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
Overview
We are an independent oil and natural gas company with a principal focus on
acquisition, development and production activities in the
The chart below shows production by product for the three and six-month periods
ended
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(1)For the three-months ended
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(2)For the three and six-months ended
Total production for the three-month periods ended
Total production for the six-month periods ended
Mid-Continent total production for the three and six-month periods ended
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
•On
•On
•On
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•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
•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
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
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