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SandRidge Energy Third Quarter 2022 Results

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SandRidge Energy, Inc. announced financial and operational results for the third quarter 2022.

Recent Highlights:

• Generated Adjusted EBITDA⁽¹⁾ of $54.8 million in the third quarter compared to $53.7 million in the prior quarter
  
  
• Third quarter net income was $53.7 million, or $1.46 per basic share. Adjusted net income⁽¹⁾ was $49.8 million, or $1.35 per basic share
  
  
• Third quarter 2022 production of 17.8 MBoed was consistent with the last three quarters as the Company continued its well reactivation program and began bringing new wells online as part of its previously announced capital development program
  
  
• The Company has drilled five wells and completed three wells during the nine months ended September 30, 2022
  
  
• As of September 30, 2022, the Company returned 42 wells to production in 2022 that were previously curtailed due to the 2020 commodity price downturn. The Company has returned over 170 wells to production since the beginning of 2021
  
  
• Adjusted G&A⁽¹⁾ was $2.0 million and $6.0 million, or $1.22 and $1.23 per Boe for the three and nine-month periods ended September 30, 2022
  
  
• The Company maintained its commitment to protecting shareholder capital invested in its development program by entering in to commodity derivative contracts for natural gas. The commodity derivative contracts have an average strike price of $8.39 per MMBtu with a positive mark-to-market asset value of $4.0 million as of September 30, 2022

Financial Results & Update

Profitability & Realized Pricing

For the three months ended September 30, 2022, the Company reported net income of $53.7 million, or $1.46 per basic share, and net cash provided by operating activities of $55.5 million. After adjusting for certain items, the Company's adjusted net income⁽¹⁾ amounted to $49.8 million, or $1.35 per basic share, adjusted operating cash flow⁽¹⁾ totaled $54.8 million and adjusted EBITDA⁽¹⁾ was $54.8 million for the quarter. The Company defines and reconciles adjusted net income, adjusted operating cash flow, adjusted EBITDA, and other non-GAAP financial measures to the most directly comparable Generally Accepted Accounting Principles in the United States ("GAAP") measure in supporting tables at the conclusion of this press release.

The Company generated approximately $36.3 million of free cash flow⁽¹⁾ in the third quarter, which represents a conversion rate of approximately 66% relative to adjusted EBITDA.

Third quarter realized oil, natural gas, and natural gas liquids prices, before the impact of derivatives,⁽²⁾ were $92.24 per Bbl, $5.99 per Mcf and $30.79 per Bbl, respectively, compared to $109.06 per Bbl, $5.30 per Mcf and $35.96 per Bbl in the prior quarter.

Operating Costs

During the third quarter of 2022, lease operating expense ("LOE") was $9.7 million or $5.92 per Boe compared to $9.5 million, or $5.87 per Boe in the prior quarter.

For the three months ended September 30, 2022, general and administrative expense ("G&A") was $2.4 million, or $1.45 per Boe compared to $2.2 million, or $1.34 per Boe for the three months ended June 30, 2022. Adjusted G&A⁽¹⁾ was $2.0 million, or $1.22 per Boe during the third quarter of 2022 compared to $1.8 million, or $1.09 per Boe during the second quarter of 2022.

Liquidity and Capital Structure

As of September 30, 2022, the Company had $240.6 million of cash and cash equivalents, including restricted cash. The Company has no outstanding term or revolving debt obligations.

Operational Results & Update

Production

Production totaled 1,638 MBoe (17.8 MBoed, 15.8% oil, 30.5% NGLs and 53.7% natural gas) for the three months ended September 30, 2022 compared to 1,620 MBoe (17.8 MBoed, 12.8% oil, 33.4% NGLs, and 53.8% natural gas) for the three months ended June 30, 2022. This production level is consistent with the last three quarters and was a result of the Company's recent completion activity and continued well reactivation program.

2022 Development Program

SandRidge operated one drilling rig in the third quarter and successfully drilled three wells and completed three wells targeting the Meramec formation in the core of the NW Stack play as part of its previously announced capital development program, which helped to increase oil production by more than 25% compared to the prior quarter. As of September 30, 2022, the Company drilled five wells and completed three wells, achieving production rates consistent with area results and the Company's expectation range, and activity is planned to continue throughout the remainder of the year.

Well Reactivation & Rod Pump Conversion Program

During the third quarter of 2022, the Company continued returning wells to production that were previously curtailed due to the commodity price downturn in the first half of 2020 and, in many cases, improving their production potential through capital improvements. The well reactivation program has helped flatten expected annual PDP decline to an average of approximately 8% over the next 10 years. Strong commodity prices, high rates of returns, and low execution risk support the Company's belief that these projects represent a superior use of capital. During the first three quarters of 2022, the Company brought 42 wells back online, bringing the total since the beginning of 2021 to over 170. Throughout 2022, SandRidge expects to return a total of approximately 54 wells to production and complete a total of approximately 35 artificial lift conversions. The Company continues to evaluate its inventory of such projects.

Outlook

SandRidge will continue to focus on growing the cash value and generation capability of its asset base in a safe, responsible and efficient manner, while exercising prudent capital allocations to projects it believes provide high rates of returns in the current commodity price environment. These projects include well reactivations, artificial lift conversions to more efficient and cost effective systems, and focused drilling in high-graded areas. The Company will continue to monitor forward-looking commodity prices, results, costs and other factors that could influence returns on investments, which will continue to shape its disciplined development decisions in 2022 and beyond. SandRidge will also continue to maintain the optionality to execute on value accretive merger and acquisition opportunities that could bring synergies, leverage the Company's core competencies, compliment its portfolio of assets, further utilize its approximately $1.6 billion of net operating losses ("NOLs"), or otherwise yield attractive returns for its shareholders.