Q4 2020 SandRidge Energy Inc Earnings Call

Okay.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Sandridge Energy fourth quarter 2020 earnings call. At this time all participant lines are in a listen only mode.

For the secrets presentation there'll be a question of the next recession. The ask a question during the session you will need the press star one on your telephone. Please note today's conference is being recorded if you require any further assistance. Please press star Zero I will now turn the call because all of the Mr. David Xu director of Fine.

Yes. Thank you. Please go ahead sir.

Thank you and welcome everyone with me today of Carl Giesler, our CEO of lots of moving our CFO.

<unk> our CEO.

Well as other members of management.

Like to remind you that today's call contains forward looking statements and assumptions, which are subject to.

The risks and uncertainties and actual results may differ materially from those projected in these forward looking statements we.

We may also refer to adjusted EBITDA, and adjusted G&A and other non-GAAP financial measures.

Deletions of the measures can be found on our website.

Thank you and good morning.

Earnings release yesterday, as well of the 10-K in Investor presentation that we will file and put on the website later today provide subsidy of detail on our financial and operating performance during the fourth quarter as well as full year 2020.

The documents also provide our formal guidance for 2021.

Currently as usual, we'll keep our prepared remarks short.

2020 was literally transformational for sandridge.

Inefficiently streamline the organization with the personnel went up from 270 at year end 2019 to just over 100 today.

Most of this reduction is due to significant significant outsourcing of non core administrative functions.

Cost came down commensurately with both adjusted G&A and LOE down just over 50% year over year.

We believe the compare favorably with the peers on both an absolute and per.

Yearly cost basis.

The tightened our capital expenditures to slashing spend about $5 million this past year compared to more than $160 million of your partner.

Our aggressive cost and capital discipline, coupled with the sale of a non core headquarters building in Oklahoma City, and North Park Basin asset in Colorado enabled us to literally flip our net debt from <unk>.

Over $50 million at year end 19 to a current net cash position of roughly the same magnitude.

On the operations side, we were able to increase of net operated working interest by buying in at a very attractive discount the PDP value.

Other riding the royalty interest in of wells held by standard Mississippian Trust II.

We anticipate having a similar opportunity later this spring with our sole remaining affiliate of trust. This past fall Sandridge Mississippian Trust, one announced the commencement of its the solution process.

Despite the challenges of navigating COVID-19, as well as the various organizational shifts within the Sandridge team remains the focus we met or beat all of operational guidance metrics provided in may of last year.

We have continued our street with other portable HSE incidents.

Now 31 months.

2021, we plan to maintain this organizational discipline.

Typically we plan to continue to price cost efficiencies of implement small ball initiatives to optimize our production profile.

Currently we will maximize the cash generation of of business.

Simultaneously, we plan to shift of strategic attention externally.

Believe the oil and gas industry generally and our core mid con based and particularly the benefit from consolidation.

Asset aggregation offer simple levers to drive shareholder value from one capturing scale of economies in both the fuel the back office to too high grading investment inventory to fleet accessing expanded sources of capital to full of providing our shareholders shareholders expanded liquidity to finally, gaining the.

Broader institutional investor in the research volume.

Finding an economically attractive way to grow our PDP asset base or combine our assets with those of another company.

The increasing manner would be of key emphasis in 2021.

We believe of publicly traded equity growing net cash position and streamlined and scale of organizational structure positions us well to potentially benefit from industry consolidation.

The issue.

Regardless no debt will be disciplined stewards of the company's cash if you can't deploy that capital to expand the <unk> footprint in an economically prudent manner, which facilitated value enhancing the merger with seek to return that cash to shareholders and proficient manner.

We'll now open the call for questions.

And at this time, if you would like to ask a question press star followed by the number one on your telephone keypad.

And that starts talking about the number one to ask a question and we'll pause for just the moment.

And as a reminder, that star one to ask a question.

And Thats Star one to ask a question.

And our first question comes from Peter.

Our first question comes from.

Garrett King with Truffle Hill capital.

Hi, Colin good morning.

Good morning.

One question I had the.

Press release list of the Companys cash balance as of March 1st did the company have any outstanding debt on that day.

[noise] excuse me.

We did it.

If you look at the balance sheet debt was summarized in our earnings release and that'll be more fully explained in the 10-K that will fall off the market close today, we have of $30 million.

Very nice credit facility.

Well, the consisting of a $20 million term loan debt and then of true 10 million Undrawn.

Our revolving portion so we do have $20 million of term loan debt on our balance sheet at an exceptionally attractive rate.

Yeah.

Got it and that remained outstanding as of March one.

That's right and I'd say the living to make had on that one.

Our regular way.

Harvey all of that was led by RBC and others as you know the RBI markets in turmoil that was expiring in April of this year.

And the left arm right leg cheetos to kind of extend that.

This is just a much more attractive options of the company from a cash.

Kaufman.

<unk> really just.

Kind of in the Unicorn and a lot of sense of news.

Yeah.

Understood and as the company now that you guys are amassing the significant cash balance of these continuing to evaluate M&A opportunities.

Well absolutely.

Right now at the end.

The day, we're well aware of that the cash is not ours yours.

And if we can't deploy it.

Five of the shareholders pretty pretty clear manner.

We're not going to do anything with it we'll get it back.

But he did you also think it makes it can help make this attractive.

Partner led accounts.

Some of them might be over levered and using the cash to do other might rightsize the balance sheet. The pro forma company that could be very value enhancing to the pro forma entity of we can accrue an outsized portion of the value. So in my mind, having a strong balance sheet and in particular, a strong cash position makes us even more attractive.

Partner and the strategic situations other.

As you know the strategic activity.

Often talk about where the die that most of the details we believe having a strong balance sheet, particularly having a strong cash position makes us net net more attractive.

Understood. Thank you.

And our next question comes from Josh Young with Bison.

Hey, guys.

So a quick question on the price realizations and would you mind talking a little bit about now that the asset base is down to just this one mid continent assets.

What's the driver of the large.

The discount from the relevant pricing benchmark, so I see 20%.

The NGL price versus <unk>, and a pretty substantial discount to the.

Of the Nymex gas price and if you could talk a little bit about how much of that is related to fixed costs or minimum volume commitments versus variable.

Okay.

Sure. Good morning. This is a great day.

Beginning with the NGL.

The 20%.

Clearly laid off of.

Our primary parts of the Targa within the ethane recovery per well.

Adding more volume.

Wichita brings the per barrel price from <unk>.

Revenue perspective of our head.

And then on the gas side.

Hey, there.

Volume.

The the 50 557 cents per annum.

Yes.

I hope the.

Good day.

Q4 <unk>.

Realized $1 56 per Mcf.

Okay, Great and then just as a follow on can you guys comment I didn't hear anything you did it see if any of the press release, obviously prices were extremely high during the recent storms.

One of the production was offline. So you get the comment on your experience do that and if you were able to maintain production through the exceptionally high price per day.

I would talk about how it maintained production and then I'll talk about how the realized pricing.

Okay.

But the change the of Cracker Jack job.

Keeping our production of online a lot of our neighbors had deferment of basically shut ins of close to 100%.

We capped at all times, one of half of production of online and very quickly got that down to more normal confirmed at levels for the.

The month of February.

So really hats off to.

James Parrish, who is really the point here on the executive team.

Equally the field I was working with them.

The the tremendous job and it's something that could have been a lot worse.

And certainly was for some of our peers. So I can talk a little bit about the pricing.

Yes, so on the pricing front.

Typically what we see in the midcon as our primary purchaser of Targa as Grayson mentioned.

And the way that our gas prices based on what's the pricing, which is the weighted average sales price.

I would say 85% of that.

<unk> is going to come from lots of frontline pricing.

And so in some months helps us where the spot price it gets lower than the front book pricing during the month.

Sometimes that can potentially hurt us where spot prices rise.

And the problem of prices lower.

However in this case, we are still working off of the details of Theres still 15% approximately on the historical basis of our volumes that will be price at spot.

One of the sort of the chaos the happened in the mid con.

In regards to force majeure letter of shutdowns of the plant things like that that were happening more downstream, we're working with target to understand better our pricing was affected.

And the weighted average sales price was affected during the month of February.

And so we will the investigating that.

Understanding that further here in the next few weeks.

All of the wallboard.

Great. Thank you.

And there are no further questions at this time.

And thank you for joining today's conference call.

You may now disconnect.

Yeah.