SandRidge Energy(SD) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated adjusted EBITDA of nearly $13 million in Q2 2024 despite lower natural gas prices [4] - Net income for the quarter was approximately $9 million, or $0.24 per basic share, with net cash provided by operating activities of about $11 million [6] - The company reported net cash, including restricted cash, of more than $211 million at the end of Q2, equating to nearly $5.70 per share [5] - The first half of the year concluded with approximately $24 million in free cash flow, representing a conversion rate of about 85% relative to adjusted EBITDA [6] Business Line Data and Key Metrics Changes - Production from Mid-Con assets averaged over 15 MBoe per day in Q2 2024 [15] - The company maintained adjusted G&A for the quarter at $2.5 million, or $1.85 per Boe, which is favorable compared to peers [26] Market Data and Key Metrics Changes - Commodity price realizations for the quarter were $79.54 per barrel of oil, $0.66 per Mcf of gas, and $18.99 per barrel of NGLs [6] - Natural gas realizations were impacted by low Henry Hub benchmark prices and a widening local basis, with forecasts suggesting a return to normal pricing over time [15][16] Company Strategy and Development Direction - The company announced a definitive agreement to acquire assets in the Western Anadarko Basin for $144 million, which is expected to be accretive to production, EBITDA, and free cash flow [3][9] - The acquisition is aimed at bolstering base production and cash flow levels while preserving a strong balance sheet and planned capital return program [9] - The company is focused on maximizing cash value and generation capacity of its incumbent Mid-Con PDP assets through high-rate return production optimization projects [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate free cash flow from producing assets despite challenges in natural gas pricing [3] - The company plans to finance the acquisition with cash on hand, maintaining approximately $70 million in cash assets post-transaction for working capital and further acquisitions [14] - Management highlighted the importance of maintaining operational efficiency and cost discipline in the face of inflationary pressures [20] Other Important Information - The company has a substantial federal NOL position estimated at $1.6 billion, which will shield future cash flows from federal income taxes [6][23] - The company has secured hedges for a portion of its oil production through the first half of 2026 and for NGLs through 2025 [27] Q&A Session Summary Question: How much will the latest acquisition add to reserves? - Management indicated that an actual reserve number addition will be forthcoming with standard performer reporting in the weeks to come [30] Question: Can you provide a figure for the expected free cash flow from the acquisition? - Management confirmed that the acquisition is expected to add up to two times in EBITDA relative to standalone operations [32]