Condensed Consolidating Financial Information

The Company provides condensed consolidating financial information for its subsidiaries that are guarantors of its registered debt. As of December 31, 2012, the subsidiary guarantors, which are 100% owned by the Company, have jointly and severally guaranteed, on a full, unconditional and unsecured basis, the Company’s 8.75% Senior Notes due 2020, 7.5% Senior Notes due 2021, 8.125% Senior Notes due 2022 and 7.5% Senior Notes due 2023. The 8.625% Senior Notes due 2015 and Senior Floating Rate Notes, prior to their purchase and redemption in 2011 and 2012, respectively, were also jointly and severally guaranteed, on a full, unconditional and unsecured basis by the 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 subsidiary 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 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 consolidated VIEs, majority owned subsidiaries and certain immaterial wholly owned subsidiaries, 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, 2012
	Parent		Guarantors			Non-Guarantors		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	300,228	$	922		$	8,616	$	—		$	309,766
Accounts receivable, net	2,162,471		808,435			717,715		(3,243,115		)	445,506
Derivative contracts	—		60,736			28,484		(18,198		)	71,022
Prepaid expenses	—		31,135			184		—			31,319
Restricted deposit	—		255,000			—		—			255,000
Other current assets	1,375		24,188			4,709		—			30,272
Total current assets	2,464,074		1,180,416			759,708		(3,261,313		)	1,142,885
Property, plant and equipment, net	—		7,236,685			1,298,877		(55,585		)	8,479,977
Investment in subsidiaries	5,425,907		(86,235		)	—		(5,339,672		)	—
Derivative contracts	—		15,957			33,114		(25,454		)	23,617
Other assets	83,642		66,512			—		(5,902		)	144,252
Total assets	$	7,973,623	$	8,413,335		$	2,091,699	$	(8,687,926	)	$	9,790,731
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued expenses	$	1,236,793	$	2,087,046		$	684,136	$	(3,241,431	)	$	766,544
Derivative contracts	2,394		30,664			—		(18,198		)	14,860
Asset retirement obligations	—		118,504			—		—			118,504
Deposit on pending sale	—		255,000			—		—			255,000
Other current liabilities	—		15,546			—		—			15,546
Total current liabilities	1,239,187		2,506,760			684,136		(3,259,629		)	1,170,454
Long-term debt	4,306,985		—			—		(5,902		)	4,301,083
Derivative contracts	—		85,241			—		(25,454		)	59,787
Asset retirement obligations	—		379,710			196		—			379,906
Other long-term obligations	1,329		15,717			—		—			17,046
Total liabilities	5,547,501		2,987,428			684,332		(3,290,985		)	5,928,276
Equity
SandRidge Energy, Inc. stockholders’ equity	2,426,122		5,425,907			1,407,367		(6,890,543		)	2,368,853
Noncontrolling interest	—		—			—		1,493,602			1,493,602
Total equity	2,426,122		5,425,907			1,407,367		(5,396,941		)	3,862,455
Total liabilities and equity	$	7,973,623	$	8,413,335		$	2,091,699	$	(8,687,926	)	$	9,790,731



	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
Prepaid expenses	—		13,442		657		—			14,099
Other current assets	—		2,621		7,037		—			9,658
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 obligations	—		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 obligations	—		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

Condensed Consolidating Statements of Operations



	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Year Ended December 31, 2012
Total revenues	$	—		$	2,435,064		$	404,418		$	(108,517	)	$	2,730,965
Expenses
Direct operating expenses	—			1,393,006			146,416			(107,750		)	1,431,672
General and administrative	515			234,954			7,635			(1,422		)	241,682
Depreciation, depletion, amortization and accretion	—			570,786			87,044			—			657,830
Impairment	—			236,671			79,333			—			316,004
Gain on derivative contracts	—			(198,732		)	(42,687		)	—			(241,419		)
Total expenses	515			2,236,685			277,741			(109,172		)	2,405,769
(Loss) income from operations	(515		)	198,379			126,677			655			325,196
Equity earnings from subsidiaries	426,264			20,667			—			(446,931		)	—
Interest (expense) income, net	(303,510		)	725			(564		)	—			(303,349		)
Gain on sale of subsidiary	55,585			—			—			(55,585		)	—
Bargain purchase gain	—			122,696			—			—			122,696
Loss on extinguishment of debt	(3,075		)	—			—			—			(3,075		)
Other income, net	—			83,797			—			(79,056		)	4,741
Income before income taxes	174,749			426,264			126,113			(580,917		)	146,209
Income tax (benefit) expense	(100,808		)	—			446			—			(100,362		)
Net income	275,557			426,264			125,667			(580,917		)	246,571
Less: net income attributable to noncontrolling interest	—			—			—			105,000			105,000
Net income attributable to SandRidge Energy, Inc.	$	275,557		$	426,264		$	125,667		$	(685,917	)	$	141,571
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, accretion 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



	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
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, accretion 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

Condensed Consolidating Statements of Cash Flows



	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Year Ended December 31, 2012
Net cash (used in) provided by operating activities	$	(659,881	)	$	1,073,816		$	298,630		$	70,595		$	783,160
Cash flows from investing activities
Capital expenditures for property, plant and equipment	—			(2,112,547		)	(33,825		)	—			(2,146,372		)
Acquisitions, net of cash received	(693,091		)	(147,649		)	(587,086		)	587,086			(840,740		)
Proceeds from sale of assets	129,830			942,675			1,333			(642,671		)	431,167
Other	(61,343		)	278,708			—			(217,365		)	—
Net cash used in investing activities	(624,604		)	(1,038,813		)	(619,578		)	(272,950		)	(2,555,945		)
Cash flows from financing activities
Proceeds from borrowings	1,850,344			—			—			—			1,850,344
Repayments of borrowings	(350,000		)	—			(16,029		)	—			(366,029		)
Proceeds from issuance of royalty trust units	—			—			587,086			—			587,086
Proceeds from the sale of royalty trust units	—			—			—			139,360			139,360
Distributions to owners	—			—			(274,980		)	93,253			(181,727		)
Dividends paid—preferred	(55,525		)	—			—			—			(55,525		)
Other	(64,121		)	(34,518		)	30,258			(30,258		)	(98,639		)
Net cash provided by (used in) financing activities	1,380,698			(34,518		)	326,335			202,355			1,874,870
Net increase in cash and cash equivalents	96,213			485			5,387			—			102,085
Cash and cash equivalents at beginning of year	204,015			437			3,229			—			207,681
Cash and cash equivalents at end of year	$	300,228		$	922		$	8,616		$	—		$	309,766
Year Ended December 31, 2011
Net cash provided by (used in) operating activities	$	413,954		$	(49,065	)	$	106,483		$	(12,418	)	$	458,954
Cash flows from investing activities
Capital expenditures for property, plant and equipment	—			(1,726,131		)	(975		)	—			(1,727,106		)
Proceeds from sale of assets	—			1,776,907			26			(917,528		)	859,405
Other	—			(2,074		)	(917,528		)	884,974			(34,628		)
Net cash provided by (used in) investing activities	—			48,702			(918,477		)	(32,554		)	(902,329		)
Cash flows from financing activities
Proceeds from borrowings	2,033,000			—			—			—			2,033,000
Repayments of borrowings	(2,123,000		)	(6,302		)	(991		)	—			(2,130,293		)
Proceeds from issuance of royalty trust units	—			—			917,528			—			917,528
Distributions to owners	—			—			(96,664		)	36,464			(60,200		)
Dividends paid—preferred	(56,742		)	—			—			—			(56,742		)
Other	(64,638		)	6,538			(8,508		)	8,508			(58,100		)
Net cash (used in) provided by financing activities	(211,380		)	236			811,365			44,972			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



	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(In thousands)
Year Ended December 31, 2010
Net cash (used in) provided by operating activities	$	(442,955	)	$	814,300		$	9,549		$	—		$	380,894
Cash flows from investing activities
Capital expenditures for property, plant and equipment	—			(1,032,316		)	(2,821		)	—			(1,035,137		)
Acquisitions, net of cash received	(138,428		)	—			—			—			(138,428		)
Proceeds from sale of assets	—			204,861			90			—			204,951
Other	—			18,595			—			(3,500		)	15,095
Net cash used in investing activities	(138,428		)	(808,860		)	(2,731		)	(3,500		)	(953,519		)
Cash flows from financing activities
Proceeds from borrowings	2,117,914			—			—			—			2,117,914
Repayments of borrowings	(1,777,914		)	(11,073		)	(932		)	—			(1,789,919		)
Proceeds from issuance of convertible perpetual preferred stock, net	290,704			—			—			—			290,704
Other	(48,219		)	3,356			(6,709		)	3,500			(48,072		)
Net cash provided by (used in) financing activities	582,485			(7,717		)	(7,641		)	3,500			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