Earnings call transcript: SandRidge Energy Q2 2025 sees stock surge despite revenue miss

SandRidge Energy Inc. reported its second-quarter 2025 earnings, revealing a mixed financial performance that led to a notable 6.53% increase in its stock price in aftermarket trading. The company’s earnings per share (EPS) slightly surpassed expectations, while revenue fell short of forecasts. According to InvestingPro data, the company maintains strong financial health with an overall score of "GOOD" and holds more cash than debt on its balance sheet. Despite the revenue miss, strong operational performance and strategic initiatives contributed to positive market sentiment.

Key Takeaways

• EPS exceeded expectations at $0.33, compared to a forecast of $0.32.
• Revenue came in at $35 million, below the anticipated $37 million.
• Stock price increased by 6.53% in aftermarket trading.
• Strong operational growth with a 33% increase in revenue year-over-year.
• Continued focus on Cherokee development and capital return program.

Company Performance

SandRidge Energy demonstrated robust operational growth in Q2 2025, with revenues increasing by 33% year-over-year to $35 million. The company also reported a significant rise in adjusted EBITDA, up 76% from the previous year, reflecting enhanced operational efficiency and strategic investments. With a strong current ratio of 2.13 and zero debt-to-equity ratio as reported by InvestingPro, the company maintains excellent financial flexibility. The increase in production, particularly in oil, contributed to these positive results.

Financial Highlights

• Revenue: $35 million, up 33% year-over-year.
• Adjusted EBITDA: $22.8 million, a 76% increase year-over-year.
• Net income: $19.6 million, or $0.53 per basic share.
• Adjusted net income: $12.2 million, or $0.33 per basic share.
• Free cash flow: $10 million for the quarter, $23 million year-to-date.

Earnings vs. Forecast

SandRidge Energy reported an EPS of $0.33, slightly above the forecasted $0.32, resulting in a 3.13% earnings surprise. However, the company’s revenue of $35 million fell short of the expected $37 million, marking a 6.68% negative surprise. This mixed performance reflects both operational improvements and market challenges.

Market Reaction

Following the earnings release, SandRidge Energy’s stock rose by 6.53% in aftermarket trading, closing at $10.77. This surge indicates investor confidence in the company’s strategic direction and operational efficiency, despite the revenue shortfall. The stock remains within its 52-week range, between $8.81 and $13.72. InvestingPro analysis suggests the stock is currently undervalued, trading at an attractive P/E ratio of 4.98x while maintaining a healthy gross profit margin of 65.1%. For deeper insights into SandRidge’s valuation and 8 additional ProTips, check out the comprehensive Pro Research Report available on InvestingPro.

Outlook & Guidance

SandRidge Energy remains focused on its Cherokee development, projecting increased production volumes in 2026. The company plans a flexible capital program, adaptable to commodity price fluctuations, and continues to prioritize its capital return program. Future earnings projections indicate steady growth, with an EPS forecast of $0.35 for Q3 2025 and $0.44 for Q4 2025.

Executive Commentary

CEO Grayson Prannen emphasized the company’s strong balance sheet and strategic focus: "We have a strong balance sheet and a more versatile kit bag, which makes the company more resilient." He also reiterated the importance of the capital return program: "Our return of capital program will continue to be our top priority."

Risks and Challenges

• Commodity price volatility could impact revenue and profitability.
• Potential operational disruptions in the Cherokee development.
• Market competition and technological advancements.
• Regulatory changes affecting the energy sector.
• Economic conditions influencing demand for oil and gas.

Despite the revenue miss, SandRidge Energy’s strategic focus and operational achievements have fostered a positive market reaction, positioning the company for future growth.

Full transcript - SandRidge Energy Inc (SD) Q2 2025:

Conference Operator: Thank you for standing by, and welcome to the SandRidge Energy Second Quarter twenty twenty five 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. Thank you. I’d now like to turn the call over to Scott Prestridge, SVP of Finance and Strategy.

You may begin.

Scott Prestridge, SVP of Finance and Strategy, SandRidge Energy: Thank you, and welcome, everyone. With me today are Grayson Prannen, our CEO Jonathan Freitas, our CFO Brandon Brown, our CAO as well as Dean Parrish, our COO. 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. These statements are not guarantees of future performance, and our actual results may differ materially due to known and unknown risks and uncertainties as discussed in greater detail in our earnings release and our SEC filings. We may also refer to adjusted EBITDA and adjusted G and 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.

Grayson Prannen, CEO, SandRidge Energy: Thank you, and good afternoon. I’m pleased to report on a positive quarter in the first half for the company. Second quarter production averaged just under 18 BOE per day, an increase of approximately 19% on a BOE basis and 46% on oil, translating to a roughly 33% increase in revenue and 76% increase in adjusted EBITDA relative to the same period last year, benefiting from increased volumes from our prior Cherokee acquisition and development program this year. In addition, we brought on the first well from our Cherokee development program with a thirty day IP of approximately 2,300 BOE per day with 49% oil. Before expanding on this, Jonathan will touch on a few highlights.

Jonathan Freitas, CFO, SandRidge Energy: Thank you, Grayson. Compared to the 2024, the company continued to benefit from improved natural gas prices, partially offset by ongoing headwinds in WTI. Combined with growing production, the company generated revenues of approximately $35,000,000 which represents a 33% increase compared to the same period last year. Adjusted EBITDA was $22,800,000 in the quarter compared to $12,900,000 in the prior year period. We continue to manage the business within cash flow while growing production, maintaining no debt and utilizing our substantial NOL, which shields us from federal income taxes.

At the end of the quarter, cash, including restricted cash, was just over $104,000,000 which represents more than $2.8 per common share outstanding. The company paid $4,000,000 in dividends during the quarter, which, including special dividends, now represents $4.36 per share paid to shareholders since the beginning of 2023. On 08/05/2025, the Board of Directors declared a $0.12 per share dividend, a 9% increase payable on September 29 to shareholders of record on 09/22/2025. Shareholders may elect to receive cash or additional shares of common stock through the company’s newly authorized dividend reinvestment plan. Year to date through the end of the quarter, the company had repurchased approximately $550,000 or $6,000,000 worth of common shares.

Our share repurchase program remains in place with roughly 69,000,000 remaining authorized. Capital expenditures during the period were roughly $18,000,000 including drilling and completions as well as new leasehold acquisitions. As noted, the company has no term debt or revolving debt obligations and continues to live within cash flow, funding all capital expenditures and capital returns with cash flow from operations. Commodity price realizations for the quarter before considering the impact of hedges were $62.8 per barrel of oil, dollars 1.82 per Mcf of gas and $16.1 per barrel of NGLs. This compares to first quarter realizations of $69.88 per barrel of oil, dollars 2.69 per Mcf of gas and $20.07 per barrel of NGLs.

Our production remains meaningfully hedged through the remainder of the year with a combination of swaps and collars representing approximately 35% of second half production based on the midpoint guidance. This includes approximately 55% of natural gas production and 33% of oil. These hedges will help secure a portion of our cash flows and support our drilling program during the recent downdrafts and prices. Despite growing production, our commitment to cost discipline continues to yield results with adjusted G and A for the quarter of approximately 2,400,000.0 or $1.48 per BOE compared to $2,500,000 or $1.85 per BOE in the second quarter last year. Net income was $19,600,000 during the quarter or $0.53 per basic share, and adjusted net income was $12,200,000 or $0.33 per basic share.

This compares to 9,000,000 or $0.24 per basic share and $6,400,000 or respectively during the same period last year. Adjusted operating cash flow was roughly $26,000,000 during the quarter. Finally, despite the ramp up of our capital program, the company generated free cash flow before acquisitions of roughly $10,000,000 during the quarter and $23,000,000 year to date. Before shifting to our outlook, we should note that our earnings release and 10 Q will provide further details on our financial and operational performance during the quarter.

Grayson Prannen, CEO, SandRidge Energy: Thank you, Jonathan. I thought it would be useful to give a brief update on operations before touching on other company highlights. During the second quarter, the company successfully completed and brought online the first well of our operated one rig Cherokee drilling program and drilled the second and third wells. We just wrapped up completion on these wells, at least when we’ve turned to production. Dean will touch more on this later.

We are very pleased with the results of our initial well, which had an IP of approximately 2,300 BOE per day with 49% oil. The other wells in our development program this year directly offset this well and other proven wells in the area, which have an average initial production rate of over 1,000 barrels of oil or 2,000 barrels of equivalent per day. Our new well and the results in the area give further confidence to reservoir quality, result consistency and expectations in the area. We hope to share further details on this and our operating results next quarter. As I mentioned previously, production for the quarter increased approximately 1946% on a BOE and oil basis year over year.

As we look forward to developing our high return Cherokee assets this year, we anticipate growing oil yield production volumes further. From a timing perspective, most of the production from our development program will occur in the second half of this year, with exit rates projected over 19 MBOE per day and estimated oil production rates increasing around another 30% relative to Q2. In addition, two completions will carry over into the next year. And when combined with further drilling, could see production volumes and specifically oil volumes increase meaningfully above 2025 exit rate levels. We’re hopeful that our nearly 24,000 net acres in the Cherokee Play will translate to a meaningful multiyear runway as we look beyond 2025, and we plan to continue to invest in new leasing and other opportunities to bolster our operating position and extend that runway.

That being said, as a prudent operator, we want to focus on delivering our initial wells before remarking more on inventory. In addition, we will continue to be mindful of results, commodity prices, costs, macroeconomic and other factors as we continue to assess our capital decisions this year and beyond. Shifting over to commodity prices. WTI prices have been around the mid-sixty dollars range over the last several weeks, and despite some fluctuations, the forward looking curve has been relatively stable. Henry Hub, on the other hand, has seen some recent headwinds with spot testing below $3 and the next twelve months in a high $3 At current commodity prices, our operated Cherokee wells have robust returns, and breakevens for these new wells are down to $35 WTI.

Given these returns and durability, we plan to continue our development plan this year with a watchful eye to adjust if needed. Please keep in mind that we do not have significant leasehold expirations this year and have the flexibility to further these projects if needed for a period of time. I’d like to pause here to highlight the optionality we have across our asset base, coupled with the strength of our balance sheet, which sets up to not only navigate but leverage changes in commodity prices. Combination of our oil weighted Cherokee and gas weighted legacy assets as well as robust net cash position give us multifaceted options to maneuver and take advantage of different commodity cycles. Our Cherokee development adds value when WTI is constructive, so we can take advantage of our legacy properties through well reactivations, incremental production optimization projects, and possibly even development at the appropriate natural gas and liquid prices or participate both when WTI and Henry Hub are both constructive.

Conversely, given the relatively low breakeven of our producing properties, no debt and cash balance over $100,000,000 we’re also well positioned to take advantage of lower commodity environments by acquiring additional producing properties at attractive prices. Put more simply, we have a strong balance sheet and a more versatile kit bag, which makes the company more resilient and better poised to maneuver and adjust the matter of the commodity environment. Now I’ll turn things over to Dean to discuss operations in more detail.

Dean Parrish, COO, SandRidge Energy: Thank you, Grayson. Let’s start on our capital program. Two operated wells in our program and two non operated wells were drilled in the Cherokee Play last quarter. The two operated wells on our first dual well pad were just turned to flowback with indications of strong well performance. We will have production results to report next quarter.

Our team successfully planned and executed drilling and completion of the first operated well on budget with minimal operational issues. The first well I feed in May, around 2,300 barrel of oil equivalent per day, and is currently free flowing and exceeding our expectations. We have now completed drilling our fourth well and anticipate to complete and have production for this well in the next quarter. Currently, we are drilling our fifth and sixth wells on a dual well pad. We plan to drill eight operated Cherokee wells with one rig this year and complete six wells.

The remaining two completions are anticipated to carry over to next year. Currently, all of our planned wells are proved undeveloped or PUD, meaning that our planned drilling locations this year will offset producing wells, which translates to higher relative confidence in well performance. Gross well costs vary by depth but are estimated to be between approximately 9,000,000 to $12,000,000 While we have taken proactive steps to help mitigate the effects of inflation, further changes to tariffs or other factors could influence these costs in the future. From a timing standpoint, most of the production from this year’s capital program will occur in the second half of the year, with the benefit extending into next year. We intend to spend between 66,000,000 and $85,000,000 in our 2025 capital program, which is made up of $47,000,000 to $63,000,000 in drilling and completions activity and between 19,000,000 and $22,000,000 in capital workovers, production optimization and selective leasing in the Cherokee play.

Our high graded leasing is focused to further bolster our interests, consolidate our position and extend development into future years. We intend to fund capital expenditures and other commitments using cash flows from our operations and cash on hand. As Grayson discussed earlier, our operated Cherokee wells have robust returns at current commodity prices. However, we could moderate or curtail our capital program if headwinds present pressures on rates of return. Our legacy assets remain approximately 99 held by production, which cost effectively maintains our development option over a reasonable tenor.

These non Cherokee assets have higher relative gas content, but commodity price futures are not yet at preferred levels to resume further development or more well reactivations at this time. Commodity prices firmly over $80 WTI and $4 Henry Hub over a confident tenor and or reduction in well costs are needed before we would return to exercise the option value of further development or well reactivation. Now shifting to lease operating expenses. LOE and expense workovers for the quarter were approximately 6,600,000 or $4.05 per BOE, which compare favorably to $6.41 per BOE in the second quarter last year. However, we do not anticipate second quarter LOE rate to continue at the same level for the remainder of the year.

The decrease in LOE was primarily due to a onetime noncash adjustment of an operating accrual as well as lower power and workover costs. We will continue to actively press on operating costs through rigorous bidding processes, leveraging our significant infrastructure, operations center and other company advantages. With that, I will turn things back over to Grayson.

Grayson Prannen, CEO, SandRidge Energy: Thank you, Dean. I will now revisit the key highlights of SandRidge. Our asset base is focused in the Mid Continent region with a PDP well set that provides meaningful cash flow, which does not require any routine flaring of produced gas. These well understood assets are almost fully held by production with a long history shallowing and diversified production profile double digit reserve life. Our incumbent assets include more than 1,000 miles each of owned and operated SWD and electrical infrastructure over our footprint.

This substantial owned and integrated infrastructure helps derisk individual well profitability for majority of our legacy producing wells down to roughly $40 WTI and $2 Henry Hub. Our assets continue to yield free cash flow and we have negative net leverage. This cash generation potential provides several paths to increase shareholder value realization and is benefited by low G and A burden. SandRidge’s value proposition is materially de risked from a financial perspective by our strengthened balance sheet, financial flexibility and advantaged tax position. Further, the company is not subject to MVCs or other significant off balance sheet financial commitments.

We have bolstered our inventory to provide further organic growth opportunities and incremental oil diversification with low breakevens in high graded areas. We maintain financial flexibility that allows us to adjust our strategy to take advantage of commodity cycles. This flexibility provides advantages and strategic optionality to further grow our business and provide the buffer to commodity headwinds while protecting our capital return program. Finally, it’s worth highlighting that we take our ESG commitment seriously and have implemented disciplined processes around them. We remain committed to our strategy in growing the value of our business in a safe, responsible, efficient manner while prudently allocating capital to high return growth projects.

We’ll also evaluate merger and acquisition opportunities in a disciplined manner with consideration of our balance sheet and commitment to our capital return program. This strategy has five points: one, maximize the value of our incumbent MidCon PDP assets, extending and flattening our production profile with high rate of return production optimization projects as well as continuously pressing on operating and administrative costs two, exercise capital stewardship and invest in projects and opportunities that have high risk adjusted and fully burdened rates of return while being mindful and prudently targeting reasonable reinvestment rates that sustain our cash flows and prioritize a regular way dividend. Three, maintain optionality to execute on value accretive merger and acquisition opportunities that could bring synergies, leverage the company’s core competencies, complement its portfolio of assets, further utilizes approximately $1,600,000,000 of federal net operating losses or otherwise yield attractive returns for its shareholders. Four, as we generate cash, we’ll continue to work with our Board to assess the path to maximize shareholder value to include investment and strategic opportunities, advancement of our return of capital program and other uses. Our regular way quarterly dividend is an important aspect of our capital return program, which we plan to prioritize in capital allocation, along with opportunistic share repurchases.

The final staple is to uphold our ESG responsibilities. As we look forward to the year and beyond, we plan to further progress our Cherokee development while monitoring commodity prices, results and other factors in order to realize high rates of return, grow our production levels while providing further oil diversification. With continued success in support of commodity prices, we’re hopeful to expand some multiyear development plans. Please keep in mind that our return of capital program will continue to be our top priority and, given our financial flexibility, will exercise capital stewardship to respond to changes in commodity prices, costs, macroeconomic or other factors. Shifting to administrative expenses, I will turn things over to Brandon.

Brandon Brown, CAO, SandRidge Energy: Thank you, Grayson. As we wind up our prepared remarks, I will point out our second quarter adjusted G and A of $2,400,000 or $1.48 per BOE continues to compare favorably to our peers. The ongoing efficiency of our organization stems from our core values to remain cost disciplined and prior initiatives, have tailored our organization to be fit for purpose. We will maintain our cost conscious and efficiency focused mindset and continue to balance the weighting of field versus corporate personnel to reflect where we create value. We have outsourced necessary but more perfunctory and less core functions, such as operations accounting, land administration, IT, tax, and HR.

Our efficient structure has allowed us to operate with total personnel of just over 100 people, while retaining key technical skill sets that have both the expertise and institutional knowledge of our business. In summary, the company had free cash flow of approximately $10,000,000 in the quarter, over $100,000,000 in cash and cash equivalents at quarter end, which represents more than $2.8 per share of our common stock outstanding. In inventory of high rate of return, low breakeven projects and overall mid composition that is approximately 95 held by production, which preserves the option value of future development potential of our legacy acreage in a cost effective manner. We have low overhead, top tier adjusted G and A, no debt, negative leverage, flattening base production profile, double digit reserve life and approximately $1,600,000,000 of federal NOLs. This concludes our prepared remarks.

Thank you for your time today. We will now open the call to questions.

Conference Operator: Thank you. We will now begin the question and answer

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