Q3 2020 SandRidge Energy Inc Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to Sandridge Energy third quarter 2020 earnings call.

At this time all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

Ask a question during the session you will need to press Star and then one on your telephone keypad.

Please be advised today's conference is being recorded and if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to David Xu Director of Finance. Thank you. Please go ahead.

Thank you and welcome everyone with me today are called these are our CEO dialogue and Moody, our CFO and races, bringing our VP of engineering and reservoir as well as other members of management will do the likes to remind you that today's call contains forward looking statements and assumptions, which.

They are subject to risks and uncertainty and actual results may differ materially from those projected in these forward looking statements. We may also refer to adjusted EBITDA and adjusted DNA and other non-GAAP financial measures reconciliations of these measures can be found on our website.

Thank you and good morning, our earnings release yesterday as well as tend to you that we will file later today, both provide some detail on our financial and operating performance during the third quarter.

Accordingly, as usual, we'll keep our prepared remarks.

You've seen a lot of the hard work over the last six months come together in this third quarter, starting with HSV spite sharp personnel reductions.

Daniel outsourcing numerous well adjustments in response to volatile commodity prices and other distractions.

Company Street without a recordable incident stands at 26 megawatts and counting.

Quite a remarkable feat.

From a debt and liquidity perspective, our financial position became considerably stronger during the quarter.

Ended three key is less than 1 million net debt versus more than $45 million the previous quarter and at the beginning of this week, we had approximately 16 million of cash on hand versus debt 12 million.

This substantial de leveraging reflects not only the approximately 35 million proceeds from the sale of our headquarters building, but also the significant cost and capital efficiencies implemented by our team.

From a production and financial performance perspective, the small ball and capital efficient Workover program and cost curtailment initiatives that we implemented over the last six months have become evident in our results.

Yesterday's earnings release, again reaffirmed or 2020 guidance from May we're.

We are increasingly confident that we should achieve and on several metrics better those targets.

We held production steady this quarter with 22.3, M.B., a day compared to 23.6 and nearly a day in the prior quarter.

At this point of the year.

We should approach if not surpassed 8.2 billion below the high end of the 2020 guidance may.

Hello, We continues to fall coming in at $8.1 billion or three point $3.94 per Boe compared to just under $9 million in just over $4 per BOE, we in the prior quarter.

We believe our Probeam LNG compares favorably with almost all our public small cap oil and gas peers.

Looking to year end, we should have a good chance to be meaningfully below the 48 million low end of the 2020 LOE guidance through may.

Just a DNA similarly continues to fall coming in at $2.3 million or 1.1, dollar 11 per Boe compared to $3.7 million or $1.74 could be in the prior quarter.

As with our we we believe our purview. We adjusted you may stacks up well against almost all our public small cap oil and gas peers. So.

For the year, we should be able to land safely within 11 million to $15 million range 2020, adjusted DNA guidance from May.

Finally on the financial front, just a DNA came in at 15.4 million rebounding approximately 75% from the prior quarter.

From a corporate structure perspective, the company is becoming simpler we.

We closed on the acquisition of the overriding royalty interest held by Sandridge Mississippian Trust too for a net purchase price of $3.3 million.

We have one remaining affiliating Trust Sandridge Mississippian Trust one.

Left that trust has announced that per the agreement governing the trust it will need to commence winding up this month.

Finally from a strategic perspective due to a building sale cost efficiencies and capital discipline, we now find ourselves in the happy position of being one of the few if not the only small cap publicly traded gas oriented oil and gas companies transitioning to an increasing net cash positive about.

Yes.

This position affords us the benefits of timing patients as well as wives strategic birth.

We'll continue to evaluate adding assets with a focus on those with high PDP weighting that we believe we can acquire in an equity value accretive manner as whilst divesting assets that no longer aligned with our strategic direction.

We'll also assessed returning capital to shareholders sharing we do it in a financially prudent economically efficient manner.

I'll now open the call to questions.

Ladies and gentlemen in order to ask a question you will need to press Star and then one on your telephone keypad again that is star one.

We stand fire will be compiled acutely roster.

Our first question is from Noel parks with comfort your comment to your line is open.

Good morning.

Good morning.

Okay, Let's go on doing well there I just had a couple of questions.

The the absorption of the Sandridge.

Trust number two.

You did actually is the the original trust.

The second one is that still independent at this point I haven't really kept up with it.

It is independent assays in the sense that has not completed its liquidation that trust announced this month that will begin the process of unwinding later this month.

And with that announcement was made by the trustee for the trust we submit.

A significant portion.

Roughly.

25% of that trust, so, but we don't we don't control it.

And we have some of the same whites during the wind down that we had with the Mississippian trust to in other words we.

We imagine the trustee will fall during fiduciary duty, which typically.

Evolves and marketing program, where that was it.

For the override.

Royalty interest in wells that we operate that are owned by the trust overrides are and then when that process is Q2 included.

The opportunity to exercise right of first refusal and by that and our board made the decision to exercise that right with wind up.

The Mississippian Trust too.

Got it and and actually was that.

The timing of.

I guess when you they trust sort of began its plans for unwinding was that something that you were aware of well in advance or is that something they can add just do at whatever point at this time.

Yes.

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To answer the first question is we had an inkling and I'll explain and answer. The second question is no suitability to the trust to wind up is actually fairly formulaic prudent trust documents and once and meet their sales can be a certain level of distributions for four quarters in a row.

They are required to wind down.

And so they don't have discretion that supplies wind down and so we can monitor what the distributions are and then like other analysts project. What we think based on the wells that we operate we know that a royalty interest on what the distributable cash flow might be and have a pretty good sense of number one now but just for clarity we have built.

Particularly in the <unk>.

Don public insight into what the plans are we just can't do the math.

Gotcha, Okay and.

I just also wanted to.

As you pointed out that the Ela OE trends have been have been positive and you think there is still more more room for that to come down going forward can you just talk a little bit about what the drivers of that would be.

Yes, I mean, the drivers have been.

You know you're kind of classic blank page review of how you operate your producing wells.

Everything from making sure we right size our compression so we're not paying for more compression that we need on a well that two years I may have justify more compression and now does that mean you visiting how what chemicals used in how you source it means being very aggressive on your our RFP, particularly on.

Trucking saltwater disposal it means thinking through how you staff.

You field operations, and making sure that you have the right right sized personnel force it means.

Making sure that we're taking full advantage of some telemetry skated that were used to rebuild marginal wells.

It means that when we do workovers.

Vince Workovers you first asked if we have an extra part laying around rather than buying a new part is a lot of the small details that.

Our.

That you implement that and to be fair one of things that are in there.

I'm proud of for for Grayson, and D. and usually the tip of the spirit of implementing this as long as well as a team to lead Mccain and Dell and they.

They do a really nice job.

Focusing on the details and the L., we reduction isn't just base, our curtailment and the number of wells that we have in fact, it's only a small part of it.

So it's really.

Yes.

Yes in a sense focusing on beacons.

Great I think thats, all I have thanks a lot.

Thank you.

And again, ladies and gentlemen, it is star and then one just curious though for a question.

Ladies and gentlemen, this concludes the acuity and today's conference.

Thank you for your participation and at this time you may now disconnect.

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