Restatement of Previously Issued Financial Statements

Overview

The Company has determined there were errors in the timing of its accrual of annual CO₂ delivery shortfall penalties incurred under its 30-year treating agreement with Occidental Petroleum Corporation (“Occidental”) and has determined that these errors were material to previously issued unaudited condensed consolidated financial statements for the three-month periods ended March 31, 2014 and 2013. For the three-month periods ended March 31, 2014 and 2013, the correction of these errors resulted in the accrual of (i) an $8.3 million CO₂ delivery shortfall penalty for the three-month period ended March 31, 2014 and (ii) an $8.0 million CO₂ under delivery shortfall penalty for the three-month period ended March 31, 2013, which was previously included in the total 2013 annual delivery shortfall penalty of $32.7 million recorded in the fourth quarter of 2013. As a result, these statements have been presented on a restated and amended basis in this Form 10-Q/A. The correction of these errors in the financial statements for the three-month period ended March 31, 2013 did not have any impact to the statement of operations or statement of cash flows for the year ended December 31, 2013 or to the balance sheet as of December 31, 2013.

Additionally, the Company has made certain revisions to its condensed consolidated balance sheets as of March 31, 2014 and December 31, 2013 in order to account for activities associated with construction of the Century Plant in Pecos County, Texas (the “Century Plant”) under the full cost method of accounting. The Company has determined that these revisions are not material to the originally issued financial statements; however, in conjunction with the Company’s need to restate its financial statements as a result of the error noted above, the Company has determined that it would be appropriate to make such revisions. The condensed consolidated balance sheet as of December 31, 2013 presented herein is consistent with the revised consolidated balance sheet included in the Company’s 2013 Form 10-K/A.

Financial Statement Presentation

In addition to the restatement of the Company’s unaudited condensed consolidated financial statements, certain information within the following notes to the unaudited condensed consolidated financial statements has been restated and/or revised to reflect the corrections presented in the tables below or to add disclosure language, as appropriate.


•	Note 6. Property, Plant and Equipment


•	Note 11. Commitments and Contingencies


•	Note 14. Earnings (Loss) per Share


•	Note 17. Business Segment Information


•	Note 18. Condensed Consolidating Financial Information

Condensed Consolidated Statements of Operations. The following table presents the impact of the error corrections on the Company’s previously reported unaudited condensed consolidated statements of operations for the three-month periods ended March 31, 2014 and 2013 (in thousands):



	Three Months Ended March 31, 2014						Three Months Ended March 31, 2013
	As Reported			As Restated			As Reported			As Restated
Production	$	98,535		$	106,856		$	132,501		$	140,457
Total expenses	$	517,065		$	525,386		$	871,216		$	879,172
Loss from operations	$	(74,009	)	$	(82,330	)	$	(359,526	)	$	(367,482	)
Loss before income taxes	$	(133,958	)	$	(142,279	)	$	(526,830	)	$	(534,786	)
Net loss	$	(134,085	)	$	(142,406	)	$	(531,259	)	$	(539,215	)
Net loss attributable to SandRidge Energy, Inc.	$	(128,015	)	$	(136,336	)	$	(479,340	)	$	(487,296	)
Loss applicable to SandRidge Energy, Inc. common stockholders	$	(141,896	)	$	(150,217	)	$	(493,221	)	$	(501,177	)
Loss per share
Basic	$	(0.29	)	$	(0.31	)	$	(1.03	)	$	(1.05	)
Diluted	$	(0.29	)	$	(0.31	)	$	(1.03	)	$	(1.05	)

Condensed Consolidated Statements of Cash Flows. The following table presents the impact of the error corrections on the Company’s previously reported unaudited condensed consolidated statements of cash flows for the three-month periods ended March 31, 2014 and 2013 (in thousands):



	Three Months Ended March 31, 2014						Three Months Ended March 31, 2013
	As Reported			As Restated			As Reported			As Restated
Net loss	$	(134,085	)	$	(142,406	)	$	(531,259	)	$	(539,215	)
Changes in operating assets and liabilities	$	(89,468	)	$	(81,147	)	$	(56,921	)	$	(48,965	)

Condensed Consolidated Balance Sheet. The Company has determined that unreimbursed costs incurred by the Company on behalf of Occidental during construction of the Century Plant that were previously presented as costs in excess of billings and contract loss should have been presented under the full cost method of accounting as an account receivable. Accordingly, the Company has restated and/or revised the condensed consolidated balance sheets as of March 31, 2014 and December 31, 2013 to reflect this presentation. This revision did not have any impact to total current assets as of March 31, 2014 or December 31, 2013. Additionally, the unaudited condensed consolidated balance sheet as of March 31, 2014 includes the accrual of an $8.3 million CO₂ under delivery shortfall penalty for the three-month period ended March 31, 2014 as described above.

The following tables present the impact of these adjustments on the Company’s previously reported condensed consolidated balance sheets as of March 31, 2014 and December 31, 2013 (in thousands):



	March 31, 2014
	As Reported			As Restated
Current assets
Costs in excess of billings and contract loss	$	4,144		$	—
Other current assets	$	25,823		$	29,967

Current liabilities
Accounts payable and accrued expenses	$	581,764		$	590,085
Total current liabilities	$	612,406		$	620,727
Total liabilities	$	3,880,718		$	3,889,039

Equity
Accumulated deficit	$	(3,602,358	)	$	(3,610,679	)
Total SandRidge Energy, Inc. stockholders’ equity	$	1,689,538		$	1,681,217
Total equity	$	2,997,539		$	2,989,218



	December 31, 2013
	As Reported		As Revised
Current assets
Costs in excess of billings and contract loss	$	4,079	$	—
Other current assets	$	21,831	$	25,910