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spk05: Ladies and gentlemen, thank you for standing by, and welcome to the Sandridge Energy fourth quarter 2020 earnings call. At this time, all participant lines 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. Please note, today's conference is being recorded. If you require any further assistance, please press star 0. I will now turn the conference over to Mr. David Zhu, Director of Finance. Thank you. Please go ahead, sir.
spk02: Thank you, and welcome, everyone. With me today are Carl Gaber, our CEO, Salah Zamudi, our CFO, and Grayson Pratt, our CO, as well as other members of management. 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. Reconciliation of these measures can be found on our website.
spk04: Thank you, and good morning. Our earnings release yesterday, as well as the 10-K and investor presentation that we will file and put on a website later today, provide substantive detail on our financial and operating performance during the fourth quarter as well as full year 2020. Those documents also provide a formal guidance for 2021. Accordingly, as usual, we'll keep our prepared remarks short. 2020 was literally transformational for Sandra. We significantly streamlined our organization with our personnel window from 270 at year-end 2019 to just over 100 today. Most of this reduction is due to significant outsourcing of non-core, more administrative functions. Costs came down commensurately with both adjusted G&A and LOE down just over 50% year-over-year. We believe we compare favorably with our peers on both an absolute and per BLE cost basis. We tightened our capital expenditures too, slashing spend to about $5 million this past year compared to more than $160 million the year prior. Our aggressive cost and capital discipline, coupled with the sale of a non-core headquarters building in Oklahoma City and North Park Basin asset in Colorado, enabled us to literally flip our net debt from over $50 million at year end 19 to a current net cash position of roughly the same magnitude. On the operations side, we were able to increase our net operating working interest by buying in at a very attractive discount to PDP value, the overriding loyalty interest in our wells held by Sanders Mississippian Trust II. We anticipate having a similar opportunity later this spring with our sole remaining affiliated trust. This past fall, Sandridge Mississippian Trust One announced the commencement of its dissolution process. Despite the challenges of navigating COVID-19, as well as the various organizational shifts within Sandridge, our team remained focused. We met or beat all operational guidance metrics provided in May of last year, and they have continued our streak without a recordable HSE incident until it's now 31st month. In 2021, we plan to maintain this organizational system. Specifically, we plan to continue to press cost efficiencies and implement small ball initiatives to optimize our production profile. Put differently, we will maximize the cash generation of our business. Simultaneously, we plan to shift our strategic attention externally, We believe the oil and gas industry generally and our core mid-con base in particular would benefit from consolidation. Asset aggregation offers several levers to drive shareholder value, from one, capturing scale economies in both the field and back office, to two, hydrating investment inventory, to three, accessing expanded sources of capital, to four, providing our shareholders expanded liquidity, to finally gaining a broader institutional investor and research model. Finding an economically attractive way to grow our PDP asset base or combine our assets with those of another company in a value-increasing manner will be a key emphasis in 2021. We believe our publicly traded equity growing net cash position and streamlined and scalable organizational structure positions us well to potentially benefit from industry consolidation. Regardless, know that we'll be disciplined stewards of the company's cash. If we can't deploy that capital to expand the PDV footprint in an economically improved manner or to facilitate a value-enhancing merger, we'll seek to return that cash to shareholders in an efficient manner. We'll now open the call to questions.
spk05: And at this time, if you would like to ask a question, press star followed by the number 1 on your telephone keypad. And that star followed by the number 1 to ask a question. And we'll pause for just a moment. And as a reminder, that star wants to ask a question. And that star wants to ask a question. And our first question comes from Peter. I'm sorry. Our first question comes from Garrett King with Truffle Helm Capital.
spk01: Hi, Carl. Good morning. Good morning. One question I had, press release list of the company's cash balance as of March 1st. Did the company have any outstanding debt? On that date?
spk04: Excuse me. Garrett, we did. As you look at the balance sheet that was summarized in our earnings release, and that will be more fully explained in a 10-K that we'll file after market close today, we have a $30 million credit facility consisting of a $20 million turn loan that is debt. and then a $10 million undrawn revolving portion. So we do have $20 million of term loan debt on a balance sheet at an exceptionally attractive rate.
spk01: Got it. And that remained outstanding as of March 1?
spk04: That's right. I believe you put an 8K ad on that. Our regular way of RBL that was led by RBC and others, as you know, the RBL markets in turmoil That was expiring in April of this year. They wanted my left arm, right leg, a few toes to kind of extend that, and this was just a much more attractive option for the company. From the cost, from the tender, really just kind of a unicorn. It made a lot of sense to do this.
spk01: Understood. And is the company, now that you guys are amassing this significant cash balance, are you continuing to evaluate M&A opportunities?
spk04: Well, absolutely. Right. Look, at the end of the day, we're well aware that the cash is not ours. It's yours. And if we can't deploy it in a way that adds value to the shareholders in a pretty clear manner, we're not going to do anything with it. We'll give it back. But you also think it can help make us an attractive partner with another company. Someone might be over-leathered and using their cash to do leather, might right-size a balance sheet of the pro-forma company. That could be very value-enhancing to the pro-forma entity, and we can accrue an outsized portion of that value. So in my mind, having a strong balance sheet, in particular a strong cash position, makes us a more attractive partner in a strategic situation. As you know, strategic activity often talked about rarely done. That was the details. We believe having a strong balance sheet, particularly having a strong cash position, makes us net-net more attractive.
spk01: Understood. Thank you.
spk05: And our next question comes from Josh Young with Bison.
spk03: Hey, guys. So a quick question on the price realizations. Would you mind talking a little bit about, now that the asset base is down to just this one mid-common asset, what's the driver of the large discount? discount from the relevant pricing benchmarks. So I see 20% of the NGL price versus WTI and pretty substantial discount to the NYMEX gas price. And if you could talk a little bit about how much of that is related to fixed costs or minimum volume commitments versus variable prices. Thank you.
spk00: Sure. Good morning. This is Grayson. beginning with MGL, 20% really made up of our primary marketer target is an effing recovery. So we're adding more volume, which dilutes the per barrel price. But from a revenue perspective, we're ahead. And then on the gas side, A, there is no minimum volume commitment. B, the fixed side is 57 cents per MCF. And we'll say within Q4, you realize $1.56 per MCF.
spk03: Okay, great. And then just as a follow-on, can you guys comment? I didn't hear anything. I didn't see anything in the press release. Obviously, prices were extremely high during the recent storm, but a lot of production was offline. Can you guys comment on your experience through that and if you were able to maintain production through that exceptionally high price period?
spk04: I'm going to talk about how we maintain production, and then Salah will talk about how we realize pricing. I mean, look, the team did a crackerjack job. keeping our production online. A lot of our neighbors had deferment or basically shut-ins close to 100%. You know, we kept at all times more than half our production online and very quickly got that down to more normal deferment levels for the month of February. So really hats off to Dean Parrish, who's really pointed here on the executive team, but equally the field that was working with them. The guys did a tremendous job, and it's something that could have been a lot worse than it certainly was for some of our peers. Salah can talk a little bit about the pricing.
spk00: So on the pricing front, typically what we see in the mid-con is our primary purchaser is Targa, as Grayson mentioned. And the way that our gas is priced is based on loss pricing, which is a weighted average sales price. And I would say 85% of that is going to come from last front month pricing. And so in some months, that helps us where the spot price gets lower than the front month pricing during the month. Sometimes that can potentially hurt us where spot prices rise and the front month price is lower. However, in this case, we are still working out the details. There's still 15% approximately on a historical basis of our volumes that will be priced at spot. Because of sort of the chaos that happened in the mid-con in regards to force majeure letters, shutdowns of plants, things like that that were happening more downstream, we're working with Target to understand better how our pricing was affected and that weighted average sales price was affected during the month of February. And so we will be investigating that and understanding that further here in the next few weeks.
spk03: Great. Thank you.
spk05: And there are no further questions at this time. And thank you for joining today's conference call. You may now
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