SandRidge Energy, Inc.

Thank you for standing by and welcome to the Sandridge Energy second quarter 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to David Zhu, Director of Finance. Please go ahead, sir.

Thanks and welcome, everyone. With me today are Carl Giesler, our CEO, Salah Ghamoudi, our CFO, and Grayson Pranin, our VP of Engineering and Reservoir, as well as other members of management. We would like to remind you that today's call contains four looking statements and assumptions. which are subject to risk and uncertainty and natural results may differ materially from those projected in these forward-looking statements. We may also refer to adjusted EBITDA and adjusted GNA and other non-GAAP financial measures. Reconciliations of these measures can be found on our website. Now let me turn the call over to Carl.

Thank you and good morning. We appreciate your interest in Sandridge. Our earnings release yesterday, as well as the SEMQ that we will file later today, both provide substantive detail on our financial and operating performance during the second quarter. Accordingly, we'll keep our prepared remarks brief, focusing on the highlights from the quarter and other initiatives, as well as the outlook for the company. It's not hyperbole to say that 2G20 was arguably the most challenging in the history of the oil and gas business. The double whammy on commodity prices, particularly oil and NGLs, of one, the demand hit from COVID-19, and two, the supply shock from the decision by OPEC Plus to ramp up production earlier in the year required depth responsiveness. We are pleased with how our team proactively adjusted. Nimbleness and rigid cash flow focus in managing the curtailment and then restoration of wells in response to commodity price fluctuations mitigated what otherwise likely would have been a more severe quarter-over-quarter production decline. Further, our cost, particularly LOE and CapEx initiatives, manifested benefits more quickly than we had anticipated. Accordingly, the quarter-over-quarter degradation in EBITDAX and free cash flow was more muted than might have been expected given commodity price fluctuations. Again, particularly the steep drops in oil and MGL prices. COVID-19, of course, has impacted a business beyond the commodity price downdraft. While we're back in the office, we have instituted appropriate procedures and policies to protect the health of our employees, as well as to comply with federal, state, and local guidelines. Aside from the broader oil and gas industry, 2Q saw substantial change at Sandridge as well, Most notably, a wholesale change in executive management and a structural reset to how we run our business. On the corporate side, staffing will stand at just over 15 people at the start of the fourth quarter, down almost 90% from the beginning of the year. In-house, we retained only direct value driving, core strategy setting, oversight, and control. For other necessary functions, we've implemented thoughtful outsource solutions that provide economies of scale, scalability, and best practice benefits. Through personnel and other savings initiatives such as software, hardware, and office expense rationalization, we've lowered our adjusted G&A to sub $2 per BOE and close to a $10 million run rate. Progress on LOE has been equally significant. with a leaner team and changes to how we go about workovers, curtailment of uneconomic wells, how we use compression and chemicals among other field initiatives, we've reduced LOE to less than $6 per BOE and about a $45 million run rate. Yesterday's earnings release reaffirmed our 2020 guidance from May. We're even more confident now than before in our ability to achieve those targets. On the HSE front, later this month, our team will rightfully celebrate two years without a recordable incident. This remarkable achievement is all the more notable given TQ's substantial industry headwinds generally and the equally significant changes at Sandridge in particular. On the debt equity front, we expect to close our previously announced building sale in the third quarter. We expect that the approximate $35 million in proceeds from that sale, coupled with anticipated cash generation in the back half of this year, will put us close to a net cash position by year end. Our commodity prices, of course, will impact our cash flows. We've extended our hedge profile to encompass more than 60% of our expected PDP gas production through the end of 2021. We'll now open the call to questions.

Thank you and as a reminder if you would like to ask a question please press star 1 on your telephone handset. And again that is star 1 in order to ask a question. and I don't show any questions in the queue at this point. I'll turn the call back to the presenters.

Thank you all very much for your interest in Sandridge. We'll now conclude the call.

Thank you very much for joining us today ladies and gentlemen. We appreciate your participation. This concludes our call and you may now disconnect.