Executive Summary / Key Takeaways

• SandRidge Energy is executing a strategic transformation, pivoting from its gas-weighted legacy assets to high-return, oil-weighted development in the Cherokee Shale Play, driving significant production and revenue growth.
• The company maintains an exceptionally strong financial position with over $100 million in cash, no debt, and a substantial $1.6 billion federal Net Operating Loss (NOL) shield, enabling robust capital returns and strategic flexibility.
• Proprietary infrastructure, including over 1,000 miles each of owned and operated saltwater disposal (SWD) and electrical systems, provides a significant cost advantage, derisking legacy well profitability down to $40 WTI and $2 Henry Hub.
• SD's 2025 capital program, focused on drilling 8 and completing 6 Cherokee wells with breakevens at $35 WTI, is projected to increase oil production meaningfully above 2025 exit rates into 2026, with a targeted reinvestment rate of 55-80% in 2025 and 50%+ in 2026.
• Despite a competitive Mid-Continent landscape, SandRidge's disciplined capital allocation, low general and administrative (G&A) burden, and versatile asset base position it to capitalize on commodity cycles and deliver consistent shareholder value through dividends and opportunistic share repurchases.

The Resilient Rebirth: SandRidge's Strategic Evolution in the Mid-Continent

SandRidge Energy, Inc. (NYSE:SD), established in 2006, has forged a path of resilience and strategic evolution within the dynamic U.S. Mid-Continent oil and natural gas landscape. Following its emergence from Chapter 11 bankruptcy in October 2016, the company embarked on a disciplined journey to rebuild and optimize its asset base, culminating in a pivotal strategic shift towards high-return, oil-weighted development in the Cherokee Shale Play. This transformation positions SandRidge as a focused exploration and production (E&P) entity, adept at leveraging its unique operational infrastructure and robust financial health to drive shareholder value.

The broader energy sector is currently experiencing significant shifts, including volatile commodity prices and emerging demand drivers such as the increasing energy needs of data centers and liquefied natural gas (LNG) exports, which particularly benefit natural gas producers. SandRidge's overarching strategy is designed to capitalize on these dynamics through five key pillars: maximizing the value of its incumbent Mid-Continent PDP (Proved Developed Producing) assets, exercising capital stewardship for high-return projects, maintaining optionality for value-accretive merger and acquisition (M&A) opportunities, prioritizing shareholder returns, and upholding its environmental, social, and governance (ESG) responsibilities.

Technological Edge and Operational Efficiency: A Foundational Moat

A cornerstone of SandRidge's competitive advantage lies in its extensive, owned, and operated infrastructure. The company boasts over 1,000 miles each of saltwater disposal (SWD) and electrical infrastructure across its operational footprint. This proprietary network is not merely an asset but a critical technological differentiator that translates directly into tangible financial benefits.

This integrated infrastructure significantly derisks the profitability of a majority of SandRidge's legacy producing wells, making them viable down to approximately $40 per barrel (WTI) for oil and $2 per MMBtu for natural gas. The company's ongoing production optimization program, which includes artificial lift conversions, further leverages this electrical infrastructure to reduce electrical demand and decrease future utility costs. For investors, this translates into a substantial cost moat, enhanced operational control, and a lean general and administrative (G&A) burden, which consistently compares favorably to peers. In the third quarter of 2025, adjusted G&A stood at a mere $1.23 per Boe.

Beyond its legacy assets, SandRidge is applying industry best practices in its Cherokee development program, including pad drilling and zipper/simul-frac techniques. These advanced drilling and completion methods are expected to further enhance cost efficiencies and boost productivity, underpinning the robust returns anticipated from the new oil-weighted wells.

The Cherokee Growth Engine: Fueling Oil Diversification

The strategic pivot to the Cherokee Shale Play represents a significant growth catalyst for SandRidge. Following an initial acquisition in the third quarter of 2024, the company made a second acquisition for $5.7 million in the fourth quarter of 2024, which increased its ownership and control over producing and undeveloped properties in the play. This move was critical for optimizing its undeveloped position around the most prolific areas of the Cherokee.

The Cherokee formation, a highly productive hydrocarbon target in the Mid-Continent, is characterized by self-sourcing shales with interbedded high-porosity sands. Productivity in the play has shown a meaningful increase with depth, particularly in the southern core where SandRidge's development is focused. The company's one-rig drilling program in the Cherokee has already yielded impressive results. The first four operated wells brought online achieved an average peak 30-day production rate of approximately 2,000 Boe per day, with a significant 43% oil component. The initial well alone produced approximately 275,000 Boe in its first 170 days, demonstrating strong recovery trends. These Cherokee wells are highly economic, boasting breakeven prices as low as $35 WTI. This high-return organic growth strategy is not only diversifying SandRidge's production profile towards a more oil-weighted mix but also establishing a meaningful multi-year development runway across its nearly 24,000 net acres in the play.

Financial Strength and Shareholder-Focused Returns

SandRidge's financial performance in 2025 underscores the success of its strategic initiatives. For the third quarter ended September 30, 2025, the company reported total revenues of $39.82 million, a substantial 32.5% increase year-over-year. This was driven by a 12% increase in total production to 19 MBoe per day and a notable 49% surge in oil production compared to the same period in 2024. Adjusted EBITDA for Q3 2025 climbed 54% year-over-year to $27.3 million, reflecting strong operational leverage and improved commodity price realizations, particularly in natural gas, which saw a 95.8% revenue increase. Net income for the quarter was $15.95 million. Year-to-date through September 30, 2025, total revenues reached $116.96 million, a 35.5% increase from the prior year, with net income of $48.56 million.

The company's balance sheet remains a fortress. As of September 30, 2025, SandRidge held $102.6 million in cash and cash equivalents, including restricted cash, equating to approximately $2.80 per common share outstanding. Crucially, the company operates with no outstanding term or revolving debt obligations, providing immense financial flexibility. Furthermore, SandRidge possesses a substantial federal Net Operating Loss (NOL) carryforward of approximately $1.6 billion, which effectively shields its cash flows from federal income taxes, significantly enhancing its after-tax profitability and cash generation.

This robust financial position directly supports a compelling capital return program. Since the beginning of 2023, SandRidge has returned $4.48 per share to stockholders through dividends, including special distributions. The Board declared a $0.12 per share dividend payable on November 28, 2025, with an option for stockholders to reinvest through a newly established Dividend Reinvestment Plan. The company also actively engages in opportunistic share repurchases, having bought back 0.6 million shares for $6.4 million year-to-date through September 30, 2025, at an average price of $10.72 per share, with $68.3 million remaining under its current authorization. The company generated free cash flow before acquisitions of $6 million in Q3 2025 and $29 million year-to-date, demonstrating its ability to fund its capital program and shareholder returns entirely from operating cash flows.

Competitive Landscape and Strategic Positioning

SandRidge operates in a competitive Mid-Continent E&P market alongside larger, more diversified players such as Devon Energy (DVN), Continental Resources (CLR), EOG Resources (EOG), and Occidental Petroleum (OXY). While these competitors often boast greater scale and broader geographic footprints, SandRidge carves out a specialized niche through its deep regional expertise and highly efficient, cost-focused operations.

SandRidge's adjusted G&A of $1.23 per Boe in Q3 2025 compares favorably to its peers, a testament to its lean organizational structure and the operational efficiencies gained from its integrated infrastructure. This cost advantage, coupled with its control over development in the high-return Cherokee play, allows SandRidge to compete effectively by focusing on project economics and capital discipline. While larger rivals may have an edge in R&D investment and technological breadth, SandRidge's targeted application of techniques like pad drilling and simul-frac, combined with its existing infrastructure, provides a strong operational moat in its core areas. The company actively evaluates M&A opportunities, seeking synergies that leverage its core competencies and substantial NOLs, indicating a proactive approach to consolidating its position and expanding its high-graded inventory.

Outlook, Guidance, and Risk Considerations

SandRidge's outlook is anchored by its continued development in the Cherokee Shale Play. The company plans to drill 8 operated Cherokee wells and complete 6 in 2025, with the remaining 2 completions carrying over into 2026. Total capital expenditures for 2025 are projected to be between $66 million and $85 million, allocated primarily to drilling and completions ($47 million to $63 million) and production optimization, workovers, and selective leasing ($19 million to $22 million).

This capital program is expected to drive significant production growth, with exit rates projected over 19 MBoe per day by year-end 2025. More importantly, oil production rates are estimated to increase around another 30% relative to Q2 2025 levels, with 2026 oil production targeted to grow by approximately 30% at the midpoint of guidance, and total BOE production by just under 10%. The company aims for a reinvestment rate between 55% and 80% in 2025, targeting 50% or better in 2026, assuming constructive commodity prices and sound execution. For its legacy, gas-weighted assets, further development or reactivations would require sustained commodity prices firmly over $80 WTI and $4 Henry Hub.

Despite this positive outlook, SandRidge acknowledges inherent risks, primarily the volatility of oil, natural gas, and NGL prices. While the company utilizes derivative contracts to hedge a portion of its anticipated production (approximately 35% of Q4 2025 production, including 55% of natural gas and 30% of oil), these hedges can limit upside participation. Other risks include potential impacts from an IRC Section 382 ownership change on its valuable NOLs and the influence of tariffs on well costs. However, SandRidge's strong balance sheet and lack of debt provide significant flexibility to moderate or curtail its capital program if commodity price headwinds persist, ensuring capital stewardship and protection of shareholder returns.

Conclusion

SandRidge Energy stands as a compelling investment proposition, having successfully transformed into a financially robust and strategically focused E&P company. Its disciplined pivot to the high-return, oil-weighted Cherokee Shale Play, coupled with the inherent cost advantages of its extensive Mid-Continent infrastructure, forms the bedrock of its investment thesis. The company's commitment to shareholder returns, evidenced by consistent dividends and opportunistic share repurchases, is underpinned by a pristine balance sheet, significant cash reserves, and a substantial federal NOL shield.

As SandRidge continues to execute its Cherokee development plan and prudently manage its diversified asset base, its ability to generate free cash flow and grow oil production meaningfully positions it for sustained value creation. The combination of operational efficiency, strategic flexibility, and a shareholder-friendly capital allocation framework makes SandRidge Energy a resilient player poised to capitalize on evolving commodity cycles and deliver attractive returns in the years ahead.