SandRidge Energy (SD) 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	SD
Entity Registrant Name	SANDRIDGE ENERGY INC
Entity Central Index Key	0001349436
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		210,732,588

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Current assets:
Cash and cash equivalents	$2,571	$7,861
Accounts receivable, net	96,155	105,476
Derivative contracts	141,569	105,994
Inventories	3,741	3,707
Costs in excess of billings	31,965	12,346
Other current assets	14,216	20,580
Total current assets	290,217	255,964
Oil and natural gas properties, using full cost method of accounting
Proved	6,160,856	5,913,408
Unproved	226,452	281,811
Less: accumulated depreciation, depletion and impairment	(4,272,882)	(4,223,437)
Oil and natural gas properties, using full cost method, net, Total	2,114,426	1,971,782
Other property, plant and equipment, net	482,183	461,861
Restricted deposits	27,820	32,894
Other assets	57,019	57,816
Total assets	2,971,665	2,780,317
Current liabilities:
Current maturities of long-term debt	10,367	12,003
Accounts payable and accrued expenses	303,603	203,908
Derivative contracts	7,590	7,080
Asset retirement obligation	2,553	2,553
Total current liabilities	324,113	225,544
Long-term debt	2,610,410	2,566,935
Other long-term obligations	16,257	14,099
Derivative contracts	80,614	61,060
Asset retirement obligation	111,601	108,584
Total liabilities	3,142,995	2,976,222
Commitments and contingencies (Note 14)
Preferred stock, $0.001 par value, 50,000 shares authorized:
Common stock, $0.001 par value, 400,000 shares authorized; 212,961 issued and 210,788 outstanding at March 31, 2010 and 210,581 issued and 208,715 outstanding at December 31, 2009	204	203
Additional paid-in capital	2,969,652	2,961,613
Treasury stock, at cost	(28,283)	(25,079)
Accumulated deficit	(3,124,094)	(3,142,699)
Total SandRidge Energy, Inc. stockholders' (deficit) equity	(182,516)	(205,957)
Noncontrolling interest	11,186	10,052
Total (deficit) equity	(171,330)	(195,905)
Total liabilities and equity	2,971,665	2,780,317
8.5% Convertible perpetual preferred stock
Preferred stock, $0.001 par value, 50,000 shares authorized:
Preferred stock	3	3
6.0% Convertible perpetual preferred stock
Preferred stock, $0.001 par value, 50,000 shares authorized:
Preferred stock	$2	$2

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009
Preferred stock, par value	0.001	0.001
Preferred stock, shares authorized	50,000	50,000
Common stock, par value	0.001	0.001
Common stock, shares authorized	400,000	400,000
Common stock, issued	212,961	210,581
Common stock, outstanding	210,788	208,715
8.5% Convertible perpetual preferred stock
Preferred stock, shares issued	2,650	2,650
Preferred stock, shares outstanding	2,650	2,650
Preferred stock, aggregate liquidation preference	$265,000	$265,000
6.0% Convertible perpetual preferred stock
Preferred stock, shares issued	2,000	2,000
Preferred stock, shares outstanding	2,000	2,000
Preferred stock, aggregate liquidation preference	$200,000	$200,000

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues:
Oil and natural gas	$169,585	$121,241
Drilling and services	5,760	6,311
Midstream and marketing	27,988	25,956
Other	7,661	5,505
Total revenues	210,994	159,013
Expenses:
Production	50,272	45,734
Production taxes	4,838	1,491
Drilling and services	7,209	4,925
Midstream and marketing	25,506	23,888
Depreciation and depletion - oil and natural gas	52,278	60,093
Depreciation, depletion and amortization - other	12,303	12,726
Impairment		1,304,418
General and administrative	31,674	28,485
Gain on derivative contracts	(61,952)	(206,647)
(Gain) loss on sale of assets	(304)	180
Total expenses	121,824	1,275,293
Income (loss) from operations	89,170	(1,116,280)
Other income (expense):
Interest income	69	11
Interest expense	(62,089)	(40,748)
Income from equity investments		234
Other income, net	1,236	760
Total other (expense) income	(60,784)	(39,743)
Income (loss) before income tax expense (benefit)	28,386	(1,156,023)
Income tax expense (benefit)	12	(1,169)
Net income (loss)	28,374	(1,154,854)
Less: net income attributable to noncontrolling interest	1,138	3
Net income (loss) attributable to SandRidge Energy, Inc.	27,236	(1,154,857)
Preferred stock dividends	8,631
Income available (loss applicable) to SandRidge Energy, Inc. common stockholders	$18,605	($1,154,857)
Basic and diluted earnings (loss) per share:
Basic.	0.09	-7.07
Diluted	0.09	-7.07
Weighted average number of common shares outstanding:
Basic	209,145	163,321
Diluted	209,932	163,321

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $)
In Thousands	Convertible Perpetual Preferred Stock	Common Stock	Additional Paid-In Capital	Treasury Stock	Accumulated Deficit	Noncontrolling Interest	Total
Beginning Balance at Dec. 31, 2009	$5	$203	$2,961,613	($25,079)	($3,142,699)	$10,052	($195,905)
Beginning Balance (in shares) at Dec. 31, 2009	4,650	208,715
Distributions to noncontrolling interest owners						(4)	(4)
Stock issuance expense			(87)				(87)
Purchase of treasury stock				(2,770)			(2,770)
Stock purchases - retirement plans, net of distributions (in shares)		(45)
Stock purchases - retirement plans, net of distributions			(18)	(434)			(452)
Stock-based compensation			8,133				8,133
Stock-based compensation excess tax benefit			12				12
Issuance of restricted stock awards, net of cancellations (in shares)		2,118
Issuance of restricted stock awards, net of cancellations		1	(1)
Net income					27,236	1,138	28,374
Convertible perpetual preferred stock dividends					(8,631)		(8,631)
Ending Balance (in shares) at Mar. 31, 2010	4,650	210,788
Ending Balance at Mar. 31, 2010	$5	$204	$2,969,652	($28,283)	($3,124,094)	$11,186	($171,330)

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$28,374	($1,154,854)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for doubtful accounts	84
Depreciation, depletion and amortization	64,581	72,819
Impairment		1,304,418
Debt issuance costs amortization	2,218	1,611
Discount amortization on long-term debt	519
Unrealized gain on derivative contracts	(15,511)	(108,010)
(Gain) loss on sale of assets	(304)	180
Investment (income) loss	(427)	47
Income from equity investments		(234)
Stock-based compensation	6,882	5,205
Changes in operating assets and liabilities	61,186	(45,838)
Net cash provided by operating activities	147,602	75,344
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property, plant and equipment	(190,580)	(350,184)
Proceeds from sale of assets	5,606	247
Refunds of restricted deposits	5,095
Net cash used in investing activities	(179,879)	(349,937)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings	273,343	559,099
Repayments of borrowings	(232,023)	(525,718)
Dividends paid - preferred	(11,263)
Noncontrolling interest distributions	(4)	(11)
Proceeds from issuance of convertible perpetual preferred stock, net	(87)	243,289
Stock-based compensation excess tax benefit	12	(2,113)
Purchase of treasury stock	(2,770)	(513)
Debt issuance costs	(221)
Net cash provided by financing activities	26,987	274,033
NET DECREASE IN CASH AND CASH EQUIVALENTS	(5,290)	(560)
CASH AND CASH EQUIVALENTS, beginning of year	7,861	636
CASH AND CASH EQUIVALENTS, end of period	2,571	76
Supplemental Disclosure of Noncash Investing and Financing Activities:
Change in accrued capital expenditures	38,001	(53,024)
Convertible perpetual preferred stock dividends payable	$5,814

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
Basis of Presentation	1.Basis of Presentation Nature of Business.SandRidge Energy, Inc. (including its subsidiaries, the Company or SandRidge) is an independent oil and natural gas company concentrating on exploration, development and production activities. The Company also owns and operates natural gas gathering and treating facilities and carbon dioxide (CO 2) treating and transportation facilities and has marketing and tertiary oil recovery operations. In addition, Lariat Services, Inc. (Lariat), a wholly owned subsidiary of the Company, owns and operates drilling rigs and a related oil field services business. The Companys primary exploration, development and production areas are concentrated in west Texas. The Company also operates interests in the Mid-Continent, the Cotton Valley Trend in east Texas, the Gulf Coast and the Gulf of Mexico. Interim Financial Statements.The accompanying condensed consolidated financial statements as of December31, 2009 have been derived from the audited financial statements contained in the Companys 2009 Form10-K. The unaudited interim condensed consolidated financial statements have been prepared by the Company in accordance with the accounting policies stated in the audited consolidated financial statements contained in the 2009 Form10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the information in the Companys unaudited condensed consolidated financial statements have been included. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the 2009 Form10-K.

Summary of Significant Accounti

Summary of Significant Accounting Policies
	3 Months Ended Mar. 31, 2010
Summary of Significant Accounting Policies	2.Summary of Significant Accounting Policies For a description of the Companys significant accounting policies, refer to Note1 of the consolidated financial statements included in the 2009 Form10-K. Reclassifications.Certain reclassifications have been made to prior period financial statements to conform with current period presentation. Risks and Uncertainties.The Companys revenue, profitability and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, each of which depend on numerous factors beyond the Companys control such as economic conditions, regulatory developments and competition from other energy sources. The energy markets and oil and natural gas prices historically have been volatile, and may be subject to significant fluctuations in the future. The Companys derivative arrangements serve to mitigate a portion of the effect of this price volatility on the Companys cash flows, and while derivative contracts for the majority of expected 2010, 2011 and 2012 oil production are in place, there are no fixed price swap contracts in place for the Companys natural gas production beyond 2010. See Note 11 for the Companys open oil and natural gas commodity derivative contracts. In addition, the Company will need to incur capital expenditures in 2010 in order to achieve production targets contained in certain gathering and treating arrangements. The Company is dependent on availability under its senior credit facility, along with cash flows from operating activities, to fund those capital expenditures. Based on anticipated oil and natural gas prices and availability under its senior credit facility, the Company expects to be able to fund its planned capital expenditures for 2010. However, a substantial or extended decline in oil or natural gas prices could have a material adverse effect on the Companys financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced, which could impact the Companys ability to comply with the financial covenants under its senior credit facility, which in turn would limit further borrowings to fund capital expenditures. See Note 10 for discussion of the financial covenants in the senior credit facility. Recently Adopted Accounting Pronouncements.In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-03 (ASU 2010-03) to align the oil and natural gas reserve estimation and disclosure requirements of ASC Topic 932, Extractive Industries Oil and Gas, with the requirements in the Securities and Exchange Commissions final rule, Modernization of the Oil and Gas Reporting Requirements, which was issued on December31, 2008 and was effective for the year ended December31, 2009. Modernization of the Oil and Gas Reporting Requirements was designed to modernize and update the oil and gas disclosure requirements to align with current practices and changes in technology. The Company implemented ASU 2010-03 prospectively as a change in accounting principle inseparable from a change in accounting estimate at December31, 2009. In December 2009

Fair Value Measurements

Fair Value Measurements
	3 Months Ended Mar. 31, 2010
Fair Value Measurements	3.Fair Value Measurements The Company applies the guidance provided under ASC Topic 820 to its financial assets and liabilities and nonfinancial liabilities that are measured and reported on a fair value basis. Pursuant to this guidance, the Company has classified and disclosed its fair value measurements using the following levels of the fair value hierarchy: Level1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level3: Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable for objective sources (i.e., supported by little or no market activity). Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels as described in ASC Topic 820. The determination of the fair values, stated below, takes into account the market for the Companys financial assets and liabilities, the associated credit risk and other factors as required by ASC Topic 820. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 Fair Value Measurements Restricted deposits.The fair value of restricted deposits is based on quoted market prices. Other long-term assets.The fair value of other long-term assets, consisting of assets attributable to the Companys deferred compensation plan, is based on quoted market prices. Level 3 Fair Value Measurements Derivative Contracts.The fair values of the Companys oil, natural gas and interest rate swaps are based upon quotes obtained from counterparties to the derivative contracts. The Company reviews other readily available market prices for its derivative contracts as there is an active market for these contracts. However, the Company does not have access to the specific valuation models used by its counterparties or other market participants. Included in these models are discount factors that the Company must estimate in its calculation. Additionally, the Company applies a value weighted average credit default risk rating factor for its counterparties in determining the fair value of its derivative contracts. Based on the inputs for the fair value measurement, the Company has classified its derivative contract assets and liabilities as Level 3. The following tables summarize the Companys financial assets and liabilities measured at fair value on a recurring basis by the fair value hierarchy (in thousands): March31, 2010 Fa

Property, Plant and Equipment

Property, Plant and Equipment
	3 Months Ended Mar. 31, 2010
Property, Plant and Equipment	4.Property, Plant and Equipment Property, plant and equipment consists of the following (in thousands): March31, 2010 December31, 2009 Oil and natural gas properties: Proved $ 6,160,856 $ 5,913,408 Unproved 226,452 281,811 Total oil and natural gas properties 6,387,308 6,195,219 Less accumulated depreciation, depletion and impairment(1) (4,272,882 ) (4,223,437 ) Net oil and natural gas properties capitalized costs 2,114,426 1,971,782 Land 13,937 13,937 Non oil and natural gas equipment(2) 616,567 594,132 Buildings and structures 83,800 78,584 Total 714,304 686,653 Less accumulated depreciation, depletion and amortization (232,121 ) (224,792 ) Net capitalized costs 482,183 461,861 Total property, plant and equipment, net $ 2,596,609 $ 2,433,643 (1) Includes cumulative full cost ceiling limitation impairment charges of $3,548.3 million at both March31, 2010 and December31, 2009. (2) Includes capitalized interest of approximately $3.8million at both March31, 2010 and December31, 2009.

Other Assets

Other Assets
	3 Months Ended Mar. 31, 2010
Other Assets	5. Other Assets Other assets consist of the following (in thousands): March31, 2010 December 31, 2009 Debt issuance costs, net of amortization $ 47,104 $ 49,103 Investments 6,992 6,251 Other 2,923 2,462 Total other assets $ 57,019 $ 57,816

Variable Interest Entities

Variable Interest Entities
	3 Months Ended Mar. 31, 2010
Variable Interest Entities	6.Variable Interest Entities In accordance with the guidance in ASC Topic 810, Consolidation, including the guidance in ASU 2009-17, the Company consolidates the activities of variable interest entities (VIEs) of which it is the primary beneficiary. The primary beneficiary of a VIE is that variable interest holder possessing a controlling financial interest through (i)its power to direct the activities of the VIE that most significantly impact the VIEs economic performance and (ii)its obligation to absorb losses or its right to receive benefits from the VIE that could potentially be significant to the VIE. In order to determine whether or not the Company owns a variable interest in a VIE, it performs a qualitative analysis of the entitys design, organizational structure, primary decision makers and related financial agreements. The Companys significant associated VIEs, including those for which the Company has determined it is the primary beneficiary and those for which it has determined it is not, are described below. Grey Ranch, L.P.Primarily engaged in treating and transportation of natural gas, Grey Ranch, L.P. (GRLP) is a limited partnership that operates the Companys Grey Ranch Plant (the Plant) located in Pecos County, Texas. The Company has long-term operating and gathering agreements with GRLP and also owns a 50% ownership in GRLP. Income or losses of GRLP are allocated to the partners based on ownership percentage and any operating or cash shortfalls require contributions from the partners. The Company has determined that GRLP qualifies as a VIE under the provisions of ASC Topic 810. During October 2009, the Company executed amendments to certain agreements related to the ownership and operation of GRLP. The amended operating agreements provide for GRLP to pay management fees to the Company to operate the Plant as well as lease payments on the Plant. Under the operating agreements, lease payments are reduced if throughput volumes are below those expected. The Company has determined that it is the primary beneficiary of GRLP as it has both (i)the power to direct the activities of GRLP that most significantly impact its economic performance as operator of the Plant and (ii)the obligation to absorb losses, as a result of the operating and gathering agreements, that could potentially be significant to GRLP. Prior to October 2009, the Company accounted for its ownership interest in GRLP using the equity method of accounting; however, due to the amendments discussed above, the Company began consolidating the activity of GRLP in its consolidated financial statements prospectively on the effective date of the amendments, October1, 2009. The change from equity method accounting to the consolidation of GRLP activity had no effect on the Companys net income. The ownership interest not held by the Company is presented as noncontrolling interest in the consolidated financial statements. At March31, 2010 and December31, 2009, consolidated amounts related to GRLP included total assets of $19.8 million and $22.5 million, respectively and total liabilities of $0.8 million and $2.0 million, respectively. GRLPs assets can only be use

Impairment

Impairment
	3 Months Ended Mar. 31, 2010
Impairment	7.Impairment Under the full cost method of accounting, the net book value of oil and natural gas properties, less related deferred income taxes, may not exceed a calculated ceiling. The ceiling limitation is the discounted estimated after-tax future net revenue from proved oil and natural gas properties, excluding future cash outflows associated with settling asset retirement obligations included in the net book value of oil and natural gas properties, plus the cost of properties not subject to amortization. In calculating future net revenues for the three-month period ended March31, 2010, prices and costs used are based on the most recent 12-month average. Prior to December31, 2009, prices and costs used to calculate future net revenues were based on prices on the last day of the period. These prices are not changed except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts. The Company has entered into various commodity derivative contracts; however, these derivative contracts are not accounted for as cash flow hedges. Accordingly, the effect of these derivative contracts has not been considered in calculating the full cost ceiling limitation. The net book value, less related deferred tax liabilities, is compared to the ceiling limitation on both a quarterly and annual basis. Any excess of the net book value, less related deferred taxes over the ceiling limitation, is written off as an expense. An expense recorded in one period may not be reversed in a subsequent period even though higher average oil and natural gas prices may have increased the ceiling limitation in the subsequent period. During the first quarter of 2009, the Company reduced the carrying value of its oil and natural gas properties by $1,304.4million due to a full cost ceiling limitation. There was no full cost ceiling impairment at March31, 2010.

Costs in Excess of Billings

Costs in Excess of Billings
	3 Months Ended Mar. 31, 2010
Costs in Excess of Billings	8.Costs in Excess of Billings In June 2008, the Company entered into an agreement with a subsidiary of Occidental Petroleum Corporation (Occidental) to construct a CO2 treating plant in Pecos County, Texas (the Century Plant) and associated compression and pipeline facilities for $800.0million. Under this agreement, the Company will construct the Century Plant and Occidental will pay a minimum of 100% of the contract price, plus any subsequent agreed-upon revisions, to the Company through periodic cost reimbursements based upon the percentage of the project completed by the Company. The Century Plant is expected to be completed in two phases with the start-up of Phase I expected in mid 2010. Upon start-up, the Century Plant will be owned and operated by Occidental for the purpose of separating and removing CO2 from natural gas delivered by the Company. Pursuant to a 30-year treating agreement executed simultaneously with the construction agreement, Occidental will remove CO2 from the Companys delivered production volumes. The Company will retain all methane gas from the Century Plant. The Company accounts for construction of the Century Plant using the completed-contract method, under which contract revenues and costs are recognized when work under the contract is completed or substantially completed. In the interim, costs incurred on and billings related to contracts in process are accumulated on the balance sheet. Contract gains or losses will be recorded, as development costs within the Companys oil and natural gas properties as part of the full cost pool, when it is determined that a gain or loss will be incurred. At March31, 2010 and December31, 2009, no amounts had been recorded to the full cost pool in anticipation of probable and estimable gains or losses. Costs in excess of billings were $32.0 million and $12.3million and are reported as a current asset in the accompanying condensed consolidated balance sheets at March31, 2010 and December31, 2009, respectively.

Asset Retirement Obligation

Asset Retirement Obligation
	3 Months Ended Mar. 31, 2010
Asset Retirement Obligation	9.Asset Retirement Obligation A reconciliation of the beginning and ending aggregate carrying amounts of the asset retirement obligation for the period from December31, 2009 to March31, 2010 is as follows (in thousands): Asset retirement obligation, December31, 2009 $ 111,137 Liability incurred upon acquiring and drilling wells 1,073 Revisions in estimated cash flows Liability settled in current period (326 ) Accretion of discount expense 2,270 Asset retirement obligation, March31, 2010 114,154 Less: Current portion 2,553 Asset retirement obligation, net of current $ 111,601

Long-Term Debt

Long-Term Debt
	3 Months Ended Mar. 31, 2010
Long-Term Debt	10.Long-Term Debt Long-term debt consists of the following (in thousands): March31, 2010 December 31, 2009 Senior credit facility $ 45,214 $ Other notes payable: Drilling rig fleet and related oil field services equipment 13,712 17,375 Mortgage 17,721 17,952 Senior Floating Rate Notes due 2014 350,000 350,000 8.625%Senior Notes due 2015 650,000 650,000 9.875%Senior Notes due 2016, net of $14,074 and $14,479 discount, respectively 351,426 351,021 8.0%Senior Notes due 2018 750,000 750,000 8.75%Senior Notes due 2020, net of $7,296 and $7,410 discount, respectively 442,704 442,590 Total debt 2,620,777 2,578,938 Less: Current maturities of long-term debt 10,367 12,003 Long-term debt $ 2,610,410 $ 2,566,935 For the three months ended March31, 2010 and 2009, interest payments, net of amounts capitalized, were approximately $9.0million and $10.0million, respectively. Senior Credit Facility.The amount the Company can borrow under its senior secured revolving credit facility (the senior credit facility) is limited to a borrowing base, which was $850.4million at March31, 2010. The senior credit facility is available to be drawn on subject to limitations based on its terms and certain financial covenants, as described below. The senior credit facility contains various covenants that limit the ability of the Company and certain of its subsidiaries to grant certain liens; make certain loans and investments; make distributions; redeem stock; redeem or prepay debt; merge or consolidate with or into a third party; or engage in certain asset dispositions, including a sale of all or substantially all of the Companys assets. Additionally, the senior credit facility limits the ability of the Company and certain of its subsidiaries to incur additional indebtedness with certain exceptions, including under the series of senior notes discussed below. The senior credit facility contains financial covenants, including maintaining agreed levels for the (i)ratio of total funded debt to EBITDAX (as defined in the senior credit facility), which may not exceed 4.5:1.0 at each quarter end calculated using the last four completed fiscal quarters, (ii)ratio of EBITDAX to interest expense plus current maturities of long-term debt, which must be at least 2.5:1.0 at each quarter end calculated using the last four completed fiscal quarters, and (iii)ratio of current assets to current liabilities, which must be at least 1.0:1.0 at each quarter end. In the current ratio calculation (as defined in the senior credit facility) any amounts available to be drawn under the senior credit facility are included in current assets, and unrealized assets and liabilities resulting from mark-to-market adjustments on the Companys derivative contracts are disregarded. As of and for the three-month period ended March31, 2010, the Company was in compliance with all of the financial covenants under the senior credit facility. The obligations under the senior credit facility a

Derivatives

Derivatives
	3 Months Ended Mar. 31, 2010
Derivatives	11.Derivatives The Companys derivative contracts have not been designated as hedges. The Company records all derivative contracts, which include commodity derivatives and interest rate swaps, at fair value. Changes in derivative contract fair values are recognized in earnings. Cash settlements and valuation gains and losses are included in gain on derivative contracts for the commodity derivative contracts and in interest expense for the interest rate swaps in the condensed consolidated statements of operations. Commodity derivative contracts are settled on a monthly basis. Settlements on the interest rate swaps occur quarterly. Derivative assets and liabilities arising from the Companys derivative contracts with the same counterparty that provide for net settlement are reported on a net basis in the condensed consolidated balance sheets. Commodity Derivatives.The Company is exposed to commodity price risk, which impacts the predictability of its cash flows from the sale of oil and natural gas. The Company manages this risk through the use of commodity derivative contracts. These derivative contracts allow the Company to limit its exposure to a portion of its projected oil and natural gas sales. None of the Companys derivative contracts may be terminated early as a result of a party to the contract having its credit rating downgraded. At March31, 2010 and December31, 2009, the Companys commodity derivative contracts consisted of fixed price swaps and basis swaps, which are described below: Fixedpriceswaps: The Company receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume. Basisswaps: The Company receives a payment from the counterparty if the settled price differential is greater than the stated terms of the contract and pays the counterparty if the settled price differential is less than the stated terms of the contract, which guarantees the Company a price differential for natural gas from a specified delivery point. Interest Rate Swaps.The Company is exposed to interest rate risk on its long-term fixed and variable interest rate borrowings. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes the Company to (i)changes in market interest rates reflected in the fair value of the debt and (ii)the risk that the Company may need to refinance maturing debt with new debt at a higher rate. Variable rate debt, where the interest rate fluctuates, exposes the Company to short-term changes in market interest rates as the Companys interest obligations on these instruments are periodically redetermined based on prevailing market interest rates, primarily LIBOR and the federal funds rate. The Company has entered into two interest rate swap agreements to manage the interest rate risk on a portion of its floating rate debt by effectively fixing the variable interest rate on its Senior Floating Rate Notes. See Note10 for further discussion of the Companys interest rate swaps. Fair Value of Derivatives.In accordance with ASC Topic 815, the following table presents the fair value of the Companys der

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	12.Income Taxes The Company estimates for each interim reporting period the effective tax rate expected for the full fiscal year and uses that estimated rate in providing income taxes on a current year-to-date basis. The provision (benefit) for income taxes consisted of the following components for the three-month periods ended March31, 2010 and 2009 (in thousands): 2010 2009 Current: Federal $ $ (2,166 ) State 12 997 12 (1,169 ) Deferred: Federal State Total provision (benefit) $ 12 $ (1,169 ) Deferred income taxes are provided to reflect the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets are reduced by a valuation allowance as necessary when a determination is made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. As of December31, 2008, the Company determined it was appropriate to record a full valuation allowance against its net deferred tax asset. For the three-month period ended March31, 2010, the Company continued to have a full valuation allowance against its net deferred tax asset resulting in a low effective tax rate for the period. Internal Revenue Code (IRC) Section382 addresses company ownership changes and specifically limits the utilization of certain deductions and other tax attributes on an annual basis following an ownership change. The Company experienced an ownership change within the meaning of IRC Section382 on December31, 2008. The ownership change subjected $305.0 million of federal net operating loss carryforwards to the IRC Section382 limitation which could result in a material amount of these carryforwards expiring unused. The limitation did not result in a current federal tax liability for the three-month period ended March31, 2010. No reserves for uncertain income tax positions have been recorded pursuant to the guidance for uncertainty in income taxes under ASC Topic 740, Income Taxes. Tax years 1999 to present remain open for the majority of taxing authorities due to net operating loss carryforwards from those years. The Companys accounting policy is to recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense. The Company did not have an accrued liability for interest and penalties at March31, 2010. For the three months ended March31, 2010 and March31, 2009, income tax payments, net of refunds, were approximately ($3.4)million and ($0.5)million, respectively.

Earnings

Earnings (Loss) Per Share
	3 Months Ended Mar. 31, 2010
Earnings (Loss) Per Share	13.Earnings (Loss) Per Share Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed using the weighted average shares outstanding during the period, but also include the dilutive effect of awards of restricted stock and outstanding convertible preferred stock. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share, for the three-month periods ended March31, 2010 and 2009 (in thousands): 2010 2009 Weighted average basic common shares outstanding 209,145 163,321 Effect of dilutive securities: Restricted stock 787 Convertible preferred stock Weighted average diluted common and potential common shares outstanding 209,932 163,321 For the three-month period ended March31, 2009, restricted stock awards covering 4.2million shares were excluded from the computation of net loss per share because their effect would have been antidilutive. In computing diluted earnings per share, the Company evaluated the if-converted method with respect to its outstanding 8.5% convertible perpetual preferred stock and 6.0% convertible perpetual preferred stock (see Note 15) for the three-month period ended March31, 2010 and its outstanding 8.5% convertible perpetual preferred stock for the three-month period ended March31, 2009. Under this method, the Company assumes the conversion of the preferred stock to common stock and determines if this is more dilutive than including the preferred stock dividends (paid and unpaid) in the computation of income available to common stockholders. The Company determined the if-converted method was not more dilutive and included preferred stock dividends in the determination of income available to common stockholders for the three-month periods ended March31, 2010 and 2009.

Commitments and Contingencies

Commitments and Contingencies
	3 Months Ended Mar. 31, 2010
Commitments and Contingencies	14.Commitments and Contingencies On April3, 2010, the Company and one of its subsidiaries entered into an agreement to acquire all of the outstanding shares of common stock of Arena for a combination of company common stock and cash. Since the announcement of the transaction, nine putative class action lawsuits have been filed in Oklahoma and in Nevada by Arena shareholders, purportedly on behalf of persons similarly situated, challenging the transaction. The lawsuits contain substantially the same allegations that Arenas directors breached their fiduciary duties by negotiating and approving the transaction and by administering a sale process that failed to maximize shareholder value and that Arena, the Company, and/or a subsidiary of the Company aided and abetted such breaches of fiduciary duty. The lawsuits seek, among other relief, an injunction preventing the consummation of the merger and, in certain cases, unspecified damages.The Company believes all of the lawsuits are without merit and intends to defend itself vigorously against them. In addition, the Company is a defendant in lawsuits from time to time in the normal course of business. In managements opinion, the Company is not currently involved in any legal proceedings which, individually or in the aggregate, could have a material effect on the financial condition, operations or cash flows of the Company.

Equity

Equity
	3 Months Ended Mar. 31, 2010
Equity	15.Equity Preferred Stock.The following table presents information regarding the Companys preferred stock (in thousands): March31, 2010 December31, 2009 Shares authorized 50,000 50,000 Shares outstanding at end of period: 8.5% Convertible perpetual preferred stock 2,650 2,650 6.0% Convertible perpetual preferred stock 2,000 2,000 The Company is authorized to issue 50,000,000shares of preferred stock, $0.001par value, of which 4,650,000shares were designated as convertible perpetual preferred stock at March31, 2010 and December31, 2009. 8.5% Convertible perpetual preferred stock.The Companys 8.5% convertible perpetual preferred stock was issued in January 2009. Each share of 8.5% convertible perpetual preferred stock has a liquidation preference of $100 and is convertible at the holders option at any time initially into approximately 12.4805shares of the Companys common stock based on an initial conversion price of $8.01, subject to adjustments upon the occurrence of certain events. Each holder of the convertible perpetual preferred stock is entitled to an annual dividend of $8.50 per share to be paid semi-annually in cash, common stock or a combination thereof, at the Companys election. The first dividend payment was paid in cash in February 2010. Approximately $2.8 million in both paid and unpaid dividends, totaling approximately $5.6 million, on the 8.5% convertible perpetual preferred stock have been included in the Companys earnings per share calculations for the three-month period ended March31, 2010 as presented in the accompanying condensed consolidated statements of operations. The 8.5% convertible perpetual preferred stock is not redeemable by the Company at any time. After February20, 2014, the Company may cause all outstanding shares of the convertible perpetual preferred stock to automatically convert into common stock at the then-prevailing conversion rate if certain conditions are met. 6.0% Convertible perpetual preferred stock.The Companys 6.0% convertible perpetual preferred stock was issued in December 2009. Each share of the 6.0% convertible perpetual preferred stock has a liquidation preference of $100 and is entitled to an annual dividend of $6.00 payable semi-annually in cash, common stock or any combination thereof, at the Companys election, beginning on July15, 2010. Approximately $3.0 million in unpaid dividends on the 6.0% convertible perpetual preferred stock has been included in the Companys earnings per share calculations for the three-month period ended March31, 2010 as presented in the accompanying condensed consolidated statements of operations. The 6.0% convertible perpetual preferred stock is not redeemable by the Company at any time. Each share is initially convertible into 9.21 shares of the Companys common stock, at the holders option, at any time on or after February1, 2010 based on an initial conversion price of $10.86 and subject to customary adjustments in certain circumstances. Five years after their issuance, all outstanding shares of the convertible preferred stock will be converted automatically into shares of the Companys common st

Related Party Transactions

Related Party Transactions
	3 Months Ended Mar. 31, 2010
Related Party Transactions	16.Related Party Transactions The Company enters into transactions in the ordinary course of business with certain of its stockholders and other related parties. These transactions primarily consist of purchases of gas treating services and drilling equipment and sales of oil field services, equipment and natural gas. Following is a summary of significant transactions with such related parties (in thousands): Three Months Ended March31, 2010 2009 Sales to and reimbursements from related parties $ 6,613 $ 3,813 Purchases from related parties $ 2,176 $ 8,942 March31, 2010 December 31, 2009 Accounts Receivable due from related parties $ 113 $ 64 Accounts Payable due to related parties $ 50 $ 860 Oklahoma City Thunder Agreements.The Companys Chairman and Chief Executive Officer owns a minority interest in a limited liability company which owns and operates the Oklahoma City Thunder, a National Basketball Association team playing in Oklahoma City, where the Company is headquartered. The Company, like four other Oklahoma City companies, has a five-year sponsorship agreement whereby the Company pays approximately $3.3 million per year for advertising and promotional activities related to the Oklahoma City Thunder. Additionally, the Company entered into an agreement to license a suite at the arena where the Oklahoma City Thunder plays its home games. Under this four-year agreement, the Company will pay an annual license fee of $0.2 million. Larclay, L.P.Until April15, 2009, Lariat and its partner Clayton Williams Energy, Inc. (CWEI) each owned a 50% interest in Larclay, L.P. (Larclay), a limited partnership, and, until such time, Lariat operated the rigs owned by Larclay. On April15, 2009, Lariat completed an assignment to CWEI of Lariats 50% equity interest in Larclay pursuant to the terms of an Assignment and Assumption Agreement (the Larclay Assignment) entered into between Lariat and CWEI on March13, 2009. Pursuant to the Larclay Assignment, Lariat assigned all of its right, title and interest in and to Larclay to CWEI effective April15, 2009, and CWEI assumed all of the obligations and liabilities of Lariat relating to Larclay. The Company fully impaired both the investment in and notes receivable due from Larclay at December31, 2008. There were no additional losses on Larclay during the three-month period ended March31, 2009 or as a result of the Larclay Assignment. For the three-month period ended March31, 2009, sales to and reimbursements from Larclay were $2.7 million and purchases of services from Larclay were $1.8 million.

Subsequent Events

Subsequent Events
	3 Months Ended Mar. 31, 2010
Subsequent Events	17.Subsequent Events Events occurring after March31, 2010 were evaluated to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. In April 2010, the Company and a subsidiary of the Company entered into a merger agreement with Arena whereby the Company will acquire Arena and, in connection therewith, issue 4.7771 shares of Company common stock and pay $2.50 in cash for each share of Arena common stock outstanding. Based upon the closing price of the Companys stock on April1, 2010, the consideration to be received by Arena shareholders is valued at $40.00 per share. Completion of the transaction is contingent upon approval by stockholders of both companies as well as other customary closing conditions. On April 30, 2010, the companies were notified that early termination of the waiting period mandated under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 had been granted effective immediately. The meetings of the Companys and Arenas stockholders to approve the transaction have been set for June8, 2010, and the record date for such meetings is May 5, 2010. SandRidge will be the surviving parent company after completion of the merger. Arena is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico. In April 2010, the Company amended and restated its $1.75 billion senior credit facility, extending the maturity date to April15, 2014 from November21, 2011 and affirming the borrowing base at $850.0 million.

Business Segment Information

Business Segment Information
	3 Months Ended Mar. 31, 2010
Business Segment Information	18.Business Segment Information The Company has three business segments: exploration and production, drilling and oil field services and midstream gas services. These segments represent the Companys three main business units, each offering different products and services. The exploration and production segment is engaged in the acquisition, development and production of oil and natural gas properties. The drilling and oil field services segment is engaged in the land contract drilling of oil and natural gas wells. The midstream gas services segment is engaged in the purchasing, gathering, processing, treating and selling of natural gas. The All Other column in the tables below includes items not related to the Companys reportable segments, including the Companys CO2 gathering and sales operations and corporate operations. As further discussed in Note 19, SandRidge Energy, Inc., the parent company, contributed its oil and natural gas related assets and liabilities to one of its wholly owned subsidiaries effective as of May 1, 2009. As a result, the financial information of SandRidge Energy, Inc. is now included in the All Other column in the table below. This information was previously included in the exploration and production segment. This presentation is consistent with how the Companys management evaluates the business segments. All periods presented below reflect this change in presentation. Management evaluates the performance of the Companys business segments based on operating income, which is defined as segment operating revenues less operating expenses and depreciation, depletion and amortization. Summarized financial information concerning the Companys segments is shown in the following table (in thousands): Exploration and Production DrillingandOil Field Services MidstreamGas Services All Other Consolidated Total Three Months Ended March31, 2010 Revenues $ 170,184 $ 86,074 $ 82,537 $ 10,453 $ 349,248 Inter-segment revenue (65 ) (80,314 ) (55,011 ) (2,864 ) (138,254 ) Total revenues $ 170,119 $ 5,760 $ 27,526 $ 7,589 $ 210,994 Operating income (loss) $ 110,023 $ (4,301 ) $ 1,254 $ (17,806 ) $ 89,170 Interest income (expense), net 79 (313 ) (138 ) (61,648 ) (62,020 ) Other income, net 768 468 1,236 Income (loss) before income taxes $ 110,870 $ (4,614 ) $ 1,116 $ (78,986 ) $ 28,386 Capital expenditures(1) $ 192,077 $ 9,417 $ 20,422 $ 6,665 $ 228,581 Depreciation, depletion and amortization $ 52,993 $ 7,330 $ 876 $ 3,382 $ 64,581 At March31, 2010 Total assets $ 2,411,894 $ 219,109 $ 123,895 $ 216,767 $ 2,971,66

Condensed Consolidating Financi

Condensed Consolidating Financial Information
	3 Months Ended Mar. 31, 2010
Condensed Consolidating Financial Information	19.Condensed Consolidating Financial Information The Company provides condensed consolidating financial information for its subsidiaries that are guarantors of its registered debt. The subsidiary guarantors are wholly owned and have, jointly and severally, unconditionally guaranteed on an unsecured basis the Companys 8.625%Senior Notes and Senior Floating Rate Notes. The subsidiary guarantees (i)rank equally in right of payment with all of the existing and future senior debt of the subsidiary guarantors; (ii)rank senior to all of the existing and future subordinated debt of the subsidiary guarantors; (iii)are effectively subordinated in right of payment to any existing or future secured obligations of the subsidiary guarantors to the extent of the value of the assets securing such obligations; and (iv)are structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors who are not themselves guarantors. The Company has not presented separate financial and narrative information for each of the subsidiary guarantors because it believes that such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the guarantees. Effective May1, 2009, SandRidge Energy, Inc., the parent, contributed all of its rights, title and interest in its oil and natural gas related assets and accompanying liabilities to one of its wholly owned guarantor subsidiaries, leaving it with no oil or natural gas related assets or operations. The following condensed consolidating financial information represents the financial information of SandRidge Energy, Inc., and its wholly owned subsidiary guarantors, prepared on the equity basis of accounting. The non-guarantor subsidiaries are minor and, therefore, not presented separately. The financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the subsidiary guarantors operated as independent entities. Condensed Consolidating Balance Sheets March31, 2010 Parent Company Guarantor Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 155 $ 2,416 $ $ 2,571 Accounts receivable, net 691,545 236,411 (831,801 ) 96,155 Derivative contracts 141,569 141,569 Other current assets 49,922 49,922 Total current assets 691,700 430,318 (831,801 ) 290,217 Property, plant and equipment, net 2,596,609 2,596,609 Investment in subsidiaries 1,902,587 (1,902,587 ) Other assets 47,106 37,733 84,839 Total assets $ 2,641,393 $ 3,064,660 $ (2,734,388 ) $ 2,971,665 LIABILITIES AND EQUITY Current liabilities: Accounts payable and accrued expenses $ 222,421 $ 912,983