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SandRidge Energy Third Quarter 2021 Results

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SandRidge Energy, Inc. reported its Q3 2021 results.

Recent Highlights:

• Third quarter net cash⁽¹⁾ increased by $28.4 million quarter-over-quarter to $99.0 million. Total cash and cash equivalents was $99.0 million as of September 30, 2021.
• In early September, the Company repaid its $20 million term loan in full and terminated its existing credit facility. As of September 30, 2021, the Company had no remaining term debt or revolving debt obligations.
• Total third quarter net production was 18.7 MBoed compared to 19.0 MBoed in the prior quarter.
• Third quarter net income was $28.6 million, or $0.78 per share, compared to net income of $16.3 million, or $0.45 per share in the prior quarter.
• As of September 30, 2021, the Company returned 106 wells to production that were previously curtailed due to the 2020 commodity price downturn.
• Third quarter realized oil, natural gas, and natural gas liquids prices, before the impact of derivatives, were $69.40, $2.89 and $26.93, respectively, compared to $64.73, $1.66 and $17.33 in the prior quarter.
• The Company maintained its commitment to protecting shareholder capital invested in well reactivation and other capital projects by entering in to hedges for natural gas and natural gas liquids, which represents approximately 13% of our third quarter total net production on a pro-rata basis. The hedges had average strike prices of $4.07 per MMbtu for natural gas and $1.20 per gallon for natural gas liquids, respectively. The Company remains unhedged from March of 2022 forward.
• SandRidge is actively exploring Carbon Capture, Utilization, and Sequestration ("CCUS") potential across the Company's owned and operated infrastructure footprint. The Company recently entered into a cooperation agreement with the University of Oklahoma to further understand the technical feasibility, as well as assess the potential for commerciality of CCUS within its existing asset base.
• The Company maintains its commitment to not engage in flaring of produced natural gas

Financial Results

Profitability & Realized Pricing

For the three-months ended September 30, 2021, the Company reported net income of $28.6 million, or $0.78 per share, and net cash provided by operating activities of $33.1 million. After adjusting for certain items, the Company's adjusted net income⁽¹⁾ amounted to $29.4 million, or $0.80 per share, operating cash flow⁽¹⁾ totaled $35.2 million and adjusted EBITDA⁽¹⁾ was $33.5 million for the quarter. The Company defines and reconciles adjusted net income, operating cash flow, adjusted EBITDA, and other non-GAAP financial measures to the most directly comparable Generally Accepted Accounting Principles ("GAAP") measure in supporting tables at the conclusion of this press release on pages 10-13.

Third quarter realized oil, natural gas, and natural gas liquids prices, before the impact of derivatives,⁽²⁾ were $69.40, $2.89 and $26.93, respectively, compared to $64.73, $1.66 and $17.33 in the prior quarter.

For the nine-months ended September 30, 2021, the Company reported net income of $79.9 million, or $2.20 per share, and net cash provided by operating activities of $66.3 million. After adjusting for certain items, to include the one-time gain of $18.9 million related to the sale of NPB assets, the Company's adjusted net income amounted to $63.4 million, or $1.75 per share, operating cash flow totaled $75.4 million and adjusted EBITDA was $76.1 million for the nine months period ended.

Operating Costs

During the third quarter of 2021, lease operating expense ("LOE") was $9.1 million or $5.27 per Boe compared to $9.2 million, or $5.33 per Boe in the prior quarter. LOE remained relatively flat when compared to prior quarter.

For the three months ended September 30, 2021, general and administrative expense ("G&A") was $2.2 million, or $1.29 per Boe compared to $2.5 million, or $1.46 per Boe for the three months ended June 30, 2021. Adjusted G&A⁽¹⁾ was $2.0 million, or $1.15 per Boe during the third quarter of 2021 compared to $2.0 million, or $1.13 per Boe during second quarter of 2021.

Debt Repayment

On September 2, 2021, SandRidge repaid all outstanding indebtedness and terminated all commitments and obligations under the Credit Facility. We paid the lender approximately $20.0 million, which satisfies all of the Company's remaining debt obligations. As of September 30, 2021, SandRidge had no debt on its balance sheet.

Share Repurchase Program

The Company did not repurchase any shares during the third quarter, under the Program announced in August 2021, which authorizes the Company to purchase an aggregate of $25.0 million of the Company's common stock, in accordance with Rule 10b-18 of the Exchange Act. Subject to applicable rules and regulations, repurchases under the Program can be made from time to time in open markets at the Company's discretion, and in compliance with safe harbor provisions, or in privately negotiated transactions. The Program does not require any specific number of shares be acquired and can be discontinued by the Company's Board of Directors at any time.

Operational Results

Production

Mid-Continent totaled 1,722 MBoe (18.7 MBoed, 12.7% oil, 32.1% NGLs and 55.2% natural gas) for the three-months ended September 30, 2021. Production totaled 5,096 MBoe (18.7 MBoed, 14.4% oil, 33.1% NGLs and 52.5% natural gas) for the nine-months ended September 30, 2021.

Production in the Mid-Continent totaled 5,029 MBoe (18.4 MBoed, 13.3% oil, 33.5% NGLs and 53.2% natural gas) for the nine-months ended September 30, 2021.

Well Reactivation Program

During the third quarter of 2021, 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 modest capital improvements. Focused efforts to improve operating costs, along with commodity prices rebounding from their 2020 lows, have bolstered the economics of these well reactivation projects. High rates of return and low execution risk support the Company's belief that these projects represent an efficient use of capital. As of September 30, 2021, the Company brought more than one hundred wells back online. Approximately 78 of these wells required workovers to return to service and accounted for capital expenditures of $3.5 million and expense dollars of $1.1 million. The balance of the wells required little to no expense to reactivate.

Proved Developed PV-10

Management believes the unaudited proved developed PV-10 reserve value of SandRidge's Mid-Continent assets to be approximately $413 million,⁽¹⁾ with an effective date of October 1, 2021, as routinely updated for the quarter from the Company's engineered year-end 2020 reserves, consistent with standard industry reserve practice, including performance and commercial updates for price differentials, operating expenses and other commercials, based on the historical trailing 12 month averages, using NYMEX strip pricing as of October 29, 2021.

Natural Gas Flaring Mitigation

Subsequent to the first quarter of 2021 sale of its North Park Basin assets in Colorado, the Company is no longer engaged in the routine flaring of produced natural gas.

Carbon Capture, Utilization, and Sequestration ("CCUS")

The Company is actively exploring Carbon Capture, Utilization, and Sequestration potential across its operated asset base. The Company owns and operates an existing infrastructure network of more than 1,000 miles of saltwater pipelines and electrical lines and more than 60 active saltwater injection wells. Along with the University of Oklahoma ("OU"), the Company is evaluating the technical feasibility of utilizing these assets to one day transport and/or sequester CO₂ emitted from nearby industrial facilities.

In addition to the environmental benefits of reducing emissions, proposed federal tax legislation contemplates meaningful financial incentives for the injection and/or sequestration of CO₂. While these projects are in their infancy and require additional research before moving into commercial stages, the Company is excited to continue exploring their potential through its partnership with the University of Oklahoma.

Liquidity

As of September 30, 2021, the Company had $99.0 million of cash and cash equivalents, including restricted cash. As of November 5, 2021, the Company's cash on hand, including restricted cash, was approximately $115.8 million. As noted above, the Company repaid its outstanding term loan and terminated its credit facility in early September. The Company has no outstanding term or revolving debt obligations.