Good morning. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to SandRidge Energy's third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers have merged, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Scott Prestridge, Director of Finance and Investor Relations will begin your conference.
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 SVP of Operations. We would like to remind you that today's call contains forward-looking statements and discussions 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 and good morning. I'm proud to report on another strong quarter of results for the company. That the company remains well-positioned to capitalize on the recent commodity price surge, including focused high-graded drilling in the core of the Northwest STACK and the continuation of our well reactivation, which will add incremental production this year. Before expanding on this, Salah will touch on a few highlights from the first quarter.
Thank you, Grayson. Despite us having no drilling or completion activity during the past year, we were able to slightly increase 1Q21 to 1Q22 production, averaging 17.5 MBOEs per day and 17.8 MBOEs per day in the MidCon over their respective periods. The production for the quarter as well as the last year benefited from the reactivation of over 139 wells that were previously curtailed during commodity price downdrafts in 2023.
Net cash, including restricted cash, increased to approximately $156 million, which represents $4.51 per share of our common stock issued and outstanding as of March 31st, 2022. An approximate $26 million increase over the quarter is supported by production from our well reactivation program, as well as higher commodity prices and realization. A net of approximately $5 million in prepurchases of materials related to our 2022 capital program. The company has no term debt or revolving debt obligations as of March 31st, 2022, and continues to live within cash flow, funding all of its capital expenditures with organic from cash flow to cash held on the balance sheet. Over the quarter, the company generated Adjusted EBITDA of approximately $39 million. Again, despite no new drilling and completion activities.
As we have pointed out in the past, our Adjusted EBITDA is a unique metric for SandRidge due to us having no IDRs and very little PVP. Given that we have no debt and a substantial NOL position, shields our cash flow from federal income taxes. Commodity price realizations in the first quarter, after considering the impact of hedges, increased to $93.35 per barrel from $3.84 per Mcf, which represent 97% and 82% of daily average FX spot prices of WTI for oil and Henry Hub for NG. NGL realizations were $33.73 per barrel or 35% lower than WTI. Please note that current natural gas prices in the second quarter of 2022 have increasingly reached spot prices above $7 per Mcf beginning in April, subsequent to the quarter we are reporting on.
As of today, we have no open hedge positions or commodity derivatives contracts. However, as we invest capital into our drilling, completion, and well reactivation programs, we will work side by side with our board to evaluate and potentially enter into hedge positions to help protect investor capital spent. As alluded to earlier, we have maintained a large NOL position, which is estimated to be $1.6 billion as of the end of 1Q 2022. Our NOL position has and will continue to allow us to shield our cash flows from federal income taxes. Our cost discipline continued to improve during the quarter, with Adjusted G&A decreasing to $2.2 million or $1.35 per BOE from $2.5 million or $1.46 per BOE in the prior quarter.
We have also held LOE and workovers to approximately $10.9 million or 16.6 per BOE during the quarter, partially driven by an increase in workover activity associated with well reactivations and well repairs at higher commodity prices. We still 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 shareholders. During the quarter, we earned net income of approximately $35 million or $0.95 per share. Note that our earnings release posted yesterday and 10-Q that we plan to file later today provide further detail on our financial and operational performance during the quarter. Thank you, Salah. We thought it would be helpful to walk through some of the company's highlights, business strategy, and other business details.
As mentioned previously, we are pleased with the results in the first quarter and are positioned to capitalize on robust commodity prices with high rate of return drilling in the Northwest STACK. Continued well reactivations and further increases cash flows from our already producing properties in Mid-Con. We were able to keep Mid-Con production flat and commodity increases from Q1 2021 to Q1 2022, despite no new drilling activity during the period, driven in part by the continued benefit of our well reactivation of 129 wells since early 2021. We will continue to reactivate wells, targeting 30 projects over the year, averaging over 100% IRR. In addition, we will convert artificial lift engines of 35 wells to rod pumps, which will lead to optimizing lifting efficiency and lower $0.4 costs for each wellhead.
With the additional inventory economics at today's commodity prices, together with our board, we will evaluate the potential for additional capital allocation later in the year. I'm happy to report that we drilled the first of 9 wells produced this year, targeting the Meramec in the Northwest STACK play in April. Thus far, drilling is progressing as planned. I'm extremely pleased with the planning and approach that our team has taken on this front. As Tom mentioned earlier, we pre-purchased nearly $5 million of materials to include our casing for all of our drilling programs, pumping units for our capital workovers and other items. Investment made earlier this year is indeed warding off inflationary pressures of today's market and has already benefited the program. We hope to share more details on the execution of this program in the next call.
I would pause for a moment to revisit the key highlights of SandRidge. Our asset base consists of the Mid-Continent regions with primarily CDP wellheads, which do not require any routine flaring of produced gas. These wells in this Mid-Continent asset form a fully hardwired production with a long history, seasonality, improved five production profile, and double-digit reserve life. These assets include more than 1,000 mi of owned and operated SWD and electric infrastructure over our footprint. This substantial owned and integrated infrastructure provides the company both cost and strategic advantages, both in asset operating margins through reduced lifting as well as water handling and disposal costs. Combined with other advantages, this de-risks individual well profitability down to $3 WTI and $2 Henry Hub. In addition, the asset connectivity and ample capacity will avoid some unforeseen pitfalls.
Our assets continue to yield significant free cash flow, with total net cash totaling nearly $156 million, with zero debt as of quarter end. This cash generation position provides several paths to increase shareholder value, and has benefited by a relatively low unit ACRE. As we realize value to 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 strong balance sheet, robust net cash position, financial flexibility, and over $1.6 billion in NOL. Further, the company is not subject to IDRs or other significant off-balance sheet financial commitments. Currently, the company does not have any implemented hedging contracts after 31st March .
However, we could enter into hedging from time to time to support the certainty return for our capital expenditures, manage commodity risk or other fundamental drivers. Finally, it's worth highlighting that we take our ESG commitments seriously and have implemented disciplined processes around them. We remain committed to our strategy to focus on growing the cash value and generating capabilities of our business in a safe, responsible, and steady manner, while prudently allocating capital to high return, organic growth opportunities that remain watchful for potential value-accretive opportunities. This strategy has four points. One, maximize the cash value and generating capacity of our commitment on CDP SF5, extending and flattening our production profile with high rate of return workover, well reactivations and artificial lift conversions. Continuously press on operating and administrative costs.
Our intention is to ensure we convert as much EBITDA to free cash flow as possible by exercising practical stewardship and investing in projects and opportunities that have a high risk-adjusted fully burdened net return. Executing on our nine-well drilling program in the core of the Northwest STACK is economically cash-accretive. I'm committed to remain open-minded, patient, and maintain optionality for opportunistic value-accretive acquisitions. We'll focus on value-adding opportunities that bring synergies, further leveraging SD's core competence to complement and balance the company's portfolio or otherwise yield a competitive return. Further, as we generate cash, we will continue to work with our board to assess cash to maximize shareholder value and include investment opportunities in ESG opportunities, return of capital and other uses. The final table is the capital target year-to-year cost plug. Now switching back to this year's drilling program.
We've had a controlled and purposeful start to drilling, and we will continue to pursue responsible and disciplined execution this year in order to realize high rates of return with these investments. The program consists of nine wells that are optimal, highly profitable horizontal wells, and have favorable geologic and reservoir characteristics. In each area, we will be developing this year's program, continuously reviewed by Cambridge and other reputable operators. We know this area well. Approximately 50% of the program will be infill development, and the remaining 40% being riskier well development or co-development to find a new offset, productive and profitable wells. Of note is that we are benefiting from having a long-proven history in Mid-Continent. Previous development programs, we can leverage a very tight cost structure to add incremental barrels to our production in a very capital-efficient way.
Gross MVP cost is estimated to be $4.75 million for single laterals and $7 million for a twin lateral. This reflects leasing, drilling, and other material equipment and services already secured at reasonable cost and its current market estimates. We will continue to lean toward indirect positioning for remaining items for the program to further offset inflationary pressures. However, inflation will be a central focus this year in comparing our secured costs to future drilling decisions. Our drillable inventory is economic at today's commodity prices. Program results, commodity price stabilization or further flattening, well costs that includes committed inflation controls, future well spacing, and other factors will guide future drilling decisions and inventory considerations. In addition to well reactivations, we will continuously assess each factor and along with our board, evaluate the potential for additional future capital options as they present themselves.
Put simply, we will continue to prove up the reserves first and then go from there. Getting to expenses, we are able to lower Adjusted EBITDA quarter-over-quarter from $8.5 million or $1.46 per BOE in the prior quarter to $6.3 million or $1.35 per BOE in the third quarter. Benefiting from our core values to remain cost disciplined as well as prior initiatives that's tailored our organization to be fit and focused. A continued balance of weighting of field versus corporate personnel to reflect where we actually create value and outsource necessary, but more proprietary and less core functions such as operations, accounting, land administration, IT, tax, and HR. Despite the spending activity and producing well count, our total personnel remain at roughly 100 people.
Although corporate personnel remain at 16 people, 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, as well as the ability to flex through a different competency of specialized areas to do more. On the continued progress on operating costs, we anticipate expenses, specifically working group expenses, to remain near this quarter's level as we reactivate and repair more wells this year. The increase in commodity price has improved the economics of the wells that may have been or would have remained shut in otherwise. The good news is this will translate to increased production. However, while profitable, the remaining costs of well reactivations have relatively higher operating costs, which will increase power, water, chemical, and other expenses.
In addition to the cost of an increasing producing well count, inflation will continue to be a theme throughout the year. We will continue to combat inflationary pressures as well as through rigorous bidding processes, securing material, equipment, and services over an appropriate tenure to offset market increases, as well as continuing to leverage our significant infrastructure, operations center, and efficiency advantages. In summary, the company has $156 million in net cash and cash equivalents at quarter end, which represent $4.51 per share of our common stock, PVP outstanding. Modest production increases from Q1 2021- Q1 2022. Serious and unique current conditions. Expanded 2022 capital program of high return projects to further enhance production and arrest decline. They include 9 new wells, high gradings toward the Northwest STACK, and continuation of our well reactivation program.
Low overhead and top-tier G&A of $1.35 per BOE. 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. $1.6 billion in NOLs that will build free cash flow from federal income tax. Fully owned and operated SWDs and electric compressors that comprise costs and strategic advantages require little to no future capital to maintain. This concludes my prepared remarks. Thank you for your time. I'll now open the call to questions.
As a reminder, if you would like to ask a question over the phone, please press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Josh Young from Bison Interests. Please go ahead. Your line is open.
Great. Thank you. Thanks, Grayson and Salah. Good quarter. Can you talk a little bit about. Well, I guess I have a few quick questions. One, you guys historically had disclosed your net cash position as of the day before the press release, and I noticed that that was missing, and I guess I'm curious about that. I guess that's probably a quick answer. Your LOE was up, but also your realized gas price was up. Was there a connection there? If not, could you guys address the combination of, kind of the change in LOE, kind of where that came from and then, kind of why your realized gas price versus the hub price improved?
Then finally, I guess this is probably people's biggest question, is just, what are you guys doing with the cash and how do you avoid losing a bunch of money drilling wells like every other operator has in the areas that you guys are active in? Kind of, I mean, over a multi-year period of since you've started drilling wells of the types that you're planning or actively drilling in that area.
Thanks, Josh. This is Salah. I'll go ahead and take the cash disclosure question. We in past quarters did report cash on hand. I just want to be clear that that was not true net cash. That was strictly, you know, what was available in the bank. It was an unreconciled balance that didn't take out things like outstanding checks and things like that. We did not report that this quarter because we are currently spending money on our capital program. Unlike in prior years where our capital program was very small and had minimum impacts on our free cash flow, capital being spent on our drilling and work over program this year is a lot more meaningful.
You know, we wanna make sure that we give investors the full picture through the financials quarterly and give them context. Unlike past years and past quarters, there isn't just sort of a cash build every single quarter that's sequential and routine. Our capital program will dip into some of those cash balances as we go, so we didn't feel like it was as meaningful of a disclosure this quarter. I'll go ahead and let Grayson take the other questions.
Yeah. Morning, Josh. Thanks for calling in and great questions. I'll tackle LOE and differentials. First, there was no connection between, you know, LOE and differentials, very different drivers between the two. First, on the differentials, we are happy to see that improvement in the decrease in the relative differentials on a percentage basis. A lot of that is driven by two things. A, as the index prices move up, the fixed components of those fees are reduced and diluted. The second is just, you know, marking when the molecules are traded on what day. Some positive benefits there and, you know, exceeded our guidance and I think we have some tailwinds behind us in general with the WTI and Henry Hub.
On LOE, there's really three drivers there. The first, you know, we have more producing wells today that add to, you know, power, water, chemical and other similar type costs. The second is continued work over activity as we reactivate and repair more wells. You know, as commodity price increases, that helps us bring more wells online. I would anticipate that work over activity to remain kind of at this quarter's level going into next quarter. The third is inflation. I think, you know, all E&Ps are having to work through that environment in addition to other markets. We have a proactive approach.
We're bidding out, you know, all of the services, equipment and materials to gain favorable prices in the current market and appropriate tenure. We'll continue to lean into that throughout the year. Then, third, you know, potential use of cash. This is something that's important to us and very much priority. We're actively discussing with our board to assess, you know, best use of those cash assets. I do think we don't wanna repeat the sins of others from the past, so we wanna make sure that that's appropriately put to use and a sound investment. We're definitely conservative in not wanting to overrun our ceiling, and that's why we're having a controlled and purposeful start to our drilling program.
We have had a meaningful increase in commodity prices over the last quarter. In fact, you know, over the last weeks and days. As we see that, we continue to assess, you know, the potential for increased capital allocation, but wanna again, do that in a prudent manner.
In addition to that, Josh, to kind of round out Grayson's points on our cash reserves, we do wanna make it clear to our investors and our shareholder base that, you know, we will be extremely prudent in the current commodity price environment for any material cash M&A. So use of this cash will need to be, you know, very, very value accretive and secure, you know, for us to use it on any sort of cash M&A transaction or combination.
Thanks, Josh.
Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from Jonathan Frates from Fulcrum Health, a private investor. Please go ahead, your line is open.
Hi, good morning, Grayson and Salah Gamoudi, and well done on the quarter. I have three questions for you today, if I may. First you said, like, you were pleased with the results. Like, I mean, it's more than pleased. Like, I think one of your peer, like the Callon CEO today said, he thinks like Callon is one of the most compelling investment opportunity in the energy sector on footage. I would agree, but I find like SandRidge is even a superior investment. Of course, I mean, the quick math is incredible. Like, you disclosed like $166 million or thereabouts of cash. Like it's an increase of $26 million since Q4. and you pay like $5 million of material. Just using the forward curve, your very low cost.
I'm not talking about LOE, it's just like total cost. Like I think it's like $10.82 per barrel. Like cash should mathematically go up in Q2, in Q3, in Q4. I mean, it could be at $7 a share at the end of the year. That's incredible. On top of that, you have then some of the 9 new wells who will be coming and contributing at the end of the year based on the deck who take eight. Like, I mean, we're literally on uncharted territory. Like it will be like over 100% return, so that could be even more cash coming. Repeating what you said, Salah, like the $1.7 billion NOL that shield you from taxes, no tax meaning like no interest and no debt and motivation.
I mean, $20 a share is really undervalued despite like the 350% return over the last 12 months. My question is, would you feel comfortable, like paraphrasing Callon's CEO saying like, SandRidge is one of the most compelling investment opportunity in the energy sector? I guess I will keep going is if so, like why would you not buy back some shares?
Yes. Jon, thank you for the kind words and for joining this call and the challenging question. You know, I think for us to really focus in on the blocking and tackling, let's make sure that we keep costs as low as possible, convert as much EBITDA to free cash flow as we can and make prudent investment decisions. I think this is shown evident over the last two quarters. We've benefited from the commodity price of this quarter and certainly the strip looks positive going forward. We really focus on what we can control in the business and making good decisions. The other inferences I'll leave to you, Josh.
I do think some of this hard work is showing up in our low G&A. We've been able to, you know, again, blocking and tackling, keeping production up and to the right, you know. We're able through that well reactivation program to actually have a slight increase in Q1 of this year relative to Q1 of last year, which is really meaningful. If you look at this year, we look at these declines and we anticipate, you know, high teens and with reactivations in the low single digits. You add on Northwest STACK drilling, you know, with results coming online in the back half of the year, that can meaningfully add to that and even begin some production growth in that relative period.
We're really, again, focused on what we can control.
In addition to Jon , in relationship to your question about share repurchases and the repurchase program. I'd just like to remind our shareholders that that share repurchase program is a 10b-18, so if the company has any material inside information or any sort of restricted trading period, we can't exercise that. There are times and places where, perhaps, you know, we feel it might be opportunistic to buy back shares. Again, if we're in any sort of strategic discussion or have any inside information, that can be fairly limiting on what we can do from a securities law perspective.
Yeah. Of course. Thanks. I think you said it, I see earlier that these nine wells, the high-grade program across the Northwest STACK. Do you know, like how many other, additional wells will be there for 2023 or 2024 should you decide to do more?
Yeah, again, as I mentioned earlier, we can continue to assess the potential for additional capital allocation with our board. The further increase in WTI has certainly helped. I think, you know, before we get into inventory, we want to resume drilling. Get a couple of strong wells behind us, and then you'll see us, you know, come out with additional commentary on inventory. There's certainly, you know, it's a well economic activity, right?
How many wells do you need to slide in 2023? To get an idea or an indication.
Yeah, I think the nine-well program we actually plan to have a production increase from January to December. Again, because of the timing, not all of that production wedge is taking full effect over the 2022 period if you look at the full fiscal year. It will materially impact annual decline this year with additional you know production output going into next year.
Well done. Just last for me on carbon capture. Last year, I think in one of the decks you had, like, you disclosed, like, 1,000 mi of pipeline right of way, 51 disposal wells. I think, like, water disposal was divided by five over the last few years for SandRidge. In order of magnitude at least. I know there is no value in the carbon capture play today, and you said it in the press release. It's only exploring the technical and commercial possibility. Would these assets be used for it?
Yes, Jonathan Frates, this is Salah Gamoudi. Absolutely, I mean, we are exploring using our incumbent asset base. Everything that you described is accurate. You know, we have taken steps along this path and have gotten some initial reads with our partnership with the University of Oklahoma that there is substantial potential for carbon sequestration on our asset base. However, there's a lot of things to be done in regards to technical feasibility, commercial viability, you know, finding an emitter. You know, all of those things kind of need to come into place before we could ascribe any value to it. We have taken steps and continue to move the football down the field, so to speak, on those efforts.
Thank you. Thank you for taking my question.
It's appropriate and for us to do the due diligence here, just because we have, you know, these material assets in Northwest Oklahoma that are underutilized today in some places only using a portion of the total capacity, and how can we further leverage that? I will caveat that there is no capital currently being allocated to that, and we need to prove out the commercial viability before we do. As soon as we have, you know, meaningful news that could be the case, we'll come out and disclose that. Right now, I would not ascribe any value to it.
Thank you. We'll continue the hard work. Congratulations again. Bye-bye.
Thank you.
We have no further questions in queue. This will conclude today's conference call. Thank you for your participation. You may now disconnect.