Good morning. My name is Mariama and I will be your conference operator today. At this time, I would like to welcome everyone to the SandRidge Energy Fourth Quarter 2018 Earnings 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. [Operator Instructions]. Thank you. I would now like to turn the call over to Johna Robinson. You may begin your conference.

Thank you, operator, and welcome everyone. With me today are Paul McKinney, 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. Now let me turn the call over to Paul.

Thank you, Johna, and good morning everyone. Before we get started, I'd like to take this opportunity to thank Bill Griffin for his service and contribution to SandRidge. As most of you know, Bill served as our CEO during the last year. His leadership, hard work, and deep rooted knowledge of our industry were instrumental in achieving numerous accomplishments during his tenure and have set the groundwork for our path forward. Bill, you did an incredible job leading this company and I certainly appreciate everything you did to bring me up to speed. Collectively from me, and the employees of SandRidge, thank you for your leadership and service. Now with respect for everyone joining us on the call, we appreciate your interest in SandRidge and for taking time today to join us as we review our 2018 fourth quarter and full-year results, our new business strategy, and our outlook and guidance for 2019. We'll be referencing the investor presentation posted on our website earlier this morning. So I encourage you to use it to follow along. Now turning to Page 3 of our presentation, one of the first things we did upon my arrival was to develop a new business strategy. We deliberated on the principles and industry best practices that we believe lead to success and organize them so we can articulate them to our employees and to ensure they become a defining aspect of our culture. Our business strategy is focused on a few key components we believe will drive success as we acquire, explore for, and develop hydrocarbon resources in the United States. Simply stated, we will attract, retain, and motivate the people we need to succeed. We will be defined by our operational excellence and sense of urgency delivering low-cost consistent and efficient execution of our…

Thank you, Paul. And I'd like to extend a very warm welcome to you on behalf of the employees of SandRidge. We are all excited to have the opportunity to work with you and to build a brighter future for our company and our stakeholders. I'll be commenting broadly on various aspects of our earnings release as well as Slides 4 and 5 of our earnings presentation. Our fourth quarter and full-year results exceeded our expectations. We also met or beat full-year guidance on production, capital expenditures, LOE, and adjusted G&A. 2018 was a year of transition at SandRidge and we believe that the pillars for future growth and sustainable returns on our capital investments are now in place. We're very encouraged by our 2018 results and are anxious to move forward with a singular focus on our new business strategy and profitable growth plans. We posted fourth quarter net income of $54 million compared to a net loss of $19 million in 2017 and we generated fourth quarter adjusted EBITDA of $45 million compared to $49 million in 2017. With full-year adjusted EBITDA of $167 million and capital expenditures of $171 million, this level of outspend is a clear demonstration of our financial discipline. We also significantly reduced production costs by $10 million in 2018; a 10% decrease compared to 2017, and adjusted G&A by $19 million or 34% year-over-year. Our fourth quarter divestiture of legacy assets in the Central Basin Platform and the acquisition of working interest in the majority of our Mid-Continent properties were small but meaningful steps to simplify our portfolio, improve profitability, enhance value, and allow us to focus on our core operations and development strategy. The divestiture eliminated more than one-third of our well count which collectively averaged only one barrel of oil equivalent…

Thanks Mike. Let's look at the operational results for the full-year 2018. Our performance allowed us to meet or beat our full-year guidance for production lease operating expenses and capital expenditures. The company spud 36 wells with total CapEx of $171 million while producing 12.3 million barrels of oil equivalent at an average lifting cost of $7.52 per BOE. Moving now to our North Park Basin asset in Colorado on Slide 6. We utilized one rig approximately seven months in 2018. We spud 13 wells consisting of 12 XRLs and one SRL. At the beginning of 2018, we outlined plans to drill two spacing tests and to further delineate the southern edge of the field. As you will recall, we began the year drilling the next four wells of an eight well Eastern spacing test that utilized a 12 well per section spacing pattern. This test spaced wells 1,320 feet apart on each of three offset stacked rows within the Niobrara interval. These wells were completed and came on line in Q3. On Slide 7, you'll see the average production of eight wells drilled so far in this test is cumulatively beating the type curve by 14% after 320 days with minimal pressure interference. This group has already cumulatively produced over 1.1 million barrels of oil since inception. Returning to Slide 6, the next six wells in the Western spacing test utilized the 23 well per section pattern. These wells were spaced 660 feet apart on three offset stacked rows, twice the spacing density of the Eastern test. We used micro-seismic testing during completion of these wells to help determine optimal spacing considering well placement, simulation size, and drainage pattern overlap. These wells recently went to sales. We anticipate a full review of results versus type curve and micro-seismic learnings…

Thank you, John. And before sharing with you my vision for SandRidge, I believe it is appropriate to share a little about me, my background, and the events in my 35-year career that shaped my world view. I began my career in 1983 with Anadarko Production Company which was at the time a wholly-owned subsidiary of Panhandle Eastern Pipe Line Company. Technical excellence was a defining aspect of Anadarko's culture during my tenure of almost 24 years there. Later after moving on to Apache Corporation, I was impressed by their insatiable quest for operational excellence and their sense of urgency to get things done. During my most recent experience at Yuma, I learned the incredible importance of liquidity, the need for accurate forecasts, and to consistently look for ways to reduce cash costs. Throughout my career, I have learned that integrity trumps all and that discipline, hard work ethic, and humility are important traits of the best leaders. Now with this new role, I bring the best aspects of my experiences to SandRidge with a very clear vision of building an organization that delivers a competitive and sustainable rate of return to our shareholders. And while doing so, improving lifestyles in the communities in which we operate, and our reputation with our partners, stakeholders, and the regulators with whom we do business. Switching gears now to address our vision, the SandRidge board has given me a very clear mandate to profitably grow this company in a disciplined manner with a long-term focus. Having said that, we believe, we can grow SandRidge in essentially two ways this year. We can grow organically by investing in the opportunities we have in-house and we can grow by pursuing accretive M&A opportunities in the marketplace. With respect to the organic growth, and as John…

[Operator Instructions]. Your first question comes from the line of David Beard with Coker Palmer. Your line is open.

Hi, good morning everybody. Thanks for the clear description and slides.

You're welcome. How are you, David?

Good, good. A couple of small questions and move to some bigger picture questions. Could you give any color relative to your assumptions behind your 2019 production guidance from the North Park? Really I'm trying to triangulate between you gave first and second quarter in the slides and where you kind of expect to end up third quarter, fourth quarter relative to the full-year?

Yes, thank you, David. This is John Suter. Yes, certainly the Q1 and Q2 that we show on Slide 8 is in reference to all the wells coming on in Q1. And then with the current capital program, we finish up potentially drilling in Q2 and then it should be done until about the end of Q4. So as far as Q3 and Q4 production, I need to look that up here real quick but should be seeing some declines off of that Q2 number that you see without new drilling, we don't generally guide per basin on production.

Right, right. Now that's helpful. I know there's a lot of seasonality associated with drilling, so just trying to get some color on that, so that's helpful. And then would you look at this GTL project you'd said hey we want to see some metrics before we can determine if it's scalable. Can you give me a little color of what you're looking for? It doesn't seem like there's any hurdles at least from the outside to having this be scalable but obviously you guys are on the ground. And so what do you need to see to scale this?

Yes. So this is -- this is an existing technology but it is relatively, relatively new patented process that makes this process work. We just want to see it executed with our gas stream but there's no surprises. We feel confident that it will. But we want to see that. And then as Paul mentioned understanding the resource potential play especially on the Eastern Flank where there's a dramatic amount of acreage there that could make a significant difference of what product needs to be processed or moved out of basin gas wise that would make a difference whether gas to liquids would be a reasonable alternative or whether the Midstream solution makes more sense. But again we have no, no real big surprises anticipated here. We want to see it work. And then, as we gain more information through the year, we'll work that decision little harder.

Yes, David. This is Paul. I'll jump in on that. Again it goes back to what John said it's a function of the resource in plays. If the GOR continues to be the same across all of our acreage, that will suggest that we'll have relatively less gas and so perhaps that won't be enough to -- won't be enough gas to justify bringing in a pipeline. So maybe GTL will work. But if we find that we have a larger gas component of the resource in plays well then that could justify a pipeline. So that's part of the reason for the capital spend this year in terms of the vertical wells trying to understand the resource in plays because all of that will come together towards the end of the year, we'll know a lot more towards the end of the year. Does that help?

That makes sense, really it's geology driven versus engineering of the plant driven so that makes sense. And then just a little bit on the density tests, it is all surprising you went so dense on that Western testing, are trying to push an upper boundary or just give me some thoughts behind that Western testing?

Yes, it goes back to what we're seeing in the marketplace. If you look at the history of what's happened in our industry back when oil prices were really high, companies were very quick to go to down spacing and putting more wells in acreage than perhaps they needed to. The right way to do things is basically what this company did before I arrived and they started to test. And so when you consider that you have potentially a tremendous number of wells to drill, the best thing you can do is learn what the proper spacing is early upfront and if that takes a few wells that might be more tightly spacing, they should have. That gives you the information so that the rest of your development can be developed on the proper spacing. So that's the purpose of both of these tests. And so, yes, some people could say that the 23 wells per second test might be a little bit too many but we'd rather know that now than spend than learn that 500 wells from now. And so that's the whole purpose of this. This is the SandRidge team has taken pretty much a classic engineering view to solving the problem before you spend significant dollars.

And David I will add that even though it's a 23 well per section pattern, we do understand how drilling the full section up would be too early. So we've drilled six wells on that pattern, two in the B, C, and D benches. So we have really only put minimal capital into that. That should give us some, some pretty strong results we think. But we haven't…

Right, yes I totally understood. It's not a 23 well test, it’s six well test and I guess in a way we should expect some interference as you say you try to push an upper boundary and so we should expect interference at some point in time and I guess the upside is if you saw minimal at that level, that would be quite a positive surprise. Am I thinking about that properly?

That's absolutely correct. We would anticipate the ultimate density to be somewhere in between these two book ends. And again similar to the D.J. Basin, it’s a little different Niobrara but still 20, 15 to 20 wells per section there is not unheard of. So it's I think it's prudent book ends for us to evaluate.

Right. Right. And there's been some test higher in the D.J. too, so you're not out of bounds from if I drew the line there. And just lastly, well would -- just remind us that all of what percent of the acres you've delineated in your inventory there and the spacing assumptions behind that?

I'd have to look at the acreage count. But in my mind this core area and as you can see from the little map inserts on Slide 6, we have probably a 50 section core area that's pretty well delineated. We certainly have the boundaries of it delineated and now we're working on coming back in like at the end of the 2018 year, we'll do some infill drilling. But it's roughly; I would say roughly 30% of our total acreage that exist in this delineated portion.

All right, good, that's helpful. And if I may just take a bit more time to switch over to a big picture question relative to M&A. You seem to state that you're going to be active but that your stock is undervalued which would imply M&A is going to be mostly if not all debt focused. Am I thinking about that right? And how much leverage would you be willing to use depending if you buy something that's with production and EBITDA or without?

Yes, there's multiple financial strategies that can be pursued. But right now, it’s also a function of what we encounter and how accretive it is to our portfolio. Of course there will always be an adjustment to our borrowing base with any added new production that we bring on. But yes, leverage is again a responsible use of leverage is primarily the way we'll go. If you look at that from the standpoint of what's out in the marketplace though and yes, we do want to be active. But as you know, it takes two people to agree to every deal. And so we'll see -- we'll see how that participation actually goes throughout the year.

There are no further questions at this time. I will now turn the call back over to Paul McKinney for closing remarks.

Okay, thank you very much. And thank you everyone for participating in this call. We are truly excited about what the future holds for SandRidge and our investors and we're very encouraged by your support. And so this brings our conference call to an end. Thank you guys and we'll talk to you again at the end of next quarter.

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