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SandRidge Energy, Inc. Reports Financial and Operational Results for Fourth Quarter and Full Year 2011

OKLAHOMA CITY, Feb. 23, 2012 /PRNewswire/ -- SandRidge Energy, Inc. (NYSE: SD) today announced financial and operational results for the quarter and year ended December 31, 2011.

Key Financial Results

Fourth Quarter

  • Adjusted EBITDA of $175 million for fourth quarter 2011 compared to $130 million in fourth quarter 2010.
  • Operating cash flow of $153 million for fourth quarter 2011 compared to $72 million in fourth quarter 2010.
  • Net loss applicable to common stockholders of $389 million, or $0.97 per diluted share, for fourth quarter 2011 compared to net loss applicable to common stockholders of $208 million, or $0.53 per diluted share, in fourth quarter 2010.
  • Adjusted net income of $9.1 million, or $0.02 per diluted share, for fourth quarter 2011 compared to adjusted net loss of $35.4 million, or $0.07 per diluted share, in fourth quarter 2010.

Full Year

  • Adjusted EBITDA of $654 million ($699 million including realized cash gains on out-of-period derivative contract settlements) for 2011 compared to $645 million ($668 million including realized cash gains on out-of-period derivative contract settlements) in 2010.
  • Operating cash flow of $535 million for 2011 compared to $410 million in 2010.
  • Net income available to common stockholders of $52 million, or $0.13 per diluted share, for 2011 compared to net income available to common stockholders of $153 million, or $0.52 per diluted share, in 2010.
  • Adjusted net income of $7.1 million, or $0.01 per diluted share, (adjusted net income of $52.6 million, or $0.11 per diluted share, including realized cash gains on out-of-period derivative contract settlements) for 2011 compared to adjusted net income of $42.4 million, or $0.11 per diluted share, (adjusted net income of $65.7 million, or $0.17 per diluted share, including realized cash gains on out-of-period derivative contract settlements) in 2010.

Adjusted net income available (loss applicable) to common stockholders, adjusted EBITDA and operating cash flow are non-GAAP financial measures. Each measure is defined and reconciled to the most directly comparable GAAP measure under "Non-GAAP Financial Measures" beginning on page 11.

Highlights

  • Cash proceeds of over $2 billion received since January 1, 2011 through royalty trust offerings, joint ventures and asset sales.
  • Secured $1 billion in drilling carries through two Mississippian joint ventures.
  • Entered into agreement to acquire Dynamic Offshore Resources, LLC for aggregate consideration of $1.275 billion, consisting of approximately $680 million in cash and approximately 74 million shares of SandRidge common stock. Closing expected during second quarter of 2012.
  • Record oil production in fourth quarter and full year 2011 of 3.29 MMBbls and 11.83 MMBbls, respectively.
  • Consolidated oil reserves of 245 MMBbls at year end 2011.
  • Consolidated proved reserves of 471 MMBoe at year end 2011.
  • Consolidated SEC PV-10 value of $6.9 billion at year end 2011.
  • Reserve replacement of 303%.
  • Current daily production of 67 MBoe per day.

Drilling Activities

SandRidge averaged 35 rigs operating during the fourth quarter of 2011 and drilled 254 wells. The company drilled a total of 970 wells during 2011. A total of 254 gross (233 net) operated wells were completed and brought on production during the fourth quarter of 2011, bringing the total number of operated wells completed and brought on production during 2011 to 943 gross (892 net). Currently, the company has 37 rigs operating (including 3 drilling saltwater disposal wells), of which 19 are SandRidge-owned Lariat rigs.

Mississippian Play. During the fourth quarter of 2011, SandRidge drilled 59 horizontal wells in the Mississippian play in northern Oklahoma and Kansas bringing the total number of operated wells drilled during 2011 in the Mississippian to 167. Industry-wide, over 480 horizontal wells have been drilled to date in the 17 million acre Mississippian play, including 232 drilled by SandRidge. SandRidge has identified over 9,000 (7,000 net) drilling locations on over 2 million (1.5 million net) acres. The company presently has 24 rigs operating in the play, of which 21 are drilling horizontal producer wells with 3 drilling saltwater disposal wells, and plans to operate an average of 26 rigs in the Mississippian during 2012. SandRidge plans to drill approximately 380 horizontal wells in the Mississippian play in 2012.

Permian Basin. The company drilled 195 wells in the Permian Basin during the fourth quarter of 2011 and 803 wells during 2011 and has identified approximately 7,900 additional drilling locations on its 225,000 net acres. SandRidge presently operates 13 rigs in the Permian Basin, all of which are operating on the Central Basin Platform drilling primarily Grayburg/San Andres vertical wells at depths ranging from 4,500 feet to 7,500 feet. The company plans to drill over 750 wells in the Permian Basin in 2012.

Proved Reserves

The company's estimated consolidated proved reserves as of December 31, 2011 were 471 MMBoe, representing an 18% increase (after adjustments for asset sales and production) from December 31, 2010. During 2011, the company recognized additional consolidated proved reserves of 101 MMBoe primarily as a result of successful drilling in the Mississippian Play and the Central Basin Platform. This increase was partially offset by 30 MMBoe of downward revisions to natural gas properties, primarily in the Pinon Field. Proved developed reserves constituted 49% of total consolidated reserves as of December 31, 2011. Third party engineers evaluated a combined 98% of the total consolidated proved PV-10 value as of December 31, 2011.

The December 31, 2011 estimated future net cash flows from consolidated proved reserves, discounted at an annual rate of 10%, before income taxes ("PV-10") were $6.9 billion, an increase of 52% from December 31, 2010 and an increase of 122% after adjustments for asset sales and production. The weighted average wellhead prices, which are based on index prices and adjusted for transportation and regional price differentials, used to estimate the company's consolidated proved reserves and future net revenues were $85.77 per barrel for oil and $4.06 per Mcf for natural gas at December 31, 2011 compared to $66.93 per barrel for oil and $3.80 per Mcf for natural gas at December 31, 2010.

Proved developed drilling finding costs and proved developed all-in finding costs, which include drilling, land and seismic costs, were $19.66 and $24.61 per Boe, respectively, for the year ended December 31, 2011.

Analysis of Changes in Consolidated Proved Reserves








Liquids


Natural Gas


Combined


(MBbls)


(MMcf)


(MBoe)

As of December 31, 2010

252,114


1,762,665


545,892

Sales of reserves

(43,331)


(476,212)


(122,699)

Pro forma as of December 31, 2010

208,783


1,286,453


423,193







Acquisition of reserves

1,533


2,906


2,018

Production

(11,830)


(69,306)


(23,381)

Extensions and discoveries

55,577


299,848


105,551

Revisions of previous estimates

(9,278)


(164,845)


(36,751)

As of December 31, 2011(1)

244,785


1,355,056


470,630














2011


2010



PV-10 (in Millions)






Oil properties

$ 6,589


$ 3,961



Gas properties

287


548



Total(2)

$ 6,876


$ 4,509









% Oil Properties to Total

96%


88%









PV-10 of proved Reserves ($/Boe)

$ 14.61


$ 8.26









(1) Includes approximately 26,350 MBoe attributable to noncontrolling interests.

(2) December 31, 2011 includes PV-10 attributable to noncontrolling interests of approximately $935 million.



Operational and Financial Statistics

Information regarding the company's production, pricing, costs and earnings is presented below:










Three Months Ended December 31,


Year Ended December 31,










2011


2010


2011


2010

Production














Oil (MBbl)(1)







3,290


2,612


11,830


7,386

Natural gas (MMcf)







16,866


18,753


69,306


76,226

Oil equivalent (MBoe)






6,101


5,738


23,381


20,090

Daily production (MBoed)(2)






66.3


62.4


64.1


55.0

















Average price per unit













Realized oil price per barrel - as reported(1)





$ 84.74


$ 71.84


$ 83.21


$ 66.89

Realized impact of derivatives per barrel(1)





(5.46)


(3.69)


(6.80)


1.26

Net realized price per barrel(1)






$ 79.28


$ 68.15


$ 76.41


$ 68.15

















Realized natural gas price per Mcf - as reported





$ 2.99


$ 3.07


$ 3.50


$ 3.68

Realized impact of derivatives per Mcf





0.12


(0.43)


(0.23)


2.52

Net realized price per Mcf






$ 3.11


$ 2.64


$ 3.27


$ 6.20

















Realized price per Boe - as reported





$ 53.97


$ 42.73


$ 52.47


$ 38.56

Net realized price per Boe - including impact of derivatives




$ 51.35


$ 39.64


$ 48.35


$ 48.58

















Average cost per Boe













Lease operating







$ 13.20


$ 11.42


$ 13.81


$ 11.84

Production taxes







2.04


1.75


1.97


1.45

General and administrative














General and administrative, excluding stock-based compensation



4.93


6.73


4.70


7.06


Stock-based compensation





1.68


2.35


1.65


1.88

Depletion







14.72


13.51


13.97


13.70

















Lease operating cost per Boe












Excluding offshore and tertiary recovery





$ 12.46


$ 10.70


$ 12.86


$ 10.77

Offshore operations






33.87


25.52


38.29


25.74

Tertiary recovery operations






33.71


34.50


39.04


53.17

















Earnings per share













(Loss) income per share (applicable) available to common stockholders












Basic







$ (0.97)


$ (0.53)


$ 0.13


$ 0.52


Diluted







(0.97)


(0.53)


0.13


0.52

















Adjusted net (loss) income per share (applicable) available to common stockholders











Basic







$ (0.01)


$ (0.12)


$ (0.12)


$ 0.02


Diluted







0.02


(0.07)


0.01


0.11

















Weighted average number of common shares outstanding (in thousands)












Basic







399,430


395,255


398,851


291,869


Diluted(3)







497,833


491,329


496,779


387,059

















(1) Includes NGLs.

(2) 2011 production includes impact from 2011 Wolfberry, New Mexico and East Texas asset sales with combined production of approximately 7,200 Boe per day at the time of their respective sales.

(3) Includes shares considered antidilutive for calculating earnings per share in accordance with GAAP for certain periods presented.









Discussion of 2011 Financial Results

Fourth Quarter

Oil and natural gas revenue increased 34% to $329.3 million in fourth quarter 2011 from $245.2 million in the same period of 2010 as a result of increases in oil production and realized reported oil prices. Oil production increased 26% to 3.3 MMBbls from fourth quarter 2010 production of 2.6 MMBbls mainly due to continued development of the company's oil properties in the Mississippian play and Permian Basin. Fourth quarter 2011 total production increased 6% to 6.1 MMBoe from 5.7 MMBoe in fourth quarter 2010. Realized reported prices, which exclude the impact of derivative settlements, were $84.74 per barrel and $2.99 per Mcf during fourth quarter 2011. Realized reported prices in the same period of 2010 were $71.84 per barrel and $3.07 per Mcf.

Production expense increased 23% to $80.5 million in fourth quarter 2011 from $65.5 million in the same period of 2010 due primarily to the addition of costs from newly completed oil wells brought on production during 2010 and 2011 with the growth of the company's Permian Basin and Mississippian plays. The company brought 254 wells on production during fourth quarter 2011. Fourth quarter 2011 production expense was $13.20 per Boe compared to fourth quarter 2010 production expense of $11.42 per Boe.

Depletion per unit in fourth quarter 2011 was $14.72 per Boe compared to $13.51 per Boe in the same period of 2010. The increase in rate per unit primarily was a result of 2011 non-core asset sales.

Full Year

Oil and natural gas revenues increased 58% to $1,226.8 million in 2011 from $774.8 million in 2010 as a result of increases in oil production and realized reported prices. Oil production increased 60% to 11.8 MMBbls from 2010 production of 7.4 MMBbls mainly due to oil production added as a result of the company's drilling programs in the Mississippian play and Permian Basin. Total 2011 production increased 16% to 23.4 MMBoe from 2010 production of 20.1 MMBoe. Realized reported prices were $83.21 per barrel and $3.50 per Mcf during 2011 compared to $66.89 per barrel and $3.68 per Mcf in 2010.

Production expense increased 36% to $322.9 million in 2011 from $237.9 million in 2010 due primarily to newly completed wells brought on production during 2011 with the growth of the company's Permian Basin and Mississippian plays. The company completed and brought 943 wells on production during 2011. Production expense was $13.81 per Boe in 2011 compared to $11.84 per Boe in 2010.

Depletion per unit in 2011 was $13.97 per Boe compared to $13.70 per Boe in 2010 due to non-core asset sales during 2011.

Capital Expenditures

The table below summarizes the company's capital expenditures for the quarters and years ended December 31, 2011 and 2010:







Three Months Ended December 31,


Year Ended December 31,







2011


2010


2011


2010









(in thousands)



Drilling and production











Permian Basin




$ 183,627


$ 166,044


$ 700,577


$ 446,230


Mid-Continent




173,435


63,533


621,089


146,455


WTO




11,102


41,125


30,155


299,910


Tertiary




4,940


10,024


23,041


23,030


Other




2,143


2,252


7,365


31,167







375,247


282,978


1,382,227


946,792

Leasehold and seismic











Permian Basin




2,891


5,540


31,977


27,582


Mid-Continent




74,349


37,798


307,169


63,641


WTO




48


323


2,987


7,239


Tertiary




4


-


238


88


Other




1,159


1,198


5,597


4,515







78,451


44,859


347,968


103,065














Pipe inventory(1)




1,031


(6,089)


(16,329)


(22,962)














Total exploration and development(2)


454,729


321,748


1,713,866


1,026,895














Drilling and oil field services



4,983


5,149


25,674


31,658

Midstream




23,123


1,499


38,514


48,401

Other - general




16,800


5,664


54,971


22,699














Total capital expenditures, excluding acquisitions


499,635


334,060


1,833,025


1,129,653














Acquisitions(3)




11,877


-


34,628


138,428














Total capital expenditures



$ 511,512


$ 334,060


$ 1,867,653


$ 1,268,081














(1) Pipe inventory expenditures for the three-month period ended December 31, 2010 and years ended December 31, 2011 and 2010 represent transfers

of pipe inventory to the full cost pool for use in drilling and production activities.

(2) Exploration and development expenditures for the years ended December 31, 2011 and 2010 exclude $25.0 million and $105.0 million, respectively,

of additional estimated loss on Century Plant construction contract.

(3) 2010 acquisition expenditures exclude common stock valued at approximately $1.25 billion issued in connection with and tax liability adjustments

resulting from the Arena acquisition.



Derivative Contracts

The tables below set forth the company's consolidated oil swaps and natural gas price and basis swaps for the years 2012 through 2015 as of February 21, 2012 and include contracts to which SandRidge Mississippian Trust I and SandRidge Permian Trust are parties.





Quarter Ending










3/31/2012


6/30/2012


9/30/2012


12/31/2012












Oil Swaps











Volume (MMBbls)


3.04


3.41


3.69


3.81


Swap



$99.21


$99.73


$100.02


$100.19












Natural Gas Swaps










Volume (Bcf)


1.82


1.82


-


-


Swap



$4.90


$4.90


-


-


Collar Volume (Bcf)


-


-


0.20


0.20


Collar: High


-


-


$6.20


$6.20


Collar: Low


-


-


$4.00


$4.00
















Year Ending












12/31/2012


12/31/2013


12/31/2014


12/31/2015












Oil Swaps











Volume (MMBbls)


13.95


12.88


12.83


7.64


Swap



$99.82


$93.51


$89.16


$84.77












Natural Gas Swaps










Volume (Bcf)


3.64


-


-


-


Swap



$4.90


-


-


-


Collar Volume (Bcf)


0.40


0.86


0.94


1.01


Collar: High


$6.20


$7.15


$7.78


$8.55


Collar: Low


$4.00


$4.00


$4.00


$4.00












Natural Gas Basis Swaps










Volume (Bcf)


-


14.60


-


-


Swap



-


$0.46


-


-



Balance Sheet

The company's capital structure at December 31, 2011 and 2010 is presented below:








December 31,


December 31,








2011


2010








(in thousands)











Cash and cash equivalents




$ 207,681


$ 5,863











Current maturities of long-term debt



$ 1,051


$ 7,293

Long-term debt (net of current maturities)







Senior credit facility




-


340,000


Mortgage





14,978


16,029


Senior Notes










Senior Floating Rate Notes due 2014



350,000


350,000



8.625% Senior Notes due 2015



-


650,000



9.875% Senior Notes due 2016, net



354,579


352,707



8.0% Senior Notes due 2018



750,000


750,000



8.75% Senior Notes due 2020, net



443,568


443,057



7.5% Senior Notes due 2021



900,000


-



Total debt




2,814,176


2,909,086











Stockholders' equity








Preferred stock




8


8


Common stock




399


398


Additional paid-in capital




4,568,856


4,528,912


Treasury stock, at cost




(6,158)


(3,547)


Accumulated deficit




(2,937,094)


(2,989,576)



Total SandRidge Energy, Inc. stockholders' equity


1,626,011


1,536,195












Noncontrolling interest




922,939


11,288











Total capitalization




$ 5,363,126


$ 4,456,569



During 2011, the company's debt, net of cash balances, decreased by approximately $297 million as a result of capital raising efforts during 2011. On February 21, 2012, the company had no amount drawn under its $790 million senior credit facility and approximately $205 million of cash, leaving approximately $967 million of available liquidity (including the impact of outstanding letters of credit). The company was in compliance with all of the applicable financial and other covenants contained in its debt agreements during the year ended December 31, 2011 and through and as of the date of this release.

Operational Guidance


Year Ending


December 31, 2012




Projection as of


February 23, 2012

Production



Oil (MMBbls)(1)

18.2


Natural Gas (Bcf)

84.8


Total (MMBoe)

32.3



Differentials



Oil(1)

$9.00


Natural Gas

0.50



Costs per Boe



Lifting

$16.10 - $17.80


Production Taxes

1.75 - 1.95


DD&A - oil & gas

15.90 - 17.65


DD&A - other

1.75 - 1.95


Total DD&A

$17.65 - $19.60


G&A - cash

4.30 - 4.75


G&A - stock

1.15 - 1.30


Total G&A

$5.45 - $6.05


Interest Expense

$8.70 - $9.60



EBITDA from Oilfield Services, Midstream and Other ($ in millions)(2)

$43.5

Adjusted Net Income Attributable to Noncontrolling Interest ($ in millions)(3)

$113.8

P&A Cash Cost ($ in millions)

$35.2



Corporate Tax Rate

0%

Deferral Rate

0%



Shares Outstanding at End of Period (in millions)



Common Stock

493.0


Preferred Stock (as converted)

90.1


Fully Diluted

583.1



Capital Expenditures ($ in millions)



Exploration and Production

$1,550


Land and Seismic

145


Total Exploration and Production

$1,695


Oil Field Services

20


Midstream and Other

135


Total Capital Expenditures

$1,850



(1)

Includes NGLs.

(2)

EBITDA from Oilfield Services, Midstream and Other is a non-GAAP financial measure as it excludes from net income interest expense, income tax expense and depreciation and amortization. The most directly comparable GAAP measure for EBITDA from Oilfield Services, Midstream and Other is Net Income from Oilfield Services, Midstream and Other. Information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time, as management is unable to forecast the excluded items for future periods and/or does not forecast the excluded items on a segment basis.

(3)

Adjusted Net Income Attributable to Noncontrolling Interest is a non-GAAP financial measure as it excludes unrealized gain or loss on derivative contracts and gain or loss on sale of assets. The most directly comparable GAAP measure for Adjusted Net Income Attributable to Noncontrolling Interest is Net Income Attributable to Noncontrolling Interest. Information to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure is not available at this time, as management is unable to forecast the excluded items for future periods.



The company is providing new guidance for 2012, which includes the following anticipated effects of acquiring Dynamic Offshore Resources, LLC ("Dynamic") (assuming the acquisition closes on April 30, 2012):

  • Increased Production by approximately 5.8 MMBoe, which is risk-adjusted for potential shut-ins during hurricane season;
  • Decreased Oil and Natural Gas Differentials as production from the Dynamic properties is expected to realize higher prices;
  • Increased per unit Lifting Cost due to higher costs associated with the operation of offshore properties, including insurance expenses;
  • Decreased per unit Production Taxes as there is a lower overall production tax burden associated with the Dynamic properties;
  • Increased per unit DD&A – oil and gas due to a higher depletion rate associated with the Dynamic properties;
  • Decreased per unit DD&A – other, G&A – cash, G&A – stock and Interest Expense due to increased production;
  • Increased EBITDA from Oilfield Services, Midstream and Other for revenues from production handling agreements associated with the Dynamic properties;
  • Increased Common Stock Shares Outstanding at end of period due to anticipated issuance of shares in conjunction with the Dynamic acquisition;
  • Increased Exploration and Production Capital Expenditures by $200 million for anticipated capital expenditures associated with the Dynamic properties.

Additionally, projected Land and Seismic Expenditures have increased to $145 million from $95 million as a result of planned infill leasing around the company's existing Mississippian acreage.

Non-GAAP Financial Measures

Operating cash flow, adjusted EBITDA, adjusted net (loss applicable) income available to common stockholders and PV-10 are non-GAAP financial measures.

The company defines operating cash flow as net cash provided by operating activities before changes in operating assets and liabilities. It defines EBITDA as net income before income tax expense (benefit), interest expense and depreciation, depletion and amortization. Adjusted EBITDA, as presented herein, is EBITDA excluding interest income, realized gains on out-of-period derivative contract settlements, non-cash realized losses on financing derivatives, (gain) loss on sale of assets, transaction costs, loss on extinguishment of debt, settlement for prior claims and other various non-cash items (including non-cash portion of noncontrolling interest, stock-based compensation, unrealized losses (gains) on derivative contracts, asset impairment, provision for doubtful accounts and inventory obsolescence).

Operating cash flow and adjusted EBITDA are supplemental financial measures used by the company's management and by securities analysts, investors, lenders, rating agencies and others who follow the industry as an indicator of the company's ability to internally fund exploration and development activities and to service or incur additional debt. The company also uses these measures because operating cash flow and adjusted EBITDA relate to the timing of cash receipts and disbursements that the company may not control and may not relate to the period in which the operating activities occurred. Further, operating cash flow and adjusted EBITDA allow the company to compare its operating performance and return on capital with those of other companies without regard to financing methods and capital structure. These measures should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Therefore, the company's adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

Management also uses the supplemental financial measure of adjusted net (loss applicable) income available to common stockholders, which excludes unrealized losses (gains) on derivative contracts, realized gains on out-of-period derivative contract settlements, non-cash realized losses on financing derivatives, transaction costs, loss on extinguishment of debt, settlement for prior claims and (gain) loss on sale of assets from (loss applicable) income available to common stockholders. Management uses this financial measure as an indicator of the company's operational trends and performance relative to other oil and natural gas companies and believes it is more comparable to earnings estimates provided by securities analysts. Adjusted net (loss applicable) income available to common stockholders is not a measure of financial performance under GAAP and should not be considered a substitute for (loss applicable) income available to common stockholders.

PV-10 represents the present value of estimated future cash inflows from proved oil and natural gas reserves, less future development and production costs, discounted at 10% per annum to reflect timing of future cash flows and using 12-month average prices. PV-10 differs from Standardized Measure because it does not include the effects of income taxes on future net revenues. Management uses PV-10 as an arbitrary reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities that are not dependent on the tax-paying status of the entity.

The tables below reconcile the most directly comparable GAAP financial measures to operating cash flow, EBITDA and adjusted EBITDA, adjusted net (loss applicable) income available to common stockholders and PV-10.

Reconciliation of Net Cash Provided by Operating Activities to Operating Cash Flow






Three Months Ended December 31,


Year Ended December 31,


2011


2010


2011


2010




(in thousands)











Net cash provided by operating activities

$ 142,659


$ 50,915


$ 475,485


$ 390,128

Add









Changes in operating assets and liabilities

10,145


21,367


59,796


20,030

Operating cash flow

$ 152,804


$ 72,282


$ 535,281


$ 410,158



Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA






Three Months Ended December 31,


Year Ended December 31,


2011


2010


2011


2010


(in thousands)









Net (loss) income attributable to SandRidge Energy, Inc.

$ (374,716)


$ (196,475)


$ 108,065


$ 190,565









Adjusted for









Income tax expense (benefit)

196


10,406


(5,817)


(446,680)


Interest expense(1)

60,274


60,856


243,818


239,343


Depreciation and amortization - other

13,712


14,212


53,630


50,776


Depreciation and depletion - oil and natural gas

89,816


77,501


326,614


275,335

EBITDA

(210,718)


(33,500)


726,310


309,339










Asset impairment

2,825


-


2,825


-


Provision for doubtful accounts

889


27


2,511


129


Inventory obsolescence

(105)


(200)


40


-


Interest income

(146)


(60)


(240)


(296)


Stock-based compensation

9,528


13,507


36,017


37,681


Unrealized losses (gains) on derivative contracts

426,132


148,240


(101,034)


283,604


Realized gains on out-of-period derivative










contract settlements

-


(3,847)


(45,627)


(23,202)


Non-cash realized losses on financing derivatives

1,721


-


6,591


-


Other non-cash expense

(2,672)


(243)


(2,012)


(371)


(Gain) loss on sale of assets

(896)


2,385


(2,044)


2,424


Transaction costs

823


1,941


5,354


17,375


Loss on extinguishment of debt

-


-


38,232


-


Settlement for prior claims

-


2,200


-


18,200


Non-cash portion of noncontrolling interest(2)

(52,179)


-


(13,059)


-









Adjusted EBITDA

$ 175,202


$ 130,450


$ 653,864


$ 644,883









(1)

Excludes unrealized (gain) loss on interest rate swaps of ($2.9) million and ($3.1) million for the three-month periods ended December 31, 2011 and 2010, respectively, and ($6.2) million and $8.4 million for the years ended December 31, 2011 and 2010, respectively.

(2)

Represents depreciation and depletion of ($7.4) million and ($15.9) million for the three-month period ended and year ended December 31, 2011, respectively, and unrealized (losses) gains on commodity derivative contracts of ($44.8) million and $2.8 million for the three-month period and year ended December 31, 2011, respectively, attributable to noncontrolling interests.




Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA


















Three Months Ended December 31,


Year Ended December 31,








2011


2010


2011


2010








(in thousands)















Net cash provided by operating activities



$ 142,659


$ 50,915


$ 475,485


$ 390,128















Changes in operating assets and liabilities



10,145


21,367


59,796


20,030

Interest expense(1)




60,274


60,856


243,818


239,343

Realized gains on out-of-period derivative











contract settlements




-


(3,847)


(45,627)


(23,202)

Transaction costs





823


1,941


5,354


17,375

Settlement for prior claims




-


2,200


-


18,200

Noncontrolling interest - SDT(2)




(14,793)


-


(41,165)


-

Noncontrolling interest - PER(2)




(17,728)


-


(26,078)


-

Noncontrolling interest - Other(2)



69


(898)


(250)


(4,445)

Other non-cash items




(6,247)


(2,084)


(17,469)


(12,546)















Adjusted EBITDA





$ 175,202


$ 130,450


$ 653,864


$ 644,883















(1)

Excludes unrealized (gain) loss on interest rate swaps of ($2.9) million and ($3.1) million for the three-month periods ended December 31, 2011 and 2010, respectively, and ($6.2) million and $8.4 million for the years ended December 31, 2011 and 2010, respectively.

(2)

Excludes depreciation and depletion of ($7.4) million and ($15.9) million for the three-month period ended and year ended December 31, 2011, respectively, and unrealized (losses) gains on commodity derivative contracts of ($44.8) million and $2.8 million for the three-month period and year ended December 31, 2011, respectively, attributable to noncontrolling interests.



Reconciliation of (Loss Applicable) Income Available to Common Stockholders to Adjusted Net (Loss Applicable) Income Available to Common Stockholders


















Three Months Ended December 31,


Year Ended December 31,








2011


2010


2011


2010








(in thousands, except per share data)





























(Loss applicable) income available to common stockholders


$ (388,597)


$ (208,023)


$ 52,482


$ 153,123















Tax (benefit) expense resulting from Arena acquisition


(2,152)


8,937


(8,399)


(447,500)

Asset impairment





2,825


-


2,825


-

Unrealized losses (gains) on derivative contracts(1)


381,328


148,240


(98,178)


283,604

Realized gains on out-of-period derivative











contract settlements




-


(3,847)


(45,627)


(23,202)

Non-cash realized losses on financing derivatives


1,721


-


6,591


-

(Gain) loss on sale of assets




(896)


2,385


(2,044)


2,424

Transaction costs





823


1,941


5,354


17,375

Loss on extinguishment of debt




-


-


38,232


-

Settlement for prior claims




-


2,200


-


18,200

Effect of income taxes




202


1,191


255


955

Adjusted net (loss applicable) income available to common










stockholders





(4,746)


(46,976)


(48,509)


4,979

Preferred stock dividends




13,881


11,548


55,583


37,442















Total adjusted net income (loss)




$ 9,135


$ (35,428)


$ 7,074


$ 42,421















Weighted average number of common shares outstanding










Basic





399,430


395,255


398,851


291,869


Diluted(2)





497,833


491,329


496,779


387,059















Total adjusted net (loss) income












Per share - basic




$ (0.01)


$ (0.12)


$ (0.12)


$ 0.02


Per share - diluted




$ 0.02


$ (0.07)


$ 0.01


$ 0.11















(1)

Excludes unrealized (losses) gains on commodity derivative contracts of ($44.8) million and $2.8 million forthe three-month period and year ended December 31, 2011, respectively, attributable to noncontrolling interests.

(2)

Weighted average fully diluted common shares outstanding for certain periods presented includes shares thatare considered antidilutive for calculating earnings per share in accordance with GAAP.



Reconciliation of Standardized Measure of Discounted Net Cash Flows to PV-10




















December 31,










2011


2010










(in millions)













Standardized measure of discounted net cash flows(1)




$ 5,216


$ 3,683

Present value of future net income tax expense discounted at 10%



1,660


826

PV-10(2)







$ 6,876


$ 4,509













(1) Includes approximately $933 million attributable to noncontrolling interests at December 31, 2011.

(2) Includes approximately $935 million attributable to noncontrolling interests at December 31, 2011.



Conference Call Information

The company will host a conference call to discuss these results on Friday, February 24, 2012 at 8:00 am CST. The telephone number to access the conference call from within the U.S. is 866-700-6979 and from outside the U.S. is 617-213-8836. The passcode for the call is 14163110. An audio replay of the call will be available from February 24, 2012 until 11:59 pm CST on March 23, 2012. The number to access the conference call replay from within the U.S. is 888-286-8010 and from outside the U.S. is 617-801-6888. The passcode for the replay is 58664616.

A live audio webcast of the conference call also will be available via SandRidge's website, www.sandridgeenergy.com, under Investor Relations/Events. The webcast will be archived for replay on the company's website for 30 days.

5th Annual Investor/Analyst Meeting

February 28, 2012 (Tuesday) – New York, NY at the Grand Hyatt New York, 109 East 42nd Street at 8:00 am EST.

Conference Participation

SandRidge Energy, Inc. will participate in the following upcoming events:

  • March 26-27, 2012 – Barclays 2012 High Yield Bond & Syndicated Loan Conference; Phoenix, AZ
  • March 26, 2012 – Howard Weil 40th Annual Energy Conference; New Orleans, LA
  • April 16-18, 2012 – IPAA 2012 OGIS; New York, NY

At 8:00 am Central Time on the day of each presentation, the corresponding slides and any webcast information will be accessible on the Investor Relations portion of the company's website at www.sandridgeenergy.com. Please check the website for updates regularly as this schedule is subject to change. Also, please note that SandRidge Energy, Inc. intends for its website to be used as a reliable source of information for all future events in which it may participate as well as updated presentations regarding the company. Slides and webcasts (where applicable) will be archived and available for at least 30 days after each use or presentation.

First Quarter 2012 Earnings Release and Conference Call

May 3, 2012 (Thursday) – Earnings press release after market close
May 4, 2012 (Friday) – Earnings conference call at 8:00 am CDT

SandRidge Energy, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)
















Three Months Ended









December 31,


Year Ended December 31,







2011


2010


2011


2010







(Unaudited)





Revenues











Oil and natural gas

$ 329,288


$ 245,185


$ 1,226,794


$ 774,763


Drilling and services

28,180


13,630


103,298


28,543


Midstream and marketing

13,027


26,250


66,690


100,118


Other

3,343


8,004


18,431


28,312




Total revenues

373,838


293,069


1,415,213


931,736














Expenses











Production

80,506


65,496


322,877


237,863


Production taxes

12,459


10,024


46,069


29,170


Drilling and services

16,346


9,948


65,654


22,368


Midstream and marketing

13,227


24,085


66,007


90,149


Depreciation and depletion - oil and natural gas

89,816


77,501


326,614


275,335


Depreciation and amortization - other

13,712


14,212


53,630


50,776


Impairment

2,825


-


2,825


-


General and administrative

40,279


52,146


148,643


179,565


Loss (gain) on derivative contracts

445,021


165,250


(44,075)


50,872


(Gain) loss on sale of assets

(896)


2,385


(2,044)


2,424




Total expenses

713,295


421,047


986,200


938,522


(Loss) income from operations

(339,457)


(127,978)


429,013


(6,786)














Other income (expense)









Interest income

146


60


240


296


Interest expense

(57,401)


(57,749)


(237,572)


(247,738)


Loss on extinguishment of debt

-


-


(38,232)


-


Other income, net

2,460


496


3,122


2,558




Total other expense

(54,795)


(57,193)


(272,442)


(244,884)

(Loss) income before income taxes

(394,252)


(185,171)


156,571


(251,670)

Income tax expense (benefit)

196


10,406


(5,817)


(446,680)

Net (loss) income

(394,448)


(195,577)


162,388


195,010

Less: net (loss) income attributable to noncontrolling interest

(19,732)


898


54,323


4,445

Net (loss) income attributable to SandRidge Energy, Inc.

(374,716)


(196,475)


108,065


190,565

Preferred stock dividends

13,881


11,548


55,583


37,442


(Loss applicable) income available to SandRidge Energy, Inc.










common stockholders

$ (388,597)


$ (208,023)


$ 52,482


$ 153,123














Earnings (loss) per share









Basic

$ (0.97)


$ (0.53)


$ 0.13


$ 0.52


Diluted



$ (0.97)


$ (0.53)


$ 0.13


$ 0.52














Weighted average number of common shares outstanding









Basic



399,430


395,255


398,851


291,869


Diluted



399,430


395,255


406,645


315,349



SandRidge Energy, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except per share data)














December 31,







2011


2010










ASSETS


Current assets







Cash and cash equivalents

$ 207,681


$ 5,863

Accounts receivable, net

206,336


146,118

Derivative contracts

4,066


5,028

Inventories

6,903


3,945

Other current assets

16,854


14,636



Total current assets

441,840


175,590










Oil and natural gas properties, using full cost method of accounting






Proved (includes development and project costs excluded from amortization of $231.3 million and $186.5 million)

8,969,296


8,159,924


Unproved

689,393


547,953


Less: accumulated depreciation, depletion and impairment

(4,791,534)


(4,483,736)







4,867,155


4,224,141










Other property, plant and equipment, net

522,269


509,724

Restricted deposits

27,912


27,886

Derivative contracts




26,415


-

Goodwill





235,396


234,356

Other assets

98,622


59,751



Total assets

$ 6,219,609


$ 5,231,448










LIABILITIES AND EQUITY




Current liabilities







Current maturities of long-term debt

$ 1,051


$ 7,293

Accounts payable and accrued expenses



506,784


376,922

Billings and estimated contract loss in excess of costs incurred


43,320


31,474

Derivative contracts

115,435


103,409

Asset retirement obligation

32,906


25,360



Total current liabilities

699,496


544,458










Long-term debt

2,813,125


2,901,793

Derivative contracts

49,695


124,173

Asset retirement obligation

95,210


94,517

Other long-term obligations

13,133


19,024



Total liabilities

3,670,659


3,683,965










Commitments and contingencies















Equity








SandRidge Energy, Inc. stockholders' equity






Preferred stock, $0.001 par value, 50,000 shares authorized





8.5% Convertible perpetual preferred stock; 2,650 shares issued and outstanding





at December 31, 2011 and December 31, 2010; aggregate liquidation preference





of $265,000

3


3


6.0% Convertible perpetual preferred stock; 2,000 shares issued and outstanding





at December 31, 2011 and December 31, 2010; aggregate liquidation preference





of $200,000




2


2


7.0% Convertible perpetual preferred stock; 3,000 shares issued and outstanding





at December 31, 2011 and December 31, 2010; aggregate liquidation preference





of $300,000




3


3

Common stock, $0.001 par value, 800,000 shares authorized; 412,827 issued and





411,953 outstanding at December 31, 2011 and 406,830 issued and 406,360





outstanding at December 31, 2010

399


398

Additional paid-in capital

4,568,856


4,528,912

Treasury stock, at cost

(6,158)


(3,547)

Accumulated deficit

(2,937,094)


(2,989,576)



Total SandRidge Energy, Inc. stockholders' equity

1,626,011


1,536,195

Noncontrolling interest

922,939


11,288



Total equity




2,548,950


1,547,483



Total liabilities and equity

$ 6,219,609


$ 5,231,448



SandRidge Energy, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)














Year Ended December 31,







2011


2010








CASH FLOWS FROM OPERATING ACTIVITIES





Net income

$ 162,388


$ 195,010


Adjustments to reconcile net income to net cash provided by operating activities







Provision for doubtful accounts



2,511


129




Depreciation, depletion and amortization

380,244


326,111




Impairment



2,825


-




Debt issuance costs amortization

11,372


11,006




Discount amortization on long-term debt


2,383


2,153




Loss on extinguishment of debt



38,232


-




Deferred income taxes



(6,986)


(447,500)




Unrealized (gain) loss on derivative contracts

(101,034)


283,604




Realized loss on financing derivatives


6,591


-




(Gain) loss on sale of assets

(2,044)


2,424




Investment loss (income)

115


(460)




Stock-based compensation

38,684


37,681




Changes in operating assets and liabilities

(59,796)


(20,030)


Net cash provided by operating activities

475,485


390,128






CASH FLOWS FROM INVESTING ACTIVITIES







Capital expenditures for property, plant and equipment(1)

(1,743,637)


(1,044,371)




Acquisition of assets, net of cash received of $0 and $39,518, respectively

(34,628)


(138,428)




Proceeds from sale of assets

859,405


204,951




Deposit received on pending asset sale

-


10,000




Refunds of restricted deposits



-


5,095


Net cash used in investing activities

(918,860)


(962,753)






CASH FLOWS FROM FINANCING ACTIVITIES







Proceeds from borrowings

2,033,000


2,117,914




Repayments of borrowings

(2,130,293)


(1,789,919)




Premium on debt redemption



(30,338)


-




Debt issuance costs



(20,326)


(12,540)




Proceeds from issuance of royalty trust units

917,528


-




Distributions to royalty trust unitholders


(57,449)


-




Noncontrolling interest distributions

(2,751)


(3,515)




Noncontrolling interest contributions

-


306




Proceeds from issuance of convertible perpetual preferred stock, net

(231)


290,704




Stock-based compensation excess tax benefit


53


15




Purchase of treasury stock

(13,796)


(7,169)




Dividends paid - preferred

(56,742)


(28,525)




Cash received on financing derivatives


6,538


3,356


Net cash provided by financing activities

645,193


570,627






NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

201,818


(1,998)










CASH AND CASH EQUIVALENTS, beginning of year

5,863


7,861

CASH AND CASH EQUIVALENTS, end of year

$ 207,681


$ 5,863










Supplemental Disclosure of Cash Flow Information






Cash paid for interest, net of amounts capitalized

$ 224,127


$ 210,112


Cash paid (received) for income taxes

$ 2,083


$ (1,508)

Supplemental Disclosure of Noncash Investing and Financing Activities






Change in accrued capital expenditures(1)

$ 89,388


$ 85,282


Convertible perpetual preferred stock dividends payable

$ 16,572


$ 17,363


Adjustment to oil and natural gas properties for estimated contract loss


$ 25,000


$ 105,000


Common stock issued in connection with acquisition


$ -


$ 1,246,334


Stock issued to satisfy settlement



$ -


$ 12,200










(1) Capital expenditures on an accrual basis were $1,833,025 and $1,129,653 for the years

ended December 31, 2011 and 2010, respectively.



For further information, please contact:

Kevin R. White
Senior Vice President
SandRidge Energy, Inc.
123 Robert S. Kerr Avenue
Oklahoma City, OK 73102-6406
(405) 429-5515

Cautionary Note to Investors - This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, the information appearing under the heading "Operational Guidance." These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes. The forward-looking statements include projections and estimates of leverage, net income, drilling plans, drilling locations, funding, oil and natural gas production, derivative transactions, shares outstanding, pricing differentials, operating costs and capital spending, tax rates, descriptions of our development plans, and the timing and effect of closing the company's acquisition of Dynamic Offshore Resources, LLC. We have based these forward-looking statements on our current expectations and assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including the volatility of oil and natural gas prices, our success in discovering, estimating, developing and replacing oil and natural gas reserves, actual decline curves and the actual effect of adding compression to gas wells, the availability and terms of capital, the ability of counterparties to transactions with us to meet their obligations, our timely execution of hedge transactions, credit conditions of global capital markets, changes in economic conditions, the amount and timing of future development costs, the availability and demand for alternative energy sources, regulatory changes, including those related to carbon dioxide and greenhouse gas emissions, and other factors, many of which are beyond our control. We refer you to the discussion of risk factors in (a) Part I, Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2010, (b) comparable "risk factors" sections of our Quarterly Reports on Form 10-Q filed thereafter, and (c) Part I, Item 1A – "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2011. All of the forward-looking statements made in this press release are qualified by these cautionary statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on our company or our business or operations. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements.

SandRidge Energy, Inc. is an oil and natural gas company headquartered in Oklahoma City, Oklahoma with its principal focus on exploration and production. SandRidge and its subsidiaries also own and operate gas gathering and processing facilities and CO2 treating and transportation facilities and conduct marketing and tertiary oil recovery operations. In addition, Lariat Services, Inc., a wholly-owned subsidiary of SandRidge, owns and operates a drilling rig and related oil field services business. SandRidge focuses its exploration and production activities in the Mid-Continent, Permian Basin, Gulf of Mexico, West Texas Overthrust and Gulf Coast. SandRidge's internet address is www.sandridgeenergy.com.