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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s income tax benefit consisted of the following components for the years ended December 31 (in thousands):
| Year Ended December 31,
| 2012 |  | 2011 |  | 2010
Current |  |  |  |  |
Federal | $ | (72 | ) |  | $ | 618 |  |  | $ | (732 | )
State | (2 | ) |  | 551 |  |  | 1,552 |
| (74 | ) |  | 1,169 |  |  | 820 |
Deferred |  |  |  |  |
Federal | (97,410 | ) |  | (6,447 | ) |  | (434,117 | )
State | (2,878 | ) |  | (539 | ) |  | (13,383 | )
| (100,288 | ) |  | (6,986 | ) |  | (447,500 | )
Total benefit | (100,362 | ) |  | (5,817 | ) |  | (446,680 | )
Less: income tax provision attributable to noncontrolling interest | 304 |  |  | 109 |  |  | 115 |
Total benefit attributable to SandRidge Energy, Inc. | $ | (100,666 | ) |  | $ | (5,926 | ) |  | $ | (446,795 | )
A reconciliation of the provision (benefit) for income taxes at the statutory federal tax rate to the Company’s actual income tax benefit is as follows for the years ended December 31 (in thousands):
| 2012 |  | 2011 |  | 2010
Computed at federal statutory rate | $ | 51,173 |  |  | $ | 54,800 |  |  | $ | (88,085 | )
State taxes, net of federal benefit | 8,913 |  |  | 5,231 |  |  | 1,659 |
Non-deductible expenses | 7,247 |  |  | 6,394 |  |  | 5,507 |
Stock-based compensation | 7,172 |  |  | 8,229 |  |  | 9,940 |
Net effects of consolidating the non-controlling interests’ tax provisions | (37,047 | ) |  | (19,120 | ) |  | (1,556 | )
Bargain purchase gain | (42,944 | ) |  | — |  |  | — |
Impairment of non-deductible goodwill | 71,885 |  |  | — |  |  | — |
Other | (348 | ) |  | (4,539 | ) |  | 3,576 |
Change in valuation allowance | (66,429 | ) |  | (51,631 | ) |  | 69,664 |
Valuation allowance release | (100,288 | ) |  | (5,290 | ) |  | (447,500 | )
Total income tax benefit | $ | (100,666 | ) |  | $ | (5,926 | ) |  | $ | (446,795 | )
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 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 December 31, 2008, the Company determined it was appropriate to record a full valuation allowance against its net deferred tax asset. During the year ended December 31, 2012, the Company recorded a net deferred tax liability of $100.3 million associated with the Dynamic Acquisition and released a corresponding portion of the previously recorded valuation allowance. In the second quarter of 2011, the Company completed its valuation of assets acquired and liabilities assumed related to the Arena Acquisition in order to finalize the purchase price allocation. In connection therewith, the Company adjusted the previously recorded net deferred tax liability associated with the Arena Acquisition by recording an additional net deferred tax liability of $7.0 million and released a corresponding portion of its previously recorded valuation allowance. This release of valuation allowance is in addition to the $447.5 million released in 2010. The partial releases of the valuation allowance in 2012, 2011 and 2010 were based on management’s assessment that it is more likely than not that the Company will realize a benefit from more of its existing deferred tax assets as the Dynamic and Arena deferred tax liabilities are available to offset the reversal of the Company’s deferred tax assets. Although the Company continued to have a full valuation allowance against its net deferred tax asset at December 31, 2012, the partial releases of the valuation allowance resulted in a deferred tax benefit in 2012, 2011, and 2010. The Company continues to closely monitor all available evidence in making its determination for the need to maintain a valuation allowance against its net deferred tax asset. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| December 31,
| 2012 |  | 2011
Deferred tax liabilities |  |  |
Investments(1) | $ | 334,331 |  |  | $ | 233,819 |
Property, plant and equipment | 198,424 |  |  | — |
Derivative contracts | 24,819 |  |  | — |
Total deferred tax liabilities | 557,574 |  |  | 233,819 |
Deferred tax assets |  |  |
Property, plant and equipment | — |  |  | 289,148 |
Derivative contracts | — |  |  | 39,268 |
Allowance for doubtful accounts | 17,713 |  |  | 11,725 |
Net operating loss carryforwards | 859,328 |  |  | 556,768 |
Litigation settlement | 7,200 |  |  | — |
Compensation and benefits | 13,935 |  |  | 14,053 |
Alternative minimum tax credits and other carryforwards | 42,242 |  |  | 39,979 |
Asset retirement obligations | 172,229 |  |  | 45,762 |
Other | 2,193 |  |  | 2,721 |
Total deferred tax assets | 1,114,840 |  |  | 999,424 |
Valuation allowance | (557,266 | ) |  | (765,605 | )
Net deferred tax liability | $ | — |  |  | $ | — |
____________________
(1) | Includes the Company’s deferred tax liability resulting from its investment in the Royalty Trusts. See Note 4 for further discussion of the Royalty Trusts.
As of December 31, 2012, the Company had approximately $9.2 million of alternative minimum tax credits available that do not expire. In addition, the Company had approximately $2.3 billion of federal net operating loss carryovers that expire during the years 2023 through 2032. Excess tax benefits of approximately $16.7 million associated with the vesting of restricted stock awards are included in the federal net operating loss carryovers, but will not be recognized as a tax benefit recorded to additional paid-in capital until realized. IRC Section 382 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 Section 382 on December 31, 2008. The ownership change subjected certain of the Company’s tax attributes, including $298.4 million of federal net operating loss carryforwards, to the IRC Section 382 limitation. The Company experienced a subsequent ownership change within the meaning of IRC Section 382 on July 16, 2010 as a result of the Arena Acquisition. The subsequent ownership change resulted in a more restrictive limitation on certain of the Company’s tax attributes than with the December 31, 2008 ownership change. The more restrictive limitation applies not only to the $298.4 million of federal net operating loss carryforwards and certain other tax attributes existing at December 31, 2008, but also to net operating losses of approximately $627.8 million and certain other tax attributes generated in periods following the December 31, 2008 ownership change. The subsequent limitation could result in a material amount of existing loss carryforwards expiring unused. Arena also experienced an ownership change on July 16, 2010 as a result of its acquisition by the Company. This ownership change resulted in a limitation on Arena’s net operating loss carryforwards of $119.9 million available to the Company. None of the limitations discussed above resulted in a current federal tax liability at December 31, 2012 or 2011. At December 31, 2012 and 2011, respectively, the Company had a liability of approximately $1.3 million and $1.8 million for unrecognized tax benefits. If recognized, approximately $0.9 million, net of federal tax expense, would be recorded as a reduction of income tax expense and would affect the effective tax rate. Consistent with its policy to record interest and penalties on income taxes as a component of the income tax provision, the Company has included approximately $0.03 million, $0.11 million and $0.07 million of accrued gross interest with respect to unrecognized tax benefits in its consolidated statement of operations during the years ended December 31, 2012, 2011 and 2010, respectively. The Company had a corresponding accrued liability of $0.21 million and $0.18 million for interest and penalties relating to uncertain tax positions at December 31, 2012 and 2011, respectively. The Company’s only taxing jurisdiction is the United States (federal and state). The Company’s tax years 2009 to present remain open for federal examination. Additionally, various tax years remain open beginning with tax year 2003 due to federal net operating loss carryforwards. The number of years open for state tax audits varies, depending on the state, but are generally from three to five years. Currently, several examinations are in progress. The Company does not anticipate that any federal or state audits will have a significant impact on the Company’s results of operations or financial position. As a result of ongoing negotiations pertaining to the Company’s current state audits, it is reasonably possible that the Company’s gross unrecognized tax benefits balance may decrease within the next twelve months by approximately $1.0 million.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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