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SandRidge Energy Inc (SDRPQ.PFD) (Q1 2024) Earnings Call Transcript Highlights: Robust ...

GuruFocus Research
·4-min read

  • Adjusted EBITDA: $15 million

  • Interest Income: $2.7 million from high yield deposit accounts

  • Dividends: Total cumulative dividends of $141 million or $3.81 per share; Q1 2024 dividend of $0.11 per share, a 10% increase from 2023

  • Cash Position: Over $208 million, equating to more than $5.60 per share

  • Long-term Debt: None reported as of March 31, 2024

  • Commodity Price Realizations: $75.8 per barrel of oil, $1.25 per Mcf of gas, $23.65 per barrel of NGLs

  • Net Operating Loss (NOL): Estimated at $1.6 billion

  • Adjusted G&A: $2.8 million, or $2.3 per BOE

  • Net Income: Approximately $11 million, or $0.3 per basic share

  • Net Cash from Operating Activities: Approximately $16 million

  • Free Cash Flow: $15 million, representing a 99% conversion rate relative to adjusted EBITDA

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • SandRidge Energy Inc (SDRPQ.PFD) reported generating adjusted EBITDA of nearly $15 million, reflecting strong operational performance despite natural gas price fluctuations.

  • The company has maintained a robust financial position with over $208 million in cash and no long-term debt, enhancing its financial stability and flexibility.

  • SandRidge Energy Inc (SDRPQ.PFD) continues to deliver on its return of capital program, paying cumulative dividends of $141 million to date, including a recent increase in quarterly dividends.

  • The company's strategic focus on cost discipline resulted in an adjusted G&A of $2.8 million, or $2.3 per BOE, demonstrating efficient management and operational leverage.

  • SandRidge Energy Inc (SDRPQ.PFD) successfully converted over 99% of its EBITDA to free cash flow, indicating highly effective capital management and operational efficiency.

Negative Points

  • The company experienced higher than normal seasonal downtime due to cold weather, which temporarily impacted production levels.

  • Natural gas prices experienced a downdraft during the quarter, which could pose risks to revenue if prolonged or intensified.

  • Despite a strong cash position, the fluctuating commodity price environment necessitates cautious capital management and could impact future investment and growth strategies.

  • The company did not operate a drilling rig this quarter, deferring significant development activities, which could delay potential growth opportunities.

  • While SandRidge Energy Inc (SDRPQ.PFD) has a large federal NOL position to shield cash flows from federal income taxes, reliance on such fiscal advantages might pose risks if regulatory changes occur.

Q & A Highlights

Q: Can you provide an overview of SandRidge Energy's financial performance in the first quarter of 2024? A: (Brandon Brown - CFO & SVP) Despite the downturn in natural gas prices, SandRidge Energy generated an adjusted EBITDA of nearly $15 million. The company also reported net income of approximately $11 million, or $0.30 per basic share, and produced about $15 million in free cash flow. The total net cash, including restricted cash at the end of the quarter, was more than $208 million.

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Q: What dividends did SandRidge Energy declare in the first quarter of 2024? A: (Brandon Brown - CFO & SVP) The Board declared an $0.11 per share dividend in Q1 2024, which was a 10% increase over the dividends paid in 2023. This dividend was paid on March 29th. Additionally, another $0.11 per share quarterly dividend was declared last week, to be paid on May 31st, 2024.

Q: How is the company managing its capital expenditures and operational costs? A: (Dean Parrish - COO & SVP) SandRidge is focusing on high return projects like Artificial Lift conversions and production optimization to enhance production and reduce costs. The company did not operate a drilling rig this quarter and is deferring significant development to maximize returns in a favorable commodity environment. Lease operating expenses were approximately $10.9 million, or $7.92 per BOE.

Q: What strategic advantages does SandRidge Energy hold in its operations? A: (Grayson Pranin - President & CEO) The company benefits from a substantial owned and integrated infrastructure, which helps reduce lifting, water handling, and disposal costs. This infrastructure, along with a strong balance sheet, no debt, and a significant NOL position of approximately $1.6 billion, positions SandRidge well in the market.

Q: Can you discuss the company's approach to mergers and acquisitions? A: (Grayson Pranin - President & CEO) SandRidge is maintaining optionality to execute on value-accretive M&A opportunities that leverage the company's core competencies or complement its asset portfolio. The company's strong cash position and no debt provide competitive leverage in evaluating M&A opportunities.

Q: What are the key points of SandRidge's strategy moving forward? A: (Grayson Pranin - President & CEO) The strategy includes maximizing cash value generation from Mid-Con PDP assets, converting EBITDA to free cash flow efficiently, maintaining flexibility for M&A, and continuing the return of capital to shareholders. The company aims to grow its business responsibly and efficiently while allocating capital to high-return projects.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.