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Acquisitions and Divestitures (Tables) | 12 Months Ended
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Dec. 31, 2012
Arena Acquisition |
Business Acquisitions and Dispositions [Line Items] |
Values of Assets Acquired and Liabilities Assumed | In the second quarter of 2011, the Company completed its valuation of assets acquired and liabilities assumed related to the Arena Acquisition, which are included in the following table (in thousands):
Current assets | $ | 83,563 |
Oil and natural gas properties(1) | 1,587,630 |
Other property, plant and equipment | 5,963 |
Long-term deferred tax assets | 48,997 |
Other long-term assets | 16,181 |
Goodwill(2) | 235,396 |
Total assets acquired | 1,977,730 |
Current liabilities | 38,964 |
Long-term deferred tax liability(2) | 503,483 |
Other long-term liabilities | 8,851 |
Total liabilities assumed | 551,298 |
Net assets acquired | $ | 1,426,432 |
____________________
(1) | Weighted average commodity prices utilized in the determination of the fair value of oil and natural gas properties were $105.58 per barrel of oil and $8.56 per Mcf of natural gas, after adjustment for transportation fees and regional price differentials. The prices utilized were based upon forward commodity strip prices, as of July 16, 2010, for the first four years and escalated for inflation at a rate of 2.5% annually beginning with the fifth year through the end of production, which was more than 50 years. These assumptions represent Level 3 inputs. Approximately 91.0% of the fair value allocated to oil and natural gas properties is attributed to oil reserves.
(2) | The Company received carryover tax basis in Arena’s assets and liabilities because the merger was not a taxable transaction under the Internal Revenue Code (“IRC”). Based upon the final purchase price allocation, a step-up in basis related to the property acquired from Arena resulted in a net deferred tax liability of approximately $454.5 million, which in turn contributed to an excess of the consideration transferred to acquire Arena over the estimated fair value on the acquisition date of the net assets acquired, or goodwill.
Unaudited Pro Forma Results of Operations | Future results may vary significantly from the results reflected in this pro forma financial information because of future events and transactions, as well as other factors.
| Year Ended December 31, 2010
| (In thousands, except per share data)
| (Unaudited)
Revenues | $ | 1,046,569 |
Income available to SandRidge Energy, Inc. common stockholders(1) | $ | 171,654 |
Earnings per common share |
Basic | $ | 0.44 |
Diluted | $ | 0.43 |
____________________
(1) | Includes a $454.5 million reduction in tax expense related to the release of a portion of the Company’s valuation allowance on existing deferred tax assets.
Dynamic Acquisition |
Business Acquisitions and Dispositions [Line Items] |
Values of Assets Acquired and Liabilities Assumed | The following table summarizes the estimated values of assets acquired and liabilities assumed in connection with the Dynamic Acquisition (in thousands, except stock price):
Consideration(1) |
Shares of SandRidge common stock issued | 73,962 |
SandRidge common stock price | $ | 7.33 |
Fair value of common stock issued | 542,138 |
Cash consideration(2) | 680,000 |
Cash balance adjustment(3) | 13,091 |
Total purchase price | $ | 1,235,229 |
Estimated Fair Value of Liabilities Assumed |
Current liabilities | $ | 129,363 |
Asset retirement obligation(4) | 315,922 |
Long-term deferred tax liability(5) | 100,288 |
Other non-current liabilities | 4,469 |
Amount attributable to liabilities assumed | 550,042 |
Total purchase price plus liabilities assumed | 1,785,271 |
Estimated Fair Value of Assets Acquired |
Current assets | 142,027 |
Oil and natural gas properties(6) | 1,746,753 |
Other property, plant and equipment | 1,296 |
Other non-current assets | 17,891 |
Amount attributable to assets acquired | 1,907,967 |
Bargain purchase gain(7) | $ | (122,696 | )
____________________
(1) | Consideration paid by the Company consisted of 74 million shares of SandRidge common stock and cash of approximately $680.0 million. The value of the stock consideration is based upon the closing price of $7.33 per share of SandRidge common stock on April 17, 2012, which was the closing date of the Dynamic Acquisition. Under the acquisition method of accounting, the purchase price is determined based on the total cash paid and the fair value of SandRidge common stock issued on the acquisition date.
(2) | Cash consideration paid, including amounts paid to retire Dynamic’s long-term debt, was funded through a portion of the net proceeds from the Company’s issuance of $750.0 million of unsecured 8.125% Senior Notes due 2022.
(3) | In accordance with the acquisition agreement, the Company remitted to the seller a cash payment equal to Dynamic’s average daily cash balance for the 30-day period ending on the second day prior to closing. This resulted in an additional cash payment by SandRidge of $13.1 million at closing.
(4) | The estimated fair value of the acquired asset retirement obligation was determined using the Company’s credit adjusted risk-free rate.
(5) | The net deferred tax liability is primarily a result of the difference between the estimated fair value and the Company’s expected tax basis in the assets acquired and liabilities assumed. The net deferred tax liability also includes the effects of deferred tax assets associated with net operating losses and other tax attributes acquired as a result of the Dynamic Acquisition.
(6) | The fair value of oil and natural gas properties acquired was estimated using a discounted cash flow model, with future cash flows estimated based upon projections of oil and natural gas reserve quantities and weighted average oil and natural gas prices of $113.62 per barrel of oil and $3.83 per Mcf of natural gas, after adjustment for transportation fees and regional price differentials. The commodity prices utilized were based upon commodity strip prices as of April 17, 2012 for the first four years and escalated for inflation at a rate of 2.0% annually beginning with the fifth year through the end of production. Future cash flows were discounted using an industry weighted average cost of capital rate.
(7) | The bargain purchase gain results from the excess of the fair value of net assets acquired over consideration paid and, as additional information becomes available, is subject to adjustment. To validate the estimated bargain purchase gain on this acquisition, the Company reviewed its initial identification and valuation of assets acquired and liabilities assumed. The Company believes it was able to acquire Dynamic for less than the estimated fair value of its net assets due to their offshore location resulting in less bidding competition.
Unaudited Pro Forma Results of Operations | Future results may vary significantly from the results reflected in this pro forma financial information because of future events and transactions, as well as other factors.
| Year Ended December 31,
| 2012(1) |  | 2011(2)
| (in thousands, except per share data)
| (Unaudited)
Revenues | $ | 2,908,899 |  |  | $ | 1,932,945 |
Net income | $ | 39,563 |  |  | $ | 509,644 |
(Loss applicable) income available to SandRidge Energy, Inc. common stockholders | $ | (120,962 | ) |  | $ | 399,278 |
(Loss) earnings per common share |  |  |
Basic | $ | (0.25 | ) |  | $ | 0.84 |
Diluted | $ | (0.25 | ) |  | $ | 0.80 |
____________________
(1) | Pro forma net income, income available to SandRidge Energy, Inc. common stockholders and earnings per common share exclude a $122.7 million bargain purchase gain, a $100.3 million partial valuation allowance release included in income tax benefit, $10.9 million of fees incurred to secure financing for the Dynamic Acquisition included in interest expense and $13.0 million of transaction costs incurred and included in general and administrative expense in the accompanying consolidated statements of operations for the year ended December 31, 2012.
(2) | Pro forma net income, income applicable to SandRidge Energy, Inc. common stockholders and earnings per common share include a $122.7 million bargain purchase gain, a $100.3 million partial valuation allowance release, $10.9 million of fees incurred to secure financing for the Dynamic Acquisition and $13.0 million of estimated transaction costs.
Gulf of Mexico Properties Acquisition |
Business Acquisitions and Dispositions [Line Items] |
Values of Assets Acquired and Liabilities Assumed | The following table summarizes the consideration paid to acquire the properties and the amounts of the assets acquired and liabilities assumed as of June 20, 2012. The purchase price allocation is preliminary and subject to adjustment upon the final closing settlement to be completed during the first quarter of 2013 (in thousands):
Consideration paid |
Cash, net of purchase price adjustments | $ | 38,458 |
Fair value of identifiable assets acquired and liabilities assumed |
Proved developed and undeveloped properties | $ | 93,901 |
Asset retirement obligations | (55,443 | )
Total identifiable net assets | $ | 38,458 |
Unaudited Pro Forma Results of Operations | Future results may vary significantly from the results reflected in this pro forma financial information because of future events and transactions, as well as other factors.
| Year Ended December 31,
| 2012 |  | 2011
| (In thousands, except per share data)
| (Unaudited)
Revenues | $ | 2,759,381 |  |  | $ | 1,502,325 |
Net income | $ | 248,920 |  |  | $ | 191,335 |
Income available to SandRidge Energy, Inc. common stockholders | $ | 88,395 |  |  | $ | 81,429 |
Earnings per common share |  |  |
Basic | $ | 0.19 |  |  | $ | 0.20 |
Diluted | $ | 0.19 |  |  | $ | 0.20 |
Drilling Carry Transaction Activities |
Business Acquisitions and Dispositions [Line Items] |
Drilling and Completion Costs Associated with Sale of Working Interests | These transactions and the associated drilling carries as of December 31, 2012, are as follows:
Partner |  | Closing Date |  | Proceeds Received At Closing(1) |  | Drilling Carry Recorded |  | Drilling Carry Remaining
|  |  |  | (In millions)
Atinum MidCon I, LLC |  | September 2011 |  | $ | 287.0 |  |  | $ | 157.2 |  |  | $ | 92.8 |
Repsol E&P USA, Inc. |  | January 2012 |  | 272.5 |  |  | 229.3 |  |  | 520.7 |
|  |  |  | $ | 559.5 |  |  | $ | 386.5 |  |  | $ | 613.5 |
____________________ (1) Includes amounts related to the drilling carry.

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