Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the SandRidge Energy Fourth Quarter 2021 earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one once again. Thank you. Scott Prestridge, Director of Finance and Investor Relations, you may begin your conference.
Thank you, and good morning, everyone. With me today are Grayson Pranin, our CEO and COO, Salah Gamoudi, our CFO and CAO, as well as Dean Parrish, our VP of Operations. We would like to remind you that today's call contains forward-looking statements and assumptions, which are subject to risk and uncertainty, 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, Scott, and good morning. Hopefully, you've had time to review the earnings release and investor presentation we posted yesterday after market close. We will be referencing both during the call. The company is well-positioned to capitalize on recent commodity price tailwinds to include an expanded capital program this year with focused high-graded drilling in the core of the Northwest STACK and a continuation of our well reactivation program. Before expanding on this in the presentation, Salah will touch on a few highlights from the fourth quarter and full year 2021 results.
Thank you, Grayson. Simply put, 2021 was a strong year. Despite no new drilling or completion activity, we were able to keep January to December production flat, averaging 18.6 MBoe per day for the company and 18.4 MBoe per day for MidCon. The production for the quarter as well as the year benefited from the reactivation of over 129 wells throughout 2021 that were curtailed during commodity price downdrafts in 2020.
Net cash, including restricted cash, increased to approximately $140 million, which represents net cash of $3.80 per share of our common stock issued and outstanding as of December 31st, 2021. The $41 million increase from the prior quarter was primarily driven by production from our well reactivation program, higher commodity price and commodity price realizations, and our continued focus on cost minimization.
As of March 7th, 2022, the company's cash on hand, including restricted cash, was approximately $161 million. The company has no remaining term debt or revolving debt obligations, as the company repaid its $20 million term loan in full and terminated its previously existing credit facility in early September. Our adjusted EBITDA increased to approximately $37 million for the quarter and approximately $114 million for the year. Again, despite no new drilling or completion activities during either period. Adjusted EBITDA is a unique metric for SandRidge as we have no I and very little T, given that we have no debt and a substantial NOL position.
Commodity price realizations in the fourth quarter increased by 9%, 36%, and 5% from the prior quarter to $75.72 per barrel, $3.94 per Mcf, and $28.39 per barrel for oil, gas, and NGLs, respectively, before considering the impact of hedges. As of today, we have no open hedge positions or commodity derivative contracts. However, as we invest shareholder capital into our drilling and completion and well reactivation program, we will work side by side with our board to evaluate potentially into hedge positions in order to help protect investor capital spent. As alluded to earlier, we have maintained our large NOL position, which was over $1.7 billion as of year-end 2021. Our NOL position has and will continue to allow us to shield our cash flows from federal income tax.
Our cost discipline continued to improve during the quarter, with previously implemented initiatives by the board and management further manifesting in our financials, partially offset by an increase in workover activity associated with well reactivations. This year, total G&A was lower year- over- year at approximately $9.7 million or $1.42 per BOE compared to $15.3 million or $1.76 per BOE for the prior year. Adjusted G&A decreased by $5.8 million to $8.3 million or $1.22 per BOE from $14.1 million or $1.62 per BOE in the prior year. The team also held LOE and expense workovers to approximately $36 million or $5.30 per BOE during the year while reactivating over 129 wells.
We believe we compare favorably with our peers in regards to G&A and LOE on both an absolute and a per BOE basis. We continue to generate net income for our shareholders. During the quarter, we reported net income of approximately $37 million, an approximate 29% increase from the prior quarter at a $117 million or $3.21 per share for the year. Before shifting to our investor presentation, we should note that our earnings release posted yesterday and the 10-K that we will file later today provide further detail on our financial and operational performance during the quarter and full year ended 2021.
Thank you, Salah. Now turning to the presentation. We thought it might be helpful to walk through some of the company's highlights, management strategy, and other business details. Over the past few years, the board and management have focused the company's assets, optimized its production profile, streamlined its organization and cost structure, and strengthened its balance sheet. As a result, we enter the year positioned to 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. Let's start on Page 4. As Salah mentioned, 2021 was truly an exceptional year for the company.
We were able to beat production by more than 6% relative to the midpoint of guidance, which is driven by a well reactivation program, was more than 20% increase to guidance at the beginning of last year. Note that we were able to add this production, offsetting annual decline for the year with $11 million of capital, which was 9% below the midpoint of guidance. On the expense side, we're able to come under adjusted G&A midpoint of guidance by 35% and kept LOEs at $36 million despite increased activity and inflationary pressures. In other notable accomplishments for the year, we paid off our previous $20 million term loan and ended the year with zero debt.
We closed the sale of North Park Basin assets in February of last year, simplifying and focusing our asset base in the Mid-Continent region, and completed the purchase of all overriding royalty interest assets of SandRidge Mississippian Trust I. The key highlights of SandRidge are on Page 5. Again, our asset base is focused in the Mid-Continent region with a primarily PDP well set, which do not require any routine flaring of produced gas.
These well-understood assets are almost fully held by production, with a long history of shallow decline and diversified production profile and double-digit reserve life. As a result of this focus on the Mid-Con, the company was able to keep annual production relatively flat at 18.6 MBoe per day, despite no new drilling or completion activities, driven in part by the reactivation of over 129 wells throughout 2021.
In addition to continuation of our well reactivation program this year, we plan to resume drilling with a focused, purposeful, high return program in the Northwest STACK consisting of nine wells. We will expand on this later in the presentation on Page 8. Our assets continue to yield significant free cash flow, which added $41 million of net cash, included restricted cash this past quarter, now totaling nearly $140 million net of debt pay down as of year-end 2021. As detailed on Page 14, the company has demonstrated and been the leader in efficiently converting EBITDA to free cash flow, given our low per BOE cost structure and light CapEx last year, as well as improved commodity prices and realizations. Further, over 75% of operated wells can produce profitably down to $40 WTI and $2 Henry Hub.
This cash generation potential provides several paths to increase shareholder value realization and is benefited by relatively low G&A burden. As we realize value and generate cash, our board is committed to utilizing our assets, including our cash, to maximize shareholder value. SandRidge's value proposition is materially de-risked from a financial perspective by our strengthened balance sheet, robust net cash position, financial flexibility, and over $1.7 billion in NOLs.
Further, the company is not subject to MVCs or other significant off-balance sheet financial commitments. Currently, the company does not have any open hedging contracts after March of this year. However, we could enter into hedges from time to time in support of securing returns for our capital campaign, manage commodity risk or other fundamental drivers. It's finally worth highlighting that we take our ESG commitment seriously and have implemented disciplined processes around it.
Page 6 lays out our go-forward strategy. In summary, we are focused on growing the cash value and generation capability of our business in a safe, responsible, and efficient manner, while prudently allocating capital for high return organic growth projects while remaining vigilant for value accretive opportunities. This strategy has four points. One, maximize the cash value and generation capacity of our incumbent Mid-Con PDP assets by extending and flattening our production profile with high rate of return workover and well reactivation. Initiate a nine-well drilling program in the core of Northwest STACK to economically add production. Continuously press on operating and administration costs. The second is to ensure we convert as much EBITDA to free cash flow as possible while exercising capital stewardship and investing in projects and opportunities that have high risk-adjusted, fully burdened rates of return.
The third is to remain vigilant, patient, and maintain optionality for opportunistic value accretive acquisitions. We'll focus on value-adding opportunities that bring synergies, further leverage SE's core competencies, complement or balance the company's portfolio or otherwise yield a competitive return. The final prong is to uphold our ESG responsibility.
Moving to Page 7, which details our core MidCon asset position. The prominent points here are long history and long lived. Double-digit reserve life and ample high-res production history to aid in projections. Shallowing base declines that will be lessened further from nearly 30 well reactivations and focused drilling in 2022. A diversified production profile, both from a gas to liquid hydrocarbon mix perspective and value diversity perspective. High interest and mostly HBP, which aids breakevens and makes spending commitments de minimis. Turning to Page 8, we will discuss this year's drilling program.
We will have a controlled and purposeful start to drilling this year with high-graded locations in the Northwest STACK. The program consists of nine wells that are offsets to highly profitable horizontal wells and have favorable geologic and reservoir characteristics. The focus area we will be developing with this year's program has previously been delineated by SandRidge and other reputable operators. We know this area well. Approximately 60% of the program will be infill development, with the remaining 40% being first wells in section or co-development that again offsets productive and profitable wells. Of note is that we are benefiting from having a long-tenured history in MidCon, previous development programs, and can leverage a very tight cost structure to add incremental barrels to our base production in a very capital efficient way.
As Salah mentioned earlier, having no interest or federal income tax further makes our investment dollars spent very capital efficient. The graph on the bottom of the slide illustrates the average performance of offsets, which include both first wells in section as well as child infill wells filled at denser spacing than our planned 2022 program, as well as an IRR sensitivity over a range of flat prices. It is important to know that historically the play has been developed at three to five well spacing. This year's well set is spaced conservatively at two to three well per section spacing. Gross D&C costs are estimated to be $4.75 million for single laterals and $7 million for extended reach laterals, which reflect casing, drilling, and other material equipment and services already secured at reasonable cost and current market estimates.
We will continue to lean forward in requisitioning the remaining items for the program to offset inflationary pressures. However, inflation will be a central focus this year and has bearing on unsecured costs and future drilling decisions. Program results, commodity price stabilization or further flattening, well costs to include effectiveness of inflationary controls or projections, denser well spacing and other factors will guide future drilling decisions and inventory considerations. We will continuously assess these factors and along with our board, evaluate the potential for future capital allocation in a prudent manner. Put simply, we'll prove out the results first and then go from there. Page 9 addresses our approach to production optimization.
Last year, we brought back online 129 wells, which collectively added an average of 3,200 gross barrels of oil equivalent per day and delivered more than 100% capital weighted rate of return. We plan to continue this program through the remainder of this year, bringing on approximately 30 incremental wells. We will continue to monitor commodity prices, which could influence further well reactivations later in the future. In addition, we plan to convert a subset of these and other PDP wells to a more efficient long-term artificial lift method, which will likely reduce their go-forward costs. Shifting to Page 10, which outlines our various initiatives of the board and management over the last several years have led to an absolute and per BOE reduction in LOE of 75% and 30% respectively since 2016.
We are pleased with our expense performance relative to peers. While we continue to press on operating costs, we anticipate expenses, specifically workover expenses, to remain at prior period levels as we reactivate more wells this year. Further, we will continue to combat inflationary pressures here as well through rigorous bidding processes, securing material, equipment, and services over an appropriate tenor to offset market increases, as well as continuing to leverage our significant infrastructure, operations center, and other company advantages. Page 11 illustrates the more than 1,000 miles each of owned and operated SWD and electric infrastructure over our footprint, representing significant prior investment over the last decade plus.
This substantial owned and integrated infrastructure provides the company both cost and strategic advantages, bolstering asset operating margins through reduced lifting costs as well as water handling and disposal costs, while de-risking positive free cash flow down to $40 WTI and $2 Henry Hub. In addition, the interconnectivity and ample capacity help buffer against unforeseen curtailment. Please note that with the assistance from the University of Oklahoma, we continue to evaluate the technical feasibility and potential commerciality of carbon capture, utilization, and sequestration, also CCUS, applications across our infrastructure.
While we are interested in opportunities to increase the utilization and profitability of our own infrastructure, any project will need to compete for capital within the company's portfolio and demonstrate an adequate rate of return. Currently, there is no significant capital allocated at CCUS. On Page 12, we provide an overview of the organization today.
Over the last year plus, we have tailored our organization to be fit for purpose. This change has rebalanced the weighting of field versus corporate personnel to reflect where we actually create value and outsource necessary but more perfunctory and less core functions such as operations accounting, land administration, IT, tax, and HR. However, we have retained key technical skill sets that have both the experience and institutional knowledge of our area of operations to support drilling and completion operations, as well as ability to flex through additional outsourcing of specialized areas to do more. Beyond the more than $6 million in per year G&A savings, outsourcing provides us greater flexibility and scalability to adjust the changes in our business or the market.
As Page 13 illustrates the effect of our organizational streamlining, which is a 75% and 60% reduction in absolute and per BOE G&A respectively since 2018. Needless to say, we are very pleased with our administrative cost reduction and how that performance relates to our peers. Now encapsulating many of the points we just covered, let's turn to Page 14, which highlights the company's efficiency of converting EBITDA to free cash flow. This metric is important to us. Outside of smart, risk-adjusted, high rate of return investments or value accretive opportunities, our goal is to translate as much of the company's value-generating resources to free cash flow. On the lower graph, you can see how SandRidge's no debt position stacks up relative to its peers. Now on Page 15, we lay out our guidance for the year.
Let's circle back to Page 3 for a moment to summarize some of the company's current strengths to include year-end 2021 SEC proved developed reserve PV-10 of $433 million, and management's internal unaudited PD reserve PV-10 at March 2nd prices of $546 million. Note that this does not reflect market changes over the past week. $140 million net cash and cash equivalent at year-end 2021, which represents net cash of $3.80 per share of our common stock issued and outstanding. Flat production over the trailing 12 months with $11 million of invested capital. Expanded 2022 capital program of high return projects to further enhance production and arrest decline to include nine new wells high-graded in the core of the Northwest STACK and continuation of our well reactivation program.
Low overhead, top-tier G&A of $1.42 per BOE for full year 2021. No debt, in fact, negative leverage. Significant free cash flow and a growing net cash position supported by a diverse production profile, low decline, multi-decade life asset base. $1.7 billion in NOL, which will shield future cash flow from federal income taxes. A low operating cost benefiting from a large SWD and electric infrastructure requiring little to no future capital to maintain. This concludes our prepared remarks. Thank you for your time. We'll now open the call to questions.
At this time, I'd like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. We'll take our first question from Michael Furrow with Johnson Rice. Your line is open.
Hi, Good morning, and thanks for taking my questions.
Good morning. Thanks for calling in.
Yeah. SandRidge is in a free cash flow generating mode now, and, you know, combined with a healthy balance sheet opens up plenty of options for you guys for uses of cash, whether that be shareholder returns or drilling new wells or some combination of both. We haven't seen any share repurchases in the third or the fourth quarter despite the initiation of that program at 2Q reporting. I think it would be helpful if you could sort of explain management's view on capital allocation going forward, specifically on buying back shares versus drilling new wells.
Great question, Michael. I think that, you know, overall I'd like to highlight, number one, that the buyback program that we put in place was meant to maximize strategic optionality, and we did that via entering into a 10b-18 program. Just to ensure that all of our investors are aware of some of the dynamics and challenges with the 10b-18, while it does give you and the board and management, ultimate flexibility, in executing on a share repurchase or a buyback program, it also can be very restrictive because we have to act very similar to any other shareholder. You know, for instance, in the preparation of the financials, that starts two weeks before every quarter until we file.
Then if we're in any sort of strategic discussion, whether that's M&A, you know, whether that's even discussing other modes of returning capital with our board and key investors, you know, that set of discussions can restrict us from being able to execute on the buyback. While we have it in place to maximize strategic optionality, you know, we are constantly reviewing ways that we can maximize shareholder returns. That also can limit us on being able to execute at the right time and place via the buyback program. With that said, we are working with our board continuously and constantly having discussions on this topic.
I think that the inertia that we have right now is basically pointing us in the direction of saying, "Hey, we really do have something special in our space with a large NOL position, a lot of cash in our balance sheet with no debts and plenty of free cash flow," as you mentioned. We're wanting to make sure that we deploy that capital in the most strategically accretive manner to our investors. Share buybacks are one option. We are evaluating dividends. You know, we are also evaluating more strategic optionality outside of organic inventory to try to maximize those shareholder returns.
Great. Thank you. That makes plenty of sense to me. My next question is on the well reactivation program. SandRidge reactivated just close to 130 wells last year, but it looks like in the 2022 plans, it's to complete just 30. This kind of leads me to believe that the results of this allocation of capital towards the Northwest STACK drilling program. You know, Slide 8 very clearly illustrates the profitability of the program, especially at these commodity prices. The well reactivation program also appears to have some favorable economics as well. Is there any sort of reason why the company has decided to reinitiate a drilling program versus continuing with the same reactivation pace seen in 2021? Why exactly was this specific area chosen in the acreage?
Sure. I think that's a great series of questions. I'll try to address all of them. First, I think we'll talk about the area. The Meramec in the Northwest STACK is the highest grade return within our drilling inventory. So I think that makes the most sense to hydrate. I think the Miss Lime and the Chester could become more meaningful, you know, with the stabilization around the current spot or further flattening. We'd like to see, you know, the D&C for the Miss Lime be sub-$2 million.
In regards to capital allocation decisions, you know, it's one thing to hydrate based off of rate of return, but we also consider, you know, PV-10 and PVI or present value index on how much meaningful value that the investment is actually bringing to the table because some of these well reactivations have a high return, but they add significantly less PV-10. That's just a product of our hydrating the program from last year, accelerating the most meaningful portion of the well reactivations. The remaining inventory is very gradational. We continue to hydrate and try to bring on the most profitable within the program, but they have much less relative PV-10 impact. That's why you're seeing more capital being allocated to drilling in the Northwest STACK.
Great. That's very helpful. Thank you for your time.
Thank you.
Next, we'll go to Josh Young with Bison Interests. Your line's open.
Hey, guys. Good morning.
Good morning.
I have a couple questions for you. The first is on this drilling program. It's good to see and it's helpful to see the rate of return you guys are expecting, which I'm assuming is probably at least somewhat risky given the history. Can you talk to how much of the spend for that program might be reflected in the net cash number you provided as of early March?
Sure. Happy to. I think you're picking up some of the comments we made during the call that we're being proactive in combating, you know, inflationary pressures and repositioning, you know, material and equipment in advance of the program in order to ward off, you know, future increases. We've spent a lot of time early this year securing casing, pumping units, and other equipment and material just to make sure that we have a successful program and deliver the well cost that we've underwritten. Not prepared to disclose an absolute number today, but that has impacted our cash balance as of March 17th of this year.
Okay, great. Okay. Yeah, that was my understanding. I just wanted to get clarification because it does look a little light in terms of the cash build, but you guys also disclosed the program, so that's helpful. I guess my other question is similar to the prior questioner regarding return of capital. Given the substantial build of cash, what's management's view? I guess I can't really ask about the board because they're not on this call, but what's management's view on returning that capital, if not through a share repurchase, through a dividend? It just looks like there is this huge amount of free cash flow based on guidance and based on the historic cash build, that there would be a meaningful dividend that could be payable just from this. It might not even cut into the cash balance. It could just reduce the amount of cash build.
Josh, great question. I think that, you know, the view of management and the process that we go through and how we think about this is that all options are on the table. I think that if we do not find a highly accretive strategic option within the energy space or otherwise to deploy this capital and, you know, again, to use the same verbiage, a highly accretive way for our investors that's both prudent and highly profitable. You know, I think that those options are on the table, and we would be supportive of that.
We will work with our board to discuss that and just make sure that that's the most, you know, economically accretive as well as, you know, via consensus with our board and shareholders that we can get to. Also, you know, on the other side of that, there are options for an expanded capital and drilling program as we go along. You know, we are very prudent and conservative in regards to what we wanna put out there for our investors and how we spend your money.
As we go along in the year and we drill and complete new wells and bring more wells back onto production, and we kind of see where these commodity tailwinds as well as the volatility goes, you could see us expand that drilling program if it's the most accretive and prudent thing to do.
Okay, great. Thank you.
I'd like to remind everyone, in order to ask a question, press star one on your telephone keypad. Next, we'll go to Patrick Retzer with Retzer Capital. Your line's open.
Good morning, guys. First of all, I'd like to congratulate you on doing a great job of bringing this company to the point you have, very efficiently and economically. Thank you for that. Secondly, you know, I'm a bit puzzled given the price levels for oil and gas currently as to, I believe your guidance for 2022 is for a production decline of 17% up to about flattish. Is that right?
Sure. Thank you for joining the call. It's a great question, and appreciate the comments. You know, I think what we anticipate with this program is you know, most of the production impact from the drilling of the nine wells will occur in the second half of the year. If you look at over the next two years, about half of the production volume impact is gonna occur this year and next year. You know, the long story short is that the drilling program is gonna meaningfully stem declines and grow production by about 5% January to December, and then it'll further stem from base declines next year.
Okay. You've got no doubt a pile of cash. You can reactivate wells at very low costs, yet you're doing maybe 30 wells this year versus over 100 last year, and letting your production decline in a high price environment. Can you talk about how we should think about that and perhaps what the inventory of wells is that you have that can be reactivated at some point?
Sure. Let me address the well reactivation first. We do have a meaningful inventory of previously curtailed wells that, you know, not only occurred in 2020, but further back than that. We're constantly assessing, you know, which wells that we can reactivate in the current environment. The 30 wells is really a product of, you know, our initial budget planning. Of course, we've seen a tremendous surge in pricing over the last week that does not factor that in. We continue to assess that and remain flexible to relook at things for further potential activations throughout next year and on. Again, the drilling program is gonna be pretty meaningful adding economic barrels from the back half of the year. Our goal is to, you know, flatten the increased production. If that answers your question.
Okay. All right. Thank you. Keep up the good work.
Thank you.
Thank you.
That concludes today's question and answer session. We thank you for your participation in today's call. You may now disconnect.