Good morning, my name is Heidi and I will be your conference operator today. At this time, I would like to welcome everyone to the SandRidge Energy Third Quarter 2018 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. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Johna Robinson, you may begin your conference.

Thank you and welcome everyone to the conference call. With me today are Bill Griffin, President and Chief Executive Officer; Mike Johnson, Chief Financial Officer, and John Suter, Chief Operating Officer. We would like to remind you that in conjunction with our earnings release and conference call, we have posted slides on our website under the Investor Relations tab that we will be referencing during the call. Keep in mind today’s call contains forward-looking statements and assumptions which are subject to risks and uncertainties, and actual results may differ materially from those projected in these forward-looking statements. We will also make reference to adjusted G&A and other non-GAAP financial measures. Reconciliations of these measures can be found on our website. Finally, you will see us file our 10-Q later this afternoon. Now let me turn the call over to Bill.

Thank you Johna, and good morning everyone. I appreciate you taking time today to join us for this review of SandRidge Energy’s 2018 third quarter performance results and go-forward outlook. Today’s conversation will be referencing the third quarter investor presentation posted on our website earlier this morning. As John mentioned, joining me today are John Suter, our Chief Operating Officer who will be discussing a number of exciting updates later in the call, along with Mike Johnson, our Chief Financial Officer who will be speaking to our financial results. Please turn to Slide 3. This was a significant quarter for SandRidge as we delivered tangible positive results and accelerated our forward progress, both strategically and operationally. We announced in September the conclusion of a long and thorough assessment process that highlighted the significant disconnect between the intrinsic value of the company and current market perception. The board’s decision was to move forward with the company’s asset development plan, further expand efforts on efficiency and margin improvements, and the pursuit of additional opportunities to create value and change market perceptions. Notwithstanding the formal conclusion of our strategic review process, the company remains committed to serious consideration of any transaction that provides meaningful relative value to the shareholders. It was also announced that the board has formed a committee and has commenced a search for the best long-term CEO candidate to lead this continued transition and evolution of SandRidge. I have no additional details to provide at this time as we move forward with this very important process. Operationally, this quarter was a step function improvement for us. We achieved an important milestone with the realized growth in production from the previous quarter. This meaningful step ended an extended period of continual quarterly declines. This overall production increase was driven by record…

Thank you Bill, and good morning to everybody on the call. We are very encouraged by our third quarter results and are anxious to move forward with a singular focus on a successful development and growth plan. During the quarter, when considerable effort and attention was given to the company’s review of strategic alternatives, our third quarter results reflect significant progress toward our efforts to meet or exceed our 2018 guidance expectations. As shown on Slide 6 of our investor presentation and elsewhere in our earnings release, we posted third quarter net income of $12 million, EBITDA of $48 million, and cash flow from operations of $53 million With third quarter capital expenditures of roughly $43 million, we are demonstrating our financial discipline by operating within our cash flow and are continuing to reduce LOE and G&A cash cost per BOE. As Bill mentioned, our margin uplift this quarter was driven largely from our increased North Park basin oil production. Equally important is the reversal of a string of quarterly production declines, a trend we expect to continue to see in 2019 and thereafter. This strong performance was generated in spite of the fact that we had a significant portion of our third quarter liquids production hedged at roughly $55 a barrel, leading to a net realized hedging loss of $12 million during the quarter. Looking ahead, this week’s announcement of our divestiture of legacy assets in the central basin platform and the acquisition of addition working interest in the majority of our Mid-Continent properties are small but meaningful steps to simplify our portfolio, improve profitability, enhance value, and allow us more time to focus on our core operations and development strategy. The majority of the value in our central basin platform properties was monetized in 2011 when we formed…

Thanks Mike. I’d like to update you on the operational results for the quarter. Let’s first look at our 2018 objectives for the North Park asset on Slide 7. We utilized one rig until mid-April to drill four wells of the eight-well eastern spacing test and the first well of our western spacing test. All five wells were brought online between June and early August while we ceased drilling to evaluate performance. North Park capital expenditures for the quarter were $25 million. We expect an increase in expenditures during the fourth quarter as we initiate drilling the next five wells of the western spacing test, as seen on Slide 8. Also related to this project, we will gather micro-seismic data during frac operations. This will help determine optimal development spacing both vertically and horizontally within the 400 to 500 foot Niobrara column. We will also run fiber optic cable with permanent gauges on one of the wells. This installation will monitor production flow from each stage in order to optimize completion design parameters. By incorporating this, we can enhance the cluster efficiency and ultimately maximize production from future wells drilled. We will achieve our final objective for 2018 as we move into the southern edge of the play to do additional delineation within the surprise federal unit. Now to North Park achievements on Slide 9, our focused efforts are impacting production, well performance and drilling efficiency. We obtained record third quarter oil production rates averaging 4,100 barrels oil per day. Well performance from the eight eastern spacing test wells have cumulatively averaged 19% above type curve, producing within a 12 wells per section spacing pattern. Finally, our operation results continue to improve with our fastest XRL well, which drilled 16,582 feet measured depth in a record 10 days from spud…

Thanks John. In summary, we remain confident in our ability to transform the company. This was a positive quarter that clearly demonstrates the current and the future potential of SandRidge. We continue to listen and strive to be responsive to our shareholders, and this organization remains focused on continuous improvement and solid operational performance while working in parallel to generate and realize new growth opportunities. Our commitment remains unchanged: to create value for the shareholders. It is important not to lose sight of the opportunity that presents itself with SandRidge. First and foremost is that we have an incredible platform for growth. This provides tremendous optionality as we assess a multitude of options moving forward. Second, unlocking this incremental value is within our control and our capacity. We have a mature HBP Miss Lime asset generating significant cash flow to fund development of a meaningful inventory of future wells in the North Park basin and elsewhere in the Mid-Continent. While we grow operating income in oil as a percentage of our product mix in these areas, we expect to extend Miss Lime cash flow generation through continued expense reductions and targeted capital investments. We have demonstrated capabilities and competencies that are aligned with the asset base. Additionally, we continue to take meaningful steps towards restructuring the company’s cost structure and positioning the organization to efficiently and effectively execute our development program. SandRidge is undervalued relative to most standard industry evaluation metrics. While this is partially attributable to some individuals’ perceptions of our various operating areas, we believe these views are misguided and remain dedicated to changing those impressions through the delivery of tangible results. I’m confident that continued success through the drill bit, further reductions in cash costs, and demonstrated profitable growth in production and EBITDA will be the catalysts for this change. We remain focused on execution, returns, margin improvements, and value creation for the enterprise. I appreciate your time today and will now turn it back to the operator for questions.

[Operator instructions] Your first question comes from the line of David Beard with Coker Palmer. Please go ahead.

Hi, good morning everybody.

Good morning.

As it relates to some of the assumptions behind your liquidation value, did they contemplate the North Park Niobrara production guidance that you’d had in there and contemplate the successful defeat of the ballot initiative; and if not, would that change the implied value of the North Park assets?

The valuations and the way we’ve approached this has been consistently that Proposition 112 would be defeated. We certainly had contingency plans to the alternative. No, that development plan has remained unchanged.

The bigger question we get with the stock at 10 and the liquidation at 12 or 13, do you revisit that or is revisiting that plan not stock price dependent?

Could you elaborate a little bit on that question when you say revisit the plan? Could you explain what you--just to make sure I understand.

It’s a question we get, with the stock at 10 and if you can sell at 13, why don’t you, or why don’t you revisit it? Back to my question, in that number, did you contemplate--did investors or buyers of North Park contemplate those production numbers and contemplate Proposition 112 being defeated, because if they didn’t, the value it seems would have been lower, now maybe the valuation would be higher.

Well, it’s difficult for me to speak to what potential interested parties considered when they made their proposals and looked at our North Park asset. I can say that the uncertainty surrounding that proposition certainly had an impact. I think the continuing concern about a solution on the takeaway situation certainly had an impact, but the bottom line is the indications of interest that we received were just completely disconnected from the value, even on a PDP basis.

Right, understood. How about the process to revisit that - as I said, if the stock was at 20 you might not, but with the stock trading below those values, is there thoughts to just revisit that process?

We are constantly looking at all the options, so yes, the option to revisit is certainly there. One additional follow-up on the North Park piece, I think what you saw in the third quarter was being realized. We talked to that last quarter, that we were seeing some really tremendous wells coming out of our eastern pilot that was substantiated with the volumes, and even the EBITDA, so it’s a little bit of overcoming some of the inherent skepticism of a relatively new basin in a new area, but the results are compelling.

Yes, I see that too as well, they are. That’s where it seems to be driving value higher, and I’m just probing a little bit more how to unlock that. Appreciate the time, thank you.

Yes, I share your thoughts there. It’s frustrating, but we delivered a quarter with almost $50 million EBITDA and when you relate that to our current market capitalization, there’s a disconnect. I firmly believe that multiple quarters of delivering this type of performance will eliminate that skepticism and it will be reflected in our stock price.

Yes, and we’ve seen that with other stocks too as well. Good, appreciate it. Thanks guys.

Thanks David.

Again that’s star then one to ask a question. Your next question comes from the line of Bill Dezellem with Tieton Capital. Please go ahead.

Thank you, appreciate that. I have a group of questions, if I may. First of all just on the last line of questioning, were any offers contingent upon Proposition 12 failing and--well, let’s start there and then I’ll continue on.

I’m not going to talk in any detail about specific offers, but I can only say that it was a factor in the interest or even some conversations with some interested parties that may not have made offers. It was a difficult point in time to be making significant capital investment decisions and commitments with that uncertainty.

Then you were mentioning that there’s a disconnect between the offers that you received and the value of the business. Why do you think that is? What do you believe are the main drivers leading to that disconnect?

Well, there’s a number of them, and I would take you back to the press release where we discussed the conclusion of the strategic process. With regard to the Miss Lime, it’s an out of favor asset in general. The market perception is such, there’s some overhang there that just limits the number of interested parties in an asset like that. It is significant in size, so the current market and with regard to being a buyer or seller’s market certainly had an impact. There is not as many cash buyers out there looking for something like the Miss Lime. The northwest STACK, it’s an evolving area. As we’ve talked about previously, there is variability across the play and there is, frankly, quite a few different companies, both public and private equity backed, who are out there and a number of different attempts have been made, some successfully, to market those positions. But with that uncertainty, what we’ve seen, and it was reflected in the indications of interest we received, is on the northwest STACK the current market is mostly focused on PDP with minimal willingness to pay for the undeveloped upside. You can look at the types of wells that John showed, the Medill area being a perfect example of there are wells with compelling value to be drilled in the northwest STACK, and to essentially give those away was just something that the company was unwilling to do. North Park, all the reasons we just previously discussed, but again with the uncertainty on what you do with the produced gas, and we are working well with all the regulatory agencies, they’ve been very supportive, and we are moving forward on a number of different solutions to the produced gas question out there. But until that’s permanently resolved, I think there’s always going to be a discount put on the value of the North Park until there’s a clear path forward and a clear associated cost of that. I would add, this gas to liquids pilot that we’ll be implementing is a very interesting option. I mean, we’re going to--I think in the first quarter we’ll know a lot more about the viability of that as a possible supplement and ultimately maybe even eliminate the need for a pipeline out of the basin.

Great, thank you. Let me shift, if I may, to the Mississippian Lime assets. Why was it that the seller was willing to sell those assets? Just talk about that transaction, if you would please.

This was a legacy joint venture position that was entered into during the early stages of the development. It was a minority interest and the seller was just in a position that they needed to exit out of a non-operated, fairly significant position. The other motivating factors behind their decision to do that, I really can’t say other than I can certainly understand you’re sitting there holding a declining asset and their drivers were at the time, and we took advantage of it to pick up that position.

Do you see additional opportunities like that, Bill?

I think on a smaller scale. I think it’s certainly possible. Someone might ask, why would you buy incremental Miss Lime assets after you just went through the process, and I would say to buy new Miss Lime assets, meaning new well bores in new areas and incremental operational requirements, we’ll be more thoughtful. These types of acquisitions that are essentially just increasing interest in wells we already operate, it takes exactly the same amount of effort and cost to operate these wells today as they did before we did the deal, so we’re always interested in rolling up additional interest. We liked the compelling price that we were able to do that, and I think if we’re able to repeat that, we would do it again. I’m not saying that we wouldn’t even consider incremental new Miss Lime properties, but it’s going to be at a compelling NPV value.

Thank you, and then I have two North Park questions and then I’ll jump off. First of all, relative to the wells coming in above expectations, would you please discuss what you believe is behind that, and then secondarily the decline rates that you’re anticipating in the first couple years on those assets?

I’ll turn that over to John. He deserves a lot of the credit for the performance out there and what the geotechnical and operations teams have been able to accomplish. John, you want to answer that?

I think the eastern spacing test again that we’ve had such fabulous results in, there are a number of things. Two of the better wells that were drilled there were drilled in the B and C benches of that Niobrara column, and we really have not explored the B much. We’ve only had a few wells that have targeted that, and we are seeing some of our very best results from it. We plan to drill additional wells both in Q4 and in ’19 in these B and C benches to see if we get similar results. The other thing is that as we drill a number of wells at one time, of which I think there were six of these wells were stimulated at the same time back to back, it really is more effective fracturing when you can do zipper fracs and take advantage of the pressure rate opportunities, and so I think it’s a combination of the B and C reservoir as well as the stimulating at one time.

Great, thank you.

As there are no further questions in the queue, I turn the call back over to the presenters.

Thank you again for joining today’s call, and we look forward to providing additional updates in the near future. I appreciate your interest, and please don’t hesitate to reach out with any further questions. Thank you.

This concludes today’s conference call. You may now disconnect.