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Item 2 — Management's Discussion and Analysis
Sandridge Energy, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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Introduction
The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report, as well as our audited consolidated financial statements and the accompanying notes included in the 2025 Form 10-K. Our discussion and analysis includes the following subjects:
•Overview;
•Consolidated Results of Operations;
•Liquidity and Capital Resources; and
•Critical Accounting Policies and Estimates.
The financial information with respect to the three and six months ended June 30, 2026 and 2025, discussed below, is unaudited. In the opinion of management, this information contains all adjustments, which consist only of normal recurring adjustments unless otherwise disclosed, necessary to state fairly the accompanying unaudited condensed consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year.
Overview
We are an independent oil and natural gas company with a principal focus on acquisition, development and production activities in the U.S. Mid-Continent region (“Mid-Con”).
The charts below show production by product and percent revenues for the three and six months ended June 30, 2026 and 2025:
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Total MBoe production for the three months ended June 30, 2026 was comprised of approximately 18.3% oil, 49.6% natural gas and 32.1% NGL compared to 16.7% oil, 49.4% natural gas and 33.9% NGL in the second quarter of 2025. Total MBoe production for the six months ended June 30, 2026 was comprised of approximately 19.6% oil, 49.7% natural gas and 30.7% NGL compared to 16.7% oil, 49.2% natural gas and 34.1% NGL in the first half of 2025.
Recent Events
•On June 26, 2026, the Company entered into a purchase and sale agreement for the acquisition of certain producing assets and leasehold interests in the Cherokee Play of the Mid-Continent region for $65.0 million, subject to customary purchase price adjustments, and three contingent earn-out payments of $2.0 million each, based on exceeding the average daily spot price for West Texas Intermediate crude oil at certain price thresholds beginning July 1, 2026 and ending December 31, 2027. The Company expects to fund the acquisition with cash on hand. The acquisition is expected to close during the third quarter of 2026 and will be effective May 1, 2026.
Outlook
We remain committed to growing the value of our asset base in a safe, responsible and efficient manner, while prudently allocating capital to high-return, growth projects. Currently, these projects include: (1) one-rig development in the Cherokee Shale Play (2) evaluation of accretive merger and acquisition opportunities, with consideration of our strong balance sheet and commitment to our capital return program (3) production optimization program through artificial lift conversions to more efficient and cost-effective systems and (4) a leasing program that will bolster future development and extend development in our Cherokee assets. We are developing our term acreage in the Cherokee Play, and our total leasehold position, inclusive of the Cherokee, NW Stack and legacy assets, is approximately 95% held by production, which cost-effectively maintains our development option over a reasonable tenor. We will continue to monitor forward-looking commodity prices, project results, costs, impacts of tariffs and other factors that could influence returns and cash flows, and will adjust our program accordingly, to include curtailment of capital activity and wells, if needed, or conversely, well reactivations in higher commodity price environments. These and other factors, including reasonable reinvestment rates, maintaining our cash flows and prioritizing our regular-way dividend, will continue to shape our development decisions for the remainder of the year and beyond.
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Consolidated Results of Operations
Our consolidated revenues and cash flows are generated from the production and sale of oil, natural gas and NGL. Our revenues, profitability and future growth depend substantially on prevailing prices received for our production, the quantity of oil, natural gas and NGL we produce, and our ability to find and economically develop and produce our reserves. Prices for oil, natural gas and NGL fluctuate widely and are difficult to predict. To provide information on the general trend in pricing, the average New York Mercantile Exchange ("NYMEX") prices for oil and natural gas are shown in the tables below:
Three-month periods ended
June 30, 2026 March 31, 2026 December 31, 2025 September 30, 2025 June 30, 2025
NYMEX Oil (per Bbl) $ 95.65 $ 72.74 $ 59.62 $ 65.78 $ 64.57
NYMEX Natural gas (per Mcf) $ 3.06 $ 4.89 $ 3.87 $ 3.15 $ 3.31
In order to reduce our exposure to price fluctuations, from time to time we may enter into commodity derivative contracts for a portion of our anticipated future oil, natural gas and NGL production as discussed in “Item 3. Quantitative and Qualitative Disclosures About Market Risk.” During periods where the strike prices for our commodity derivative contracts are below market prices at the time of settlement, we may not fully benefit from increases in the market price of oil, natural gas and NGL. Conversely, during periods of declining oil, natural gas and NGL market prices, our commodity derivative contracts may partially offset declining revenues and cash flows to the extent strike prices for our contracts are above market prices at the time of settlement. See “Note 3 — Derivatives” to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report for additional information regarding our commodity derivatives.
Revenues
Consolidated revenues are presented in the table below (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
Oil $ 31,327 $ 16,956 $ 14,371 $ 56,398 $ 35,836 $ 20,562
Natural gas 7,278 8,748 (1,470) 22,899 21,421 1,478
NGL 12,512 8,827 3,685 21,597 19,878 1,719
Total revenues $ 51,117 $ 34,531 $ 16,586 $ 100,894 $ 77,135 $ 23,759
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Oil, Natural Gas and NGL Production and Pricing
Our production and pricing information is shown in the table below:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
Production data
Oil (MBbls) 328 270 58 681 540 141
Natural gas (MMcf) 5,349 4,801 548 10,337 9,520 817
NGL (MBbls) 577 548 29 1,064 1,099 (35)
Total volumes (MBoe) 1,797 1,619 178 3,468 3,226 242
Average daily total volumes (MBoe/d) 19.7 17.8 1.9 19.2 17.8 1.4
Average prices—as reported(1)
Oil (per Bbl) $ 95.35 $ 62.80 $ 32.55 $ 82.80 $ 66.34 $ 16.46
Natural gas (per Mcf) $ 1.36 $ 1.82 $ (0.46) $ 2.22 $ 2.25 $ (0.03)
NGL (per Bbl) $ 21.68 $ 16.10 $ 5.58 $ 20.29 $ 18.09 $ 2.20
Total (per Boe) $ 28.45 $ 21.33 $ 7.12 $ 29.09 $ 23.91 $ 5.18
Average prices—including impact of derivative contract settlements
Oil (per Bbl) $ 86.38 $ 64.13 $ 22.25 $ 77.38 $ 67.02 $ 10.36
Natural gas (per Mcf) $ 1.75 $ 2.05 $ (0.30) $ 2.50 $ 2.36 $ 0.14
NGL (per Bbl) $ 21.72 $ 16.18 $ 5.54 $ 20.31 $ 17.97 $ 2.34
Total (per Boe) $ 27.97 $ 22.25 $ 5.72 $ 28.88 $ 24.32 $ 4.56
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(1) Prices represent actual average sales prices for the periods presented and do not include effects of derivative settlements.
Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold are shown in the table below (in thousands):
Three Months Ended June 30, 2026 Six Months Ended June 30, 2026
2025 oil, natural gas and NGL revenues $ 34,531 $ 77,135
Change due to production volumes 6,948 12,779
Change due to average prices 9,638 10,980
2026 oil, natural gas and NGL revenues $ 51,117 $ 100,894
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Operating Expenses
Operating expenses consisted of the following (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
Lease operating expenses $ 10,302 $ 6,556 $ 3,746 $ 21,089 $ 17,473 $ 3,616
Production, ad valorem, and other taxes 3,210 2,158 1,052 6,231 5,257 974
Depreciation and depletion—oil and natural gas 10,494 8,290 2,204 20,314 16,706 3,608
Depreciation and amortization—other 1,624 1,612 12 3,247 3,215 32
Total operating expenses $ 25,630 $ 18,616 $ 7,014 $ 50,881 $ 42,651 $ 8,230
Lease operating expenses ($/Boe) $ 5.73 $ 4.05 $ 1.68 $ 6.08 $ 5.42 $ 0.66
Production, ad valorem, and other taxes ($/Boe) $ 1.79 $ 1.33 $ 0.46 $ 1.80 $ 1.63 $ 0.17
Depreciation and depletion—oil and natural gas ($/Boe) $ 5.84 $ 5.12 $ 0.72 $ 5.86 $ 5.18 $ 0.68
Production, ad valorem, and other taxes (% of oil, natural gas and NGL revenue) 6.3 % 6.2 % 0.1 % 6.2 % 6.8 % (0.6) %
Lease operating expenses for the three and six months ended June 30, 2026 increased in total and per BOE compared to the three and six months ended June 30, 2025 primarily due to a $2.1 million one-time non-cash adjustment during the three and six months ended June 30, 2025 of an operating accrual dating back to the Company’s emergence from bankruptcy (see Note 1—Basis of Presentation to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report for further information).
Production, ad valorem, and other taxes for the three and six months ended June 30, 2026 increased in total compared with the three and six months ended June 30, 2025 primarily due to higher average commodity prices, sales volumes, and related revenues. Production, ad valorem, and other taxes per BOE increased for the three and six months ended June 30, 2026 compared with the three and six months ended June 30, 2025 primarily due to higher average commodity prices.
The increase in depreciation and depletion for oil and natural gas properties for the three and six months ended June 30, 2026 versus the same period in 2025 was primarily the result of an increase in sales volumes and our depletion rate.
Impairment
A ceiling limitation calculation is performed at the end of each quarter. If the full cost pool balance exceeds the ceiling limitation, an impairment of the full cost pool is required. Calculation of the full cost ceiling test is based on, among other factors, trailing twelve-month first-day-of-the-month index prices (“SEC prices”) as adjusted for price differentials and other contractual arrangements. The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at June 30, 2026 were $71.90 per barrel of oil and $3.64 per MMBtu of natural gas, before price differential adjustments.
The ceiling limitation was not exceeded; therefore, no full cost ceiling limitation impairments were recorded during the three or six months ended June 30, 2026 or 2025. Full cost pool ceiling limitation impairments have no impact to our cash flow or liquidity.
Based on the SEC prices over the trailing ten months ended July 31, 2026, as well as two months of NYMEX strip pricing for August and September of 2026 as of July 30, 2026, we estimate the SEC prices utilized in the September 30, 2026 full cost ceiling test may be $75.25 per barrel of oil and $3.62 per MMBtu of natural gas (the "estimated third quarter prices"). Applying these estimated third quarter prices, and holding all other inputs constant to those used in the calculation of our June 30, 2026 ceiling test, we expect that no full cost ceiling limitation impairment is indicated for the third quarter of 2026.
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Any actual full cost ceiling limitation impairment recognized in future quarters may fluctuate significantly from projected amounts based on the outcome of numerous other factors such as declines in the actual trailing twelve-month SEC prices, lower NGL pricing, changes in estimated future development costs and operating expenses, and other adjustments to our levels of proved reserves.
Other Operating Expenses
Other operating expenses consisted of the following (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
General and administrative $ 3,769 $ 3,028 $ 741 $ 6,757 $ 6,881 $ (124)
Restructuring expenses (14) 412 (426) 132 452 (320)
(Gain) loss on derivative contracts (4,222) (6,059) 1,837 (696) (3,572) 2,876
Other operating (income) expense (3) — (3) 7 — 7
Total other operating expenses $ (470) $ (2,619) $ 2,149 $ 6,200 $ 3,761 $ 2,439
General and administrative expenses increased for the three months ended June 30, 2026 versus the same period in 2025 primarily as a result of increased professional fees and other costs. General and administrative expenses for the six months ended June 30, 2026 were consistent with the same period in 2025.
The following table summarizes derivative activity (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(Gain) loss on derivative contracts $ (4,222) $ (6,059) $ (696) $ (3,572)
Settlement gains (losses) on derivative contracts $ (847) $ 1,478 $ (717) $ 1,319
Our derivative contracts were not designated as accounting hedges and, as a result, changes in their fair values were recorded each quarter as a component of operating expenses. Internally, management has historically viewed the settlement of commodity derivative contracts at contractual maturity as adjustments to the price received for oil, natural gas and NGL production to determine “effective prices.” In general, cash is received on settlement of contracts due to lower oil, natural gas and NGL prices at the time of settlement, compared to the contract price for our commodity derivative contracts; and, cash is paid on settlement of contracts due to higher oil, natural gas and NGL prices at the time of settlement, compared to the contract price for our commodity derivative contracts. See further discussion of derivative contracts in “Item 3. Quantitative and Qualitative Disclosures about Market Risk” included in Part I of this Quarterly Report.
Other Income (Expense)
Our other income (expense) is presented in the table below (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Other income (expense)
Interest income (expense), net $ 735 $ 1,027 $ 1,549 $ 1,887
Other income (expense), net 1 (3) 1 (3)
Total other income $ 736 $ 1,024 $ 1,550 $ 1,884
Interest income, net during the three and six month periods ended June 30, 2026 and 2025 is primarily comprised of interest income on cash deposits.
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Liquidity and Capital Resources
As of June 30, 2026, our cash and cash equivalents, including restricted cash, was $114.7 million. We expect our cash on hand and cash from operations to be adequate to meet our short and long-term liquidity needs. We had no outstanding term or revolving debt obligations as of June 30, 2026.
Working Capital and Sources and Uses of Cash
Our principal sources of liquidity for the next year include cash flows from operations and cash on hand.
Decreases in accounts payable and accrued expenses are the primary driver of the increase in working capital to $93.9 million at June 30, 2026 compared to $79.8 million at December 31, 2025.
Cash Flows
Our cash flows from operations are substantially dependent on current and future prices for oil, natural gas and NGL, which historically have been, and may continue to be, volatile. Cash flows from operations are also affected by timing of cash receipts and disbursements and changes in other working capital assets and liabilities.
Our cash flows are presented in the following table and discussed below (in thousands):
Six Months Ended June 30,
2026 2025
Cash flows provided by operating activities $ 62,195 $ 43,181
Cash flows used in investing activities (44,344) (23,745)
Cash flows used in financing activities (15,504) (14,748)
Net increase (decrease) in cash and cash equivalents and restricted cash $ 2,347 $ 4,688
Cash Flows from Operating Activities
The increase in cash flows from operations for the six months ended June 30, 2026 compared to the same period in 2025 is primarily due to an increase in revenues from higher average oil and NGL prices and higher sales volumes from our development program in the Cherokee Play of the Mid-Con.
Cash Flows from Investing Activities
Capital expenditures and acquisitions of oil and gas properties are summarized below (in thousands):
Six Months Ended June 30,
2026 2025
Capital Expenditures
Drilling, completion, and capital workovers $ 33,672 $ 24,533
Leasehold and geophysical 2,585 3,151
Capital expenditures (on an accrual basis) 36,257 27,684
Acquisition of oil and natural gas assets 5,132 4,427
Capital expenditures, including acquisitions 41,389 32,111
Changes in accounts payable and accrued expenses 3,802 (5,670)
Inventory material transfers to oil and natural gas properties — (3)
Total cash paid for capital expenditures $ 45,191 $ 26,438
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Cash Flows from Financing Activities
Cash used in financing activities for the six months ended June 30, 2026 consisted of $14.5 million in cash dividends, $0.5 million of cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise, and finance lease payments of $0.4 million. Since 2023, the Company has paid cash dividends totaling $184.2 million and issued 0.2 million shares in lieu of cash dividends under the Dividend Reinvestment Program, which represents $3.70 per share in special dividends and $1.35 per share in quarterly dividends for a total of $5.05 per share in total dividends. Cash used in financing activities for the six months ended June 30, 2025 consisted primarily of $8.2 million in cash dividends, $5.9 million in repurchases of common stock, finance lease payments of $0.4 million, and $0.2 million of cash used for tax withholdings paid in exchange for shares withheld on employee vested stock awards that were settled by net exercise. Net exercises of stock awards allows the holder of a stock award to tender back to us a number of shares at fair value upon the vesting of such stock award that equals the employee payroll tax obligation due. We then remit a cash payment to the relevant taxing authority on behalf of the employee for their payroll tax obligations resulting from the vesting of their stock award.
Contractual Obligations and Off-Balance Sheet Arrangements
At June 30, 2026, our contractual obligations included asset retirement obligations, leases and other individually insignificant obligations. Additionally, we have certain financial instruments representing potential commitments that were incurred in the normal course of business to support our operations, including surety bonds. The underlying liabilities insured by these instruments are reflected in our balance sheets, where applicable. Therefore, no additional liability is reflected for the surety bonds or other instruments.
There were no other significant changes in total contractual obligations and off-balance sheet arrangements from those reported in the 2025 Form 10-K.
Critical Accounting Policies and Estimates
For a description of our critical accounting policies and estimates, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2025 Form 10-K. For a discussion of recent accounting pronouncements, newly adopted and recent accounting pronouncements not yet adopted, see “Note 1—Basis of Presentation” to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report. We did not have any material changes in critical accounting policies, estimates, judgments and assumptions during the first six months of 2026.
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