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 2020 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-month periods ended June 30, 2021, and 2020, 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. Prior to February 5, 2021, we held assets in the North Park Basin of Colorado, which have been sold in their entirety.

The chart below shows production by product for the three and six-month periods ended June 30, 2021 and 2020:


                     [[Image Removed: sd-20210630_g1.jpg]]

(1)For the three-months ended June 30, 2021, there was no NPB oil production as a result of the sale. For the six-months ended June 30, 2021, North Park Basin had 67 MBoe of oil production.


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Tabl e of Contents (2)For the three and six-months ended June 30, 2020, North Park Basin had 222 MBoe and 550 MBoe, respectively of oil production.

Total production for the three-month periods ended June 30, 2021 and June 30, 2020 were comprised of approximately 13.1% oil, 51.5% natural gas and 35.4% NGLs compared to 24.2% oil, 44.1% natural gas and 31.7% NGLs, respectively.

Total production for the six-month periods ended June 30, 2021 and June 30, 2020 were comprised of approximately 15.3% oil, 51.1% natural gas and 33.6% NGLs compared to 25.5% oil, 43.7% natural gas and 30.8% NGLs, respectively.

Mid-Continent total production for the three and six-month periods ended June 30, 2021 and 2020 was comprised of the following:


                      Three Months Ended June 30,                  Six Months Ended June 30,
                           2021                  2020                  2021                 2020
Oil                                 13.1  %      15.4  %                       13.5  %      15.6  %
NGL                                 35.4  %      35.3  %                       34.3  %      34.8  %
Natural gas                         51.5  %      49.3  %                       52.2  %      49.6  %
Total                              100.0  %     100.0  %                      100.0  %     100.0  %



Recent Events

•In August 2021, our Board of Directors (the "Board") approved the initiation of a share repurchase program (the "Program") authorizing us to purchase up to an aggregate of $25.0 million of our common stock beginning as early as August 16, 2021. The Program is in accordance with Rule 10b-18 of the Exchange Act. Subject to applicable rules and regulations, repurchases under the Program can be made from time to time in open markets at our discretion and in compliance with safe harbor provisions, or in privately negotiated transactions. The Program does not require any specific number of shares to be acquired, and can be modified or discontinued by the Board at any time.

•On July 26, 2021, we entered into an amendment (the "First Amendment") to the New Credit Facility. Pursuant to the First Amendment, we will be permitted to grant liens securing its obligations under swap contracts with certain counterparties to the extent such swap contracts are permitted under the Credit Agreement and approved by our board of directors. •In connection with the resignation of our previous Chief Executive Officer ("CEO"), the Board appointed Grayson Pranin as President and CEO effective July 16, 2021 and in addition will maintain his role as Chief Operating Officer. Mr. Pranin's compensation will be determined at a later time. Mr. Pranin, age 41, has held the role of Senior Vice President and Chief Operating Officer since March 3, 2021.

•On July 9, 2021, Carl F. Giesler, Jr. submitted his resignation from his positions as CEO, President and as a member of the Board of the Company, effective July 16, 2021 in order to pursue another career opportunity. Mr. Giesler did not resign as a result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.

•On April 22, 2021, we announced the acquisition of all the overriding royalty interest assets of SandRidge Mississippian Trust I (the "Trust"). The gross purchase price is $4.9 million (net $3.6 million, given our 26.9% ownership of the Trust).



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Tabl e of Contents •During the second quarter of 2021, we began returning wells to production that were previously curtailed due to the commodity price downturn in the first half of 2020 and, in many cases, improving their production potential through modest capital improvements. Focused efforts to improve operating costs, along with commodity prices rebounding from their 2020 lows, have bolstered the economics of these well reactivation projects. High rates of return and low execution risk support our belief that these projects represent an efficient use of capital. As of June 30, 2021, we returned 49 wells to production, resulting in average incremental production of 0.8 MBoed in the first half of 2021. Approximately 30 of these wells required workovers to return to service and accounted for capital expenditures of $0.6 million and $0.8 million of expense workovers. The balance of the wells required little to no expenditures to reactivate.

•Subsequent to the sale of NPB assets in the first quarter of 2021, we are no longer engaged in the routine flaring of produced natural gas.

Outlook

Throughout 2021, we have focused and will continue to focus on maximizing free cash flow in 2021 through a combination of cost control measures and the continued exercise of financial discipline and prudent capital allocation, which includes limiting our capital projects to projects we believe will provide high rates of return in the current commodity price environment. As a result, our planned capital expenditures for 2021 will likely be of similar magnitude, but potentially an increase to 2020 levels. Given this expected level of capital expenditures, our oil, natural gas and NGL production will likely decline in 2021. However, wells brought back online during the period, as well as potential future well reactivations may partially stem the natural decline of our base production. We may consider further expanding our capital program after assessing all factors, including commodity prices. We will also continue our pursuit of acquisitions and business combinations which provide high margin properties with attractive returns at current commodity prices.

The COVID-19 pandemic reduced global economic activity and negatively impacted energy demand during the previous twelve months. Demand for oil and natural gas is slowly returning to pre-pandemic levels as COVID-19 vaccination rates and economic activity have increased. However, the spread of COVID-19 variants and the effectiveness of the vaccines against these variants are significant risk factors to a full and sustained recovery. If the vaccines currently available are not effective against COVID-19 or its other variants, we will have to continue to rely on mobility and activity restrictions to mitigate the spread, which will lead to a longer, more drawn-out return in demand for certain products.

Additionally, we have implemented several additional initiatives to maximize free cash flow, our liquidity position and, ultimately realize greater shareholder value. These initiatives included personnel and non-personnel cost reductions, along with the sale of our headquarters during 2020. Prior to February 5, 2021, we held assets in the North Park Basin, which have been sold in their entirety.

Consolidated Results of Operations

The majority of our consolidated revenues and cash flow are generated from the production and sale of oil, natural gas and NGLs. Our revenues, profitability and future growth depend substantially on prevailing prices received for our production, the quantity of oil, natural gas and NGLs we produce, and our ability to find and economically develop and produce our reserves. Prices for oil, natural gas and NGLs 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 table below:

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