SD - Earnings call transcript Q2 2018 | SandRidge Energy, Inc.

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Operator

Good morning. My name is Andrew, and I will be your conference operator today. At this time, I'd like to welcome everyone to the SandRidge Energy Second Quarter 2018 Earnings Conference Call. [Operator Instructions] Thank you. Johna Robinson, you may begin your conference.

Johna Robinson

welcome the and call. Operator, you, everyone conference to Thank Officer. and Bill Officer; and With Operating are President John Chief Chief Officer me today Financial Griffin, Executive Chief Mike Suter, Johnson, in We during conjunction conference would the we slides Investor call. under posted our have remind we'll Relations like you tab call, with earnings that release to our and website the to that be referencing may which differ today's call from and contains are assumptions subject mind and uncertainty, to in in Keep actual projected statements results materially those statements. these and risk forward-looking forward-looking

other will financial can reference We website. make to also on found Reconciliations adjusted measures G&A, these and non-GAAP of our measures. be

Finally, will this us later XX-Q afternoon. you file see our

turn Now, the call let me Bill. to over

Bill Griffin

you of join for the presentation our be morning you taking to our time Thank second utilize Energy and SandRidge go-forward I we’ll website investor encourage earlier you, performance Johna today this for outlook. us discussion. appreciate good results today’s review referencing second that quarter I morning quarter XXXX conversation and and on Today’s to posted this everyone.

are be joining on later Financial Suter, Johna results in Chief call. John Officer who to our Mike be data me Johnson, financial and our mentioned, our Officer Operating who providing As enough will will Chief speaking the operations

election slide directors. the If at was SandRidge changes of as you last aware most Most please been turn significantly a number three, new there since will a to of have board you are call. of our of

with our the the identify annual with NorthWest running drilling providing geological North immediate after to the new hit in best on meetings took have deep increased dive meaningful aspects model our in board undrilled have some impact play. of along and program Park results organization. exciting control all The the of that value confidence we new into should where the ability is a our meeting June our ground across numerous has in Additionally, initiating acreage well and position and this opportunities STACK the in a the company

assessment existing to of process interested know The the Some these shareholder evaluation base you strategies all appropriate value. current include associated a comprehensive of development of I in the status and and create plan. creation. company’s returns and of This of strategic to plan our maximize alternatives ongoing solicit and reserve to understanding possible the strategic process review numerous meaningful asset to process and broad opportunities that a and value growth potential that options shareholders. incorporates could value is outcomes the for are evolving

currently are potential and due each expediently [ph] which of and evaluate current of and the submittals results. working continued company proposal the value positive reverse and several against drilling our We weighing evaluating require diligence. management while board every now to The are

compensation deliver maintaining the with won’t ongoing add continue longer the plan non-core analysis structure program that processed, management cost assets. process the thoughtful the ways possible company’s cost, returns. term solid monetize the near a board and and with able working Most insight during our feasibility includes predictable improvement accelerating risk target approach with the this SandRidge and urgency continue and to reverse to trends including current in hedging of more we levels to call. is current In managing much because to on are for declining of We’re cash and production future and accessing practices, outcome associated importantly, deliberate to EBITDA activity process quickly is ensure to today’s while additional decisions a shareholders. best strategic be priority looks I in highest forward the ongoing is definitive Everyone to conjunction this our but alternatives resulting the

a and of cost leaner margin calls, am continues our two potential a results opportunities. we pleased the to our new discussed that transition During meaningful evolution and quarter achievement report the upside company to additional remaining metrics. this spectrum and to revising reaffirmation performance with the reflect broad of last with demonstrated are cash I XXXX focused and lower savings of fact supported are experiences our the guidance during that key by we the

item. current Our remains a major EBITDA production in decline focus

impacted results fleet our The extended but second the completion with production North quarter newly other quarter in wells. operations basin encountered simultaneous deferments North our the drilled far performance we operating areas should we Park was well to total Net short-term production associated Despite expectations, current events report reaffirming oil as make are in shortfall. of challenging, are guidance during as production as in These and the Park guidance the well frac and pleased result, this shut-ins XXXX and negatively up Park second delays company budget exceeding quarter these new new I'm North production delays, projections. a

impacted production events for in that were compounded book, quarter. the oil Additionally, hedge the a loss which by our resulted

provide of profile The this drilling EBITDA to clear disappointing, increasing makeup we line sight helps demonstrate to in graph in as an production meaningfully and decline the with expected higher-margin growth future, positive is a near we slide XXXX. mitigation are production of our the transition the during a results While this to second expect on accelerate half of oil.

in but speak margins. costs significant this we Mike more detail key Additionally, and to continued profitability expect overall achieved cost cutting and focused John later we remain progress both will reductions and our this have driver. on cash on aggressively improving in

Near remains and value four, to cash slide is focus from of preservation term on enhancement Turning shareholders. to creation flow Lime returns priority. Miss our a

to and to ongoing of in Oklahoma advance wells, prioritize and costs operations XX-hour centralized ability has center and improvements and personnel key reduce a savings direct operational continued our the real-time utilization locations the City relatively This information incremental downtime. facilities that operations provides on in from via profitability resulted a As daily asset, in efficiency activities is mature and capability basis. labor With enhancements. objective

costs during additional G&A reductions during the effectiveness first second quarter center. to the of this the were attributable there quarter, year, meaningfully labor our in in to operations command In field this labor addition reductions

the yielded has While savings. this impact of cost capability

by enhance the In distinguish that operations in this We reducing provided helps separate production production. production feel capability More from and others. capacity is short, attention. importantly, to increasing areas directing it has unique a downtime of need us and impact to personnel the highest

As mentioned earlier, mitigating ensuring capitals while strong current the a invested production on returns priority. decline, is

investment sight both Miss the future line While North the in drilling Lime within incremental to core results acreage opportunities providing company. position basin STACK there of NorthWest Park and growth, capital remain of of

STACK, basin for our initial generate excitement. to all value in of but initiated provide more that per In addition four shortly, base and this to of wells we and Park our in strong reserve this the increasing wells thousand a recent day, NorthWest production second we excess current Niobrara projections and the and the The that of drilling Miss rates our new well the valid. generate Lime results drill most play provide uplift. key have collectively also that programs our of continue details support in to increases to in North wells the Park first significantly continued confidence John value curve expected to in with barrels multiple North meaningful are fact complete will tight rates above have half return These are four capital will production asset. on

this associated oil confident total the that as access even grow, and from production pipeline interest to more provide basin area outside from are terms parties to will continue rates quickly. We this expand the to

mitigate key solutions this to We’re to forward delineation summary, we additionally we on creating accelerating as performance. emissions process I of the remain company commentary oil our and will profitable accessing growth process strategic not expanded over turn In in provide Mike of lost business midstream and drivers organic asset. Johnson continue identify has value focused our alternatives, Mike? with on we move of production financial our through to now evaluation our it the near-term move the partner, continue to to but and sight day-to-day growth.

Mike Johnson

everybody what delivered exceeded will we value results and The are Sandridge the call. key in significant believe and setting of expectations you, be the on employees Thank morning Bill, to for stage future. operating the that our creation good

to the midpoint. which cash This Our connection quarter guidance million with at in things, were combined cash was a X cost majority proxy a of achieved incentive-based and financial our performance time incurred reflect, resulted expenses other that adjusted over second costs enabled when reduce in outstanding and also by compensation considerable G&A significant at the reductions to of or contest XXXX effort production results the company has awards. share for acceleration the among and

in bid and workforce came the a production our XX our In had spend; hedged under staff, reductions, natural lowering realizations a recent and when our reductions production and second be declining hedging With our budget XXX We $XX Bill at respect a are our our lowered during from his pumped realized of maintenance shouldn't for range to lower both of a from number roughly a second operating lower quarter on portion first color of of projected the a primarily during spend to significant electrical center reflect and million spite seen production loss leading addition, these to of financial and of these improvements second to down XX to operational improvements With five a third-party adjusted advancements, presentation Slide overshadowed and value is In asset that cost both now part the assets key and chemical highlights quarter, by of guidance of poised being we the compressors. much quarter. expenses are as existing more Sandridge just LOE, lease the and WTI all a these mentioned, by million reduced experienced the and trends our gas liquids we cost, facility exception sourcing will time staff believe reflect the Permian categories from John encouraging price additional as period. our of remarks moment. our maximize offers at in-house that we lower investor at/or $XX XX year-over-year provide cost charges. in net In recap the quarter operations reductions to converting in projected price a cost our barrel, our XXXX range to million. obstacles, results release compared sequentially million G&A original to oil base quarter. processes and of of considerably spend to are of and Mid-Continent outlook of

liquidity lower cost As adjusted projected seen of and cost, are million. G&A continues cash to being million of personnel to to seen including XX we’ve in confidence to XX lower gives costs to consulting range number the areas Shifting G&A anticipated original year-to-date The occurring for and our the XX faster legal. than year-to-date, reductions are a balance our to a the million million range strong. of be us sheet, guidance XX and

That $XXX cash continue at quarter, decline second end motivated we cash take first said, we our advantage over undrawn the our primarily return. facility. our credit that of that during increase are to intend investment the to by were the flows. This primarily high operating liquidity be we highly the of yield quarter reflects expenditures quarter prudently capital additional on our and end Our with million assets fact position our slightly expect financed substantial the will rates and production to in oily of

these no benefit our in the hedges recent oil from Like quarter. our throughout our portfolio XXXX there most to in various are XXXX, prices. the has changes of times shown during relative in which hedge appendix, run-up to at our we ability limited peers, report to layered and As

John with on our his We second develop are currently With and board for go-forward that, his strategy. hedging also going our turn to I’ll forward. quarter thoughts results, operational to it a working outlook

John Suter

Thanks Mike.

go turn with them we to several cover me more touch highlights six, If you’ll then detail on. slide shortly. in have you’ll operational I’ll see to briefly,

six multiple North Current in rate. patterns We advance west tests We some production of ramped and year. spacing Wells per expectations. on this sides oil oil targeted from production barrels deploy a day, we Park, and drilling making quarter, two First expansion. the first in spacing east over XXXX test area. to our this of which field scheduled future progress will over western QX test further of twice on objectives. as spacing exciting exceed our rig in from core results both to that to our average from we’re results good wells April is the to late plan rig for field initial the released evaluate benches planned have different to first Subsequent new the year's results XXXX well tests half optimize has

developed asset. In further delineate area this we’ll southern the addition, less of

selection Finally, we’ll process. partner initiate midstream the

one coming takeaway will these and Mid-Con, execute initiatives gas on STACK planned rig our utilize more provide asset under In color oil partner NorthWest in agreement. chosen participation drilling continues drilling projects. I’ll Our slides. to the

we year arrangement. this this far, wells eight So under drilled

delineating We while projects. expanded future continue [ph] for improving practices drill asset return rig the of to focus our Miss completion we’re first using this on one higher development. and drilling to four In the

on our and pre-spend Well efforts year. is primarily of more for pipeline on activities density Park facilities, Now from North up infrastructure specifically. up drilling during Central and slide let's other seven, of in made drilling program. spend make than zoom [ph] the completion half our Non VNC XXXX delineation and

density least had see their you'll curve set. and are sand D pounds core the lines between test C and bench Moving representing on aerial which These B, type foot completion, colored impressive widely of distributed portion our defines at slide that in to the across in per map, wells exists a field the the XXX wide results eight, area.

that test from spacing XX-XXHXX, note well our western the on the Annex our located Gregory eastern the is the six producing currently Also reference, Grizzly first pad test. for Peters You'll pad. wells our of contains

early to first pilot. at go nine slide the Let's to look of results the spacing

layers a wells. first table the of initially benches spacing the bench. to averaging was wells four two the This which higher six believe, We from right test, various reserves drilling. seismic barrels test three bottom goal individually, we [ph] producing on cost XXXX with micro work, further Niobrara within XX% core Three intended and the shows effective our pud from all the per B oil category four oil primarily day. The we bookings wells which eastern this to manner. initial impact in begin but is of between type have of few initial reserve in historical note review growth, of X same We Our barrels strong graph after date. pressures recovery wells recover of to foot exhibited top The the in highly we days, efficient two the produced test can to all benches weeks. in important capital first upside wells doubled the test than [ph] testing the D&C benches The accomplishes up approximately most now plan on core where bench It's and the of only are IPs be the that of to eight that curve reserves next nearly shows of of out in have per flowing to intervals. could X XXXX proved XX area flow XXXX rate. last over section large per day have will right the this or wells pilot

Now pretty It's these turning program. the how from to slide our XX. benefit uplift successful clear wells recent

of the resulted oil online [ph] is per the first behind field total in have Bill oil crude above in half period and of delayed SIMOPS little growth as been current and Our turning year rate frac the schedule. mentioned wells planned XXXX day averaging a barrel longer

will required achieve results curtailments, may are additional these midstream processing drill With there. by we potential the equipment and our we we guidance from our Despite oil. exceeding performance, capacity that In to curtailments believe different existing of until is pads these curve utilize type availability on operational midpoint interim, processing year-end. be will

review to objectives program. our Park XXXX XX, capital slide to move Let's remaining the for North

spacing foot spacing test per well As – returns there's to be development, earlier, five QX to the wells of Eastern in well to of in next the next but I drill the the test western the test XXX layers rig think three to eight foot well the mentioned we'll XXX in our pilot for we opportunity layer. same Similar wells spacing there'll bench. same

an IP giving The forward. first type us confidence well of to this produce test move curve above

far our wells the new the of will addition step-out western two core be end area. to at In capital test the drilling spacing spent remaining southern

from our should XRL right of will XRL requirements economics drilled be performance drilling and in As half you'll of On X.X our million wells second wells XX, Bill early overall designs XX the curve. development overlaid last slide of SRL XXXX that table meet the plan type QX, on over PV-XX our to-date Most quarter program of deliver outlines utilize and The completion and strip to see mentioned XXXX. drilling performance criteria the return inventory. current at XXX% our online which rate pricing.

Currently as we trucking plans attractive progress move and discussion capability. oil underway will flaring Let's on oil under forward. with midstream XX. slide differentials. move pipeline our waivers gas combusting Two the We're processing our are gas projects to

First mechanical out our liquids strip will unit of a the portion refrigeration gas installation of of the permitted stream.

Second installed will sites a further diesel from until lean could eliminating are pad plant liquids to that omissions pipelines at stream. portion our gas of Both convert gasoline completely to plants and gas our built. modularly high-volume be

pipeline carryout a XX construct QX an facility Walden and north the line we allow testing side pipeline. away Colorado miles productive from in XXXX determination to BLM to will Niobrara are the field. first On to After trucking of on process plan Numerous the to regional nearby submitted of a currently proven oil awaiting gas build Rawlins and establishing The multiple the plant now us levels, transport up previously area partner. plans rates prepared and in process achieving to lay initiate lines engineered find refineries. meaningful markets product layers and gas to the to production The IED at a lines we're oil significant midstream and partner reserves corridor. with to to that

beginning NorthWest XX, now the development. Agreement the Participation leverage to to Drilling slides fund STACK we continue Moving on to

agreement our extended drilled drilling In four Woodward to to away QX area test County XX only million Southeast this wells wells to in total the drilling to plan a wells in million including two with million minimal into additional in and the an recall, XX% spent delineate costs. Boe million our develop $XX $XX went million and of X.X least from consisting we day, budget sales asset QX Of STACK of per we outlay. Major oil. Of total and days As oil, production costs. $X County core leasehold. in was XXXX $X our NorthWest drill participating is to you to Southwest $X to capital objective outside to that net We delineate average and capital six completion XX produced per MBoe completion IP XX% quarter, for with of day five in at XXX and the

is production on net Our drilling the producing participation the of wells lower interest result our agreement. under

quarter, As evidenced has production on by QX Drilling the times NorthWest cycle improvement. the in STACK over of reduced chart since seen slide, XXX% right-hand corner time increased XX the gross days initiating the the are since second by on our XXXX. of a in XX have to XX% drilling over lower improvements been slide

time XXX%. improve Over the the period, same footage per and by we've foot cost XX% the per cut day

Given between us Major and Sunkey our well of key well bottom in slide the learnings interest rigs XX on selection wells also County direct you active other efficiency in our of progression vertical XX as located these XX graph logs total lead have intervals our to over Slide well that increase XXXX plan from higher in core learnings towards highlighting shows increases taken study the These Merrimack, profit developments. success change A result STACK; we a in the supported our The successful of play. a enhanced right in is brittle made to fluctuating play, industry to SandRidge's of advancement the NorthWest the The some future. Oklahoma model apply in currently more completion production seen the stimulation. placement results targeting interesting the relative higher of within the drilling areas with using field. productivity at of we've is on major case in growth is examine the Look Sunkey our and to NorthWest Merrimack results The by XXXX. for the basin STACK tested the the result. interpretation to non-wells our density. as is slide geologic improved has XX depositional wide design lateral been step well

other and on encouraging show acreage indicated wells areas. the the County in delineation play Major industry near near our across map, and As core our plan Southwest SandRidge results

year production Woodward Moving in Major, half efforts we the to drilling step the Counties. out exist established in and slide. on our slide XX previous the continue Southeast second NorthWest plan areas within Dewey the locations Central All of plan of

the compared generate by the slide million a the wells right. forward XX% curve pretty on the oil, and top on pricing. in basis. offset on X.X return causing defined solid performance consistently curve XX, STACK outperform SRL current beat rate expectations with SandRidge table at of to our is operators economic and type strip type on Moving parameters NorthWest a meet NPV-XX a well BOE a gas thereby

of first economics planned with Mississippian As NPV-XX pricing. the of mentioned earlier, current XX% program at the four wells the program $X we've return see On slide of for rate four-well composite spud quarter. subsequent an you'll strip exhibit million XX the to a

wells We online late remarks. I'll Bill start turn over expect to the for some to in now QX. closing coming

Bill Griffin

in year organizational Board challenging Thanks, achieved. a quarter, early leadership team, summary, our was in progress the senior John. meaningful the navigated this subsequently significant with structure change In company but of one we've which Directors. in Since was and

and in strategic continue improvement to responsive on alternatives. strive to while remains be assess operational our all continuous shareholders. parallel and This listen to We solid focused working organization to performance

create remains presents to that It's the SandRidge. Our itself commitment important unchanged sight for with our of shareholders. lose to value not opportunity

million of First we as assess we growth platform we only optionality going had we of multitude and tremendous options This not that an for liquidity. have provides as foremost August structure incredible capital do a is a of X clean $XXX but have forward.

percentage and STACK, we future and our fund while grow HBP wells significant capacity, we to North Lime mature have Park asset in the cash we values the generation in to expect asset our are incremental flow flow within and this Lime Miss unlocking areas, cash product reductions with Second, and NorthWest base. a We've inventory a of targeted meaningful competencies of of income Miss basin control and aligned capabilities development extend generating as through expense a investments. demonstrated our these capital operating mix extended that oil

major the attractively SandRidge execute our and believe company's of relative remain program. effectively and most cost time we those that is growth the toward partially execution, your to catalyst demonstrated industry operating cash taken returns, is drill these now it success EBITDA we've structure tangible through for operator perceptions and reductions further impressions to enterprise. delivery through results. confident We continued this margin change. steps evaluation today restructuring appreciate our I'm in and development back attributable metrics, the bit the this we'll remain value for the Additionally, of valued creation the profitable and are and focused turn misguided views positioning to some I cost and organization standard to individual will improvements areas, on in for production be various efficiently while dedicated to changing questions.

Operator

question Instructions] [Operator Capital. line first from the Our FM Yang with comes of Lin

line open. Your is

Lin Yang

Good Two please. morning. Hello. questions

in see the political of any First potential you current impact can all, environment from Colorado.

areas, example, you're effects, but to process? permitting any for drilling [Indiscernible] by movement, example, not Although be in rural potential spillover for supposed the impacted

John Suter

this to where point, Jackson don't regulatory John. had sit with haven’t issue we in work we think to-date. with Yes. try various authorities, and rule This is I them making up to the any issues County. We concerns or keep from have

Lin Yang

Great.

some gains potential tax asset, have the tax, if asset offsetting be you sell back value XXXX? question any in acquired is, were capital example, that – you may for company XXXX assets than Second North Park higher to for any

Bill Griffin

Yes.

going loss in We Those operating attributes but available this carry tax carefully might have XX-Q that we do remaining of file are outlined transactions that we our we're series more net afternoon, any undertake. forward. substantial have substantial to for

Lin Yang

much. Fantastic. very Thank Okay. you

Operator

comes next Instructions] [Operator the line Our of Management. Tieton with Dezellem Bill question from Capital

open. Your line is

Bill Dezellem

I of a group have questions. you. Thank

on wells First please us on that? What expectations? assets, above relative of think with is driver behind new coming those primary all, the line North you you would to the production share Park the

Bill Griffin

started Well, Niobrara. there learning Bill, to the there things Park North multiple out the with in and on curve walk and we've down are the going in as particular evolve

key mentioned these and one that our techniques of As the complete wells. important. we We John continued think evolution how the completion here certainly drivers of is

The second function specific rock been piece We've where land think of a that's and on well. continued target particularly and the I effective itself. intervals we these is evolve as somewhat to laterals

Bill Dezellem

about you rates rate you then those ask and of started rates of higher another? expectation first be guess, thinking then success the these decline impacted before wells, be? And decline of the would one does wells all, what decline on or what initial two success I let saw me questions, your And secondarily would this level way

Bill Griffin

producing in basis early for curve. type for I years to number of were initial area have it's this Well, which tell. and you it time drilled But and the that difficult our been would to is a wells point back the fact there particular been have

increased I associated in some applying those acreage after type seeing started additional generations curve. acquiring therefore this techniques. we techniques new position, with our at we last time we believe As was started year uplift point it of completion And

now, How initially, all-in-all times, type uplifted had wells here with our my curve out for curve. we projections. to As current have we it more to quarter and somewhat that is IP type But outperforming our these there so in expectation we John even curve predict. general sit the as out But demonstrated it's is are incremental here early reserves. ultimately prior but to type wells good continue is follow looks even will this yield they decline real is the unknown, still today difficult

Bill Dezellem

at a decline after sort one projection what put And of would years? the and type you curve two

Bill Griffin

look think general year at but I'll that is on decline the as have I to with can you we there. on type back some you you I tell particular feel get slide, decline curve two can't get rate if you the XX, kind that that Let we'll to particular me of slide second back pull what would the you let years, question. enter that in – but graph for level of

Bill Dezellem

is assets expect Lime QX. the in it last group this completed there. from right would us the is the in happening you right, completed the increase a ducts what and enough I'm and different grasp That's have then quarter the in have reported apologies. that you of just the you with you been between wells second wells then anticipate that other you. I trying – QX or post versus you still here things that share guess my My to were be can to Miss And from have be hoping to production I'm Thank question still under production or fall incremental as [ph]. ducts? one completed uplift the those And that wells,

John Suter

the doing follow to question, a completed do year year of what associated to of that clear the you're and that best how is trying half I half can't projections for indicator second sight total believe the be. to we're We production incremental to I to company -- to guidance with that – as the is quarter. And production would probably be to on point the get just I of to If would the being would fact point yet the wells will end that. performance we're -- the the in provided be reference math talking as the I to going with second what you much of I question. continue that you we've line the

Bill Dezellem

you. Thank

Bill Griffin

Thank you.

Operator

this back I'll to time. now at Griffin. over no There Mr. the further turn are questions call

Bill Griffin

call the any future for look today. to further today's And us give and and in discussed Appreciate updates on you. current interest along results call. outcomes we a please new forward our providing joining again process you with questions. strategic with Thank alternatives the your near activities of Thank

Operator

conference This concludes call. today's

may disconnect. You now

SandRidge Energy (SD) 9 Aug 182018 Q2 Earnings call transcript