Good morning. My name is Denise, and I will be your conference operator today. At this time, I would like to welcome everyone to the SandRidge Energy’s Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. Thank you. Johna Robinson, you may begin your conference..

Thank you, and welcome everyone to the conference call. With me today are Paul McKinney, President and Chief Executive Officer; Mike Johnson, Chief Financial Officer; and John Suter, Chief Operating Officer.

We would like to remind you that in conjunction with our earnings release and conference call, we have posted slides on our website under the Investor Relations tab that we will be referencing during this call.

Keep in mind today's call contains Forward-Looking Statements and assumptions, which are subject to risks and uncertainties, and actual results may differ materially from those projected in these forward-looking statements. We will also make reference to adjusted EBITDA and adjusted G&A and other non-GAAP financial measures.

Reconciliations of these measures can be found on our website. Also, you will see us file our 10-Q later this afternoon. Now, let me turn the call over to Paul..

Thank you, Johna, and good morning, everyone. Thank you for taking the time to join us today and for your interest in SandRidge. We plan to review with you our second quarter results and to provide updates on our operations and guidance.

We will be representing the investor presentations Johna mentioned just now, we posted on our website earlier this morning. So I encourage you to use it and follow along.

SandRidge is an independent oil and natural gas exploration and production Company headquartered in Oklahoma City, with principal focus on acquisition, exploration and development of high recurrent resources in United States.

On page three of our corporate presentation, we provide an overview of the Company that includes a map that highlights the location of our operations and if you table that summarize updated market and financial information, and our Company production reserves and assets statistics. We hope you find the consolidation of this information useful.

Moving on to Page 4. This is a summary we include to remind our investors of our business strategy and the key components we believe lead about near-term and sustainable long-term success for our shareholders.

We have discussed this strategy with you in the past and it continues to guide us and provide us with the flexibility to change of industry conditions change. Later in the call, we will discuss some of the changes we observed happen in our industry and how SandRidge is responding to them. Moving on a Page 5.

You will find a summary of our second quarter highlights. Mike Johnson will review our results with you, but before doing so, I want to leave you with one important point. Our results this quarter demonstrated our ability to deliver on our promises and commitments we made earlier this year.

We believe it is important to demonstrate quarter-over-quarter our commitment to financial discipline, cost control and to other aspects of our strategy we believe lead to success. So with no further ado, I will turn this over to Mike Johnson to review our second quarter 2019 financial results.

And afterwards launching John Suter to review our second quarter operational results. Once they are done, I will be back to finish up with some closing comments..

Thank you, Paul and good morning everyone. Despite the fact that our second quarter results were challenged by low commodity prices. They also reflect our progress and in two key areas. First, they demonstrate our operational success in adding more oil to our product mix. Second, they reflect our ongoing efforts to reduce our cost pressures.

We believe these accomplishments will enable us to meet or exceed our expectations and guidance in 2019. We posted a net loss of $13 million in the current quarter, compared to the net loss of $34 million in the same quarter last year. Adjusted EBITDA was $35 million in the current order, compared to $33 million last year.

The slight increase in adjusted EBITDA was accomplished during a period where we saw commodity prices decrease across the Board, wellhead prices were down 13% for oil, 53% for NGOs and 18% for natural gas. In the aggregate, we had a 13% reduction in the blended price of our commodities, yet we still increased adjusted EBITDA year-over-year.

This was achieved primarily as a result of our development efforts in the North Park basin that drove the increase in our higher margin oil sales, as evidenced by the 30% increase in oil production year-over-year and a roughly 200% year-over-year increase in our operating margin for this important asset.

We also made the difficult decision this quarter to reduce our workforce, which is expected to decrease our annual cash G&A run rate by at least $6 million and this is reflected on our revised 2019 full-year guidance for adjusted G&A. The current quarter’s results reflect the charge of 4.5 million related to this staff reduction.

Although we have no derivatives in place during the second quarter, we have sent that it swaps on 20% of our expected oil production during the remainder of 2019 at a strike price just above $60 per barrel and we intend to layer in additional derivatives during 2019 as the right opportunities arise.

Because our 2019 capital expenditure plan is front-end loaded with roughly 65% of our capital allocated to the first half of the year, we exited the second quarter with $52 million drawn on our revolver and $8 million in unrestricted cash.

Based on the current strip for oil and natural gas, we expect to exit 2019 modestly drawn on our credit facility demonstrating our commitment to financial discipline. In June we also amended our current facility primarily to extend the maturity day an additional year to April, 2021 and to lower the interest rate pricing grid by 100 basis points.

I will now turn it to John for his thoughts on our second quarter operational results and his outlook for the remainder of the year..

Thanks Mike. Total Company production for the quarter was 3.2 million barrels of oil equivalent highest of 30% oil, 6% NGLs and 44 % natural gas. Our listing cost averaged a $7.37 per BOE for the quarter. The Company brought nine wells to sales, two in North Park Basin and seven in the Northwest STACK Play.

CapEx for the quarter was $35 million, with $23 million in drilling and completion cost primarily from North Park rig activity. Rig utilization will be substantially reduced in the second half of the year.

We are preserving the option to utilize our rig in the fourth quarter depending on various lease commitment requirements while still staying within capital guidance range. Let’s now look at the North Park asset on Slide 6. As mentioned last quarter, we initiated drilling on a six well pad on the north side of the field.

Two Peterson Ridge unit XRLs were drilled to reach the farthest limits north to-date. From the same pad we drilled four Patriot XRLs to the South. With the four Patriots we are testing a 15 well per section, two rail wine rack pattern based on technical evaluation of our initial micro seismic results from the previous Peters wells spacing test.

We finished drilling all six wells and released the rig as planned in early June. We initiated stimulation operations on all six of these XRLs plus a refrac of a legacy SRL within the same section in mid-June. We anticipate being completed with stimulation operations this week.

After finishing reaming completion activities, we anticipate having all these wells tied into infrastructure and on production by early September. We look forward to this production information to help optimize our spacing plans for future development.

Additionally, we are anxious to see how refracs on legacy wells can be beneficial as we continue infill development in existing producing areas. On Slide 7 you can see updates on well results from three Surprise wells located in the southern extension of the play that were turned inline near the end of Q1.

These wells targeted three new undrilled sections. Aggregate cumulative oil production from these wells is 13% above type curve after 120 days. Additionally, two Ray Ranch SRLs on the east central edge of the field returned to sales in the second quarter.

These wells have produced for roughly 90 days, and have cumulatively produced 19% above the oil type curve in aggregate. As we delineate new areas of the field, we continue to be excited about well performance that consistently meets or outperforms type curve results, leading to higher returns. On Slide 8.

Our North Park net daily oil production plot, so as that we achieved a record second quarter 2019 oil rate averaging 4920 net BOE per day. This was accomplished as we brought on our previously mentioned Surprise and Ray Ranch wells in April with peak production from these five wells in May.

We will have spent the first two months of the third quarter stimulating and completing our northern six well pad. The fourth quarter will realize the full benefit of these six new wells, which should generate 4500 barrels of oil per day gross initial rate assuming type curve performance.

This will be a great addition to our current base oil production in the year strong. Now, I would like to move from the North Park base into our assets in the mid-continent on Slide 9.

As mentioned earlier, we brought seven new Northwest stack Merrimack wells to sales during the quarter that produced a 30-day IP per well average of 511 BOE per day 70% oil. We concluded our drilling obligations within the drilling Participation Agreement as we brought these last seven wells to sales.

The drilling Participation Agreement successfully established 1.7 million barrels of oil equivalent of new cumulative gross production to-date of drilling 26 well by holding 13200 net acres by production. Additional high quality Northwest stack locations exists for development, as commodity pricing and capital allocation allows.

Our Mississippian assets contributed 2.5 million barrels of oil equivalent 16% oil, 31% NGLs and 53% natural gas. In closing, I'm excited about our continued progress toward our North Park production with a record Q2 oil rate as well as strategic objectives we are accomplishing there.

Most of all, I would like to thank the SandRidge team for another important record achieved that we haven’t mentioned. We have now achieved one year with zero recordable incidence for Company personnel. I will now hand it back to Paul for closing remarks..

Thank you John. SandRidge delivered another solid quarter executing on key elements of our work program and the strategy we laid out to shareholders earlier this year. As John pointed out, our teams are doing so in a safe and environmentally responsible manner. Congratulations to all of you and I'm speaking about all of you that work here at SandRidge.

Your hard work and commitment to our values make my job easier and thank you very much.

Again back to business, as you can see our operating team continues to deliver according our capital and operating plans and we had advanced several important strategic objectives in North Park and continuing to do so with our completion operations currently underway there.

We remain encouraged by our well results in both North Park and in Northwest STACK and now that we have completed our drilling programs for the first half of the year, we are focused on developing our future drilling, completion and development plans as we continue to evaluate a multitude of A&D opportunities we encountered in the marketplace.

Earlier this year, we told you that our capital spending program were going according to budget and they still are, but due to lower commodity prices, we may end the year with a minimal amount of debt on the balance something slightly different than what I predicted in our last call.

We are reaffirming our guidance with exceptions of two changes, we are reducing our adjusted G&A expense down from the range of $34 million to $37 million to $31 million to $35 million reflecting the changes we made this quarter associated with our reduction in force.

We are also decreasing our price realization for natural gas liquids from 37% of West Texas Intermediate to 25% of WTI reflecting the prices that we anticipate for the rest of the year.

Now with respect to the current market conditions and our ambition to grow through M&A, we have absorbed failed asset sale attempts and unsuccessful strategic alternative processes, leading us to believe there remains a gap between the expectations of buyers and sellers.

We believe there are multitude of issues contributing to this proceed gap, volatility and hydrocarbon prices being one of them. In-light of this, we intend to be patient disciplined and creative as we evaluate opportunities and our M&A efforts will be guided by our strategy to improve our margins and lower our breakeven cost.

We also intend to evaluate the acquisition of producing assets of distressed companies, important thing our shareholders need to keep in mind about our efforts in this regard, is that we are focused on acquisition and merger opportunities that we believe generate attractive returns.

Having said all that, at this point I would like to express my sincere appreciation to all of you joining us on the call today. We will now turn the call over to our moderator and open it up for questions..

[Operator Instructions] Your first question comes from Bill Dezellem with Tieton Capital. Your line is open..

Hi thank you. Let us start with your last point relative to acquisitions. So first of all, I think you referenced in your commentary, a multitude of A&D, D would be for divestiture.

To what degree is that part of the evaluation process today? And then secondarily, on the acquisition front, would you characterize how many transactions that you are looking at today, versus one quarter ago please..

Well, with respect to divestitures, we do have properties that we operate and we are contacted by various different operators associated with potential acquisitions. As you and I have talked Bill in the past, anything I have is for sale for the right price. And anything you have I'm going to buy for the right price.

And so that is the nature and so we did actually sell a small portion of some of our midcontinent assets earlier this last quarter, a small amount, but it was meaningful for us to clean up some accounting and some other things. And so, yes, we continue to participate there. Nothing big at this point, but pretty much minor disposition.

Now, with respect to acquisitions, we have actually gained a lot of momentum during the second quarter up to now. I'm going to give you the numbers, but we are in a significant number of data rooms right now.

We have signed a significant number of CA's, some of these are actual processes that are out there and being marketed by companies that specialize in that. One or two of these are with companies where we contacted them, and we have agreed to exchange the aid. And so I guess the point I'm making is that we are very, very active.

As we have seen this year go by, we have seen a lot of properties, hit the streets, we have seen a few failed sales and strategic alternative processes.

And so this is a key component of our future growth plans and so we are, like I said, we are going to remain patient, we are going to remain disciplined and we are going to remain creative in the process..

Paul, have you had much churn in that list of acquisitions or properties that you are evaluating. Meaning that some dropped off the list, compared to three months ago, but new ones have come on, which I understand is part of the normal process.

I'm just wondering if a lot of that has taken place, with the difference between the bid offers spread or if your analysis has really been rather continuous on a more static group properties?.

No. There has no quite a few opportunity that we have evaluated that have dropped off the list. And that is just kind of the nature of that kind of work. As you very well know, I mean, the success rate or I should say the capture rates for A&D is typically pretty low. So you will kick a lot of tires before you will find that deal that works.

You got to remember there is two people on either side of that negotiation have to agree. And so our perceived gap in expectation between buyers and sellers is the primary reason that transactions hadn't happened yet. But we are representing our shareholders and we believe we are doing the right thing by being patient and disciplined..

In net gap do you perceive that it has narrowed or widened with the most recent consternation in the industry?.

I don't have a feel for that to be honest with you. I do believe though that both sides of those transactions need to become a little bit more creative to get deals done.

I think this volatility is frustrating for a lot of us that are in the industry, that are trying to make a living, drilling and completing wells and developing resource that this world desperately needs, right. But I don’t have an opinion on that Bill, I just know that the gap exists..

Understood I have a group of more questions, would you prefer I either step back in queue or shall I continue?.

Actually you are welcome. Call back here afterwards for the long conversation. You know that you are welcome to call here and we will schedule something at your convenient..

Great. I will turn it over then. Thank you..

[Operator Instructions] Your next question comes from [indiscernible]. Your line is open..

Hi, how are you?.

Hi.

I'm good and well, how are you?.

Good, good. Thank you very much in taking my call.

Obviously the big inconsistency in the room is that you are looking for distressed properties at a small fraction of book value, you are a pretty distressed property yourself and my question is rather than spending a nickel on more assets shouldn’t you be thinking about actively buying back some shares here?.

That is a strategy that other companies have pursued and the point that you make is a very valid one, okay. the challenge that we have for a company our size is that if I take the liquidity that we have and buyback shares then that robs us of the liquidity that we need to grow. And I joined this Company with a clear mandate to grow this Company.

And so we had a similar - not with you, but I had a similar question once before I think we were reviewing our annual report, our annual 10-K, similar question.

And so I can tell you that I agree with you from the standpoint that as a valid request and a valid position to hold, but we are committed to growing the Company, I need the liquidity to grow this..

Okay can I continue. if you are interested in growth let me tell you that I'm a shareholder not an analyst and I interested actually in the share price. I'm interested in how I return on my investment and I couldn’t give a list about how big you are whether you become an [Exxon] (Ph) or whether you don’t.

I'm interested and you are doing your job and I want to tell your Board of Directors that this is a false mission, you have enormous book value, you can write down that book value to really what you think it’s worth or you should be buying the hell a lot of a stock and I don’t care which, as I said about your growth I care about how my investment your Company does.

That was just a comment.

My question is does your balance sheet accurately reflects the value of your assets or are they overstated and if they are overstated, I would suggest that you start writing them down to a place where I don’t have to ask you questions to why you are not buying the shares back?.

Well, first of all they are not overstated and as a shareholder I really do appreciate your feedback, I really do. We have a difference of opinion, I will do everything and my team will do everything we can to address your primary concern, which I have as well. And that is with respect to share price growth.

And we believe that we are taking the right steps and my only request for you is to be patient, because I would like to encourage you to remain a shareholder with us and allow us to earn your confidence. Thank you very much..

So we have a philosophical difference. On the one hand, you are interested in growth. On the other hand, I'm interested in creating value.

So how do you reconcile this?.

I really don't think it's productive for you and I to continue this debate. I encourage you to call me direct and we will have a longer conversation about this later. So please proceed with the call..

Thank you very much..

You are welcome. You are very welcome..

There are no further questions queue up at this time. I will turn the call back over to management for closing remarks..

Thank you everyone for participating in this call. We are excited about what the future holds for SandRidge and to our investors and are encouraged by your support. This is the end of our call. You are also welcome to call us here directly or to talk to me and other members of the management team. And so thank you again..

This concludes today's conference call. You may now disconnect..