SandRidge Energy (SD) Q2 2025 Earnings Call Transcript | The Motley Fool

DATE

Thursday, August 7, 2025, at 2 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Grayson Pranin
• Chairman of the Board — Jonathan Frates
• Chief Financial Officer — Scott Prestridge
• Chief Operating Officer — Brandon Brown
• Vice President of Operations — Dean Parrish

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TAKEAWAYS

• Adjusted EBITDA— Adjusted EBITDA was $22.8 million for Q2 2025, up 76% year over year, driven by higher production and improved pricing.
• Net Income— Net income reached $19.6 million, or $0.53 per basic share (GAAP); adjusted net income was $12.2 million, or $0.33 per basic share.
• Cash Position— Cash, including restricted cash, exceeded $104 million as of Q2 2025, equating to more than $2.80 per share.
• Dividend— Dividends paid during Q2 2025 totaled $4 million; a $0.12 per share dividend—up 9%—was declared on Aug. 5, 2025, payable Sept. 29, 2025.
• Share Repurchase— Year-to-date through Q2 2025, the company repurchased approximately 550,000 shares for $6 million, with $69 million remaining authorized.
• Free Cash Flow— Free cash flow before acquisitions was roughly $10 million for Q2 2025, with $23 million year to date.
• Capital Expenditures— The company spent about $18 million on capital expenditures, including drilling, completions, and leasehold acquisitions in Q2 2025.
• Commodity Price Realization— Oil realized $62.80 per barrel, natural gas $1.82 per Mcf, and NGLs $16.10 per barrel for Q2 2025; all declined sequentially from Q1 2025.
• Hedging— Approximately 35% of second-half production is hedged for the remainder of 2025, covering about 55% of natural gas and 33% of oil output.
• Adjusted G&A— Adjusted general and administrative expenses were $2 million, or $1.48 per BOE for Q2 2025, down from $2.5 million or $1.85 per BOE in Q2 2024.
• Cherokee Development— The first Cherokee well IP’d at about 2,300 BOE per day with 49% oil in May 2025; average initial production rates from proven wells in the program exceed 1,000 barrels of oil or 2,000 BOE per day.
• Breakevens— Breakeven for new Cherokee wells is down to $35 WTI at current commodity prices, while legacy well economics are viable at $40 WTI and $2 Henry Hub due to infrastructure advantages.
• Capital Program Guidance— Full-year capital spend is expected between $66 million and $85 million for 2025, including $47 million to $63 million for drilling/completions and $19 million to $22 million for workovers, optimization, and selective Cherokee leasing.

SUMMARY

SandRidge Energy(SD 6.92%) reported a 19% year-over-year increase in production and a 33% rise in revenue for Q2 2025, supported by the successful launch of its Cherokee development program. Management highlighted the company’s financial flexibility, citing more than $1.6 billion in federal net operating losses, a zero-debt balance sheet, and over $100 million in cash. The company emphasized that more than 95% of its asset base is held by production, preserving future development optionality and a low-risk operating structure. SandRidge Energy stated that it has no significant leasehold expirations and retains the ability to scale or moderate development in response to commodity price changes. The board authorized a new dividend reinvestment plan, allowing shareholders to receive cash or additional shares, and indicated ongoing evaluation of M&A to leverage substantial federal tax assets, complement its portfolio, or create shareholder value.

• Chairman Frates said, “We have paid a cumulative $4.36 per share in dividends since the beginning of 2023,” underscoring the company’s ongoing capital return focus.
• Operating cash flows fully covered capital expenditures and returns to shareholders without reliance on external financing.
• The company’s combined oil-weighted and gas-weighted asset base, along with a robust net cash position, enables strategic optionality across commodity cycles.
• All operated 2025 wells are characterized as proved undeveloped (PUD), providing higher well performance confidence by offsetting existing production as stated in the company’s capital program.
• The company is positioned to evaluate acquisitions of additional producing assets should commodity prices weaken, leveraging its cash and no-debt capital structure.

INDUSTRY GLOSSARY

• BOE (Barrels of Oil Equivalent): A standard measure that aggregates oil, gas, and NGL production into barrels of oil equivalent to facilitate comparison and reporting.
• PUD (Proved Undeveloped Reserves): Oil and gas reserves that are demonstrated by existing data but require additional drilling to produce.
• LOE (Lease Operating Expense): The direct cost of operating and maintaining oil and gas leases, including labor, utilities, and routine maintenance.
• NGL (Natural Gas Liquids): Hydrocarbon liquids extracted from natural gas, such as ethane, propane, and butane.
• NOL (Net Operating Loss): A tax provision allowing a company to offset taxable income with accumulated losses from previous years.
• Henry Hub: The pricing point for natural gas futures contracts traded on the NYMEX, serving as a benchmark for U.S. natural gas prices.
• WTI (West Texas Intermediate): A grade of crude oil used as a major pricing benchmark in North America.

Full Conference Call Transcript

Grayson Pranin: Thank you, and good afternoon. I’m pleased to report on a positive quarter in the first half for the company. Second quarter production averaged just under 18 BOE per day, an increase of approximately 19% on a BOE basis and 46% on oil, translating to a roughly 33% increase in revenue and 76% increase in adjusted EBITDA relative to the same period last year. Benefiting from increased volumes from our prior Cherokee acquisition and development program this year. In addition, we brought on the first well from our Cherokee development program with a thirty-day IP of approximately 2,300 BOE per day with 49% oil. Before expanding on this, Jonathan will touch on a few highlights.

Jonathan Frates: Thank you, Grayson. Compared to 2024, the company continued to benefit from improved natural gas prices partially offset by ongoing headwinds in WTI. Combined with growing production, the company generated revenues of approximately $35 billion, which represents a 33% increase compared to the same period last year. Adjusted EBITDA was $22.8 million in the quarter compared to $12.9 million in the prior year period. We continue to manage the business within cash flow while growing production, maintaining no debt, and utilizing our substantial NOL, which shields us from federal income taxes. At the end of the quarter, cash, including restricted cash, was just over $104 million, which represents more than $2.80 per common share outstanding.

The company paid $4 million in dividends during the quarter, which, including special dividends, now represents $4.36 per share paid to shareholders since the beginning of 2023. On 08/05/2025, the Board of Directors declared a $0.12 per share dividend, a 9% increase payable on September 29 to shareholders of record on 09/22/2025.

Scott Prestridge: Shareholders may elect to receive cash,

Brandon Brown: or additional shares of common stock through the company’s newly authorized dividend reinvestment plan. Year to date through the end of the quarter, the company had repurchased approximately 550,000 or $6 million worth of common shares. Our share repurchase program remains in place, with roughly $69 million remaining authorized. Capital expenditures during the period were roughly $18 million, including drilling and completions as well as new leasehold acquisitions. As noted, the company has no term debt or revolving debt obligations and continues to live within cash flow, funding all capital expenditures and capital returns with cash flow from operations.

Commodity price realizations for the quarter before considering the impact of hedges were $62.8 per barrel of oil, $1.82 per Mcf of gas, and $16.10 per barrel of NGLs. This compares to first quarter realizations of $69.88 per barrel of oil, $2.69 per Mcf of gas, and $20.07 per barrel of NGLs. Our production remains meaningfully hedged through the remainder of the year with a combination of swaps and collars representing approximately 35% of second half production based on the midpoint guidance. This includes approximately 55% of natural gas production and 33% of oil. These hedges will help secure a portion of our cash flows and support our drilling program during the recent downdraft in prices.

Despite growing production, our commitment to cost discipline continues to yield results with adjusted G&A for the quarter of approximately $2 million or $1.48 per BOE compared to $2.5 million or $1.85 per BOE in the second quarter last year. Net income was $19.6 million during the quarter or $0.53 per basic share and adjusted net income was $12.2 million or $0.33 per basic share. This compares to $9 million or $0.24 per basic share and $6.4 million or $0.17 per basic share, respectively, during the same period last year. Adjusted operating cash flow was roughly $26 million during the quarter.

Finally, despite the ramp-up of our capital program, the company generated free cash flow before acquisitions of roughly $10 million during the quarter and $23 million year to date. Before shifting to our outlook, I should note that our earnings release and 10-Q will provide further details on our financial and operational performance during the quarter.

Grayson Pranin: Thank you, Jonathan. I thought it’d be useful to give a brief update on operations before touching on other company highlights. During the second quarter, the company successfully completed and brought online the first well of our operated one rig Cherokee drilling program. We drilled the second and third wells. We just wrapped up completion on these wells, and then we’ve turned to production. Dean will touch more on this later. We are very pleased with the results of our initial well, which had an IP of approximately 2,300 BOE per day with 49% oil.

The other wells in our development program this year directly offset this well and other proven wells in the area, which have an average initial production rate of over a thousand barrels of oil or 2,000 barrels of equivalent per day. Our new well and the results in the area give further confidence to reservoir quality, result consistency, and expectations in the area. We hope to share further details on this and our operating results next quarter. As I mentioned previously, production for the quarter increased approximately 19% on a BOE and oil basis year over year. As we look forward to developing our high return Cherokee assets this year, we anticipate growing oil and production volumes further.

From a timing perspective, most production from our development program will occur in the second half of this year. In addition, two completions will carry over with exit rates projected over 19 MBoe per day and estimated oil production rate increasing around another 30% relative to Q2 into the next year. And when combined with further drilling, we could see production volumes and specifically oil volumes increase meaningfully above the 2025 exit rate level. We’re hopeful that our nearly 24,000 net acres in the Cherokee Play will translate to a meaningful multiyear runway as we look beyond 2025, and we plan to continue to invest in new leasing and other opportunities to bolster our operating position and extend that runway.

That being said, as a prudent operator, we want to focus on delivering our initial wells before remarking more on inventory. In addition, we will continue to be mindful of results, commodity prices, costs, macroeconomic, and other factors as we continue to assess our capital decisions this year and beyond. Shifting over to commodity prices, WTI prices have been around the mid $60 range over the last several weeks, and despite some fluctuations, the forward-looking curve has been relatively stable. Henry Hub, on the other hand, has seen some recent headwinds, the spot testing below $3, and the next twelve months in a high 3.

At current commodity prices, our operated Cherokee wells have robust returns, and breakevens for these new wells are down to $35 WTI. Given these returns and durability, we plan to continue our development plan this year with a watchful eye to adjust if needed. Please keep in mind that we do not have significant leasehold expirations this year and have the flexibility to further these projects if needed for a period of time. I’d like to pause here to highlight the optionality we have across our asset base. Coupled with the strength of our balance sheet, which sets us up to not only navigate but leverage changes in commodity price.

The combination of our oil-weighted Cherokee and gas-weighted legacy assets, as well as a robust net cash position, give us multifaceted options to maneuver and take advantage of different commodity cycles. Our Cherokee development adds value with WTI’s constructive, and we could take advantage of our legacy properties through well reactivations, incremental production optimization projects, and possibly even development at the appropriate natural gas and liquid prices. Or participate in both when WTI and Henry Hub are both constructive. Conversely, given the relatively low breakeven of our producing properties, no debt, and cash balance over $100 million, we’re also well-positioned to take advantage of a lower commodity environment by acquiring additional producing properties at attractive prices.

Put more simply, we have a strong balance sheet and a more versatile kit bag, which makes the company more resilient and better poised to maneuver and adjust, no matter the commodity environment. Now I’ll turn things over to Dean to discuss operations in more detail.

Dean Parrish: Thank you, Grayson. Let’s start on our capital program. Two operated wells in our program and two nonoperated wells were drilled in the Cherokee Play last quarter. The two operated wells on our first dual well pad were just turned to flowback with indications of strong well performance. We will have production results to report next quarter. Our team successfully planned and executed drilling and completion of the first operated well on budget with minimal operational issues. The first well IP’d in May around 2,300 barrels of oil equivalent per day and is currently free-flowing and exceeding our expectations. We have now completed drilling our fourth well and anticipate completing and having production for this well in the next quarter.

Currently, we are drilling our fifth and sixth wells on a dual well pad. We plan to drill eight operated Cherokee wells with one rig this year and complete six wells. The remaining two completions are anticipated to carry over to next year. Currently, all of our planned wells are proved undeveloped or PUD, meaning that our planned drilling locations this year will offset producing wells, which translates to higher relative confidence in well performance. Gross well costs vary by depth but are estimated to be between approximately $9 to $12 million. While we have taken proactive steps to help mitigate the effects of inflation, further changes to tariffs or other factors could influence these costs in the future.

From a timing standpoint, most of the production from this year’s capital program will occur in the second half of the year, with the benefit extending into next year.

Scott Prestridge: We intend to spend between $66 million and $85 million in our 2025 capital program.

Grayson Pranin: Which is made up of $47 million to $63 million in drilling and completions activity, and between $19 million and $22 million in capital workovers, production optimization, and selective leasing in the Cherokee play. Our high-graded leasing is focused on further bolstering our interests, consolidating our position, and extending development into future years. We intend to fund capital expenditures and other commitments using cash flows from our operations and cash on hand. As Grayson discussed earlier, our operated Cherokee wells have robust returns at current commodity prices. However, we could moderate or curtail our capital program if headwinds present pressures on rates of return.

Our legacy assets remain approximately 99% held by production, which cost-effectively maintains our development option over a reasonable tenor. These non-Cherokee assets have higher relative gas content, but commodity price futures are not yet at preferred levels to resume further development or more well reactivations at this time. Commodity prices firmly over $80 WTI and $4 Henry Hub over a competent tenor and/or reduction in well costs are needed before we would return to exercise the option value of further development or well reactivation. Now shifting to lease operating expenses. LOE and expense workovers for the quarter were approximately $6.6 million or $4.5 per BOE, which compare favorably to $6.41 per BOE in the second quarter last year.

However, we do not anticipate second quarter LOE rates to continue at the same level for the remainder of the year. The decrease in LOE was primarily due to a one-time noncash adjustment of an operating accrual as well as lower power and workover costs. We will continue to actively press on operating costs through rigorous bidding processes, leveraging our significant infrastructure, operations center, and other company advantages.

With that, I will turn things back over to Grayson. Thank you, Dean. I will now revisit the key highlights of SandRidge. Our asset base is focused in the Mid Continent region with a PDP well set that provides meaningful cash flow, which does not require any routine flaring of produced gas. These well-understood assets are almost fully held by production with a long history, shallowing, diversified production profile, and double-digit reserve life. Our common assets include more than a thousand miles each of owned and operated SWD and electrical infrastructure over our footprint.

This substantial owned and integrated infrastructure helps derisk individual well profitability for the majority of our legacy producing wells down to roughly $40 WTI and $2 Henry Hub. Our assets continue to yield free cash flow, and we have negative net leverage. This past generation potential provides several paths to increase shareholder value realization and is benefited by a low G&A burden. SandRidge’s value proposition is materially derisked from a financial perspective by our strengthened balance sheet, financial flexibility, and advantaged tax position. Further, the company is not subject to MVCs or other significant off-balance-sheet financial commitments. We have bolstered our inventory to provide further organic growth opportunities and incremental oil diversification of low breakevens in high-graded areas.

We maintain financial flexibility that allows us to adjust our strategy to take advantage of commodity cycles. This flexibility provides advantageous strategic optionality to further grow our business and provides a buffer to commodity headwinds while protecting our capital return program. Finally, it’s worth highlighting that we take our ESG commitment seriously and have implemented disciplined processes around it. We remain committed to our strategy in growing the value of our business in a safe, responsible, efficient manner while prudently allocating capital to high-return growth projects. We’ll also evaluate merger and acquisition in a disciplined manner with consideration of our balance sheet and commitment to our capital return program. This strategy has five points.

One, maximize the value of our incumbent MidCon PDP assets, extending and flattening our production profile with high rate of return production optimization projects, as well as continuously pressing on operating and administrative costs. Two, exercise capital stewardship and invest in projects and opportunities that have high risk-adjusted and fully burdened rates of return while being mindful and prudently targeting reasonable reinvestment rates that sustain our cash flows and prioritize a regular way dividend. Three, maintain optionality to execute on value-accretive merger and acquisition opportunities that could bring synergies, leverage the company’s core competencies, complement its portfolio of assets, fully utilize approximately $1.6 billion of federal net operating losses, or otherwise yield attractive returns for its shareholders.

Four, as we generate cash, we’ll continue to work with our board to assess paths to maximize shareholder value to include investment and strategic opportunities, advancement of our return of capital program, and other uses. Our regular way quarterly dividend is an important aspect of our capital return program, which we plan to prioritize in capital allocation, along with opportunistic share repurchases. The final staple is to uphold our ESG responsibility. As we look forward to the year and beyond, we plan to further progress our Cherokee development while monitoring commodity prices, results, and other factors. In order to realize high rates of return, grow our production levels, while providing further oil diversification.

Continued success in support of commodity prices, we’re hopeful to expand to a multiyear development plan. Please keep in mind that a return of capital program will continue to be our top priority, and given our financial flexibility, we’ll exercise capital stewardship to respond to changes in commodity prices, costs, macroeconomic, or other factors. Shifting to administrative expenses, I will turn things over to Brandon.

Brandon Brown: Thank you, Grayson. As we wind up our prepared remarks, I will point out our second quarter adjusted G&A of $2.4 million or $1.48 per BOE continues to compare favorably to our peers. The ongoing efficiency of our organization stems from our core values to remain cost disciplined, and prior initiatives, which have tailored our organization to be fit for purpose. We will maintain our cost-conscious and efficiency-focused mindset and continue to balance the weighting of field versus corporate personnel to reflect where we create value. We have outsourced necessary but more perfunctory and less core functions, such as operations accounting, land administration, IT, tax, and HR.

Our efficient structure has allowed us to operate with total personnel of just over 100 people while retaining key technical skill sets that have both the expertise and institutional knowledge of our business. In summary, the company had free cash flow of approximately $10 million in the quarter, over $100 million in cash and cash equivalents at quarter end, which represents more than $2.80 per share of our common stock outstanding. In inventory, of high rate of return, low breakeven projects, and overall mid composition that is approximately 95% held by production, which preserves the option value of future development potential of our legacy acreage in a cost-effective manner.

We have low overhead, top-tier adjusted G&A, no debt, negative leverage, flattening base production profile, double-digit reserve life, and approximately $1.6 billion of federal NOLs. This concludes our prepared remarks. Thank you for your time today. We will now open the call to questions.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press. And we have no questions. This concludes today’s conference call. Thank you for your participation. You may now disconnect.