Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2022 SandRidge Energy Conference call. At this time, our all lines are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Now, I would like to turn the call over to Scott Prestridge, Director of Finance and Investor Relations.

Thank you, and welcome everyone. With me today are Grayson Pranin, our CEO and COO; Salah Gamoudi, our CFO and CAO; as well as Dean Parrish, our SVP of Operations. We would like to remind you that today's call contains forward-looking statements and assumptions, which are subject to risk and uncertainties, 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, and good morning. I am proud to report on another strong quarter results for SandRidge and that the Company's cost focus in efficient activity with high-graded drilling in the core of the Northwest STACK as well as a well reactivation program continue to add incremental economic production with strong free cash flow contribution from our producing assets this year and projected into 2023. Before expanding on this, Salah will touch on a few highlights from the third quarter.

Thank you, Grayson. Production for the third quarter remained flat at approximately 17.8 MBoe per day over the last three quarters. Production benefited from the completion of 3 new wells this quarter as well as the reactivation of 42 wells during the first nine months of 2022 that were previously curtailed during the commodity price downturn in 2020. The production from the 3 new wells contributed to an increase of oil production over the prior quarter by 25%. We expect production from this year's drilling program to continue to add the base levels in the fourth quarter of this year and into 2023 as we finish completions on wells drilled in the second half of the year. Net cash including restrictive cash increased to approximately $241 million, which represents $6.50 per share of our common stock issued and outstanding as of September 30, 2022. The approximate $35 million increase over the quarter was supported by production from our new wells and while reactivation program, as well as strong commodity prices realizations, net of capital expenditures made for inventory drilling and completion activities related to our 2022 capital program. The Company has no term debt or revolving debt obligations as of September 30, 2022, and continues to live within free cash flow, funding in all of its capital expenditures with organic free cash flow and cash held on the balance sheet. Over the quarter, the Company generated adjusted EBITDA of approximately 55 million. As we have pointed out in the past, our adjusted EBITDA is unique metric for SandRidge due to us having no eye and very little teeth given that we have no debt and a substantial NOL position that shields our cash flows from federal income taxes. Commodity price realizations in the third quarter before considering the impact of…

Thank you, Salah. I thought it would be helpful to walk through some of the Company's highlights, management's strategy and other business details. As I mentioned previously, we are pleased with the results in the third quarter and have capitalized on strong commodity prices with high rate of return drilling in the Northwest STACK, continued well reactivations and further strengthened cash flow from our producing properties and Mid-Con. We're able to keep quarter-over-quarter production flat in Mid-Con, with oil increasing by 25% over the quarter, driven in part by three new Northwest STACK wells, as well as the continued benefit from over 170 well reactivations since early 2021. We will continue to reactivate wells for a total of 54 for the year, which will average over 100% IRRs. In addition, we have converted artificial lift systems of 22 wells to rod pump, with 13 plans for the remainder of the year, which will aid in optimizing lifting efficiency and lower point forward cost for this well set. The rod pumps we have or will be installing are tailored for the wells' current food production and will reduce the electrical demand from the current artificial lift system. This is key to offset increases in utility costs associated with the rise in fuel surcharges from elevated commodity prices. These types of investments optimizing our wells production profile and cost focus has contributed to flattening expected asset level decline of our producing properties took approximately 8% over the next 10 years. We have successfully drilled 5 wells and are now producing the first 3 wells in this year's capital program through the third quarter, which have all targeted the Meramec formation in the core of the Northwest STACK play. Wells 4 and 5 we recently completed and are anticipated to have first production…

[Operator Instructions] Your first question comes from the line of Josh Young with Bison. Your line is open.

So a question and a follow-up. My question is on the PDP decline rate that you showed in your announcement, you said there was an 8% PDP decline rate. Could you elaborate on that a little bit? Is that -- are you guys saying that your existing wells are in aggregate declining by 8% a year? Or is there sort of more color on that?

Sure, Josh, and good morning. Yes, we're saying that the base decline of a producing asset will average in 8% decline with the next 10 years without capital.

And then, can you talk about your estimate of inventory of additional well locations that may be similar to the wells that you're drilling right now? So, this is less of a proved undeveloped or probable and more of estimation of similar locations to what you're drilling currently that seems to be hitting, like you guys said, a 100% or so, rates of return.

Sure. And I think you're hitting on the inventory of well reactivations. So, we're planning to do 54 for the year through the end of this year, and we continue to monitor prices and costs as we look for to the next year. We have additional inventory that's economic today, but we are economic animals and we'll continue to adjust that plan as conditions change over the quarter.

So, I meant, the Northwest STACK wells that you guys have drilled and that you have, it sounds like two or three online right now.

Sure. We're focused on executing the current program and monitoring results right now. What we've seen in the first less than four months on the first 2 wells are within expectation ranges. And the 3 well is just cleaning up after the first 30 days of production. So, we don't see anything that causes the change. However, if we telegraph in previous quarters, we're going to be controlled and disciplined before we lean further outside of what we've come out with this year's capital program, and we'll continue to monitor and hope to provide some more detail in next quarter's call.

Your next question comes from the line of Jeff Robertson with Water Tower Research. Your line is open.

Grayson or Salah, can you all talk just in very general terms how you might be able to use the NOLs to for shareholder value in the context of an acquisition?

Sure. In the context of an acquisition, I think the cast balance that we currently have provides like I said on the call, strategic advantage and competitive leverage in today's market, given the outlook on interest rates. The capital markets themselves and what actual opportunities you might be able to look at. So, I do believe that it provides that advantage. However, we're also looking at other uses, like return of capital. I think there is a scenario contingent of investors that think you can walk and chew gum at the same time by implementing a regular weight dividend. Buying back opportunistically during market dislocations and maintaining that optionality; however, the larger that you maintain in that dry powder, the more attractive opportunities that you can look at, and it brings you into that next tier of things that become live.

On the NOL Salah, can you -- are there certain structures or certain types of acquisition characteristics where the NOL could be a big benefit for SandRidge?

Yes, so Jeff, there's acquisitions whereby there is not a lot of tax basis or capital intensity needed to maintain or develop an asset. So, those specifically are typically late life PDP type assets in the ENP space, and then there's also other potential assets that we could acquire outside of traditional upstream energy, looking at midstream gathering systems, services and things like that. So, we'll always make sure that we're looking at acquisitions and M&A in light of what's most value credos to our investors. We want to make sure that we have a cohesive story in that M&A scenario. But you know, that would be the typical type of characteristics because an asset with a lot of [HUD] inventory or drilling locations and things like that, that takes a lot of capital intensity, is going to defer a lot of taxable income down the line. And so, you might not use as much of those NOLs in those sorts of assets than you would let's say, a PDP asset that you buy for a discount, or just beat up on topics.

So on a PDP asset, you can defer -- you can use the NOLs to shield all the cash taxes correct for at least for some period of time?

Correct. Because in theory a PDP asset doesn't require a lot of additional capital investment outside of the initial acquisition. And so, you're making your margin by beating up on OpEx and gathering more efficiencies and scale by expanding your number of barrels that you're producing and number of wells that you're operating. And the way that you would you would tap into the NOLs and that scenario is because you're not putting a lot of dollars into the ground, and therefore, deferring taxes, you're generating a lot of taxable income, near-term, post-acquisition of those assets. And so, therefore, you'll be able to tap into the NOL very quickly.

Your next question comes from the line of Harvey Sax with Alpha Wealth Funds. Your line is open.

I am at you back in August and I had a question for you. Your company's valuation looks incredibly low. I'm not an expert in this oil and gas industry, but we're not factoring the NOLs. What do you think that company fair value should be? It's clearly undervalued.

So, this is a lot. We don't put out specific guidance that speaks to a holistic net asset value. We do share some of your thoughts that there are value dislocations between our share price in the market at times, but we can't really comment on our internal views at this time because we haven't or we're going to [Technical Difficulty] out there, but…

I mean, you must have some idea. I mean, you're looking at evaluating acquisition opportunities. You must have some idea of what your company is worth. Is it 20% undervalued, 50% undervalued? Can you just talk in some generalities? Because I don't understand how you're looking to increase shareholder value. If you're looking at your cash as an asset and an acquisition, then you only have your stock to use as currency. And if your stock is way undervalued, then it becomes very difficult, if not impossible to make an accretive acquisition. So how do you plan on increasing the value and the shareholder value? How do you plan on increasing the price of the stock? I mean you're doing an excellent job of managing expenses and activating wells and the stock looks incredibly cheap to me, but I'm just one person.

I think great questions at this point. This is Grayson. I point you, if you're looking for evaluation metrics, the value of future discounted cash flows of our proved developed properties for oil, gas and NGL is approximately 100 million at 3Q SEC prices. I would say as far as increasing the share price performance here it's executing on the program that we just laid out, it's continued investor outreach. And all the things that we laid out during the call that we've kind of focused in our overall strategy, I think that will continue to be impactful. So, I'm happy to visit more details, but that's our short view.

No, I think some insider buying by management would draw some attention to the valuation discrepancy. Because clearly, the U.S. is positioned and natural gas is going to be greatly enhanced by the loss of Russia as a supplier to Europe. This is a long-term significant change in valuation in my opinion.

Certainly, I appreciate.

I would like to see guys buy some stock. I'd like to see more confidence from management in the valuation.

Yes, I would say, relative to that a large portion of our personal income is tied to SandRidge and the continued performance and increase in valuation of SandRidge. So, we are very much aligned on that front. And I would say, at a second point, because we are so active at looking at opportunities in the M&A space, anytime that we have material non-public information, it keeps us from traded.

There are no further questions at this time. This concludes today's call. You may now disconnect.