Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SandRidge Energy Inc (SDRPQ.PFD) reported a positive quarter with the successful acquisition in the Western Anadarko Basin, boosting production and cash flow.
• The company generated nearly $18 million in adjusted EBITDA despite low natural gas prices, showcasing strong financial performance.
• SandRidge Energy Inc (SDRPQ.PFD) has no debt and a substantial net operating loss (NOL) position, shielding cash flows from federal income taxes.
• The recent acquisition increased daily production by 27% and oil production by 65%, enhancing the company's asset base.
• The company declared a cash dividend of $0.11 per share, continuing its return of capital program with over $150 million paid to date.

Negative Points

• Natural gas prices were low during the quarter, impacting revenue and price realizations.
• The company faces inflationary pressures and increased lease operating expenses due to the expanded asset base.
• Ethane recovery by the largest natural gas purchaser affected natural gas and NGL pricing.
• The company requires commodity prices to be over $80 WTI and $4 Henry Hub to resume further developments or well reactivations.
• SandRidge Energy Inc (SDRPQ.PFD) is dependent on commodity price cycles, which could impact future capital allocation and activity levels.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Sign with SDRPQ.PFD.

Q: Could you expand on your drilling activity plans for the Cherokee play asset? A: Our plans include completing the drilled but uncompleted wells (ducts) and initiating drilling on our joint efficient units, extending into next year. We have 11 drilling and spacing units (DSUs) and 22 extended reach or 2-mile laterals to develop over the next couple of years.

Q: How many wells do you plan to drill next year? A: We plan to operate with one rig or a partial rig year, allowing us to drill up to 12 wells annually, with one well every 30 days.

Q: Can you provide details about the well cost and expected returns in the Cherokee play compared to your legacy assets? A: The Cherokee assets have higher oil content compared to our gassy legacy assets, making the economics more attractive given the current WTI and Henry Hub price ratio. The breakeven for Cherokee is roughly $35 per barrel WTI, and the returns are robust enough to justify continued capital allocation.

Q: How does the recent acquisition impact your capital allocation strategy? A: The acquisition provides more flexibility in capital allocation. We can focus on Cherokee assets when WTI is favorable and shift to legacy assets when gas prices are projected to rise. This dual approach allows us to optimize returns based on commodity price environments.

Q: What is the breakeven price for the Cherokee play? A: The breakeven price for the Cherokee play is approximately $35 per barrel WTI, providing a solid floor for economic viability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.