Good morning. My name is David, and I will be your conference operator today. I would like to welcome everyone to the SandRidge Energy Fourth Quarter 2021 Earnings Call. This conference is being recorded. All lines have been muted to avoid any background noise. After the speakers' remarks, there will be a question-and-answer session. Scott Prestridge, Director of Finance and Investor Relations, you may begin your conference.

Thank you, and good morning, everyone. With me today are Grayson Pranin, our CEO and COO; Salah Gamoudi, our CFO and CAO; as well as Dean Parrish, our VP of Operations. We would like to remind you that today's call contains forward-looking statements and assumptions, which are subject to risk and uncertainty, and actual results may differ materially from those projected in these forward-looking statements. We may also refer to adjusted EBITDA and adjusted G&A and other non-GAAP financial measures. Reconciliations of these measures can be found on our website. With that, I'll turn the call over to Grayson.

Thank you, Scott, and good morning. Hopefully, you've had time to review the earnings release and investor presentation we posted yesterday after market closed. We will be referencing both during the call. The company is well positioned to capitalize on recent commodity price tailwinds, to include an expanded capital program this year with focused, high-graded drilling in the core of the Northwest Stack and a continuation of our well reactivation program. Before expanding on this in the presentation, Salah will touch on a few highlights from the fourth quarter and full year 2021 results.

Thank you, Grayson. Simply put, 2021 was a strong year. Despite no new drilling or completion activity, we were able to keep January to December production flat, averaging 18.6 MBoe per day for the company and 18.4 MBoe per day for Mid-Con. The production for the quarter as well as the year benefited from the reactivation of over 129 wells throughout 2021 that were curtailed during commodity price downdrafts in 2020. Net cash, including restricted cash, increased to approximately $140 million, which represents net cash of $3.80 per share of our common stock issued and outstanding as of December 31, 2021. The $41 million increase from the prior quarter was primarily driven by production from our Well Reactivation program, higher commodity price realizations, and our continued focus on cost minimization. As of March 7, 2022, the company's cash on hand, including restricted cash, was approximately $161 million. The company has no remaining term debt or revolving debt obligations, as the company repaid its $20 million term loan in full and terminated its previously existing credit facility in early September. Our adjusted EBITDA increased to approximately $37 million for the quarter and approximately $114 million for the year, again, despite no new drilling or completion activities during either period. Adjusted EBITDA is a unique metric for SandRidge as we have no interest and very little tax, given that we have no debt and a substantial NOL position. Commodity price realizations in the fourth quarter increased by 9%, 36%, and 5% from the prior quarter to $75.72 per barrel, $3.94 per Mcf, and $28.39 per barrel for oil, gas, and NGLs, respectively, before considering the impact of hedges. As of today, we have no open hedge positions or commodity derivative contracts. However, as we invest shareholder capital into our drilling completion and loader activation program, we will work side-by-side with our Board to evaluate and potentially enter into hedge positions in order to help protect investor capital spend. As alluded to earlier, we have maintained our large NOL position, which was over $1.7 billion as of year-end 2021. Our NOL position has and will continue to allow us to shield our cash flows from federal income taxes. Our cost discipline continued to improve during the quarter, with previously implemented initiatives by the Board and management further manifesting in our financials, partially offset by an increase in workover activity associated with well reactivations. This year, total G&A was lower year-over-year at approximately $9.7 million, or $1.42 per Boe, compared to $15.3 million, or $1.76 per Boe for the prior year. Adjusted G&A decreased by $5.8 million to $8.3 million or $1.22 per Boe from $14.1 million or $1.62 per Boe in the prior year. The team also held LOE and expense workovers to approximately $36 million, or $5.30 per Boe during the year while reactivating over 129 wells. We believe we compare favorably with our peers in regards to G&A and LOE on both an absolute and a current Boe basis. We continue to generate net income for our shareholders. During the quarter, we earned net income of approximately $37 million, an approximately 29% increase from the prior quarter and $117 million or $3.21 per share for the year. Before shifting to our investor presentation, we should note that our earnings release posted yesterday and the 10-K that we will file later today provide further detail on our financial and operational performance during the quarter and full year ended 2021.

Thank you, Salah. Now turning to the presentation. We thought it might be helpful to walk through some of the company's highlights, management, strategy and other business details. Over the past few years, the Board and management have focused the company's assets, optimizing its production profile, streamlining its organization and cost structure, and strengthening its balance sheet. As a result, we entered the year positioned to capitalize on robust commodity prices with high rates of return drilling in the Northwest Stack, continued well reactivations, and further strengthened cash flow from our already producing properties in Mid-Con. As Salah mentioned, 2021 was truly an exceptional year for the company. We were able to beat production by more than 6% relative to the midpoint of guidance, which is driven by our well reactivation program. This was more than a 20% increase to the guidance at the beginning of last year. Note that we were able to add this production offsetting annual decline for the year with $11 million of capital, which was 9% below the midpoint of guidance. On the expense side, we managed to come under adjusted G&A midpoint of guidance by 35% and kept LOE to $36 million despite increased activity and inflationary pressures. In other notable accomplishments for the year, we paid off our previous $20 million term loan and ended the year with zero debt. We closed the sale of North Park Basin assets in February of last year, simplifying and focusing our asset base in the Mid-Continent region, and completed the purchase of all overriding royalty interest assets of Mississippian Trust I. The key highlights of SandRidge are on Page 5. Our asset base is focused in the Mid-Continent region with a primarily PDP well set, which do not require any routine flaring of produced gas. These well-understood assets are almost fully held by production, with a long history, shallow, and diversified production profile and double-digit reserve life. As a result of this focus on the Mid-Con, the company was able to keep annual production relatively flat at 18.6 MBoe per day, despite no new drilling or completion activities, driven in part by the reactivation of over 129 wells throughout 2021. In addition to a continuation of our well reactivation program this year, we plan to resume drilling with a focused, purposeful high-return program in the Northwest Stack, consisting of 9 wells. We will expand on this later in the presentation. Our assets continue to yield significant free cash flow, which added $41 million of net cash including restricted cash this past quarter, now totaling nearly $140 million, net of debt paydown as of year-end 2021. As detailed, the company has demonstrated and been the leader in efficiently converting EBITDA to free cash flow, given our low per BOE cost structure and light CapEx last year, as well as improved commodity prices and realizations. Further, over 75% of operated wells produced profitably down to $40 WTI and $2 Henry Hub. This cash generation potential provides several paths to increase shareholder value realization and has benefited by a relatively low G&A burden. As we realize value and generate cash, our Board is committed to utilizing our assets, including our cash, to maximize shareholder value. SandRidge's value proposition is materially derisked from a financial perspective by our strengthened balance sheet, robust net cash position, financial flexibility, and over $1.7 billion in NOL. Furthermore, the company is not subject to MVCs or other significant off-balance sheet financial commitments. Currently, the company does not have any open hedging contracts after March of this year. However, we could enter into hedges from time to time in support of securing returns for our capital campaign, manage commodity risk or other fundamental drivers. It's finally worth highlighting that we take our ESG commitment seriously and have implemented disciplined processes around that. In summary, we are focused on growing the cash value and generation capability of our business in a safe, responsible, and efficient manner while prudently allocating capital for high return organic growth projects, remaining vigilant for value-accretive opportunities. This strategy has four points: one, maximize the cash value and generation capacity of our incumbent Mid-Con PDP assets by extending and flattening our production profile with high rate of return workover and well reactivations; initiating a 9-well drilling program in the core of Northwest Stack to economically add production; continuously press on operating and administration costs. The second is to ensure we convert as much EBITDA to free cash flow as possible, while exercising capital stewardship and investing in projects and opportunities that have high risk-adjusted fully burdened rates of return. The third is to remain vigilant, patient and maintain optionality for opportunistic value-accretive acquisitions. We'll focus on value-adding opportunities that bring synergies, further leverage SD's core competencies, complement or balance the company's portfolio, or otherwise yield a competitive return. The final prong is to uphold our ESG responsibility. Moving to Page 7, which details our core Mid-Con asset position, the prominent points here are long history and long lived, double-digit reserve life, and ample high-res production history to aid in projections. Shallowing base declines that will be lessened further from nearly 30 well reactivations and focused drilling in 2022. A diversified production profile, both from a gas to liquid hydrocarbon mix perspective, and value diversity perspective. High interest mostly held by production, which aids breakevens and minimize spending commitments. Turning to Page 8, we will discuss this year's drilling program. We will have a controlled and purposeful start to drilling this year with high-graded locations in the Northwest Stack. The program consists of 9 wells that are offsets to highly profitable horizontal wells and have favorable geologic and reservoir characteristics. The focus area we will be developing with this year's program has previously been delineated by SandRidge and other reputable operators. We know this area well. Approximately 60% of the program will be infill development with the remaining 40% being the first wells in section or co-development that again offsets productive and profitable wells. Of note is that we are benefiting from having a long-tenured history in Mid-Con, previous development programs, and can leverage a very tight cost structure to add incremental barrels to our base production in a very capitally efficient way. As Salah mentioned earlier, having no interest or federal income tax further makes our investment dollars spent very capitally efficient. The graphs on the bottom of the slide illustrate the average performance of offsets, which include both first wells and sections as well as child infill wells drilled at denser spacing than our planned 2022 program, as well as an IRR sensitivity over a range of flat pricing. It is important to know that historically, the play has been developed at 3 to 5 wells spacing. This year's well set is spaced conservatively at 2- to 3-well per section spacing. Gross D&C costs are estimated to be $4.75 million for single laterals and $7 million for extended reach laterals, which reflect casing, drilling, and other material equipment and services already secured at reasonable cost and current market estimates. We will continue to lean forward in repositioning the remaining items for the program to offset inflationary pressures. However, inflation will be a central focus this year and has bearing on unsecured costs and future drilling decisions. Program results, commodity price stabilization, or further flattening well costs, including the effectiveness of inflationary controls or projections, denser well spacing, and other factors will guide future drilling decisions and inventory considerations. We will continuously assess these factors, and along with our Board, evaluate the potential for future capital allocation in a prudent manner. Put simply, we will prove out the results first and then go from there. Page 9 addresses our approach to production optimization. Last year, we brought back online 129 wells, which collectively added an average of 3,200 gross barrels of equivalent production per day and delivered more than 100% capital weighted rate of return. We plan to continue this program through the remainder of this year, bringing on approximately 30 incremental wells. We will continue to monitor commodity prices, which could influence further well reactivations later in the future. In addition, we plan to convert a subset of these and other PDP wells to a more efficient long-term artificial lift method, which will likely reduce their go-forward costs. Shifting to Page 10, which outlines our various initiatives of the Board and management over the last several years that have led to an absolute and per Boe reduction in LOE of 75% and 30%, respectively, since 2016. We are pleased by our expense performance relative to peers. While we continue to press on operating costs, we anticipate expenses, specifically workover expenses, to remain at prior period levels, as we reactivate more wells this year. Further, we will continue to combat inflationary pressures here as well through rigorous bidding processes, securing material, equipment, and services over an appropriate tenor to offset market increases, as well as continuing to leverage our significant infrastructure, operation center, and other company advantages. Page 11 illustrates the more than 1,000 miles each of owned and operated SWD and electric infrastructure over our footprint, representing significant prior investment over the last decade plus. This substantial owned and integrated infrastructure provides the company both cost and strategic advantages, bolstering asset operating margins through reduced lifting costs as well as water handling and disposal costs, while derisking positive free cash flow down to $40 WTI and $2 Henry Hub. In addition, that interconnectivity and ample capacity helps buffer against unforeseen curtailment. Please note that with the assistance from the University of Oklahoma, we continue to evaluate the technical feasibility and potential commerciality of Carbon Capture, Utilization, and Sequestration applications across our infrastructure. While we are interested in opportunities to increase the utilization and profitability of our own infrastructure, any project will need to compete for capital within the company's portfolio and demonstrate an adequate rate of return. Currently, there is no significant capital allocated at CCUS. On Page 12, we provide an overview of the organization today. Over the last year plus, we have tailored our organization to be fit for purpose. This change has rebalanced the weighting of field versus corporate personnel to reflect where we actually create value and outsource necessary, but more perfunctory and less core functions such as operations accounting, land administration, IT, tax, and HR. However, we have retained key technical skill sets that have both the experience and institutional knowledge of our area of operations to support drilling and completion operations, as well as the ability to select through additional outsourcing of specialized areas to do more. Beyond the more than $6 million in per year G&A savings, outsourcing provides us greater flexibility and scalability to adjust the changes in our business or the market. As Page 13 illustrates, the effect of our organizational streamlining has resulted in a 75% and 60% reduction in absolute and per Boe G&A, respectively, since 2018. Needless to say, we are very pleased with our administrative cost reductions and how that performance relates to our peers. Now in calculating many of the points we discovered, on Page 14, which highlights the company's efficiency of converting EBITDA to free cash flow. This metric is important to us. Outside of smart, risk-adjusted, high rate of return investments or value accretive opportunities, our goal is to translate as much of the company's value generating resources to free cash flow. On the lower graph, we can see how SandRidge's no debt position stacks up relative to its peers. Now on Page 15, we lay out our guidance for the year. Let's circle back to Page 3 for a moment to summarize some of the company's current strengths, including year-end 2021 SEC proved developed reserve PV-10 of $433 million and management's internal unaudited PV reserve PV-10 at March 2 prices of $546 million. Note that this does not reflect market changes over the past season. $140 million net cash and cash equivalent at year-end 2021, which represents net cash of $3.80 per share of our common stock issued and outstanding, flat production over the trailing 12 months with $11 million of invested capital. Expanded 2022 capital program of high-return projects to further enhance production and arrest decline to include 9 new wells high graded in the core of the Northwest Stack and continuation of our well reactivation program. Low overhead, top-tier G&A of $1.42 per Boe for full year 2021. No debt, in fact, negative leverage. Significant free cash flow and a growing net cash position supported by a diverse production profile, low decline, multi-digit light asset base. $1.7 billion in NOLs, which will shield future cash flow from federal income taxes. A low operating cost benefiting from a large SWD and electric infrastructure requiring little to no future capital to maintain. This concludes our prepared remarks. Thank you for your time. We will now open the call to questions.

We'll take our first question from Michael Furrow with Johnson Rice.

So SandRidge is in a free cash flow generating mode now. And combined with a healthy balance sheet opens up plenty of options for you guys for uses of cash, whether that be shareholder returns or drilling new wells or some combination of both. And so we haven't seen any share repurchases in the third or the fourth quarter, despite the initiation of that program at 2Q reporting. So I think it would be helpful if you could sort of explain management's view on capital allocation going forward, specifically on buying back shares versus drilling new wells?

Great question, Michael. I think that overall, I'd like to highlight, number one, that the buyback program that we put in place was meant to maximize strategic optionality. We did that via entering into a 10b-18 program. And so just to ensure that all of our investors are aware of some of the dynamics and challenges with the 10b-18 program, while it does give the Board and management ultimate flexibility in executing on a share repurchase or a buyback program, it can also be very restrictive, because we have to act very similar to any other shareholder. And so if we have any material non-public information that restricts us. For instance, in the preparation of the financials, that starts two weeks before every quarter until we file, and then if we're in any sort of strategic discussion, whether that’s M&A, whether that’s even discussing other modes of returning capital with our Board and key investors, that set of discussions can restrict us from being able to execute on the buyback. So while we have it in place to maximize strategic optionality, we are constantly reviewing ways that we can maximize shareholder returns. And we are wanting to make sure that we deploy that capital in the most strategically accretive manner to our investors. Share buybacks are one option. We are evaluating dividends, and then we are also evaluating more strategic optionality outside of organic inventory to try to maximize our shareholder returns.

Great. That makes plenty of sense to me. So my next question is on the well reactivation program. So SandRidge reactivated just close to 130 wells last year, but it looks like in the 2022 plan is to complete just 30. This kind of leads me to believe as a result of this allocation of capital towards the Northwest Stack drilling program. But Slide 8 very clearly illustrates the profitability of the program, especially with these commodity prices. So the well reactivation program also appears to have some favorable economics as well. So is there any sort of reason why the company has decided to reinitiate a drilling program versus continuing with the same reactivation pace seen in 2021? And why exactly was this specific area chosen in the acreage?

Sure. I think that's a great series of questions. I'll try to address all of them. First, I think we'll talk about the area. The Meramec and the Northwest Stack is the highest rate of return within our drilling inventory. So I think that makes the most sense to high grade. I think the Miss Lime and the Chester could become more meaningful with the stabilization around the current spot or further flattening, and also, we'd like to see the D&C for the Miss Lime be sub-$2 million. In regards to capital allocation decisions, it's one thing to high-grade based off rate of return, but we also consider PV-10 and PVI or present value index on how much meaningful value that the investment is actually bringing to the table, because some of these well reactivations have a high return, but they add significantly less PV-10. That's just a product of our high-grading the program from last year, accelerating the most meaningful portion of the well reactivations, and the remaining inventory is very gradational. So we continue to high-grade and try to bring on the most profitable within the program, but they have much less relative PV-10 impact. So that's why you see more capital being allocated to drilling in the Northwest Stack.

Next, we'll go to Josh Young with Bison Interests.

So I have a couple of questions for you. The first is on this drilling program. So it's good to see, and it's helpful to see the rate of return you guys are expecting, which I'm assuming is probably at least somewhat rest given the history. Can you talk to how much of the spend for that program might be reflected in the net cash number you provided as of early March?

Sure, happy to. I think you're picking up some of the comments we made during the call that we're being proactive and combating inflationary pressures in repositioning material equipment and advancing the program in order to ward off future increases. So we've spent a lot of time early this year securing casing, pumping units, and other equipment and material just to make sure that we have a successful program and deliver the well cost that we've underwritten. So I'm not prepared to disclose an absolute number today, but that has impacted our cash balance as of March 7 of this year.

Okay, great. Yes, that was my understanding. I wanted to clarify because the cash build appears a bit light, but you also disclosed the program, which is helpful. My other question is similar to the previous one about the return of capital. Given the significant cash build, what is management's perspective on returning that capital, possibly through a dividend instead of a share repurchase? It seems there is a considerable amount of free cash flow based on guidance and historical cash build, suggesting that a meaningful dividend could be payable without significantly affecting the cash balance. It might only reduce the cash build.

Josh, great question. I think that the view of management and the process that we go through and how we think about this is that all options are on the table. If we do not find a highly accretive strategic option within the energy space or otherwise to deploy this capital and to use the same highly accretive way for our investors that's both prudent and highly profitable, I think that those options are on the table, and we would be supportive of that. And we will work with our Board to discuss that and just make sure that that's the most economically accretive as well as be a consensus with our Board and shareholders that we can get to. Also, on the other side of that, there are options for an expanded capital and drilling program as we go along. We are very prudent and conservative regarding what we want to put out there for our investors and how we spend your money. As we go along in the year and we drill and complete new wells, and bring more wells back onto production, and we kind of see where these commodity tailwinds as well as the volatility goes, you could see us expand that drilling program if it's the most accretive and prudent thing to do.

We'll now hear from Patrick Retzer with Retzer Capital.

First of all, I want to congratulate you on the excellent job you've done in bringing this company to its current position efficiently and economically. Thank you for that. However, I'm a bit confused considering the current price levels for oil and gas. I believe your guidance for 2022 indicates a production decline of 17% up to about flat. Is that correct?

Sure. Thanks for joining the call. It's a great question, and I appreciate the comments. I think what we anticipate with this program is much of the production impact from the drilling of the 9 wells will be incurred in the second half of the year. If you look at over the next two years, about half of the production volume impact is going to occur this year and next year. So the long story short is that the drilling program is going to meaningfully slow declines and grow production by about 5% from January to December, and then it will further help to mitigate declines next year.

Okay. So you've got no debt, a pile of cash, you can reactivate wells at very low cost, yet you're doing maybe 30 wells this year versus over 100 last year, and letting your production decline in a high price environment. Can you talk about how we should think about that? And perhaps what the inventory of wells is that you have that can be reactivated at some point?

Sure. Let me address the well reactivations first. We do have a meaningful inventory of previously curtailed wells that not only occurred in 2020 but further back than that. We're constantly assessing which wells we can reactivate in the current environment. The 30 wells was really a proxy of our initial budget planning. Of course, we've seen a tremendous surge in pricing over the last week that does not factor that in. So we continue to assess that and remain flexible to relook at things for further potential activations for us. Again, the drilling program is going to be pretty meaningful in adding economic barrels in the back half of the year. Our goal is to flatten and increase production.

That concludes today's question-and-answer session. We thank you for your participation in today's call. You may now disconnect.