SandRidge Energy(US:SD)2019-03-05 16:39Financial Data and Key Metrics Changes - The company reported a fourth quarter net income of $54 million compared to a net loss of $19 million in 2017 [15] - Fourth quarter adjusted EBITDA was $45 million, down from $49 million in 2017, with full-year adjusted EBITDA of $167 million [15] - Capital expenditures for the year totaled $171 million, demonstrating financial discipline with a significant reduction in production costs by $10 million, a 10% decrease year-over-year [16][15] Business Line Data and Key Metrics Changes - The company divested legacy assets in the Central Basin Platform, eliminating over one-third of its well count, which averaged only one barrel of oil equivalent per day [17] - The acquisition of working interest in Mid-Continent properties was aimed at simplifying the portfolio and enhancing profitability [18] - North Park Basin oil production reached 1 million barrels for the year, a 53% improvement over 2017, with a peak net rate of 5,060 barrels of oil per day in August [28] Market Data and Key Metrics Changes - The company maintained strong liquidity with $11 million in cash and an undrawn $350 million credit facility as of February 20 [19] - The company lifted all oil derivatives and placed swaps on 4.5 Bcf of natural gas production at an average price of $4.28 per MMBtu [20] Company Strategy and Development Direction - The new business strategy focuses on operational excellence, reducing cash costs, and prioritizing high-margin projects [10] - The company plans to allocate approximately 80% of its 2019 operating cash flow to support the North Park development program, estimating a 9% year-over-year growth in oil production [46] - The company aims to pursue accretive M&A opportunities while preserving liquidity for potential acquisitions [52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the 2018 results and the foundation laid for future growth [14] - The company anticipates a 5% to 6% decline in total production due to declines in the Mississippian Lime asset, emphasizing the need to reduce cash costs further [51] - Management believes the stock is attractively valued and aims to change market perception through results from the new business strategy [54] Other Important Information - The company is implementing changes to improve transparency in financial reporting, including renaming production expenses to lease operating expenses [21] - The gas processing facility installations are progressing, with a mechanical refrigeration unit operational since January 2019 [30] Q&A Session Summary Question: Can you provide insights on 2019 production guidance from North Park? - Management indicated that Q1 and Q2 production will be influenced by wells coming online, with expected declines in Q3 and Q4 without new drilling [59] Question: What metrics are needed to determine the scalability of the GTL project? - Management is looking for successful execution with the gas stream and understanding resource potential to decide on scalability [60][62] Question: What is the rationale behind the density tests in the Western testing? - The company aims to determine optimal spacing early to inform future development, even if it means testing tighter spacing [65] Question: How much leverage would the company be willing to use for M&A? - Management stated that leverage would be used responsibly, depending on the accretive nature of the acquisition and its impact on the borrowing base [70]