Q3 2020 SandRidge Permian Trust 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 to.

To 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 slog, Andy our CFO in the basin, bringing our VP of engineering and reservoir as well as other members of management, which we would like to remind you that today's call contains forward looking statements and assumptions which are so.

Subject to risk 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 10 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 HFC spite sharp personnel reductions.

Stansell outsourcing numerous well adjustments in response to volatile commodity prices and other distractions The company Street without a recordable incident stands at 26 megawatts in county.

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 yes.

Yesterday's earnings release again reaffirmed our 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, Mboe, 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 Billy high end as the 2020 guidance may.

Okay.

Hello, we continues to fall coming in at $8.1 million or three point $3.94 per Boe compared.

Compared to just under $9 million and just over $4 per BOE we in.

Prior quarter.

We believe our pro via the L., we 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 LNG guidance from May.

Yeah.

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 per be early in the prior quarter.

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

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

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

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

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 affiliated 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 back.

Thanks.

This position affords us the benefits of time and patience as well as wide strategic birth.

We'll continue to evaluate adding assets with a focus on those 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.

Please standby will be compiled the culinary roster.

Our first question is from Noel parks with confidence Simmons 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.

But 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 own significant portion roughly.

Roughly.

25%.

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

Involves a marketing program, where there was that age for the override.

Royalty interest in wells that we operate that are owned by the trust overrides arm and then when that process is Q2 included we will have the opportunity to exercise right of first refusal and by that and with our board made the decision to exercise that right with wind up.

Of the Mississippian Trust too.

Got it and and actually was that.

The timing of.

I guess when you they trust Sir 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 they decide.

Yes.

The 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 further trust document and once and meet their sales can be a certain level of distributions for fourq.

Additionally, well they are required to wind down and.

And so they don't have discretion that lies 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 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 no.

Okay great.

Yes, Don public insight into what the plans are we just can do the math.

Gotcha, Okay and.

I just also wanted to.

After you pointed out that the L. 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 ago may justify more compression and now it doesn't.

It means using how what chemicals used in how you source.

Mange 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 skate and that were used to repay note marginal wells.

It means that when we do workovers.

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

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That you implement that and to be fair I want to things.

Proud effort to Grayson Indian you've really been tipped spirit implementing this as long as well as a team to lead Mccain and Dylan.

They do a really nice job.

Focusing on the details and the L., we reduction isn't just curtailment of the number 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 digits.

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

Thank you.

And again, ladies and gentlemen that is star and then one cure so for any questions.

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

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

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