Q1 2025 SandRidge Energy Inc Earnings Call
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Speaker Change: Good afternoon and welcome to SandRidge Energy's first quarter 2025 earnings conference call.
Speaker Change: All participants are in a listen only mode. After the speakers are marked, we will conduct a question and answer session. To ask a question at this time, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the call over to Scott Prestridge, SDP of Finance and Strategy. Let's go ahead.
Speaker Change: Thank you and welcome everyone. With me today are Grayson Pranin, our CEO , Jonathan Frates, our CFO , Brandon Brown, our CAO, as well as Dean Parrish, our COO.
Speaker Change: We would like to remind you that today's call contains forward-looking statements and assumptions which are subject to risk and uncertainty and actual results make different materially from those projected in these forward-looking statements.
Speaker Change: These statements are not guarantees of future performance and our actual results may differ materially due to known and unknown risks and uncertainties as discussed in greater detail in our earnings release and our SEC filings.
Speaker Change: We may also refer to adjusted EBITDAF and adjusted DNA and other non-GAAP financial measures. Reconciliation of these measures can be found on our website.
With that, I'll turn the call over to Grayson
Thank you, and good afternoon.
Grayson: I'm pleased to report on a positive quarter for the company.
Grayson: In the first quarter, total production averaged nearly 18 NDOE per day, an increase of approximately 17% on a BOE basis.
and 30% on an oil base.
Grayson: as well as roughly 40% increase in revenue and EBITDA relative to the same period last year, benefited from a prior Cherokee acquisition and improved commodity price realization.
Jonathan: Before expanding on this, Jonathan will touch on a few key highlights.
Thank you, Grayson [inaudible]
Jonathan: Compared to the first quarter of 2024, the company benefited from significantly improved natural gas prices, partially offset by Edwin and WTI.
Jonathan: Combined with growing production, the company generated revenues of approximately $43 million, which represents a 41% increase compared to the same period last year and a 9% increase
Jonathan: Adjusted evido with 25.5 million in the quarter compared to roughly 15 million in the prior year period. We continue to manage the business, the bank cash flow, have no debt and maintain a substantial NOL position that shields us from federal income taxes.
Jonathan: Cash, including restricted cash at the end of the quarter, was just over 100 million, which represents more than $2.75 per share of our common stock outstanding.
Jonathan: The company paid 4 million in dividends during the quarter, which, including special dividends, now represents $4.25 per share paid to shareholders since the beginning of 2023.
Jonathan: On May 5th, 2025, the Board of Directors declared an 11-cent per share cast dividend payable on June 2nd to shareholders of record on May 19th.
Jonathan: Following the recent decline in oil prices, the company repurchased $452,000 or $5 million worth of common shares in the first quarter. Our Sherry Purchase Program remains in place with just under $70 million remaining authorized as a quarter-end.
Jonathan: As noted, the company has no term debt or revolving debt obligations and continues to live within cash flow, funding all capital expenditures and capital returns with cash flows from operation.
Jonathan: Commodity Price Realizations for the Quarter before considering the impact of edges were $69.88 per barrel of oil, $2.69 per MCF gas, and $20.7 per barrel of NGLs.
Jonathan: This compares to fourth quarter 2024 realizations of $71.44 for barrel of oil, $1.47 for MCF of gas, and $18.19 for barrel of NGLs.
Jonathan: These hedges will help secure a portion of our cash flows and support our drilling program during the recent down draft and crisis.
Jonathan: Despite growing production, our commitment to cost-discipline continuous yield results with adjusted GNA for the quarter of approximately $2.9 million, for $1.83 per BOE compared to $2.8 million, or $2.03 per BOE in the first quarter last year.
Jonathan: Net income was $13 million during the quarter, or $0.35 for basic share, and adjusted net income was $14.5 million with $39 cents for basic share.
Jonathan: This compares to $11 million worth 30 cents per basic share and $8.4 million or $23 cents per basic share respectively during the same period last year. Adjusted operating cash flow was roughly 26 million during the quarter.
Jonathan: Finally, despite a higher CAPEX program, the company generated free cash flow before acquisition with a roughly 14 million during the quarter near that of the first quarter of 2024.
Jonathan: Before 15 to our outlook, we should note that our earnings release in 20Q will provide further detail on our financial and operational performance during the quarter.
Jonathan: Thank you, Jonathan. That would be useful to give a brief update on operations before touching on other company highlights.
Jonathan: In the first quarter, the company successfully drilled the first well of our operated one-rig charity drilling program with first production anticipated later this month.
Dean will touch more on this later.
While we are anticipating our first result later this month
Jonathan: Foren on-off in industry wells, directly offsetting this well, and other DSUs we will be developing this year had initial average production rate of over a thousand barrels of oil or two thousand barrels of equivalent per day.
Jonathan: These new wells give further confidence to reservoir quality, results consistency, and expectations in the area. We hope to share more details on this and our Operator Results next quarter.
Jonathan: As I mentioned previously, production for the quarter increased approximately 17% and 30% on a BOE and oil basis year over year.
Jonathan: As we look for developing our high return Cherokee assets this year, we anticipate growing oilier production volumes further.
Jonathan: From a timing perspective, most of the productions from our development program will occur in the second half of this year.
Jonathan: with exit rates projected around 19 MBOE per day. An increasing oil production rate has made it around another 30% relative to Q1.
Jonathan: In addition, two completions will carry over into the next year.
Jonathan: and should further drilling also continue, we will see production volumes in specifically oil volumes increased meaningfully above the year in 25 exit rate level.
Jonathan: However, please keep in mind that we will continue to be mindful of results, commodity prices, costs, macroeconomics, and other factors which will shape our capital decisions this year
Shifting over to Cmoney Price
Jonathan: WTI prices have been around the low $60 range over the last several weeks and recently
Jonathan: Although the four-looking curve has been relatively flat, we will continue to visually monitor WTI prices.
Jonathan: Current commodity prices are operated Cherokee Wells, have a robust return to break even for these new welds, or then the $35 WTI.
However,
Jonathan: We could begin to moderate or could tell a portion of our capital program before we reach a level that headwinds are more severe and present further pressure on returns.
Jonathan: Given that the program is weighted in the back half of the year, we have time to continue to monitor
Jonathan: Since we do not have significantly told explorations this year, we have the flexibility to defer these projects if needed for a period of time in order to better time the commodity environment and optimize both our cash flows and project returns.
Jonathan: While our acreage is 95% held by production, we do have undeveloped leases, include leases in the Cherokee play that have expiration.
Jonathan: Along and short, we have the flexibility to adjust our capital program this year to respond to commodity price challenges and we'll do so in a judicious manner while managing lease aspirations and other considerations.
Now.
onto natural gas prices.
Jonathan: We've benefited during the quarter with Henry Hub prices, which have been more robust and durable, rising to $4.30 per NCS, and near doubling of that from 2024.
Jonathan: While there has been some volatility in early Q2, the natural gas price outlook remains strong.
Jonathan: The real so what here is the optionality we have across our aftertaste.
Jonathan: Couple with the strength of our balance sheet that situates us well to navigate changing
Combination of our charity and legacy assets [inaudible]
Jonathan: as well as improvement in natural gas prices. Give us multi-safety options to maneuver and leverage different commodity cycles.
Jonathan: Our charity development adds value with WTI as constructive, and we can take advantage of our legacy property through well-reactivations.
Conversely, given the relatively low-break even of our producing properties,
Jonathan: and our cash loans have just over a hundred million dollars. We're also well positioned not only to weather, but the right circumstances to take advantage of lower commodity environments by acquiring additional producing property and attractive prices.
Jonathan: Put more simply, we have a strong balance sheet and a more versatile kit bag which makes the company more resilient and better points in the mover than it just with the commodity environment. Now, I'll turn things over to Dean to discuss operations in more detail.
Thank you, Grayson. Let's start on our capital program.
Dean: The first operated well in our program and two non-offerated wells were drilled and the Cherokee play last quarter.
Jonathan: First production on the operated well is expected later this month.
Jonathan: Early indications during drilling and completion are positive, and we anticipate having production results report next quarter.
Jonathan: Our team successfully planned an executed drilling of the first operated well on budget with minimal operational issues.
Jonathan: We are currently patrolling Wells No. 2 and 3 in a disbante to complete and have production for these wells in the next quarter.
Jonathan: We plan to drill eight operated Cherokee Wells with one rig this year and complete six wells.
Jonathan: The remaining two completions are anticipated to carry over to next year.
Jonathan: More than 80% of our plan wells are proved undeveloped or puds, with others projected to be converted to puds by year end.
Jonathan: Additionally, this could set up new putt additions or extensions at the end of the year.
Jonathan: Grosswell costs vary by depth, but are estimated to be between approximately $9 million and $11 million
Jonathan: While we have taken proactive steps to help mitigate these effects of inflation, further changes to tariffs or other factors could influence these costs in the future.
Jonathan: From a timing standpoint, most of the production from this year's capital program will occur in the second half of the year, with a benefit extending into next year.
Jonathan: We intend to spend between $66 and $85 million in our 2025 capital program.
Jonathan: which is made up of $47 to $63 million in drilling and completions activity in between 19 and $22 million in capital workovers, production optimization, and selective leasing in the charity play.
Jonathan: Our high graded leasing is focused to further bolster our interest in solidite our position and extend development in the future years.
Jonathan: We intend to fund capital expenditures and other commitments using cash flows from our operations and cash on hand.
Jonathan: As Grayson discussed earlier, our operated Kirikgy Wells have a robust returns at current commodity prices.
Jonathan: However, we could moderate or curtail our capital program if headwinds persist or present further pressures on rates of return.
Jonathan: If we were to take these steps, we would likely begin by reducing non-DNC stand and it faced with more challenging commodity prices followed by deferring certain completions which would make up roughly 60% of new well costs.
Jonathan: In this scenario, we would be positioned to more quickly take advantage of commodity price improvements, maintain current drilling efficiencies, manage lease explorations and other factors.
Jonathan: Under more extreme down-side cases, we have the optionality to take further steps to the per-projects, minimize spending, and optimize cash flows.
Jonathan: Through the first quarter, 13 wells were converted to rod pump and 5 wells were reactivated as we continue to focus on high return and value adding projects that provide benefits such as lowering forward-looking costs.
Jonathan: Enhancing Production on Existing Wells and further moderating our base decline profile.
Jonathan: The artificial list systems we have in we'll be installing in our conversion program are tailored for the well-current fluid production and reduced the electrical demand from the current artificial list system, which is key to decreasing future utility costs.
Jonathan: The focused efforts over past quarters in optimizing our wealth production profile and costs.
Jonathan: have contributed to flattening the expected base asset level decline of our already producing assets to single digit average over the next 10 years.
Jonathan: Our legacy assets remain approximately 99% held by production, which cost-effectively maintains our development option over a reasonable tenor.
Jonathan: These non-chararchy assets have high relative gas content, but commodity price futures are not yet at preferred levels to resume further development or more well-racked evations at this
Jonathan: Commonity crisis firmly over $80.00 WTI and $4.00 Henry Hub over a Covenant tenor, indoor reduction and well costs are needed before we would return to exercise the option value of further development or low reactivations.
Now, shifting to lease-offering expenses.
Jonathan: Despite continued inflationary pressures and increased well count from our recent acquisition in prior capital programs.
Jonathan: LLE and expense workovers for the quarter were held to approximately $10.9 million or $6.79 per BOE, which compares favorably to $7.92 cents per BOE in the first quarter last year.
Jonathan: We will continue to actively press on operating costs through rigorous bidding processes, leveraging our significant infrastructure, operation center, and other company advantages.
With that, I will turn things back over to Grayson.
Grayson: Thank you, Dean. I will now resist the key highlights of SandRidge.
Grayson: Our asset base is focused in the mid-continent region with a primarily PDP well set which does not require any routine flaring of produced gas.
Grayson: These well-understood assets are most fully held by production with a long history, shallowing and diversified production profile in double-visit reserve lives.
Grayson: Our incumbent assets include more than a thousand miles each of own and operated SWD in electrical infrastructure over our footprint.
Grayson: This substantial owned and integrated infrastructure helps the risk individual well profitability for a majority of our legacy-producing wealth under roughly $40 WTI and $2 Henry Huff.
Grayson: Our assets continue to yield free cash flow and we have negative net leverage.
Grayson: This cast generation proposal provides several paths to increase shareholder value in realization and is benefited by a low G&A burden.
Grayson: SandRidge's value proposition is materially de-risk from a financial perspective, our strength and balance-cheap financial flexibility and advantage tax position.
Grayson: We have bolstered our inventory to provide further organic growth optionality and incremental oil diversification with low-price events in high-graded areas.
Grayson: We maintain financial flexibility that allows us to adjust our strategy to take advantage of commodity cycles.
Grayson: This flexibility provides advantages and strategic optionality to further grow our business and provide the buffer to commodity headwind while protecting our capital return program.
Grayson: Finally, it's worth highlighting that we take our ESG commitment seriously and if implemented discipline processes around them.
Grayson: We remain committed to our strategy in growing the value of our business in a safe, responsible, efficient manner, while prudently allocating capital to high-return organic growth projects.
Grayson: We'll also evaluate merger and acquisition opportunities in a discipline manner with consideration of our balance sheet and commitment to our capital return program.
This strategy has five points.
One.
Grayson: Maximize the value of our incumbent mid-con PDP efforts by extending and flattening our production profile with high rate of return production optimization projects.
as well as continuously pressing on operating and administrative costs.
two.
Grayson: Exercise capital stewardship and invest in projects and opportunities that have high risk adjusted fully burdened rates to return while being mindful and prudently targeting reasonable reinvestant rates that sustain our cash flows and prioritize a regular way to divinate.
Grayson: 3. Maintain optionality to execute unvalued, creative merger and acquisition opportunities that could bring synergies, leverage the company's core competencies.
Grayson: Compliment, it's portfolio of assets for the utilized approximately 1.6 billion of federal met operating losses or otherwise yield attractive returns towards shareholders.
Four.
as we generate cash.
Grayson: We will continue to work with our board to assess past and maximize shareholder value to improve investment and strategic opportunities, advancement of our Return of Capital Program and other uses.
Grayson: As we look forward to the year and beyond, we plan to further progress our Cherokee development while monitoring money prices results in other factors.
Grayson: in order to realize high rates of return as well as maintainer production levels.
while providing further oil diversification.
Grayson: given our financial flexibility, we will exercise capital stewardship to respond to changes in money prices, cough, macroeconomic, and for other factors.
Grayson: Shifting to administrative expenses, how will turn things over to Brandon?
Brandon: Thank you, Grayson. As we wind up our prepared remarks, I will point out our first quarter at just the GNA of $2.9 million, or $1.83 per view week, continues to compare favorably to our peers.
Brandon: The ongoing efficiency of our organization tends from our core values to remain cost-discipline and prior initiatives, which have tailored our organization to be fit for purpose.
Brandon: We will maintain our cost conscious and efficiency focus mindset moving forward and continue to balance the weighting of field versus corporate personnel to reflect where we create value.
We have outsourced necessary, but perfunctory and less core functions.
such as Operations Accounting, Land Administration, IT, Tax, and HR.
Brandon: Our efficient structure has allowed us to operate with total personnel at just over 100 people while retaining key technical skill sets to have both the experience and institutional knowledge of our business.
Brandon: In summary, the company had free cash flow of approximately $14 million in the quarter.
Brandon: over $100 million in cash and cash equivalence at quarter-end, which represents more than $2.75 per share of our common stock outstanding.
An inventory of high rate of return, low break even projects.
Brandon: In overall, a main composition that is approximately 95% held by production, which preserves the option's value of future development potential of our legacy acreage in a cost-effective
Low overhead, top tier adjusted DNA, no dead, negative leverage
Brandon: Flattening Production Profile, double digit reserve life, and approximately $1.6 million [inaudible]
Brandon: This concludes our prepared remarks. Thank you for your time today. We will now open the call to questions.
Brandon: As a reminder to ask a question, please press star followed by the number one on your telephone keypad. To withdraw any questions, press star one. We'll pause for just a moment to compile the Q&A roster.
Brandon: As a reminder to ask a question, please press star one.
Brandon: We have no questions in queue. This will conclude today's conference call. Thank you for your participation. You may now disconnect.