Sandridge Energy’s Red Fork Drilling Plans and Capital Spending Estimates Clash in 2026 Q2 Call

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $34 million, a 49% increase year-over-year
• EPS: $0.72 per common share, compared to $0.53 per share during the same period last year

Guidance:

• 2026 capital expenditures expected to be $6 million, fully funded by operating cash flow.
• 2026 capital program estimated between $76 and $97 million, including $62 to $80 million in drilling/completion and $14 to $17 million in workover.
• Plan to drill 10 operated Cherokee wells and complete 9 in 2026, with the remaining completions carried over to next year.
• Continue to prioritize full cycle returns and reasonable reinvestment rates, with flexibility to adjust development plans.
• The company plans to maintain meaningful upside on hedges throughout the remainder of the year.

Business Commentary:

Production and Revenue Growth:

• The company reported production of 19.7 MBOE per day, representing an 11% year-over-year increase on a BOE basis, with oil production increasing by 48%. Revenue was just over $34 million, a 49% increase year-over-year.
• This growth was driven by the operating development program and higher commodity prices.

Cash and Dividend Distribution:

• At the end of the quarter, the company held approximately $115 million in cash, representing $3.09 per common share. $10.6 million was paid in dividends during the quarter.
• The company aims to maximize long-term cash flow while growing production, with a strategy to utilize NOLs to shield from income taxes.

Cost Management and Hedging:

• Adjusted G&A expenses were $2.7 million or $1.52 per BOE, showing a slight increase from the previous year. The company's net income was approximately $27 million, or $0.72 per common share.
• Cost discipline and hedging strategies are integral to maintaining profitability, with the company planning to maintain meaningful upside in commodity prices.

Capital Expenditure and Development Plans:

• Total capital spent for the quarter was $16.3 million, with plans for $6 million in 2026 capital expenditures. The company plans to drill 10 operated wells in the Cherokee play.
• The focus is on continuing development with one rig to further grow oily production, supported by a strong balance sheet and versatile asset base.

Sentiment Analysis:

Overall Tone: Positive

• Management reported a 'strong quarter' with year-over-year growth in production and revenue, driven by the operating development program and higher commodity prices. They highlighted 'exceptionally flat production' from a new well, 'very promising' initial estimates, and being 'very pleased with our team.' The tone emphasized strength in balance sheet, cost discipline, and optionality to leverage commodity cycles.

Q&A:

• Question from (Firm not specified): Concerns about the impact of lower natural gas prices on the company's results.
  Response: Management acknowledged the realized price of natural gas fell meaningfully due to regional differentials but emphasized the company's oil-weighted production and hedging strategy, which provides security and supports the drilling program.

• Question from (Firm not specified): Inquiry about the efficiency of the recent drilling and completion results in the Cherokee play.
  Response: Management stated drilling and completion costs are down, with the fourth well being the fastest and lowest cost to date, and they are securing critical components to minimize supply chain impact.

• Question from (Firm not specified): Question regarding the expected timeline and benefits of the announced Cherokee acquisition.
  Response: Management anticipates closing the bolt-on acquisition in Q3, which expands their footprint with quality oil-weighted production and offsets current drilling programs, without plans to add people.

• Question from (Firm not specified): Request for details on the 2026 capital program and its components.
  Response: Management outlined a $76-$97 million capital program for 2026, with $62-$80 million for drilling/completion and $14-$17 million for workover, focused on bolstering their interest and extending development in the Cherokee play.

Contradiction Point 1

Future Drilling Plans in the Red Fork Formation

It contradicts the company's stated plans for the Red Fork formation, impacting expectations for future drilling activity and resource development.

Conference Call Participant (Unknown Company) - Conference Call Participant (Unknown Company)

2026Q2: The company's asset base provides multi-faceted options, with a strong balance sheet ($115 million cash), oil-weighted Cherokee assets, gas-weighted legacy assets... - Grayson Pranin(CEO)

What are the performance results and future drilling plans for the Red Fork formation well? - Conference Call Participant (Unknown Company)

2026Q1: The Red Fork formation well... delineated a very productive well. However, no Red Fork wells are planned for the rest of 2026. - Grayson Pranin(CEO)

Contradiction Point 2

Capital Program and Drilling Cost Estimates

It involves a change in the financial forecast for the 2026 capital program, affecting investor understanding of the company's spending plans and economic strategy.

Conference Call Participant (Unknown Company) - Conference Call Participant (Unknown Company)

2026Q2: The company's strategy is built on five pillars... returning capital to shareholders... - Jonathan Frates(CFO)

How is the current commodity price environment affecting drilling economics and the 2026 capital program? - Conference Call Participant (Unknown Company)

2026Q1: The 2026 capital program is estimated between $76 million and $97 million. - Dean Parrish(COO)

Contradiction Point 3

Guidance Range Explanation

It reiterates the same explanation for the guidance range, which is not a contradiction. The factor driving the range is consistently stated as timing-related variables.

[Not specified, as no live Q&A occurred] - [Not specified, as no live Q&A occurred]

2026Q2: The range in guidance is primarily driven by timing. Factors like crew availability, weather, or delays could shift drilling/completions from 2026 to 2027, affecting the range. - Grayson Pranin(CEO)

[Not applicable; based on prepared remarks summary] - Christopher Dowd (Third Avenue Management)

20260306-2025 Q4: The range in guidance is primarily driven by timing. Factors like crew availability, weather, or delays could shift drilling/completions from 2026 to 2027, affecting the range. - Grayson Pranin(CEO)

Contradiction Point 4

Hedging Strategy and Market View

It contradicts the company's stated hedging strategy, moving from an opportunistic approach based on price trends to a position that suggests leveraging price cycles without specific hedging actions.

[Not specified, as no live Q&A occurred] - [Not specified, as no live Q&A occurred]

2026Q2: The company's asset base is positioned to leverage commodity price cycles, with oil-weighted assets benefiting from high WTI prices and gas-weighted assets providing a tailwind at lower prices. - [Prepared Remarks Summary]

[Not applicable; based on prepared remarks summary] - Christopher Dowd (Third Avenue Management)

20260306-2025 Q4: Regarding hedging, the company is opportunistic... With recent oil price increases, they have added more hedges recently. They will continue to monitor the market and 'layer on more' hedges throughout the year if prices remain favorable... - Jonathan Frates(CFO)

Contradiction Point 5

Nature of M&A Opportunities in the Cherokee Play

It contradicts the characterization of M&A opportunities in the Cherokee play, shifting from a focus on leasehold/acreage to a general statement about a robust asset base.

N/A (No participant Q&A provided) - N/A (No participant Q&A provided)

2026Q2: The company's asset base provides multi-faceted options, with a strong balance sheet... and a robust net cash position. - Grayson Pranin(CEO)

N/A (Summary of prepared remarks) - David Terdell (Unknown Company)

20251107-2025 Q3: In the Cherokee play, opportunities are currently primarily leasehold/acreage-related as most PDP (proved developed producing) assets are new and not yet generating sustained cash flow. - Grayson Pranin(CEO)