SandRidge Energy, Inc. filed an annual report with the Securities and Exchange Commission Wednesday, stating it has hired officials to evaluate strategic alternatives, which may include bankruptcy.
SandRidge spokesperson Duane Grubert said in an email that the company has no comment beyond its filing.
“As per the filing, we’ve hired advisors to help evaluate alternatives,” he said in an email.
The report states that as a result of declining industry conditions, and taking into consideration SandRidge’s “substantial amount of long-term debt outstanding,” the company engaged advisers to assist in evaluating new strategies. Strategic alternatives could include restructuring, refinancing existing debt or reorganization under Chapter 11 of the Bankruptcy Code.
“However, there can be no assurances that the Company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions,” according to the SEC filing. “As a result of these uncertainties and the likelihood of a restructuring or reorganization, management has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern as it is currently structured.”
The SEC filing for 2015 states that the company’s independent, registered, public accounting firm consolidated financial statements for the year. The firm submitted an explanatory paragraph regarding the topic of doubt and the “ability to continue as a going concern, which under the terms of the Company’s senior secured revolving credit facility (“senior credit facility”) may result in an event of default.”
The statement said the defaults could create uncertainty associated with the company’s ability to repay its outstanding long-term debt obligations.
The report, consisting of more than 200 pages, was filed Wednesday and included several exhibits with topics ranging from business strategy to its board of directors.
SandRidge released its operational results for the fourth quarter of 2015 on Tuesday.
President and CEO James Bennett said in a written statement that the company will reduce its capital spending by about 60 percent compared to 2015.
“Combining high-graded development of our Mid-Continent assets with our emerging Niobrara play is resulting in a more diversified company with improved capital efficiencies,” Bennett said. “We’ve also reduced our G&A (general and administrative) expense in order to match our ongoing activity as we preserve and extend capabilities while managing optionality in this challenging environment.”
According to the release, the company has two rigs in the Mississippian and one in the Niobrara in Colorado with expectations to run one rig in each of its areas starting in May.
“Capital expenditures for 2016 and for future periods are highly dependent on numerous factors including changes in commodity prices and available liquidity and may differ materially from guidance,” according to the release.
The company’s earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses were $79 million in the 2015 fourth quarter. Earnings were nearly three times as much for the fourth quarter of 2014 at $239 million.
In January, the company filed a Form 8-K with the SEC because it maxed out its capacity with its credit facility.
SandRidge borrowed almost $489 million from its administrative agency, Royal Bank of Canada, representing the remaining withdrawn amount available for the credit facility, according to the form.
"These funds are intended to be used for general corporate purposes," according to the form completed by SandRidge.
SandRidge Director of Communications David Kimmel did not detail the definition for general corporate purposes in which SandRidge will used the funds.
The Oklahoma City-based oil and gas company had $855 million in cash and $11.1 million in outstanding letters of credit at the time of its January filing.
Also in January, a subsidiary of SandRidge, Lariat Services, laid off 226 employees in Cherokee and Alva.
SandRidge has laid off 440 employees in 2016.
Brent Kisling, executive director of Enid Regional Development Alliance, said a number of Enid's legacy companies have used the downturn to grow and hire additional employees, including KBR construction with the Koch expansion.
“We want to continue to work very closely with families impacted by announcements such as this and make sure they find employment here in northwest Oklahoma. The long-term downturn and price of oil has impacted our local economy, but we’ve been more fortunate than some that we’ve diversified our economy and it doesn’t have as large an impact as it used to," he said.
On Wednesday, SandRidge’s stock fell to 6 cents per share.