SandRidge Energy, Inc. SD faced challenges in third-quarter 2024 as lower commodity prices and production hurdles impacted its earnings and revenues. The company's results reflect volatility in the energy market due to fluctuating oil and gas prices. Despite these headwinds, SandRidge has emphasized operational efficiencies and cost management to mitigate the effects of declining prices. Additionally, the company pursued growth initiatives through acquisitions, enhancing its production capacity, and laying the groundwork for cash flow and profitability.
Q3 Results
SandRidge reported third-quarter 2024 adjusted earnings per share of 19 cents, which declined 56.4% from 44 cents in the prior-year quarter.
Total quarterly revenues fell 21.2% to $30.1 million from $38.1 million in the prior-year quarter.
Weak quarterly earnings resulted from lower production and commodity price realizations.
SandRidge Energy, Inc. Price, Consensus and EPS Surprise
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Production
Total production was 1,563 MBoe in third-quarter 2024 compared with 1,586 MBoe in third-quarter 2023.
The total production decline includes a 13.5% decrease in oil production to 231 MBbl in the third quarter from 267 MBbl a year ago. Natural gas production also fell 10.4% to 4,729 MMcf in the third quarter from 5,276 MMcf a year ago. However, natural gas liquids’ production increased 23.6% to 544 MBbl in the third quarter from the 440 MBbl reported a year ago.
Realized Prices
Oil prices declined, with the realized oil price per barrel falling 8.5% to $73.07 from $79.83 in the third quarter of 2023. The realized natural gas price per barrel declined 32.4% to 92 cents from $1.36 in the third quarter of 2023. The realized NGL price per barrel also declined to $16.25 from $21.89 in the prior-year quarter.
The overall realized price per Boe declined 19.5% year over year to $19.23, impacting revenues despite stable production levels.
Profitability Metrics
Adjusted EBITDA, a measure of core operating profitability, excluding certain non-cash items, was $17.7 million in the third quarter of 2024, down from $22.6 million in the year-ago quarter. The decrease reflects the impacts of declining commodity prices, even as the company managed to reduce operating costs.
Adjusted net income, excluding certain one-time items, was $7.1 million in the third quarter of 2024, a 56.4% decline from $16.2 million in third-quarter 2023 due to lower realized prices for oil, gas and NGLs.
SandRidge generated $10.9 million in free cash flow in the third quarter of 2024, down from $24.2 million in the prior-year period. Despite a decline in the free cash flow, the company continued to produce a positive cash flow, maintaining flexibility to support its dividend program and potential reinvestments.
Expenses
SD reduced its lease operating expenses 19.4% to $5.82 per Boe from $7.22 in third-quarter 2023. The company credited its cost-management strategies, even with added expenses from recent acquisitions. Production taxes and other expenses decreased year over year to $1.16 per Boe from $1.28 per Boe. Notably, depletion expenses per Boe doubled to $5.34 from $2.66, reflecting increased asset values from recent acquisitions.
Liquidity & Capital Expenditure
As of Sept. 30, 2024, SandRidge had $94.1 million in cash and cash equivalents, and no outstanding debt, providing a solid foundation for future capital projects. Capital expenditure for the nine months ending in September 2024 was $13.6 million for drilling, completion and leasehold acquisitions.
Financial Performance
SandRidge’s third-quarter 2024 performance was marked by challenges in revenue generation due to the softening of oil and gas prices. The increased production of NGLs partially offset declines in oil and gas, though lower commodity prices affected overall earnings.
Despite these headwinds, the company maintained operational efficiency, reflected in reduced LOE costs and improved cost control per production unit. Management emphasized high-return investments, including its production optimization program, which targets efficiency through artificial lift enhancements and recompletions.
The company also completed a $123.8-million acquisition in the Cherokee play of the Western Anadarko Basin, which should support growth, and add to cash flow and EBITDA on a pro-forma basis. Management reported that the initial production rates from these new assets were promising, enhancing the company’s production profile and cash generation potential.
Management Guidance
Management plans to continue leveraging its recent acquisition in the Cherokee Shale Play by completing drilled uncompleted wells and starting a drilling program. It will focus on projects with strong returns and monitor commodity prices closely, adjusting capital allocation to maximize profitability. In addition, SandRidge remains vigilant in exploring further mergers and acquisition opportunities, given its strong balance sheet and commitment to shareholder returns.
Other Developments
In the third quarter, SandRidge closed the acquisition of additional assets in the Cherokee play, which includes 44 producing wells and leasehold interests in 11 drilling units. This acquisition is expected to bolster SD’s cash flow and provide high returns, particularly from oil-rich production zones. Additionally, SandRidge declared a cash dividend of 11 cents per share, reflecting its ongoing dividend policy and emphasis on shareholder value.
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