Greetings, and welcome to the Second Quarter 2022 SandRidge Energy Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Prestridge, Director of Finance and Investor Relations. Thank you, Scott. You may begin.

Thank you, and welcome, everyone. With me today are Grayson Pranin, our CEO and COO; Salah Gamoudi, our CFO and CAO; as well as Dean Parrish, our Senior Vice President of Operations. We would like to remind you that today's call contains forward-looking statements and assumptions, which are subject to risk and uncertainties, and actual results may differ materially from those projected in these forward-looking statements. We may also refer to adjusted EBITDA and adjusted G&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.

Thank you, and good morning. I'm proud to report on another strong quarter of results for SandRidge and that the company is actively capitalizing on recent commodity price tailwinds to include expanded focused, high-graded drilling in the core of the Northwest STACK and a continuation of our well reactivation, which will add incremental production this year and in 2023. Before expanding on this, Salah will touch on a few highlights from the second quarter.

Thank you, Grayson. Production for the second quarter remained flat to the first quarter at approximately 17.8 MBoe per day despite not finishing any new well completions during the first half of the year. Production did, however, benefit from the reactivation of 29 wells during the first 6 months of 2022 that were previously curtailed during commodity price downdrafts in 2020. Also, production from this year's drilling program will begin adding to base levels in the second half of this year and into 2023 as we finish completions on wells drilled in the first half of the year and further drill and complete new wells. Net cash, including restricted cash, increased to approximately $205 million, which represents $5.58 per share of our common stock issued and outstanding as of June 30, 2022. The approximate $40 million increase over the quarter was supported by production from our well reactivation program as well as higher commodity prices and realizations and net of capital expenditures made for inventory drilling and completion activities related to our 2022 capital program. The company has no term debt or revolving debt obligations as of June 30, 2022, and continues to live within cash flow, funding all its capital expenditures with organic free cash flow and cash held on the balance sheet. Over the quarter, the company generated adjusted EBITDA of approximately $54 million. Again, despite no new production from our planned, drilling or completion activities during the period. As we have pointed out in the past, our adjusted EBITDA is a unique metric for SandRidge due to us having no eye and very little teeth given that we have no debt and a substantial NOL position that shields our cash flows from federal income taxes. Commodity price realizations in the second quarter before considering the impact of…

Thank you, Salah. We thought it would be helpful to walk through some of the company's highlights, management's strategy and other business details. As I mentioned previously, we are pleased with the results in the second quarter and have begun to further capitalize on robust commodity prices with high rate of return drilling in the Northwest STACK, continued well reactivations and further strengthened cash flow from our already producing properties in Mid-Con. We were able to keep quarter-over-quarter production flat in Mid-Con despite no new production from drilling and completion activity during the period, driven in part by the continued benefit of our well reactivations of 158 wells since early 2021. We will continue to reactivate wells averaging over 100% rate IRRs, now targeting an additional 25 projects over the remainder of the year for a total of 54 by year-end. In addition, we will convert artificial lift systems of 36 wells to rod pump, 12 of which were converted over the first half of the year that will aid in optimizing lifting efficiency and lowering point forward costs for this well set. The rod pumps we have or will be installing are tailored for the wells' current food production and will reduce the electrical demand from the current artificial lift systems. This is key to offset increases in utility costs associated with the rise in fuel surcharges from elevated commodity prices. We have successfully drilled, completed and are now producing the first 2 wells in this year's capital program, targeting the Meramec in the Northwest STACK play and are currently drilling the third in extended reach lateral. The first 2 1-mile lateral wells are producing an average of approximately 400 barrels of oil per day and nearly the same level in gas at the end of July. Gross D&C…

[Operator Instructions]. Our first question comes from Josh Young with Bison.

So I just want a little more clarity on these first Meramec wells that you just announced. Can you talk about how many days of production, the initial rates you described represent? And it sounded like production was still inclining. And then I just want to clarify that the production rate is per well and not for the two wells combined.

Yes. Great questions. Yes, the production profile is still increasing. They've been online just under 30 days. And like I mentioned in my remarks earlier, we anticipate the gas specifically to go from its current rate of roughly 400 Mcf a day to just over 1 million.

Okay. Great. And again, that's per well, 400 barrels a day. Great. Okay. And then just a follow-up on capital return. You guys have an approved buyback. I asked this on the last call and prior ones. It does seem odd to have cash build on the balance sheet, have an approved buyback, have the stock price down and has the company not execute on it. Could you clarify a little bit what was intended with that approved buyback as well as what the company is planning for this cash that's building on the balance sheet?

Sure, Josh. I'm going to let Salah add in here. But before I do, I just want to reinforce -- this is something we look at routinely and a significant priority. We discuss the topic daily and modern the markets. As you know, the Board approved a 10b-18 program, take advantage of significant dislocations in the marketplace. However, I'll point out that the 10b-18 is restrictive when you have material nonpublic information because we're active in the M&A space, it can really limit the lines to take advantage of the significant dislocations that may be situational. It would be a great topic that a 10b-5 program is an alternate with the Board and continue to evaluate considerations for share repurchases, return on capital and strategic uses of cash. I'd also like to point out that our share price performance has improved substantially since early last year. So relative to that period, there's less consistent dislocation on a day-to-day basis that creates a broad window of opportunity relative to the 10b-18 program.

And Josh, this is Salah. I'll add to that just a little bit. We do have diverse set of investors, and they come with a diverse set of opinions and physicians. And we do -- our Board and management take their suggestions and recommendations very seriously. There is a contingent of investors that believe that perhaps the best use of cash is one in which we'll be able to leverage our NOL position to the maximal level, which would typically follow some sort of M&A or something there other. And so we're constantly having these discussions with the Board. And I'd just like to remind all of our investors, we do take your thoughts seriously. We bring these things to our Board. But ultimately, the Board is the only one authorized to actually perform a buyback or execute a transaction.

[Operator Instructions]. Our next question is from Jeff Robertson with Water Tower Research.

Grayson, can you talk about the inventory of wells that are still off line that could be reactivated and what their economic sensitivity is?

Yes, sure. Jeff, thank you for the question. As I mentioned, we've reactivated 158 through the second half from the beginning of last year, 29 over the first half. We'll be adding an additional 25 to the expanded capital program that we just announced for a total of 54 for the year. There are several hundred additional opportunities, and it's very gradational. And I don't mean to be obfuscate here, but it's a multivariate equation because it's dependent on not only commodity price, but what the costs are at the time. So as you have increased costs, right, it can change the breakeven relative to that quality price. So there are additional opportunities that we continue to evaluate, and we do this on a weekly basis with our team and continue to bring forward projects that have higher rates of return. But as we do with everything else, we want to make sure that we're delivering on those. So we're very conservative with our hurdle rates in that regard.

Grayson, some of the economic consideration based on where in the system, the wells are -- wells that are off-line or located with respect to how much water they may produce and how far you have to transport the water to put it back into the ground.

It's not necessarily water-driven. While water is a component, it's not really the transportation of the water per se. It's really the electricity that's required to pull the total food out of the ground. And I think you hit the nail on the head. It's -- we've gone from $90 oil and $5 gas to $90 oil and $8 gas. So some of these wells are more gappy. So last year, we brought on [indiscernible] relative to 12, and they were cheaper to fix, right? Some of them in Q1 required very little cost to bring back online. The well that we're moving to now are higher cost per Boe, but they add incremental margins and then also require increased capital relative to Q1 of last year. So instead of a cheaper rod pump repair and it means you may be installing any rod pump, which is just more expensive.

Okay. A question on the 12 wells in the Northwest STACK. Will these wells derisk locations that you might think about in a 2023 capital program?

I'm sorry. Can you repeat the question, Jeff?

Will the 12 wells that you're drilling this year, I know that it's in an area that's well defined by existing producers. But will the performance on these help further derisk wells that you might think about in the 2023 capital program?

Absolutely. And not only from extending beyond because we're directly offsetting highly profitable wells. So to the extent that you push the boundary a little bit more down on [indiscernible] higher confidence and mature derisks but also from a spacing perspective, so we're drilling this program at mostly 2 to 3 wells per section. And to the extent that we have outperformance, we could downspace which would add additional locations.

Our next question comes from Arya Cole [ph] with Cole Capital.

One tax question for you. As you know, in Congress, there's a bill pending to change corporate tax rates where the government would institute a 15% minimum tax rate for all corporations. Could you just explain to me basically your understanding from lawyers what impact this would have on you? I obviously understand you have your net operating loss carryforwards. But how would that -- how would this 15% corporate tax potentially impact you?

Yes. Good question, Arya. This is Salah. So I'll go ahead and take this. So it's a little bit sparse on details. And it is, I think, a proposal, not I believe it's been signed by President Biden, and there's still some drafting going on. But from what we understand, that minimum tax will be levied on GAAP income for corporations that have net income of $1 billion or more. So unless we incur or gather net income of $1 billion or more going up to the future and if this bill passes as it is, it shouldn't affect us based on what we understand today. But those things can change, and we're constantly monitoring that, and we'll be sure to alert investors if we believe it impacts us in a material way. But with that said, given our current position, if we have $1 billion in net income coming up, that will be a "good problem to have".

Thank you. There are no further questions at this time. This does conclude our conference for today. You may now disconnect your lines. Thank you for your participation.