24. 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 guaranteed, on a full, unconditional and unsecured basis, the Company’s Senior Floating Rate Notes, 8.75% Senior Notes and 7.5% Senior Notes as of December 31, 2011. Prior to their purchase and redemption, the 8.625% Senior Notes were also jointly and severally guaranteed, on a full, unconditional and unsecured basis by the wholly owned subsidiary guarantors. 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; (iv) are structurally subordinated to all debt and other obligations of the subsidiaries of the guarantors who are not themselves guarantors; and (v) are only released under certain customary circumstances. The Company’s subsidiary guarantors guarantee payments of principal and interest under the Company’s registered notes. 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 May 1, 2009, SandRidge Energy, Inc., the parent company, 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., its wholly owned subsidiary guarantors and its non-guarantor subsidiaries, prepared on the equity basis of accounting. The non-guarantor subsidiaries, including four variable interest entities, are included in the non-guarantors column in the tables below. 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


	December 31, 2011
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	204,015	$	437	$	3,229	$	—		$	207,681
Accounts receivable, net		1,217,096		247,824		602,541		(1,861,125	)		206,336
Derivative contracts		—		2,567		10,368		(8,869	)		4,066
Other current assets		—		16,063		7,694		—			23,757

Total current assets		1,421,111		266,891		623,832		(1,869,994	)		441,840
Property, plant and equipment, net		—		4,462,846		926,578		—			5,389,424
Investment in subsidiaries		3,609,244		90,920		—		(3,700,164	)		—
Derivative contracts		—		20,746		35,774		(30,105	)		26,415
Goodwill		—		235,396		—		—			235,396
Other assets		51,724		74,760		50		—			126,534

Total assets	$	5,082,079	$	5,151,559	$	1,586,234	$	(5,600,263	)	$	6,219,609

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	643,376	$	1,166,029	$	556,165	$	(1,858,786	)	$	506,784
Derivative contracts		8,475		115,829		—		(8,869	)		115,435
Asset retirement obligation		—		32,906		—		—			32,906
Other current liabilities		—		43,320		1,051		—			44,371

Total current liabilities		651,851		1,358,084		557,216		(1,867,655	)		699,496
Long-term debt		2,798,147		—		14,978		—			2,813,125
Derivative contracts		1,973		77,827		—		(30,105	)		49,695
Asset retirement obligation		—		95,029		181		—			95,210
Other long-term obligations		1,758		11,375		—		—			13,133

Total liabilities		3,453,729		1,542,315		572,375		(1,897,760	)		3,670,659

Equity
SandRidge Energy, Inc. stockholders’ equity		1,628,350		3,609,244		1,013,859		(4,625,442	)		1,626,011
Noncontrolling interest		—		—		—		922,939			922,939

Total equity		1,628,350		3,609,244		1,013,859		(3,702,503	)		2,548,950

Total liabilities and equity	$	5,082,079	$	5,151,559	$	1,586,234	$	(5,600,263	)	$	6,219,609


	December 31, 2010
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	1,441	$	564	$	3,858	$	—		$	5,863
Accounts receivable, net		1,224,500		141,530		408,015		(1,627,927	)		146,118
Derivative contracts		—		5,028		—		—			5,028
Other current assets		—		13,890		4,691		—			18,581

Total current assets		1,225,941		161,012		416,564		(1,627,927	)		175,590
Property, plant and equipment, net		—		4,635,747		98,118		—			4,733,865
Investment in subsidiaries		3,230,067		58,723		—		(3,288,790	)		—
Goodwill		—		234,356		—		—			234,356
Other assets		50,637		37,000		—		—			87,637

Total assets	$	4,506,645	$	5,126,838	$	514,682	$	(4,916,717	)	$	5,231,448

LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	66,539	$	1,510,827	$	427,483	$	(1,627,927	)	$	376,922
Derivative contracts		9,007		94,402		—		—			103,409
Asset retirement obligation		—		25,360		—		—			25,360
Other current liabilities		—		37,776		991		—			38,767

Total current liabilities		75,546		1,668,365		428,474		(1,627,927	)		544,458
Long-term debt		2,885,764		—		16,029		—			2,901,793
Derivative contracts		7,687		116,486		—		—			124,173
Asset retirement obligation		—		94,350		167		—			94,517
Other long-term obligations		1,454		17,570		—		—			19,024

Total liabilities		2,970,451		1,896,771		444,670		(1,627,927	)		3,683,965

Equity
SandRidge Energy, Inc. stockholders’ equity		1,536,194		3,230,067		70,012		(3,300,078	)		1,536,195
Noncontrolling interest		—		—		—		11,288			11,288

Total equity		1,536,194		3,230,067		70,012		(3,288,790	)		1,547,483

Total liabilities and equity	$	4,506,645	$	5,126,838	$	514,682	$	(4,916,717	)	$	5,231,448

Condensed Consolidating Statements of Operations


	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Year Ended December 31, 2011
Total revenues	$	—		$	1,285,854		$	268,427		$	(139,068	)	$	1,415,213
Expenses
Direct operating expenses		—			475,578			158,697			(135,712	)		498,563
General and administrative		416			144,574			4,670			(1,017	)		148,643
Depreciation, depletion, amortization and impairment		—			351,708			31,361			—			383,069
Gain on derivative contracts		—			(33,749	)		(10,326	)		—			(44,075	)

Total expenses		416			938,111			184,402			(136,729	)		986,200

(Loss) income from operations		(416	)		347,743			84,025			(2,339	)		429,013
Equity earnings from subsidiaries		379,177			28,751			—			(407,928	)		—
Interest expense, net		(236,109	)		(197	)		(1,026	)		—			(237,332	)
Loss on extinguishment of debt		(38,232	)		—			—			—			(38,232	)
Other income, net		—			2,880			242			—			3,122

Income before income taxes		104,420			379,177			83,241			(410,267	)		156,571
Income tax (benefit) expense		(5,984	)		—			167			—			(5,817	)

Net income		110,404			379,177			83,074			(410,267	)		162,388
Less: net income attributable to noncontrolling interest		—			—			—			54,323			54,323

Net income attributable to SandRidge Energy, Inc.	$	110,404		$	379,177		$	83,074		$	(464,590	)	$	108,065

Year Ended December 31, 2010
Total revenues	$	—		$	894,621		$	138,685		$	(101,570	)	$	931,736
Expenses
Direct operating expenses		—			366,947			115,912			(100,885	)		381,974
General and administrative		882			176,075			3,293			(685	)		179,565
Depreciation, depletion, amortization and impairment		—			319,297			6,814			—			326,111
Loss on derivative contracts		—			50,872			—			—			50,872

Total expenses		882			913,191			126,019			(101,570	)		938,522

(Loss) income from operations		(882	)		(18,570	)		12,666			—			(6,786	)
Equity earnings from subsidiaries		(10,253	)		7,123			—			3,130			—
Interest expense, net		(245,284	)		(1,073	)		(1,085	)		—			(247,442	)
Other income, net		74			2,267			217			—			2,558

(Loss) income before income taxes		(256,345	)		(10,253	)		11,798			3,130			(251,670	)
Income tax (benefit) expense		(446,910	)		—			230			—			(446,680	)

Net income (loss)		190,565			(10,253	)		11,568			3,130			195,010
Less: net income attributable to noncontrolling interest		—			—			—			4,445			4,445

Net income (loss) attributable to SandRidge Energy, Inc.	$	190,565		$	(10,253	)	$	11,568		$	(1,315	)	$	190,565


	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Year Ended December 31, 2009
Total revenues	$	58,273		$	498,032		$	172,585		$	(137,846	)	$	591,044
Expenses
Direct operating expenses		27,737			262,778			156,032			(137,250	)		309,297
General and administrative		15,645			82,691			2,516			(596	)		100,256
Depreciation, depletion, amortization and impairment		627,478			1,295,414			11,150			—			1,934,042
(Gain) loss on derivative contracts		(237,351	)		89,824			—			—			(147,527	)

Total expenses		433,509			1,730,707			169,698			(137,846	)		2,196,068

(Loss) income from operations		(375,236	)		(1,232,675	)		2,887			—			(1,605,024	)
Equity earnings from subsidiaries		(1,227,164	)		1,834			—			1,225,330			—
Interest expense, net		(182,009	)		(2,167	)		(1,140	)		—			(185,316	)
Other income, net		103			5,844			2,345			—			8,292

(Loss) income before income taxes		(1,784,306	)		(1,227,164	)		4,092			1,225,330			(1,782,048	)
Income tax benefit		(8,716	)		—			—			—			(8,716	)

Net (loss) income		(1,775,590	)		(1,227,164	)		4,092			1,225,330			(1,773,332	)
Less: net income attributable to noncontrolling interest		—			—			—			2,258			2,258

Net (loss) income attributable to SandRidge Energy, Inc.	$	(1,775,590	)	$	(1,227,164	)	$	4,092		$	1,223,072		$	(1,775,590	)

Condensed Consolidating Statements of Cash Flows


	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Year Ended December 31, 2011
Net cash provided by (used in) operating activities	$	413,954		$	(32,534	)	$	106,483		$	(12,418	)	$	475,485
Net cash provided by (used in) investing activities		—			32,171			(1,015,141	)		64,110			(918,860	)
Net cash (used in) provided by financing activities		(211,380	)		236			908,029			(51,692	)		645,193

Net increase (decrease) in cash and cash equivalents		202,574			(127	)		(629	)		—			201,818
Cash and cash equivalents at beginning of year		1,441			564			3,858			—			5,863

Cash and cash equivalents at end of year	$	204,015		$	437		$	3,229		$	—		$	207,681


Year Ended December 31, 2010
Net cash (used in) provided by operating activities	$	(442,955	)	$	823,534		$	9,549		$	—		$	390,128
Net cash used in investing activities		(138,428	)		(821,609	)		(6,231	)		3,515			(962,753	)
Net cash provided by (used in) financing activities		582,485			(4,202	)		(4,141	)		(3,515	)		570,627

Net increase (decrease) in cash and cash equivalents		1,102			(2,277	)		(823	)		—			(1,998	)
Cash and cash equivalents at beginning of year		339			2,841			4,681			—			7,861

Cash and cash equivalents at end of year	$	1,441		$	564		$	3,858		$	—		$	5,863


Year Ended December 31, 2009
Net cash (used in) provided by operating activities	$	(717,969	)	$	1,008,040		$	21,488		$	—		$	311,559
Net cash used in investing activities		(240,992	)		(990,148	)		(15,945	)		26			(1,247,059	)
Net cash provided by (used in) financing activities		959,282			(15,643	)		(888	)		(26	)		942,725

Net increase in cash and cash equivalents		321			2,249			4,655			—			7,225
Cash and cash equivalents at beginning of year		18			592			26			—			636

Cash and cash equivalents at end of year	$	339		$	2,841		$	4,681		$	—		$	7,861