SandRidge Energy Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 16:16
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report, as well as our audited consolidated financial statements and the accompanying notes included in the 2024 Form 10-K. Our discussion and analysis includes the following subjects:
•Overview;
•Consolidated Results of Operations;
•Liquidity and Capital Resources; and
•Critical Accounting Policies and Estimates.
The financial information with respect to the three and nine months ended September 30, 2025 and 2024, discussed below, is unaudited. In the opinion of management, this information contains all adjustments, which consist only of normal recurring adjustments unless otherwise disclosed, necessary to state fairly the accompanying unaudited condensed consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year.
Overview
We are an independent oil and natural gas company with a principal focus on acquisition, development and production activities in the U.S. Mid-Continent region ("Mid-Con").
The charts below show production by product and percent revenues for the three and nine months ended September 30, 2025 and 2024:
Total MBoe production for the three months ended September 30, 2025 was comprised of approximately 19.7% oil, 47.7% natural gas and 32.6% NGL compared to 14.8% oil, 50.4% natural gas and 34.8% NGL in the third quarter of 2024. Total MBoe production for the nine months ended September 30, 2025 was comprised of approximately 17.8% oil, 48.6% natural gas and 33.6% NGL compared to 14.5% oil, 54.2% natural gas and 31.3% NGL in the first nine months of 2024.
Outlook
We remain committed to growing the value of our asset base in a safe, responsible and efficient manner, while prudently allocating capital to high-return, growth projects. Currently, these projects include: (1) one-rig development in the Cherokee Shale Play (2) evaluation of accretive merger and acquisition opportunities, with consideration of our strong balance sheet and commitment to our capital return program (3) production optimization program through artificial lift conversions to more efficient and cost-effective systems and (4) a leasing program that will bolster future development and extend development in our Cherokee assets. We are developing our term acreage in the Cherokee Play, and our total leasehold position, inclusive of the Cherokee, NW Stack and legacy assets, is approximately 95% held by production, which cost-effectively maintains our development option over a reasonable tenor. We will continue to monitor forward-looking commodity prices, project results, costs, impacts of tariffs and other factors that could influence returns and cash flows, and will adjust our program accordingly, to include curtailment of capital activity and wells, if needed, or conversely, well reactivations in higher commodity price environments. These and other factors, including reasonable reinvestment rates, maintaining our cash flows and prioritizing our regular-way dividend, will continue to shape our development decisions for the remainder of the year and beyond.
Consolidated Results of Operations
Our consolidated revenues and cash flows are generated from the production and sale of oil, natural gas and NGL. Our revenues, profitability and future growth depend substantially on prevailing prices received for our production, the quantity of oil, natural gas and NGL we produce, and our ability to find and economically develop and produce our reserves. Prices for oil, natural gas and NGL fluctuate widely and are difficult to predict. To provide information on the general trend in pricing, the average New York Mercantile Exchange ("NYMEX") prices for oil and natural gas are shown in the tables below:
| Three-month periods ended | ||||||||||||||||||||||||||||||||
| September 30, 2025 | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | ||||||||||||||||||||||||||||
| NYMEX Oil (per Bbl) | $ | 65.78 | $ | 64.57 | $ | 71.78 | $ | 70.73 | $ | 76.43 | ||||||||||||||||||||||
| NYMEX Natural gas (per Mcf) | $ | 3.15 | $ | 3.31 | $ | 4.30 | $ | 2.53 | $ | 2.19 | ||||||||||||||||||||||
In order to reduce our exposure to price fluctuations, from time to time we may enter into commodity derivative contracts for a portion of our anticipated future oil, natural gas and NGL production as discussed in "Item 3. Quantitative and Qualitative Disclosures About Market Risk."During periods where the strike prices for our commodity derivative contracts are below market prices at the time of settlement, we may not fully benefit from increases in the market price of oil and natural gas. Conversely, during periods of declining oil and natural gas market prices, our commodity derivative contracts may partially offset declining revenues and cash flows to the extent strike prices for our contracts are above market prices at the time of settlement. See "Note 3 - Derivatives"to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report for additional information regarding our commodity derivatives.
Revenues
Consolidated revenues are presented in the table below (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| Oil | $ | 22,415 | $ | 16,871 | $ | 5,544 | $ | 58,251 | $ | 47,202 | $ | 11,049 | |||||||||||||||||||||||
| Natural gas | 8,517 | 4,349 | 4,168 | 29,938 | 13,302 | 16,636 | |||||||||||||||||||||||||||||
| NGL | 8,890 | 8,837 | 53 | 28,768 | 25,813 | 2,955 | |||||||||||||||||||||||||||||
| Total revenues | $ | 39,822 | $ | 30,057 | $ | 9,765 | $ | 116,957 | $ | 86,317 | $ | 30,640 | |||||||||||||||||||||||
Oil, Natural Gas and NGL Production and Pricing
Our production and pricing information is shown in the table below:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| Production data | |||||||||||||||||||||||||||||||||||
| Oil (MBbls) | 344 | 231 | 113 | 884 | 624 | 260 | |||||||||||||||||||||||||||||
| Natural gas (MMcf) | 4,993 | 4,729 | 264 | 14,513 | 13,979 | 534 | |||||||||||||||||||||||||||||
| NGL (MBbls) | 569 | 544 | 25 | 1,668 | 1,348 | 320 | |||||||||||||||||||||||||||||
| Total volumes (MBoe) | 1,745 | 1,563 | 182 | 4,971 | 4,302 | 669 | |||||||||||||||||||||||||||||
| Average daily total volumes (MBoe/d) | 19.0 | 17.0 | 2.0 | 18.2 | 15.7 | 2.5 | |||||||||||||||||||||||||||||
|
Average prices-as reported(1)
|
|||||||||||||||||||||||||||||||||||
| Oil (per Bbl) | $ | 65.23 | $ | 73.07 | $ | (7.84) | $ | 65.91 | $ | 75.66 | $ | (9.75) | |||||||||||||||||||||||
| Natural gas (per Mcf) | $ | 1.71 | $ | 0.92 | $ | 0.79 | $ | 2.06 | $ | 0.95 | $ | 1.11 | |||||||||||||||||||||||
| NGL (per Bbl) | $ | 15.61 | $ | 16.25 | $ | (0.64) | $ | 17.24 | $ | 19.15 | $ | (1.91) | |||||||||||||||||||||||
| Total (per Boe) | $ | 22.82 | $ | 19.23 | $ | 3.59 | $ | 23.53 | $ | 20.07 | $ | 3.46 | |||||||||||||||||||||||
| Average prices-including impact of derivative contract settlements | |||||||||||||||||||||||||||||||||||
| Oil (per Bbl) | $ | 66.15 | $ | 73.71 | $ | (7.56) | $ | 66.68 | $ | 75.89 | $ | (9.21) | |||||||||||||||||||||||
| Natural gas (per Mcf) | $ | 2.15 | $ | 0.92 | $ | 1.23 | $ | 2.29 | $ | 0.95 | $ | 1.34 | |||||||||||||||||||||||
| NGL (per Bbl) | $ | 15.82 | $ | 16.34 | $ | (0.52) | $ | 17.24 | $ | 19.19 | $ | (1.95) | |||||||||||||||||||||||
| Total (per Boe) | $ | 24.34 | $ | 19.36 | $ | 4.98 | $ | 24.33 | $ | 20.11 | $ | 4.22 | |||||||||||||||||||||||
__________________
(1) Prices represent actual average sales prices for the periods presented and do not include effects of derivative settlements.
Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold are shown in the table below (in thousands):
| Three Months Ended September 30, 2025 | Nine Months Ended September 30, 2025 | ||||||||||
| 2024 oil, natural gas and NGL revenues | $ | 30,057 | $ | 86,317 | |||||||
| Change due to production volumes | 8,203 | 23,761 | |||||||||
| Change due to average prices | 1,562 | 6,879 | |||||||||
| 2025 oil, natural gas and NGL revenues | $ | 39,822 | $ | 116,957 | |||||||
Operating Expenses
Operating expenses consisted of the following (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| Lease operating expenses | $ | 10,911 | $ | 9,104 | $ | 1,807 | $ | 28,384 | $ | 28,734 | $ | (350) | |||||||||||||||||||||||
| Production, ad valorem, and other taxes | 2,155 | 1,813 | 342 | 7,412 | 5,550 | 1,862 | |||||||||||||||||||||||||||||
| Depreciation and depletion-oil and natural gas | 9,400 | 8,345 | 1,055 | 26,106 | 16,771 | 9,335 | |||||||||||||||||||||||||||||
| Depreciation and amortization-other | 1,638 | 1,605 | 33 | 4,853 | 4,947 | (94) | |||||||||||||||||||||||||||||
| Total operating expenses | $ | 24,104 | $ | 20,867 | $ | 3,237 | $ | 66,755 | $ | 56,002 | $ | 10,753 | |||||||||||||||||||||||
| Lease operating expenses ($/Boe) | $ | 6.25 | $ | 5.82 | $ | 0.43 | $ | 5.71 | $ | 6.68 | $ | (0.97) | |||||||||||||||||||||||
| Production, ad valorem, and other taxes ($/Boe) | $ | 1.23 | $ | 1.16 | $ | 0.07 | $ | 1.49 | $ | 1.29 | $ | 0.20 | |||||||||||||||||||||||
| Depreciation and depletion-oil and natural gas ($/Boe) | $ | 5.39 | $ | 5.34 | $ | 0.05 | $ | 5.25 | $ | 3.90 | $ | 1.35 | |||||||||||||||||||||||
| Production, ad valorem, and other taxes (% of oil, natural gas and NGL revenue) | 5.4 | % | 6.0 | % | (0.6) | % | 6.3 | % | 6.4 | % | (0.1) | % | |||||||||||||||||||||||
Lease operating expenses for the three months ended September 30, 2025 increased in total and per Boe versus the same period in 2024 primarily due to an increase in labor, utility and other costs. Lease operating expenses for the nine months ended September 30, 2025 decreased in total and per Boe versus the same period in 2024 primarily due to a $2.1 million one-time non-cash adjustment of an operating accrual dating back to the Company's emergence from bankruptcy (see "Note 1-Basis of Presentation" to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report for further information) that was recorded in the second quarter of 2025. The decrease was partially offset by an increase in utility and water hauling costs.
Production, ad valorem, and other taxes for the three and nine months ended September 30, 2025 increased in total primarily due to higher average commodity prices, sales volumes, and related revenues. The increase in sales volumes was primarily the result of our one rig development program in the Cherokee Play of the Mid-Con. Production, ad valorem, and other taxes per Boe increased for the three and nine months ended September 30, 2025 versus the same period in 2024 primarily due to higher average commodity prices.
The increase in depreciation and depletion for oil and natural gas properties for the three months ended September 30, 2025 versus the same period in 2024 was primarily the result of an increase in sales volumes. The increase in depreciation and depletion for oil and natural gas properties for the nine months ended September 30, 2025 versus the same period in 2024 was primarily the result of our acquisition in the Cherokee Play of the Mid-Con during the third quarter of 2024, which increased the book value of our proved properties and subsequently our depletion rate.
Impairment
A ceiling limitation calculation is performed at the end of each quarter. If the full cost pool balance exceeds the ceiling limitation, an impairment of the full cost pool is required. Calculation of the full cost ceiling test is based on, among other factors, trailing twelve-month first-day-of-the-month index prices ("SEC prices") as adjusted for price differentials and other contractual arrangements. The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at September 30, 2025 were $67.45 per barrel of oil and $3.10 per MMBtu of natural gas, before price differential adjustments.
The ceiling limitation was not exceeded; therefore, no full cost ceiling limitation impairments were recorded during the three or nine months ended September 30, 2025 or 2024. During certain periods within the past five years, the SEC prices used in the full cost ceiling test have been lower than the SEC prices used for the September 30, 2025 full cost ceiling test and resulted in material ceiling limitation impairments. Full cost pool ceiling limitation impairments have no impact to our cash flow or liquidity.
Based on the SEC prices over the trailing ten months ended October 31, 2025, as well as two months of NYMEX strip pricing for November and December of 2025 as of October 31, 2025, we estimate the SEC prices utilized in the December 31, 2025 full cost ceiling test may be $65.45 per barrel of oil and $3.33 per MMBtu of natural gas (the "estimated fourth quarter prices"). Applying these estimated fourth quarter prices, and holding all other inputs constant to those used in the calculation of our September 30, 2025 ceiling test, we expect that no full cost ceiling limitation impairment is indicated for the fourth quarter of 2025.
Any actual full cost ceiling limitation impairment recognized in future quarters may fluctuate significantly from projected amounts based on the outcome of numerous other factors such as declines in the actual trailing twelve-month SEC prices, lower NGL pricing, changes in estimated future development costs and operating expenses, and other adjustments to our levels of proved reserves.
Other Operating Expenses
Other operating expenses consisted of the following (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| General and administrative | $ | 2,737 | $ | 2,304 | $ | 433 | $ | 9,618 | $ | 8,686 | $ | 932 | |||||||||||||||||||||||
| Restructuring expenses | 305 | 260 | 45 | 757 | 341 | 416 | |||||||||||||||||||||||||||||
| (Gain) loss on derivative contracts | (2,364) | (1,866) | (498) | (5,936) | (1,866) | (4,070) | |||||||||||||||||||||||||||||
| Other operating (income) expense | - | - | - | - | 24 | (24) | |||||||||||||||||||||||||||||
| Total other operating expenses | $ | 678 | $ | 698 | $ | (20) | $ | 4,439 | $ | 7,185 | $ | (2,746) | |||||||||||||||||||||||
General and administrative expenses increased for the three and nine months ended September 30, 2025 versus the same periods in 2024 primarily as a result of an increase in personnel and other costs.
The following table summarizes derivative activity (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (Gain) loss on derivative contracts | $ | (2,364) | $ | (1,866) | $ | (5,936) | $ | (1,866) | |||||||||||||||
| Settlement gains (losses) on derivative contracts | $ | 2,661 | $ | 199 | $ | 3,980 | $ | 199 | |||||||||||||||
Our derivative contracts were not designated as accounting hedges and, as a result, changes in their fair values were recorded each quarter as a component of operating expenses. Internally, management has historically viewed the settlement of commodity derivative contracts at contractual maturity as adjustments to the price received for oil, natural gas and NGL production to determine "effective prices." In general, cash is received on settlement of contracts due to lower oil and natural gas prices at the time of settlement, compared to the contract price for our commodity derivative contracts; and, cash is paid on settlement of contracts due to higher oil, natural gas and NGL prices at the time of settlement, compared to the contract price for our commodity derivative contracts. See further discussion of derivative contracts in "Item 3. Quantitative and Qualitative Disclosures about Market Risk"included in Part I of this Quarterly Report.
Other Income (Expense)
Our other income (expense) are presented in the table below (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
|
Other income (expense)
|
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| Interest income (expense), net | $ | 916 | $ | 1,553 | $ | 2,803 | $ | 6,742 | |||||||||||||||
| Other income (expense), net | (3) | - | (6) | 92 | |||||||||||||||||||
| Total other income | $ | 913 | $ | 1,553 | $ | 2,797 | $ | 6,834 | |||||||||||||||
Interest income, net during the three and nine month periods ended September 30, 2025 and 2024 is primarily comprised of interest income on cash deposits. The decrease in interest income, net is due to the Company's lower cash balance primarily as a result of our acquisitions as well as capital expenditures, share repurchases, and quarterly dividend payments.
Liquidity and Capital Resources
As of September 30, 2025, our cash and cash equivalents, including restricted cash, was $102.6 million. We expect our cash on hand and cash from operations to be adequate to meet our short and long-term liquidity needs. We had no outstanding term or revolving debt obligations as of September 30, 2025. On August 4, 2025, we filed a universal shelf registration statement on Form S-3 covering the offering of up to $500.0 million of securities, which was declared effective by the SEC on August 26, 2025.
Working Capital and Sources and Uses of Cash
Our principal sources of liquidity for the next year include cash flows from operations and cash on hand.
Cash flows from operations was the primary driver in the increase in working capital to $73.8 million at September 30, 2025 compared to $67.1 million at December 31, 2024. The increase in working capital was partially offset by capital expenditures of $41.4 million, dividend payments to stockholders of $12.0 million, cash payments for leasehold acquisitions of $7.8 million, and repurchases of our common stock of $6.4 million.
Cash Flows
Our cash flows from operations are substantially dependent on current and future prices for oil, natural gas and NGL, which historically have been, and may continue to be, volatile. Cash flows from operations are also affected by timing of cash receipts and disbursements and changes in other working capital assets and liabilities.
Our cash flows are presented in the following table and discussed below (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash flows provided by operating activities | $ | 68,450 | $ | 47,940 | |||||||
| Cash flows used in investing activities | (46,128) | (138,662) | |||||||||
|
Cash flows used in financing activities(1)
|
(19,246) | (69,141) | |||||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | $ | 3,076 | $ | (159,863) | |||||||
__________________
(1) Includes $12.0 million and $68.2 million in dividend payments for the nine months ended September 30, 2025 and 2024, respectively.
Cash Flows from Operating Activities
The increase in cash flows from operations for the nine months ended September 30, 2025 compared to the same period in 2024 is primarily due to an increase in revenues from higher average commodity prices and higher sales volumes from our 2024 acquisition and 2025 development program in the Cherokee Play of the Mid-Con.
Cash Flows from Investing Activities
Capital expenditures and acquisitions of oil and gas properties are summarized below (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Capital Expenditures | |||||||||||
| Drilling, completion, and capital workovers | $ | 46,246 | $ | 6,562 | |||||||
| Leasehold and geophysical | 4,392 | 6,893 | |||||||||
| Capital expenditures (on an accrual basis) | 50,638 | 13,455 | |||||||||
| Acquisitions | 7,790 | 125,950 | |||||||||
| Capital expenditures, including acquisitions | 58,428 | 139,405 | |||||||||
| Changes in accounts payable and accrued expenses | (9,274) | 258 | |||||||||
| Inventory material transfers to oil and natural gas properties | (3) | (141) | |||||||||
| Total cash paid for capital expenditures | $ | 49,151 | $ | 139,522 | |||||||
Cash Flows from Financing Activities
Cash used in financing activities for the nine months ended September 30, 2025 consisted of $12.0 million in cash dividends, $6.4 million in repurchases of common stock, finance lease payments of $0.6 million, and $0.2 million of cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise. Since 2023, the Company has paid cash dividends totaling $165.9 million and $0.6 million in shares issued in lieu of cash dividends under the Dividend Reinvestment Program, which represents $3.50 per share in special dividends and $0.98 per share in quarterly dividends for a total of $4.48 per share in total dividends. Cash used in financing activities for the nine months ended September 30, 2024 consisted primarily of $68.2 million in cash dividends, $0.4 million of cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise, and finance lease payments of $0.6 million. Net exercises of stock awards allows the holder of a stock award to tender back to us a number of shares at fair value upon the vesting of such stock award that equals the employee payroll tax obligation due. We then remit a cash payment to the relevant taxing authority on behalf of the employee for their payroll tax obligations resulting from the vesting of their stock award.
Contractual Obligations and Off-Balance Sheet Arrangements
At September 30, 2025, our contractual obligations included asset retirement obligations, leases and other individually insignificant obligations. Additionally, we have certain financial instruments representing potential commitments that were incurred in the normal course of business to support our operations, including surety bonds. The underlying liabilities insured by these instruments are reflected in our balance sheets, where applicable. Therefore, no additional liability is reflected for the surety bonds or other instruments.
There were no other significant changes in total contractual obligations and off-balance sheet arrangements from those reported in the 2024 Form 10-K.
Critical Accounting Policies and Estimates
For a description of our critical accounting policies and estimates, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 Form 10-K. For a discussion of recent accounting pronouncements, newly adopted and recent accounting pronouncements not yet adopted, see "Note 1-Basis of Presentation" to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report. We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the first nine months of 2025.
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