SD - Earnings call transcript Q3 2017 | SandRidge Energy, Inc.

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Operator

Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Third Quarter 2017 SandRidge Energy Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there'll be a question-and-answer session. you. Thank Instructions] [Operator

of you Director conference. begin Investor Lewellen, may Relations, your Justin

Justin Lewellen

available forward-looking our Executive to remarks, you, to Chief differ Chief me Officer. forward-looking make release call. Bennett, that remind everyone and subject Operating are to site today have are going materially Both then these on and our during third statements. James today's would Thank may like the for you that Bott, welcome and group statements Financial conference risk Officer; tab actual our in in and to Operator, contains results Q&A. Keep Web be EVP we'll EVP John will conjunction from posted and and Officer; and with Suter, We quarter and earnings call. Julian XXXX assumptions under be are James prepared President our projected Relations and mind the we which conference Investor John Chief and those some With and uncertainty, referencing the call, in slides call

We reconciliation will be which reference also on and found of Web our site. can financial measures, adjusted other EBITDA, non-GAAP make a to

XX-Q tomorrow you see file us Finally, will morning. our

to let Now, James. call turn me the over

James Bennett

with look our Good on on earnings morning. high-level first morning. start value. strategy page I'll this presentation be three. referencing for posted in Web that's out our XXXX to came a the slide of with site that to we creating And like We October I'd outline

moderate $XXX We'll and of the balance year, million on level XXXX. a those to and zero net left, the durable strategy have outspend the the Starting as sheet fully cash, protect debt, sheet evidenced last remained have we we XXXX. million the by into tactics this have executed of in continue we on and Importantly, revolver. with undrawn strong our how we'll balance continue $XXX during

Osage delineating flow. value. how drilling participation competitive and to creating us North the balance our strong capital ultimately while in develop and enterprise Meramec North oil-weighted our in vertically Northwest a preserving John about and the Mississippian horizontally, both plays real my assets leverage. drilling cash the Northwest plays, in Basin. two and the and value right on free program, we're Niobrara in continue the the reflected our believe Park STACK, be augments of and resource talk Also, that agreement will allows Park to have first liquidity very the we To and We the allocating will generate the Basin, low back to to bullet, sheet, page, STACK, material now

page points LOE LOE objectives the the further the is main both page Northwest Our on highlight We've bullet and of But two Ops made Basin. further. improvements the moving five, North this in the quarter at assets top assets advances year-to-date. in for the real we Park Page STACK has have developing, that discuss four team our and main we're Mid-Continent, contains that quarter. reduced the which to source will John the of

as $XXX third This about outlined XX delineate quarter, the participation wells year XX the complete XXXX our And the we the XXX and between and IP and to be in PUDs oil, In this about objective. won't to Meramec laterals ranges expect drilling oil also this resource material million year, initial developed we're in reserve develop with First, our given we to all that we true an with This equivalent. and STACK our produced drilled Based XX-day In we've while in the pay asset, more end other that the drilling play. of enhances had reserve our area, STACK we our have of reserves of at this us results structure barrels for release equivalent Adding extended At as earnings carry continue Meramec PUD and operators formations terms within early significantly report and allows seeing next under asset. of we agreement. EURs funding book section. closed agreement. confirms million locations XX XX% STACK, of vertical XXX now can well the bookings oil the day Northwest until acre the with a XXXX, major on returns, CapEx. those Osage of barrels on configuration be same plane. in on is of a of minimal per the XXX,XXX

total, If with the made a from we've $X.X just HBP Northwest XX% that these rate XXXX, up in fourth asset advancing to the the into and position forward we're more million of STACK the well beginning agreement. to account you carry XX% generating and in that's progress in material on well return the before range, our over in We've at our of taking combine XX%, from look also wells, quarter. our cost, In results expanded drilling this year. the

This from North Basin side resource in on Basin. at program Park is In benches. we have objective four Turning the here Park all drilling Niobrara of the end production the right confirmed commenced of we second North expanding now the the to page, the quarter. the

more we now drilled that total recall, unit by another and federal B XXXX will wine production. and stepping by you wells additional confirmed held held into over spacing primarily to brining and be confirm out XXXX, three rack our also production in the test from additional XXXX, benches, hold we've the in and We'll D and acres, the shallow XX,XXX benches, and in QX, XX%. A QX production If will join unit C

some Our improved teams returns. our and and have production has capital cost delivered which performance Niobrara efficiency exceptional

improved our reflect life rate This PV-XX updated to PV-XX X% this and return our On for oil $X.X $X.X million, production. Also, well. drilling added in of year our early by million well. laterals each from $XXX,XXX improvement This now increased $X side per returns to well in we're XX%, this pad earlier cost the down cost type two-mile is and million. adds for curve we

In the on the page this, fact, yields cost type IRR about can see of Based curve of appendix our the of versus on the improved performance wells. presentation. million in on XXX Niobrara MBO XX curve well XX our you all $X.X laterals the and type and XX%

which guidance, our you In the guidance appendix. we're terms reaffirming of find page range can XX the on for XXXX full-year, of production

fourth end-of-the-year low The to oil the in will third a and turn start and grow quarter. point in quarter production represents is program the as weighted, our oil corner

oil me about X:X BOE for a growth, cash talk growth that and and lot the oil growth not because that's SandRidge. generation hear flow value it's You provides

our continue your $X of cost improvements at question, guidance you that for million to reducing midpoint we've both we the On our ranges cost cash closed in and outspend million. sales and G&A. LOE In cost lowers the these guidance. make are often asset get the of XX-Q, by The what side, see the non-core year-to-date $XX XXXX. is will We of combination

interest add midpoint, you right like gets million million and I of calculate if in is at at $XXX a net outspend. back million the $X take out something million back in it less EBITDA you asset think $XX in expense, good million $XX to $XXX one sales consensus CapEx way about this, that

said $XX I to I we'll in February, of in call the range, million $XX that million be the outspend for believe our would low the range. be at and end Your

an Now, update. give to let turn to us call me John? operational over the John Suter

John Suter

fourth LOE you guidance to finally through Basin planning Thank you, for developments, natural quarter Consistent in XX% quarter. our with walk CapEx North of Production the of oil detail, and I'm development quarter production reduction for schedule. and the delivery activity, James. and our NGLs, Park we're XX% North Mid-Con barrels Park results, midyear economic Mid-Con addition gas. equivalent, million a XX% and anticipating our X.X two-rig highlights, continuation results production was comprised the oil, rig heavy well,

in testing, online of frac our NGLs, per XX% Park Two We are complete quarter as flowback gas. bolster Mid-Con current of XX% comprised two are was oil, will more coming oil XX% various that STACK the natural wells six third operations. barrels and in equivalent have they and flow XX,XXX rates. stages production North day, completions Northwest

focus in XRLs. rigs We achieved seven two strategic significant STACK SRLs two and in Northwest Meramec our With two delivering the accomplishments. quarter, we continued on third drilling running the

Osage notice on within IP X-XXH, XX-day You'll drilled six, confirms horizontal. Audra the XXX multiple of XX% existing a oil. Claire development we day, produced which directly slide zone well vertical and supports This an Meramec above a per It section. same was BEO spacing, SRL,

of our counties. XX% in our Regina potential produced BOE Northwest we County Regina development XXX STACK confirms a outside expansion and Second, IP of XX-day Garfield per first Major, which drilled the the Woodward, at SRL, oil. The X-XXH, day area primary Dewey

weeks. preparing wine drilled side Grizzly Grizzly of north drilling, in the We spud on they're of a full-field slide shifting the They in artificial for Both an Park QX. Niobrara basin North pair with installation laterals Currently you'll On North rig now the fastest testing, spacing to including day add in production the successfully value from of see was With play, and pad and release. late head two X,XXX objectives, X. seven, bench Park, per to from benches. have time achieved XX tests, rig towards development. sales one all third cost produced quarter. all lift flow in the to additional deployed as we we Basin numerous the days provided next Now, testing rack X-XHXX date, the possible our which cycle four from long reductions average we've XRL the our brought the BOE approximately in and

from really production confirmation the and expected X an in prior from established QX. pad B could B four significant in implied to is the benches. and of additional spud B we and test the is X locations value with this the QX. Grizzly from and achievement the A Since the future produced shows, only inventory, value. Further This all in significant. XXXX diagram C had results the from oil As only C wells and D, We wells remaining while our wells A add Castle D bench same

As skid you that drilling. to times improvements slide to pad to utilization related provided numerous cost lowered rig X.X fracking our moves, this cycle operations have identified and of can for addition efficiencies we've shared pad cost in million on have XRL zipper see facilities asset. Reduced operational using multi-well eight,

XXXX. We higher drilled of are pad a in percentage planning wells for

bench seen the calculations Wine same from As spacing spacing. slide bench. evaluation our XX test vertical on of set horizontal test within In acre to rack with spacing will bench two test place plan work. this support to courses XXXX, in same we wells nine, our Oil utilizing the will

previously our the and efficiencies By total tests of optimal As all the benches and in will development area, will our quantify potential mentioned the count generate the by well per the our bench bench vertically section we -- the interact capital well work on develop. we'll bench spacing, know for to long-term plan, resource how program. count knowing

left reduction delivers If cost the reference current corresponding Slide right chart well our the million again, XX% on IRR. graph you show will cost on X the the return X.X and

the Additional improves to progress which efficiencies in XX%. show million over X.XX past to return

XXX. You may down LOE of reduced earnings release, annual that recall XX% second the from by a to guidance in quarter midpoint our we XXX,

few A assets. Mid-Continent employing attributable As streamlining include million In we impressive primary that's electrical to nine in reduction XXXX, to $X $XX $X.XX. and reduction a million cost our by more sustainable maintenance in months in the the first midpoint artificial design. of operations operating an we mentioned, lift lease realized operational our now spend James initiates decreasing of reduction cost are the improvements efficient

work rental facilitated our $X improvements operation Artificial million in exception Our expenses. related a design reduction led program to runtimes and [indiscernible] to million and by contributed lift $X longer center manned reduction. a over

Finally, we've $X program three of chemical which last proactive more first led to management million a year. to quarters compared the savings implemented

equally completion Finally, Park and capital between Northwest expenditures for cost North with STACK and drilling Basin. XX spread the million quarter were

agreement participation drilling We run Northwest North the drilling expenditures. one drill Basin. planning budget The SRLs the capital two our assets our to under the in rigs are In in wells in of in the completion two and outlined XRLs Meramec are STACK on fourth previously. drilling the James and agreement developing approximately we quarter, under four current with be first the to remainder focused will Park XX million

continued Above team the performance over Wine excellent The confirmed in turn the team's we our delineation they exciting and I Park In So the for continued County now STACK, the to test. am to In safety were record. pleased call and the bench with pay North STACKed able with all, very Virginia Claire. deliver spacing rack Northwest James for this I'll our both and well well XXX,XXX progress B cost some Dewey remarks. quarter. in A Audra Niobrara Basin, the test production closing back reduction

James Bennett

release XXXX, you. in rigs first activity Thank two Northwest STACK the XXXX which to would forward guidance maintaining we quarter. a Right full-year Closing now, and upcoming year XXXX level Park into to in in and similar one the estimate approximately be the Basin. North looking

our on prices. fourth development and will for all gas, strip and to agreement needed. be tests, remain adjust closing further finalize and level capital very our innovations, quarter, behavior, spacing maintaining minimizing spending while completion and $X Moving of participation crude costs the spending, prices, while and plan, and to commodity allow a simultaneous On both cognizant the delineate we're drilling assets sheet. $XX of advance and balance of level will plays, our us protecting and allows and both nimble, moderate as using approximates budgeting natural economics We which outspend commodity activity of drilling

to In natural at XX under hedge swaps us barrel, swapped hedging, at approximately $X.XX. BcF just to a and oil gas the XXXX and terms we for of barrels beyond. of Look X.X in million of have mid-XXs $XX for continue

assets now Look to made type cash our being this for four questions. advantage now agreement. We last cost it with value confirmed decision the existing week Mississippian-only we STACK completed maintained our acres, a at and added expanded have we where true of into and basin have our to focus benches. answer from advanced how took strength We leverage. reviewing we've Meramec closed material free costs. curve, all for We've strong XXXX. from Niobrara question, for $XX. market, reduction our the Closing fact, in Operator, enterprise. continues further drilling pay the a very balance business the disciplined generate for XXXX maintain vertical the potion turn liquidity, participation and In the swaps XX,XXX no STACK oil Northwest some continued In enterprise. North and and out And and we'll every Mississippian we Park outperformed it reduced the well sheet, us returns, production in test, now over Osage the impactful on does our with how create flow execution,

Operator

the [Operator of line Lazool first James Instructions] Your comes from [ph]. question

Your is open. line

Unidentified Analyst

Good morning, thanks and question. for taking my

larger your production, wanted Just to of portion clarify trend this given Colorado? comments quarter about we on oil becoming think the in the a can fourth in activity how increasing

James Bennett

Sure, per XX,XXX quarter, third oil quarter That's little third if was the production at barrels rounding. look day, about you actual.

of that's gets If barrels you midpoint day. guidance, you about take to the XX,XXX a

is the a that trajectory. turns on and we've long year, said we're this oil time for it corner So a at And that this of end quarter.

John coming online Castle mentioned, the the wells, that fourth the quarter. we've coming So also more will in got online, Grizzly then and two wells two be

and to coming a now. the set online in So the quarter, turn right that that that wells oil Mid-Con of are a bit contributes really quite

Unidentified Analyst

trending midpoint in Great, we XQ. thanks. bit related, updated your the And production, suggests higher can trend for given the that think fourth XXXX? but had a surprising then could that's in about quarter, necessarily of the and how increase not LOE oilier year even guidance it The in

James Bennett

a We've little bit on BOE still basis; gas got a we a little have decline.

a on decline. BOE flow So while we're oil production we're still cash focused growth, and seeing total

it. a increase look continue that LOE you we've LOE this some your in to But slightly. BOE improve have down taken costs will your to year, twice at costs basis and guidance of on So fixed if

give year ready into be multiyear but next not I consider outlook going to to similar would LOE where we're yet, to year. looking to it this So end

Unidentified Analyst

flexibility all Great. program planning add looking And in hedging two-way I three-way into any collars? or hedge you more, your Do how just are one have to much XXXX? noticed are you're you that any then hedges idea swaps. in to XXXX with And

Julian Bott

we all collars at to in those. of look past. have when We've all alternatives. program We those looked flexibility in we done ahead the And do the three-way

the hedged us, pick [ph] the current our of those upcoming the given cost production with lately, used years us, most two, flows, and year, side, three. in For where we've for then bit method for that's XX and it a years on but And most the previously, quite months crude the even and bit a cash all the swaps lesser in been for we've little our of effective market have before. volatility percentage

So I first hedge exact months to production. XX and us continue percentage, for the don't but you want of look particularly to to XX give the

Unidentified Analyst

That's lot. a it for Thanks me.

Operator

the Your next [indiscernible]. line from comes of John question

Your open. line is

Unidentified Analyst

and taking my morning, for Good thanks questions. Thanks.

as for in looking Following to look maybe hard you in was you type the up could do look could could like provide color on STACK what next any wondering growth the anything, this of oil but for the question, I'm a on just constant, if for of Northwest implications to bookend next Thanks. you rigs indeed number, year. if you kind you could Niobrara, the activity or well pin was not two the hold want just oil don't necessarily into level year? of what growth be XXXX, one wondering growth

James Bennett

besides very soft. hard you're Yes, hard because looking Appreciate a don't for the numbers no there's understood not to really number. tend question. other they I But numbers be

the come Mid-Con. guidance three rigs, not, long going we all out really one-and-a-half rigs So we'll keep full-year going do in do early wait two those depend them the maintain probably it's for we or to fourth on because the how in we or year will till entire quarter, we do

quarter guidance answer come So specifically. to with little till that question us full-year give we until out the first

Unidentified Analyst

Northwest enough. was just then of was expect should wondering Okay, timing additional it. tests. final when my on Appreciate And we fair one STACK, that's

You But schedules have XX wells putting have them and year, for and now. them two you the wait time in drilling between running obviously right there's the to peak. this the to wells then lag a and rigs online, for

in near-future? here those the or So near bigger next if should have where And the future just an of intra-quarter coming potentially enough for year here expect warrant the we whether update QX you early also wait wondering results results the of a was you results, would in update? set do then on it timing

John Suter

wells mentioned in six I we coming in as Yes, Mid-Con now. my discussion, there's have, right on

have our QX to more we much in results. numbers talk So a stronger about set, should

I be those. we'll suspect discuss call that So waiting to to

James Bennett

quarter Yes, interim we hold give end of and the just usually out for don't well those results, you quarter. the

Unidentified Analyst

Okay. That's it for me. it. Appreciate Thanks.

James Bennett

Thank you.

Operator

next Your Instructions] the question comes [indiscernible]. Amir from line of [Operator

open. line Your is

Unidentified Analyst

Thank around in, from STACK. is milestones come and joint funding expected you. question the it coming to additional My in your are Northwest the to venture? the first is What for when

James Bennett

Sure.

I participation think referring agreement. you're to the drilling

agreement. So initial already well drilling we're We've that I we And three, [ph] GIAB that now. we've our closed And guys? We're from right that funding wells believe that. July. is in the well in under at started received number third

fund program. we the the as So that It calls roll XX anticipate wells under we about next program. out to about to the months XX will continue for XX for -- drilling

or continue every milestones It's are no once think funds the about. to all fund it'll sum. a And doesn't there at the the XX% So lump cost as of wells beginning month. not It to fund end, are drilled. it the at

Unidentified Analyst

sense industry where XX, of well? wells. average page And in you these for for your averages on come give has these us give as Understood. you guys some Can

James Bennett

Yes.

the So the in table you look at bottom-right.

got delineate on plays are right step with the out in our and west. to close we and east line outliers either So as those, side those. averages the the to some We've very

stepped east on XXX range, XXX we've Our lower right play. to had for delineated XXX XXX are for those and is our edges results acreage some But miles XXX so we and averages the the as west, extended an of BOE within out over lateral. to a single, to same

Unidentified Analyst

for is oil, overall from can trough when regarding, you've but sense trying is a to to again, Understood. timeframe companywide know mind overall a of there the in production And rough I my what perspective, get that. company? we question a the about about your talked expect last

James Bennett

Yes, honestly flow any I'm about I I flow, outspend. on growth, BOE growth. don't our cash cash and total closing mean, and think focused growing

we to question, to ready gets production not It when I'm gets really what's BOEs what look really know, you the on exactly back going here's say of will back So trough. year, to spend spending. oil next depends other Kind like your total to year. our next the

that first to So, we what can budget so the out quarter, with that finalize get XXXX roll production BOE need looks then and first you get looks out like me we oil our approved and but come XXXX, what total to budget for further quarter, tell the in again, we and production like.

Unidentified Analyst

much. Thank you very

Operator

There over are James turn to further no I'll time. Bennett. call this questions at now the

James Bennett

everyone listening. Thanks joining. for you We appreciate

the We back quarter. in again will be on fourth

I and us think a North Park have questions. lot mentioned, results, as John results the any in for and a your call Mid-Continent in more interest, with well we'll the you Thank give Basin. further

Operator

This today's call. conference concludes

may now You disconnect.

SandRidge Energy (SD) 2 Nov 172017 Q3 Earnings call transcript