realizations and hedging strategies. We have based these forward-looking statements on our current expectations and assumptions and analyses made by us in light
of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate
under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and
uncertainties, including the volatility of oil and natural gas prices, our success in discovering, estimating, and developing oil and natural gas reserves, the availability
and terms of capital, our timely execution of hedge transactions, credit conditions of global capital markets, changes in economic conditions, regulatory changes and
other factors, many of which are beyond our control. We refer you to the discussion of risk factors in Part I, Item 1A – “Risk Factors” of our Annual Report on Form 10K for the year ended December 31, 2014 and in comparable “Risk Factors” sections of our Quarterly Reports on Form 10-Q filed after the date of this presentation.
All of the forward-looking statements made in this presentation are qualified by these cautionary statements. The actual results or developments anticipated may not
be realized or, even if substantially realized, they may not have the expected consequences to or effects on our company or our business or operations. Such
statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking
statements. We undertake no obligation to update or revise any forward-looking statements.
The SEC permits oil and natural gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves, as each is defined by the SEC. At
times we use the term "EUR" (estimated ultimate recovery) and refer to their location and potential to provide estimates that the SEC’s guidelines prohibit us from
including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved, probable or possible reserves and, accordingly, are
subject to substantially greater risk of being actually realized by the company. For a discussion of the company’s proved reserves, as calculated under current SEC
rules, we refer you to the company’s Annual Report on Form 10-K referenced above, which is available on our website at www.sandridgeenergy.com and at the SEC’s
website at www.sec.gov.
Regulation G Disclosure: This presentation includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those
measures to the most directly comparable GAAP measures is available on our website at www.sandridgeenergy.com.
SandRidgeEnergy.com
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SANDRIDGE HAS A LEADING U.S. MIDCONTINENT OIL & GAS POSITION
WE ARE SKILLED, LARGE SCALE DEVELOPERS OF OIL AND GAS RESOURCES
• 1,400 wells drilled, over $5B invested since 2010 ($1.6B in 2014)
• Producing over 90 MBoe/d, largest water gathering system in U.S. (over 1.2 MMBw/d)
• Expert at horizontal redevelopment of legacy vertical oil and gas plays
TRANSFERABLE SKILLSETS TO OTHER PLAYS
•
•
•
•
•
Drilling: ran 30+ rigs in 2014, sub - $3MM cost per horizontal lateral
Infrastructure and logistics: optimizing extensive water and electrical systems
Production: Midcon production grew 47% yoy to 76 MBoe/d in Q4’14
Artificial Lift: optimizing gas lift, ESPs, and rod pumps
Engineering and geology: growing multi-year inventory of drilling locations
INNOVATION AND CONTINUOUS IMPROVEMENT ARE PART OF OUR CULTURE
•
•
•
•
Premier operator of the Mississippian Limestone in Oklahoma and Kansas
Developing stacked pays such as Chester and Woodford
Pioneered use of multilateral wells
Cost leaders: well costs, production expense
BUSINESS MINDED CULTURE
• Management background includes Wall Street, oil majors, independents, and midstream
• We efficiently accelerate value creation with large scale activity levels more typical
of larger companies
SandRidgeEnergy.com
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ACTIONS TO THRIVE IN LOWER PRICE ENVIRONMENT
SUCCESS DEMONSTRATED BY HITTING GROWTH GUIDANCE AND ADDING RESERVES
• Reserves up 37%, PUD type curve up 27%
• 2014 production of 29 MMBoe, 1% over guidance; Midcon grew 47% YoY to Q4’14 76 MBoe/d
IMPROVED CAPITAL EFFICIENCY THROUGH 2015 AND INTO 2016
• $2.4MM lateral cost target for 2H’15
• Lower lateral cost and improved type curve provide 27% more EUR for 80% of cost
• 2014 multilateral program at 85% of cost of single laterals for 100% of 90-day type curve volume
NEW COVENANT PROVIDES BALANCE SHEET FLEXIBILITY
• $900MM borrowing base affirmed in February
• 2.25x senior secured covenant
INTRODUCING 2015 GUIDANCE - PRESERVES LIQUIDITY AND PRODUCTION BASE
•
•
•
•
SandRidgeEnergy.com
$700MM Capex, ~6% organic production growth
Ramping down from current 9 rigs to 7
40% of 2015 program comprised of multilaterals
Targeting $200MM of capital raised from asset sales and monetization
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27% MORE EUR FOR 80% OF THE COST
At lower well costs…
returns are preserved…
drilling location count grows.
Development inventory is preserved with lower
costs and expanded with oil price recovery
Service cost reductions plus increased
efficiencies while drilling more multilaterals
Type curve returns at target costs and
current strip comparable to 35% IRRs from
higher price and cost environment in 2014
* PUDs + Risked Probables @ Strip
* 04.13.15 Strip Pricing
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2015 CAPEX OF $700MM VS. $1.6B IN 2014
Reducing Capital Spending While Increasing Efficiency
PRINCIPLES
Drilling projects must generate hurdle
returns at strip pricing
Unlock value in this market
• Efficiency gains
• Service cost reductions
• Expanded use of multilaterals
PLANNED SPEND AND RESULT
$700MM Capex budget
28.0-30.5 MMBoe guided production
Guiding 6% YoY volume growth despite
rig ramp down
7 Rigs running by 2H’15
Efficient infrastructure utilization
Appraisal New Ventures commitment
Transition toward operating
within cash flows
40% multilaterals in drilling plan
Defend and Extend capabilities
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STRONG HEDGE POSITION
$50 Oil in 2015 Realizes $81.50 per Bbl
*
•
•
•
As of 02.25.2015
Positions displayed include royalty trusts, but are exclusive of basis hedges.
Liquids hedged to NYMEX WTI; Natural Gas hedged to NYMEX Henry Hub
*
NGL barrels hedged at 3:1 ratio to WTI
SandRidgeEnergy.com
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CAPITAL STRUCTURE FOCUS
Ample Liquidity, No Near Term Maturities
• $900MM borrowing base
• New senior secured covenant (2.25x EBITDA beginning 3/31/15)
• No bond maturities before 2020
MARKET VALUE ($ in millions)
Market Cap (4/14/2015)
Net Debt(1)(2)
Preferred Stock
Enterprise Value
$1,002
3,014
565
$4,581
ASSET OVERVIEW(3)
Q4’14 Production (MBoe/d)
88.4
Proved Reserves (MMBoe)
516
% Reserves as Liquids
42%
YE14 PV10 Value ($Bln)(4)
$5.5
1)
2)
3)
4)
SandRidgeEnergy.com
(a) $100MM drawn as of February 20, 2015
Non-GAAP financial measure. Refer to the Disclaimer slide for additional disclosure
As of 12/31/2014
SandRidge consolidated reserves as of YE2014 including royalty trusts
Based on YE14 SEC pricing ($91.48 / 4.35)
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2014 ACHIEVEMENTS
Hit our Operating Stride in 2014, Now Focused on Balance Sheet
2014 FULL YEAR RESULTS
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•
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•
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37% Proved reserves growth
27% Type curve growth
47% Midcon production growth
1% over production guidance midpoint
Added Garfield county to focus area
Pioneered multilateral success in Miss
Initiated redevelopment of Chester & Woodford
Prepared infrastructure monetization (S1’d SWG)
TOTAL SD PRODUCTION
*
Q4’14 ACTIVITY
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•
•
•
•
76 MBoe/d in Mid-Continent
121 New Midcon laterals delivered 378 Boe/d 30-day IPs
10 New Chester wells delivered 470 Boe/d 30-day IPs (59% oil)
3 New Woodford wells delivered 397 Boe/d 30-day IPs (77% oil)
Permian Royalty Trust drilling completed
SandRidgeEnergy.com
* Excludes production related to divested GOM assets.
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YEAR END PROVED RESERVES +37% TO 516 MMBOE
Consistent Growth of a Strong Reserves Base
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•
•
•
•
$5.5B SEC PV-10(a) (+34% YOY)
$10.69 Proven Value/Boe(a)
604% All-in Reserve Replacement
65% Proved Developed
All-in F&D $9.00/Boe
• 42% Liquids Mix
• 18.7 Years Reserve Life
• 12.2 Years Proved Developed
Reserve Life
• $2.8B PV-10(b) at Strip
RESERVES MIX
RESERVES GROWTH
Note: SandRidge consolidated reserves as of YE 2014 including royalty trusts
(a) Based on YE 2014 SEC pricing ($91.48/4.35)
(b) 04.13.15 Strip Pricing
SandRidgeEnergy.com
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WELL PERFORMANCE SUPPORTS TYPE CURVE GROWTH
Several Quarters of Stronger Gas IPs and Early Volumes
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2015 MISSISSIPPIAN PUD TYPE CURVE
484 MBoe, 44% Liquids
2015 OIL: 118 MBo
30 Day IP (Bo/d)
1st Year Decline(a)
B Factor
190
80%
1.26
2015 NGL: 97 MBbls
Yield (Bbls/MMcf)
Shrink
51.6
86.1%
2015 GAS: 1.6 Bcf
(b)
966
62%
2.00
MBoe
30 Day IP (Mcf/d)
1st Year Decline(a)
B Factor
SandRidgeEnergy.com
(a) Represents decline from month 1 to month 13 (b) Wet gas, wellhead volumes
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MEANINGFUL WELL COST REDUCTIONS
$250K of $600K Targeted Savings Realized as of March 2015
EFFICIENCY GAINS
• Rig efficiency
• Location high-grading
• Wellbore + completion design
SERVICE COSTS
•
•
•
•
•
Rig rates
Directional drilling
Stimulation
Liner packer system
ESPs
MULTILATERAL EXPANSION
• 40% multilaterals
• 85% of the cost of single
laterals for 100% of 90-day
type curve production
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40% MULTILATERALS IN 2015 DRILLING PLAN
100% of 90-Day Type Curve Production for
85% of the Cost of a Single Lateral
FULL SECTION DEVELOPMENT
ACTIVITY AND SUCCESS IN 2014
• Sole multilateral operator in the Midcontinent
• Multilateral program consisted of 28 projects with average
completed well costs of $2.6MM per lateral
• Wells with greater than three months of production averaged
100% of the 90-day type curve Boe
– 98% of 90-day type curve oil
– 102% of 90-day type curve gas
DRIVING CAPITAL EFFICIENCY
• Two or more laterals from a single vertical wellbore create
significant cost reductions, yielding enhanced returns
• Rock integrity of our carbonates (vs shales or sandstones
elsewhere) allows for effective use of open hole completions
• Shared pad drilling operations drive reductions in location, day
rate, rig mobilization, & facility costs
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MULTI-ZONE DRILLING LOCATIONS AND 2015 ACTIVITY
Ramp Down to 6 Development Rigs + 1 Committed to Appraisal New Ventures
DRILLING LOCATION INFORMATION
MISS
CHESTER
WOODFORD*
Producing Laterals
1,375
37
5
Peak 30-Day Boe
365
361
418
Future Locations(a)
3,212
401
147
( As of February 2015)
* Wells developed under new geological model
(a) PUDs + Risked Probables @ 04.13.15 Strip
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LARGE MIDCONTINENT FAIRWAY FOR APPRAISAL
Material Success in Chester and Woodford
• Appraisal / New Ventures is a critical piece of SD business
• Focused on redevelopment of additional legacy vertical
reservoirs and technology transfer of SD expertise from
existing to new areas
• $46MM CAPEX budget in 2015 (of $700MM total) in D&C,
land, and geophysical
– Arkoma Shelf
– Central Kansas Uplift (Miss HZ, Viola, & Arbuckle)
– Southern Anadarko (Latigo and Chester Targets)
– Other recompletions and legacy acreage appraisal
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NEW VENTURES SUCCESS CASE
Pioneering Chester Oil Development
• First industry horizontal re-development of legacy
Chester vertical production
– Fine grained silty sandstone, distinct pay intervals
separated by shale
– Existing infrastructure in area
– Higher oil cut and less water production than Miss
carbonates
– Shallow decline profile
• Growth potential with appraisal success to the south
and west of focus area counties
• 230-270 MBoe EUR per well
• Program: 37 wells @ 361 Boe/d 30-day IP (63% oil),
3% above new Miss Type Curve
• 10 Wells currently completing
SandRidgeEnergy.com
LEGACY CHESTER VERTICAL PRODUCTION
HZ APPRAISAL SUCCESS
FOCUS AREA
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GEOLOGICAL EXPERTISE UNLOCKS WOODFORD
Refined Geological Model Yielding Strong Results
• Woodford targets now identified based on four
desirable characteristics:
– Production interval above Woodford
(example: Mississippian)
– Siliceous Woodford member with moveable oil
– Productive interval below Woodford
(example: Hunton or Misener)
– Underlying frac barrier separating the Woodford
from wet intervals below (example: Sylvan)
• 250-275 MBoe EUR per well
• ~100 feet of targeted gross thickness
• 5 Wells @ 418 Boe/d 30-day IP (79% Oil), 19% above
new Miss Type Curve
• 2 Wells currently completing
SandRidgeEnergy.com
Figure adapted from Amsden and Klapper (1972)
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SALTWATER GATHERING & DISPOSAL (SWG)
Most Efficient SWG Operator in the Mid-Continent
PRODUCE
~$600MM INVESTED
THROUGH 2014
• Average capacity of 15,000 Bw/d per
well
• ~1.3 million barrels of water gathered and disposed per
day during Q4‘14 in the Mid-Continent and Permian Basin
– Low pressure pumps at most locations
GATHER & PROCESS
– Various tubing sizes based on needed
capacity
• Produced water is transported to disposal location through
SD owned pipeline system
– Open hole Arbuckle completion
• Pressure and volume continuously
monitored
• Typically Polyethylene pipe (8” to 12” diameter) connected
to producing wells, buried under ground
• Water is treated at disposal location
• 191 SWG wells in Mid-Continent and Permian Basin
99%
• Many take water on a vacuum (hydrostatic pressure is
adequate to achieve disposal)
IS PIPED
INJECT
OF WATER
• Arbuckle has been taking produced
water for ~80 years
• Frac flowback is < 5% of total
• Gathering system is interconnected –
maximizing system flexibility
(VS. TRUCKED)
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LARGEST SALTWATER GATHERING SYSTEM IN THE NATION
Pipeline Footprint Resembles Typical Gathering System
• 191 SWG wells
• 1,260 MBw/d current volumes
• 99% of Water is Piped vs. Trucked
•
1,049 miles of installed pipelines
• Advanced hydraulic simulation
• Resembles hydrocarbon gathering
and processing system
• Design based on actual type curves
• Engineered design and construction
• New assets, built since 2008
100 MILES
Note: Map does not show other SWG assets in NW Kansas or West Texas.
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Change look
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2015 PRODUCTION GUIDANCE
Note: Totals may not foot due to rounding
(a) 2014: 1.3 MMBoe of non-recurring production related to divested GOM assets
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CAPITAL STRUCTURE OVERVIEW
Preferred Stock ($ in millions)
Senior Notes ($ in millions)
8.75% Sr Notes due 2020
$450
7.5% Sr Notes due 2021
1,175
8.5% Convertible Perpetual Preferred (a)
7.0% Convertible Perpetual Preferred (b)
$265
300
$565
8.125% Sr Notes due 2022
750
Total
7.5% Sr Notes due 2023
825
Credit Rating
Moody’s
S&P
Total
$3,200
Corp Rating
B1
B
Outlook
Stable
Negative
(a) Convertible at holder’s option at $8.0125 per common share; convertible after Feb 20, 2014
(b) Convertible at holder’s option at $7.7645 per common share; convertible after Nov 20, 2015
SandRidgeEnergy.com
(c) $100MM drawn as of February 20, 2015
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HEDGING OVERVIEW
LIQUIDS
Q1 2015
Q2 2015
Q3 2015
Q4 2015
2015
2016
2.29
$92.71
1.73
$91.55
1.01
$92.43
0.55
$94.11
5.59
$92.44
1.46
$88.36
0.72
$103.13
$90.82
$73.13
0.73
$103.13
$90.82
$73.13
1.56
$103.65
$90.03
$78.15
1.56
$103.65
$90.03
$78.15
4.58
$103.48
$90.28
$76.56
2.56
$100.85
$90.00
$83.14
Q1 2015
Q2 2015
Q3 2015
Q4 2015
2015
2016
14.40
$4.62
1.82
$4.20
1.84
$4.20
1.84
$4.20
19.90
$4.51
0.00
NA
0.25
$8.55
$4.00
0.25
$8.55
$4.00
0.25
$8.55
$4.00
0.25
$8.55
$4.00
1.01
$8.55
$4.00
0.00
NA
NA
9.65
($0.291)
15.47
($0.302)
15.64
($0.302)
15.64
($0.302)
56.40
($0.300)
0.00
NA
Swaps
Volumes (MMBbls)
Price ($/Bbl)
Three-way Collars
Volumes (MMBbls)
Call Price ($/Bbl)
Put Price ($/Bbl)
Short Put Price ($/Bbl)
NATURAL GAS
Swaps
Volumes (Bcf)
Price ($/Mcf)
Collars
Volumes (Bcf)
Call Price ($/Mcf)
Put Price ($/Mcf)
Basis Swaps (PEPL)
Volumes (Bcf)
Swap Price ($/Mcf)
• As of 02/25/2015
• Hedge positions include contracts that have been novated to or the benefit of which have been conveyed to SandRidge sponsored royalty trusts
SandRidgeEnergy.com
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2014 YEAR END RESERVES
Creating Value from a Strong Reserve Base
SEC Pricing $91.48 / $4.35
RESERVES
LIQUIDS
MMBbls
GAS
Bcf
PV10
PV-10
EQUIVALENT
MMBoe
%
$MM
%
Reserves by Reservoir Status
PDP – Producing
119
1,011
287
56%
15
117
35
PBP – Behind Pipe
2
76
PUD – Undeveloped
82
PNP – Non Producing
Total
$
3,523
64%
7%
462
8%
14
2%
94
2%
585
179
35%
1,437
26%
218
1,788
516
136
1,203
336
65%
82
585
179
35%
218
1,788
516
$ 5,516
Reserves by Development
Total Developed
Total Undeveloped
Total
$
4,079
74%
1,437
26%
$ 5,516
Note: Totals may not foot due to rounding
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2015 OPERATIONAL GUIDANCE
PRODUCTION
Oil (MMBbls)
Natural Gas Liquids (MMBbls)
Total Liquids (MMBbls)
Natural Gas (Bcf)
Total (MMBoe)
CAPITAL EXPENDITURES ($ in millions)
Exploration and Production
Land and Geophysical
Total Exploration and Production
Oil Field Services
Electrical/Midstream
General Corporate
Total Capital Expenditures (excl. A&D)
EBITDA from Oilfield Services
and Other ($MM)(a)
Adjusted Net Income
Attributable to NCI ($MM)(b)
Adjusted EBITDA
Attributable to NCI ($MM)(c)
PRICE REALIZATIONS
9.0 – 10.0
4.0 – 5.0
13.0 – 15.0
89.5 – 93.5
28.0 – 30.5
$612
38
$650
5
30
15
$700
$10
$60
$90
Oil (differential below WTI)
NGLs (realized % of WTI)
Gas (differential below Henry Hub)
COSTS PER BOE
Lifting
Production Taxes
DD&A – oil & gas
DD&A – other
Total DD&A
G&A – cash
G&A – stock
Total G&A
Corporate Tax Rate
Deferral Rate
$3.75
30%
$0.75
$12.25 - $13.00
0.65 – 0.85
12.00 – 15.00
2.00 – 2.20
$14.00 - $17.20
3.00 – 3.50
0.50 – 0.75
$3.50 - $4.25
0%
0%
a) EBITDA from Oilfield Services and Other is a non-GAAP
financial measure as it excludes from net income
interest expense, income tax expense and depreciation,
depletion and amortization. The most directly
comparable GAAP measure for EBITDA from Oilfield
Services and Other is Net Income from Oilfield Services
and Other. Information to reconcile this non-GAAP
financial measure to the most directly comparable GAAP
financial measure is not available at this time, as
management is unable to forecast the excluded items
for future periods and/or does not forecast the excluded
items on a segment basis.
b) Adjusted Net Income Attributable to Noncontrolling
Interest is a non-GAAP financial measure as it excludes
gain or loss due to changes in fair value of derivative
contracts and gain or loss on sale of assets. The most
directly comparable GAAP measure for Adjusted Net
Income Attributable to Noncontrolling Interest is Net
Income Attributable to Noncontrolling Interest.
Information to reconcile this non-GAAP financial measure
to the most directly comparable GAAP financial measure
is not available at this time, as management is unable to
forecast the excluded items for future periods.
c) Adjusted EBITDA Attributable to Noncontrolling Interest
is a non-GAAP financial measure as it excludes from net
income interest expense, income tax expense and
depreciation, depletion and amortization, gain or loss
due to changes in fair value of derivative contracts and
gain or loss on sale of assets. The most directly
comparable GAAP measure for Adjusted EBITDA
Attributable to Noncontrolling Interest is Net Income
Attributable to Noncontrolling Interest. Information to
reconcile this non-GAAP financial measure to the most
directly comparable GAAP financial measure is not
available at this time, as management is unable to
forecast the excluded items for future periods.
SandRidgeEnergy.com
www.SandRidgeEnergy.com
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2015 CAPEX GUIDANCE
2015 CAPEX GUIDANCE
Development D&C
Appraisal & New Ventures D&C
Carryover
Total D&C
SWG - D&C
Permian
JV Carry
Total D&C
2015 GUIDANCE
$306
29
102
$437
11
0
0
$448
OTHER E&P
Development Land & Geophysical
Appraisal & New Ventures Land & Geophysical
Total Land & Geophysical
SWG Infrastructure
Workovers & Non-Op
Capitalized G&A and Interest
Total Other E&P
$21
17
38
27
86
51
$202
NON E&P
Drilling & Oil Field Services
Midstream and Electrical
General Corporate
Total Non-E&P
TOTAL
$5
30
15
$50
$700
SandRidgeEnergy.com
LATERAL COUNTS
Development
Appraisal & New Ventures
Total Laterals
2015 GROSS
182
11
193
2015 NET
116
8
124
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Our Mission at SandRidge is to create the premier, high-return, growth-oriented,
resource conversion company, focused in the Midcontinent region of the United States.
SANDRIDGE INVESTOR RELATIONS
123 Robert S. Kerr Avenue, Oklahoma City, OK 73102
[email protected]
www.SandRidgeEnergy.com
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