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Equity
 12 Months Ended
Dec. 31, 2012
Equity [Abstract]  
Equity
Equity

Preferred Stock

The following table presents information regarding the Company’s preferred stock (in thousands):
 
December 31,
 
2012
 
2011
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

7.0% Convertible perpetual preferred stock
3,000

 
3,000



The Company is authorized to issue 50.0 million shares of preferred stock, $0.001 par value, of which 7.7 million shares are designated as convertible perpetual preferred stock at December 31, 2012 and 2011. All of the outstanding shares of the Company’s convertible perpetual preferred stock were issued in private transactions. However, all of the outstanding shares of convertible perpetual preferred stock are freely tradable.

8.5% Convertible perpetual preferred stock. The Company’s 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 $100.00 and is convertible at the holder’s option at any time initially into approximately 12.4805 shares of the Company’s common stock, subject to customary adjustments in certain circumstances. 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 Company’s election. The 8.5% convertible perpetual preferred stock is not redeemable by the Company at any time. After February 20, 2014, the Company may cause all outstanding shares of the convertible perpetual preferred stock to convert automatically into common stock at the then-prevailing conversion rate if certain conditions are met.

6.0% Convertible perpetual preferred stock. The Company’s 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 $100.00 and is entitled to an annual dividend of $6.00 payable semi-annually in cash, common stock or any combination thereof, at the Company’s election. The 6.0% convertible perpetual preferred stock is not redeemable by the Company at any time. Each share is initially convertible into approximately 9.2115 shares of the Company’s common stock, at the holder’s option, subject to customary adjustments in certain circumstances. On December 21, 2014, all outstanding shares of the 6.0% convertible preferred stock will convert automatically into shares of the Company’s common stock at the then-prevailing conversion rate as long as all dividends accrued at that time have been paid.

7.0% Convertible perpetual preferred stock. The Company’s 7.0% convertible perpetual preferred stock was issued in November 2010. Each share of the 7.0% convertible preferred stock has a liquidation preference of $100.00 per share and became convertible at the holder’s option on February 15, 2011, initially into approximately 12.8791 shares of the Company’s common stock, subject to customary adjustments in certain circumstances. Beginning on May 15, 2011, the annual dividend on each share of the 7.0% convertible preferred stock is $7.00 payable semi-annually, in cash, common stock or a combination thereof, at the Company’s election. The 7.0% convertible perpetual preferred stock is not redeemable by the Company at any time. After November 20, 2015, the Company may cause all outstanding shares of the 7.0% convertible perpetual preferred stock to convert automatically into common stock at the then-prevailing conversion rate if certain conditions are met.

Preferred stock dividends. All dividend payments to date on the Company’s 8.5%, 6.0% and 7.0% convertible perpetual preferred stock have been paid in cash. Paid and unpaid dividends included in the calculation of income available to the Company’s common stockholders and the Company’s basic earnings per share calculation for the years ended December 31, 2012, 2011 and 2010 as presented in the accompanying consolidated statements of operations, are included in tables below (in thousands):
 
Dividends Paid
 
Dividends Unpaid
 
Total
Year Ended December 31, 2012
 
 
 
 
 
8.5% Convertible perpetual preferred stock
$
14,078

 
$
8,447

 
$
22,525

6.0% Convertible perpetual preferred stock
6,500

 
5,500

 
12,000

7.0% Convertible perpetual preferred stock
18,375

 
2,625

 
21,000

Total
$
38,953

 
$
16,572

 
$
55,525

Year Ended December 31, 2011
 
 
 
 
 
8.5% Convertible perpetual preferred stock
$
14,078

 
$
8,447

 
$
22,525

6.0% Convertible perpetual preferred stock
6,500

 
5,500

 
12,000

7.0% Convertible perpetual preferred stock
18,433

 
2,625

 
21,058

Total
$
39,011

 
$
16,572

 
$
55,583

Year Ended December 31, 2010
 
 
 
 
 
8.5% Convertible perpetual preferred stock
$
14,079

 
$
8,446

 
$
22,525

6.0% Convertible perpetual preferred stock
6,000

 
6,000

 
12,000

7.0% Convertible perpetual preferred stock
—

 
2,917

 
2,917

Total
$
20,079

 
$
17,363

 
$
37,442



Common Stock

The following table presents information regarding the Company’s common stock (in thousands):
 
December 31,
 
2012
 
2011
Shares authorized
800,000

 
800,000

Shares outstanding at end of period
490,359

 
411,953

Shares held in treasury
1,219

 
874



In July 2010, in conjunction with stockholder approval of the issuance of shares of Company common stock in connection with the Company’s acquisition of Arena, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to increase the number of authorized shares of common stock from 400.0 million shares to 800.0 million shares. On July 16, 2010, the Company issued approximately 190.3 million shares of Company common stock as partial consideration for the acquisition of Arena. See Note 3 for further discussion of the Arena Acquisition.

In December 2010, the Company issued approximately 1.8 million shares of Company common stock (of which approximately 0.5 million shares were newly issued and approximately 1.3 million shares were issued from treasury stock) as part of the settlement of a dispute with certain working interest owners. The issuance of the 0.5 million shares resulted in an addition to the Company’s additional paid-in capital of $3.4 million, the amount by which the market value of the common stock on the day of issuance exceeded par value. See additional discussion, including the effects on treasury stock and additional paid-in capital, below.

On April 17, 2012, the Company issued approximately 74.0 million shares of SandRidge common stock to satisfy the stock portion of the consideration paid in the Dynamic Acquisition. See Note 3 for further discussion of the Dynamic Acquisition.

Stockholder Rights Plan

On November 19, 2012, the Company’s Board of Directors adopted a stockholder rights plan pursuant to which the Board of Directors authorized and declared to stockholders of record on November 29, 2012 a dividend of one preferred share purchase right (the “Right”) for each outstanding share of common stock. The Board adopted the rights plan to protect stockholders from coercive or otherwise unfair takeover tactics. The Rights generally become exercisable ten business days after any person or group becomes the beneficial owner of 10%, or 15% in the case of certain institutional investors, (“Acquiring Person”) or more of the Company’s outstanding common stock. Each Right entitles stockholders to buy one one-thousandth of a share of Series A Junior Participating Preferred Stock (“Series A Preferred Stock”), par value $0.001 per share, at a price of $20.00 per one one-thousandth of a preferred share, subject to adjustment. Holders of Rights (other than the Acquiring Person) are entitled to receive, upon exercise, Series A Preferred Stock, or in lieu thereof, common stock of the Company having a value of twice the Right’s then-current exercise price. The Series A Preferred Stock is not redeemable by the Company and has voting privileges and certain dividend and liquidation preferences. The Company may redeem the outstanding Rights at any time prior to any person or group becoming an Acquiring Person at a redemption price of $0.001 per Right, subject to adjustment. At any time after any person or group becomes an Acquiring Person, the Company may exchange all or part of the outstanding Rights for common stock at an exchange ratio of one common share per Right. The Rights will expire on November 19, 2013, unless redeemed or exchanged on an earlier date.

Treasury Stock

The Company makes required statutory tax payments on behalf of employees when their restricted stock awards vest and then withholds a number of vested shares of common stock having a value on the date of vesting equal to the tax obligation. As a result of such transactions, the Company withheld approximately 1.5 million shares having a total value of $11.3 million, and approximately 1.2 million shares having a total value of $10.8 million during the years ended December 31, 2012 and 2011, respectively. These shares were accounted for as treasury stock when withheld, and then immediately retired. The Company withheld approximately 0.8 million shares having a total value of $6.3 million during the year ended December 31, 2010. These shares were accounted for as treasury stock when withheld. In December 2010, the Company retired all shares held as treasury, excluding shares of Company common stock held as assets in a trust for the Company’s non-qualified deferred compensation plan, to satisfy tax withholding obligations related to the vesting of restricted stock awards under the Company’s incentive compensation plans. Retirement of the treasury shares in December 2010 resulted in a reduction to additional paid-in capital equal to the historical cost of the treasury shares, or approximately $11.3 million.

In December 2010, the Company finalized the settlement of a dispute with certain working interest owners under two joint operating agreements. As part of the settlement, the Company issued the working interest owners a total of approximately 1.8 million shares of Company common stock. As noted above, approximately 0.5 million of such shares were newly issued and the remaining 1.3 million shares were issued from treasury stock. The historical cost of the treasury shares issued was approximately $14.0 million. The difference between the market price of these shares at the time of issuance and the historical cost resulted in a decrease of the Company’s additional paid-in capital of approximately $5.2 million.

Shares of Company common stock held as assets in a trust for the Company’s non-qualified deferred compensation plan are accounted for as treasury shares. These shares are not included as outstanding shares of common stock in this report. For corporate purposes, including for the purpose of voting at Company stockholder meetings, these shares are considered outstanding and have voting rights, which are exercised by the Company.

Stockholder Receivable

On November 9, 2012, Tom L. Ward, Chief Executive Officer, and the Company entered into a settlement agreement with a stockholder plaintiff relating to a third-party claim under Section 16(b) of the Securities Exchange Act of 1934, as amended. The claim was filed in December 2010 and related to certain transactions involving Company common stock by Mr. Ward in 2008 and 2009. The settlement agreement finds no liability or other wrongdoing under Section 16(b) regarding the transactions in question. Under the settlement agreement, Mr. Ward agreed to pay to the Company $5.0 million in four installments over four years commencing October 2013 and to waive his rights under his indemnification agreement with the Company with respect to this Section 16(b) action. The Company agreed to pay the fees of the plaintiff’s lawyers and paid Mr. Ward’s legal expenses as required under his indemnification agreement.

Based on the nature of the settlement as well as Mr. Ward’s position as an officer of the Company, a $5.0 million receivable was recorded as a component of additional paid-in capital and is included in the accompanying consolidated balance sheets as of December 31, 2012.

Equity Compensation

The Company awards restricted common stock under its long-term incentive compensation plan that vest over specified periods of time, subject to certain conditions, and are valued based upon the market value of common stock on the date of grant. Awards issued prior to 2006 had vesting periods of one, four or seven years. Awards issued during and after 2006 generally have four-year vesting periods. Shares of restricted common stock are subject to restriction on transfer. Unvested restricted stock awards are included in the Company’s outstanding shares of common stock.

For the years ended December 31, 2012, 2011 and 2010, the Company recognized equity compensation expense of $39.7 million, $36.0 million and $37.7 million, net of $7.5 million, $7.6 million and $5.6 million capitalized, respectively, related to restricted common stock.

Restricted stock activity for the years ended December 31, 2012, 2011 and 2010 was as follows (shares in thousands):
 
Number of
Shares
 
Weighted-
Average Grant
Date Fair Value
Unvested restricted shares outstanding at December 31, 2009
5,322

 
$
16.80

Granted(1)
6,210

 
$
7.87

Vested(1)
(1,613
)
 
$
18.28

Forfeited / Canceled
(443
)
 
$
12.74

Unvested restricted shares outstanding at December 31, 2010
9,476

 
$
10.89

Granted
8,003

 
$
8.95

Vested
(3,270
)
 
$
12.91

Forfeited / Canceled
(823
)
 
$
9.17

Unvested restricted shares outstanding at December 31, 2011
13,386

 
$
9.34

Granted
7,604

 
$
7.46

Vested
(4,394
)
 
$
10.73

Forfeited / Canceled
(1,268
)
 
$
8.54

Unvested restricted shares outstanding at December 31, 2012
15,328

 
$
8.07

____________________
(1)
Excludes approximately 0.7 million restricted shares from stock awards assumed in the Arena Acquisition. All of these awards had vested as of December 31, 2010.

The total fair value of restricted stock that vested during the years ended December 31, 2012, 2011 and 2010, including stock awards assumed in the Arena Acquisition, was $32.1 million, $30.2 million and $17.5 million, respectively. As of December 31, 2012, there was approximately $91.0 million of unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 2.5 years. The Company had approximately 9.9 million shares available for grant under its existing incentive compensation plan at December 31, 2012.

Noncontrolling Interest

Noncontrolling interest represents third-party ownership interests in the Company’s subsidiaries and consolidated VIEs (see Note 4), and is included as a component of equity in the accompanying consolidated balance sheets and consolidated statements of changes in equity.