Introduction

The following discussion and analysis is intended to help the reader understand the Company's business, financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with the Company's unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report, as well as the Company's audited consolidated financial statements and the accompanying notes included in the 2011 Form 10-K. The Company's discussion and analysis includes the following subjects:

• Overview of the Company;

• Recent Developments;

• Recent Accounting Pronouncements;

• Results by Segment;

• Consolidated Results of Operations; and

• Liquidity and Capital Resources.

The financial information with respect to the three-month periods ended March 31, 2012 and 2011, discussed below, is unaudited. In the opinion of management, this information contains all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the unaudited condensed consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of the results of operations for the full fiscal year.

Overview of the Company

SandRidge is an independent oil and natural gas company concentrating on development and production activities related to the exploitation of its significant holdings in the Mid-Continent area of Oklahoma and Kansas, west Texas and the Gulf of Mexico. The Company's primary areas of focus are the Mississippian formation in the Mid-Continent and the Permian Basin in west Texas. The Company also owns and operates other interests in the Mid-Continent, WTO and the Gulf Coast.

The Company also operates businesses that are complementary to its primary development and production activities, including gas gathering and processing facilities, an oil and gas marketing business and an oil field services business. These complementary businesses provide the Company with operational flexibility and an advantageous cost structure by reducing the Company's dependence on third parties for these services. The extent to which each of these supplemental businesses contributes to the Company's consolidated results of operations largely is determined by the amount of work each performs for third parties. Revenues and costs related to work performed by these businesses for the Company's own account are eliminated in consolidation and, therefore, do not directly contribute to the Company's consolidated results of operations.

Recent Developments

Sale of Working Interest in Mississippian Properties. On January 5, 2012, the Company sold (i) non-operated working interests, equal to approximately 250,000 net acres, in the Mississippian formation in western Kansas and
(ii) non-operated working interests, equal to approximately 114,000 net acres, and a proportionate share of existing salt water disposal facilities in the Mississippian formation in northern Oklahoma and southern Kansas to Repsol for approximately $250.0 million. In addition, Repsol agreed to pay the development costs related to its working interest, as well as a portion of the Company's development costs equal to 200% of Repsol's working interest for wells within an area of mutual interest up to $750.0 million. The Company expects Repsol's funding of the Company's development cost for wells within the area of mutual interest to occur over a three-year period.

Senior Credit Facility Amendment. On March 29, 2012, the senior credit facility was amended and restated to, among other things, (a) increase the borrowing base to $1.0 billion from $790.0 million, (b) allow for the incurrence or issuance of additional debt (including up to $750.0 million of unsecured debt to finance the cash portion of the Dynamic purchase price and related costs and expenses),
(c) permit the Company to designate certain of its subsidiaries as unrestricted subsidiaries, and (d) effective on and after June 30, 2012, establish the financial covenants as maintaining agreed upon levels for (i) ratio of total funded debt to EBITDA, which may not exceed 4.5:1.0 at each quarter end, calculated using the last four completed fiscal quarters and (ii) ratio of current assets to current liabilities, which must be at least 1.0:1.0 at each quarter end. If no amounts are drawn under the senior credit facility when calculating the ratio of total funded debt to EBITDA, the Company's debt is reduced by its cash balance in excess of $10.0 million. In the current ratio calculation, any amounts available to be drawn under the senior credit facility are included in current assets, and unrealized assets and liabilities resulting from mark-to-market adjustments on the Company's derivative contracts are disregarded.

Dynamic Acquisition. On April 17, 2012, the Company completed its acquisition of Dynamic for approximately $1.2 billion, comprised of approximately $680.0 million in cash and approximately 74 million shares of the Company's common stock.

Issuance of 8.125% Senior Notes due 2022. On April 17, 2012, concurrent with the closing of the Dynamic Acquisition, the Company issued $750.0 million of unsecured 8.125% Senior Notes to qualified institutional buyers eligible under Rule 144A of the Securities Act and to persons outside the United States under Regulation S under the Securities Act. Net proceeds from the offering were approximately $730.7 million after deducting offering expenses, and were used to finance the cash portion of the Dynamic purchase price and to pay related fees and expenses, with any remaining amount being used for general corporate purposes. The 8.125% Senior Notes bear interest at a fixed rate of 8.125% per annum, payable semi-annually, with the principal due on October 15, 2022. Prior to 2017, the 8.125% Senior Notes are redeemable, in whole or in part, at a specified redemption price plus accrued and unpaid interest. The notes are jointly and severally guaranteed unconditionally, in full, on an unsecured basis by certain of the Company's wholly owned subsidiaries.

SandRidge Mississippian Trust II. On April 23, 2012, the Mississippian Trust II, a newly formed Delaware statutory trust, completed its initial public offering of 29,900,000 common units representing beneficial interests in the Mississippian Trust II. Net proceeds to the Mississippian Trust II, after underwriting discounts and commissions, were approximately $590.0 million. Concurrent with the closing, the Company conveyed certain royalty interests to the Mississippian Trust II in exchange for the net proceeds of the Mississippian Trust II's initial public offering and 19,825,000 units (7,393,750 common units and 12,431,250 subordinated units) representing approximately 39.9% of the beneficial interest in the Mississippian Trust II. The royalty interests conveyed to the Mississippian Trust II are in certain existing wells and wells to be drilled on certain oil and natural gas properties leased by the Company in the Mississippian formation in northern Oklahoma and southern Kansas. The Company intends to use the net proceeds from the offering for general corporate purposes, including to fund its 2012 capital expenditure program.

The Company and one of its wholly owned subsidiaries entered into a development agreement with the Mississippian Trust II that obligates the Company to drill, or cause to be drilled, a specified number of wells, which are also subject to a royalty interest, by December 31, 2016. One of the Company's wholly owned subsidiaries also granted to the Mississippian Trust II a lien on the Company's interests in the properties where the development wells will be drilled, in order to secure the estimated amount of the drilling costs for the wells. Additionally, the Company and the Mississippian Trust II entered into an administrative services agreement and a derivatives agreement. As the Mississippian Trust II is a VIE of which the Company has determined it is the primary beneficiary, its activities will be consolidated with those of the Company beginning in April 2012.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 1 to the Company's unaudited interim condensed consolidated financial statements included in Item 1 of this Quarterly Report.

Results by Segment

The Company operates in three business segments: exploration and production, drilling and oil field services and midstream gas services. The activities of the Mississippian Trust I and the Permian Trust are included in the exploration and production segment. The All Other column in the tables below includes items not related to the Company's reportable segments, including its CO2 gathering and sales operations and corporate operations. Management evaluates the performance of the Company's business segments based on operating income (loss), which is defined as segment operating revenues less operating expenses and depreciation, depletion, amortization and accretion. Results of these measurements provide important information to the Company about the activity and profitability of the Company's lines of business. Set forth in the table below is financial information regarding each of the Company's business segments for the three-month periods ended March 31, 2012 and 2011 (in thousands).

                                        Exploration  and        Drilling and Oil         Midstream  Gas                          Consolidated
                                           Production            Field Services             Services           All Other            Total
Three Months Ended March 31, 2012
Revenues                               $          343,120       $          98,332       $         26,162       $    1,406       $      469,020
Inter-segment revenue                                 (77 )               (69,023 )              (18,295 )             10              (87,385 )

Total revenues                         $          343,043       $          29,309       $          7,867       $    1,416       $      381,635

(Loss) income from operations(1)       $         (123,836 )     $           3,479       $         (2,727 )     $  (28,572 )     $     (151,656 )
Interest income (expense), net                        143                      -                    (156 )        (66,952 )            (66,965 )
Other income, net                                   1,768                      -                      -               700                2,468

(Loss) income before income taxes      $         (121,925 )     $           3,479       $         (2,883 )     $  (94,824 )     $     (216,153 )


Three Months Ended March 31, 2011
Revenues                               $          267,237       $          67,549       $         55,978       $    3,220       $      393,984
Inter-segment revenue                                 (67 )               (46,515 )              (34,038 )           (516 )            (81,136 )

Total revenues                         $          267,170       $          21,034       $         21,940       $    2,704       $      312,848

Loss from operations(1)                $         (184,207 )     $            (108 )     $         (2,528 )     $  (20,985 )     $     (207,828 )
Interest income (expense), net                        105                    (105 )                 (172 )        (59,266 )            (59,438 )
Loss on extinguishment of debt                         -                       -                      -           (36,181 )            (36,181 )
Other income (expense), net                         1,676                      -                    (701 )            222                1,197

Loss before income taxes               $         (182,426 )     $            (213 )     $         (3,401 )     $ (116,210 )     $     (302,250 )

(1) Exploration and production segment (loss) income from operations includes net losses of $254.6 million and $277.6 million on commodity derivative contracts for the three-month periods ended March 31, 2012 and 2011, respectively.

Exploration and Production Segment

The Company currently generates the majority of its consolidated revenues and cash flow from the production and sale of oil and natural gas. The Company's revenues, profitability and future growth depend substantially on prevailing prices for oil and natural gas and on the Company's ability to find and economically develop and produce oil and natural gas reserves. Prices for oil and natural gas fluctuate widely. In order to reduce the Company's exposure to these fluctuations, the Company enters into commodity derivative contracts for a portion of its anticipated future oil and natural gas production. Reducing the Company's exposure to price volatility helps ensure that it has adequate funds available for its capital expenditure programs.

The primary factors affecting the financial results of the Company's exploration and production segment are the prices the Company receives for its oil and natural gas production, the quantity of oil and natural gas it produces and changes in the fair value of commodity derivative contracts. Quarterly comparisons of production and price data are presented in the tables below. Changes in the Company's results for these periods are a result of increased oil production throughout 2011 and continuing in 2012 as a result of the Company's strategic movement toward increased oil production in 2009 and 2010, which increased oil production volumes and revenues attributable to the Company's exploration and production segment.

                                                     Three Months Ended
                                                         March 31,                      Change
                                                     2012           2011         Amount        Percent
Production data
Oil (MBbls)(1)                                         3,427         2,581           846           32.8 %
Natural gas (MMcf)                                    15,746        17,266        (1,520 )         (8.8 )%
Total volumes (MBoe)                                   6,051         5,459           592           10.8 %
Average daily total volumes (MBoe/d)                      67            61             6            9.8 %
Average prices - as reported(2)
Oil (per Bbl)(1)                                  $    89.99      $  79.76      $  10.23           12.8 %
Natural gas (per Mcf)                             $     2.10      $   3.54      $  (1.44 )        (40.7 )%
Total (per Boe)                                   $    56.42      $  48.90      $   7.52           15.4 %
Average prices - including impact of
derivative contract settlements
Oil (per Bbl)(1)                                  $    86.27      $  72.26      $  14.01           19.4 %
Natural gas (per Mcf)                             $     2.35      $   3.44      $  (1.09 )        (31.7 )%
Total (per Boe)                                   $    54.96      $  45.05      $   9.91           22.0 %

(1) Includes natural gas liquids.

(2) Prices represent actual average prices for the periods presented and do not include effects of derivative transactions.

Exploration and Production Segment - Three months ended March 31, 2012 compared to the three months ended March 31, 2011

Exploration and production segment revenues increased $75.9 million, or 28.4%, to $343.0 million in the three-month period ended March 31, 2012 from the same period in 2011, as a result of a 846 MBbl, or 32.8%, increase in oil production and a $10.23, or 12.8%, increase in the average price received for oil production. These increases were slightly offset by a 1,520 MMcf, or 8.8%, decrease in natural gas production and a $1.44, or 40.7%, decrease in the average price received for natural gas production. The increase in oil production was due to the continued focus on increased oil drilling throughout 2011 and continuing in 2012 in the Mid-Continent and Permian Basin areas from the three-month period ended March 31, 2011 to 2012. The decrease in natural gas production was primarily a result of natural production declines in existing natural gas wells.

Due to the long-term nature of the Company's investment in the development of its properties, the Company enters into oil and natural gas swaps and collars for a portion of its production in order to stabilize future cash inflows for planning purposes. The Company's derivative contracts are not designated as accounting hedges and, as a result, realized and unrealized gains or losses on commodity derivative contracts are recorded as a component of operating expenses. Internally, management views the settlement of such derivative contracts as adjustments to the price received for oil and natural gas production to determine "effective prices."

Realized gains or losses related to settlements of commodity derivative contracts with contractual maturities after the quarterly period in which they were settled ("out-of-period settlements") are not considered in the calculation of effective prices. The effective price received for oil for the three-month period ended March 31, 2012 was $86.27 per Bbl compared to $72.26 per Bbl during the same period in 2011. The effective price received for natural gas for the three-month period ended March 31, 2012 was $2.35 per Mcf compared to $3.44 per Mcf during the same period in 2011.

During the three-month period ended March 31, 2012, the exploration and production segment reported a $254.6 million net loss on its commodity derivative positions ($125.4 million realized loss and $129.2 million unrealized loss) compared to a $277.6 million net loss on its commodity derivative positions ($8.6 million realized loss and $269.0 million unrealized loss) in the same period in 2011. The realized loss for the three-month periods ended March 31, 2012 and 2011 was primarily due to higher oil prices at the time of settlement compared to the contract price for the Company's oil price swaps. Non-cash realized losses of $117.1 million resulting from the amendment of certain 2012 derivative contracts to contracts maturing in 2014 and 2015 were included in the net realized loss for the three-month period ended March 31, 2012. Realized gains totaling $12.4 million resulting from out-of-period settlements were included in the net realized loss for the three-month period ended March 31, 2011. Unrealized gains or losses on derivative contracts represent the change in fair value of open derivative contracts during the period. The unrealized loss on the Company's commodity contracts recorded during the three-month periods ended March 31, 2012 and 2011 was primarily attributable to an increase in average oil prices at March 31, 2012 and 2011 compared to the average oil prices at December 31, 2011 and 2010 or the contract price for contracts entered into during the first quarter of 2012 and 2011.

For the three-month period ended March 31, 2012, the Company had a loss from operations of $123.8 million in its exploration and production segment compared to an operating loss of $184.2 million in the same period in 2011. An increase of $74.4 million in oil and natural gas revenues and a $23.0 million decrease in loss on derivative contracts was partially offset by increases of $9.4 million in production expense, $15.6 million in depreciation and depletion on oil and natural gas properties and $15.9 million in general and administrative expenses during the three-month period ended March 31, 2012. See further discussion of these changes under "Consolidated Results of Operations" below.

Drilling and Oil Field Services Segment

The financial results of the Company's drilling and oil field services segment depend primarily on demand and prices that can be charged for its services. On a consolidated basis, drilling and oil field service revenues earned and expenses incurred in performing services for third parties, including third-party working interests in wells the Company operates, are included in drilling and services revenues and expenses. Drilling and oil field service revenues earned and expenses incurred in performing services for the Company's own account are eliminated in consolidation.

As of March 31, 2012, the Company owned 31 drilling rigs. The table below presents a summary of the Company's rigs as of March 31, 2012 and 2011:

                                                    March 31,
                                                 2012      2011
                     Rigs
                     Working for SandRidge          20        20
                     Working for third parties      10        11

                     Total operational              30        31
                     Non-operational(1)              1        -

                     Total rigs                     31        31

(1) Includes a rig stacked at March 31, 2012.

Drilling and Oil Field Services Segment - Three months ended March 31, 2012 compared to the three months ended March 31, 2011

Drilling and oil field services segment revenues increased $8.3 million to $29.3 million in the three-month period ended March 31, 2012 from the same period in 2011 and drilling and oil field services segment expenses increased $4.7 million during the same period to $25.8 million. The increase in revenues and expenses was primarily attributable to an increase in the average daily rate received per rig working for third parties and an increase in oil field services performed for third parties during the 2012 period. During the three-month period ended March 31, 2012, the average daily rate received per rig working for third parties increased to approximately $15,900 from approximately $14,600 during the same period in 2011. The increase in the average daily rate received from third parties resulted in income from operations of $3.5 million in the three-month period ended March 31, 2012 compared to a loss from operations of $0.1 million in 2011.

Midstream Gas Services Segment

Midstream gas services segment revenues consist mostly of revenue from gas marketing, which is a very low-margin business. Midstream gas services are primarily undertaken to realize incremental margins on natural gas purchased at the wellhead, and provide value-added services to customers. On a consolidated basis, midstream and marketing revenues represent natural gas sold on behalf of third parties and the fees the Company charges to gather, compress and treat this natural gas. Gas marketing operating costs represent payments made to third parties for the proceeds from the sale of natural gas owned by such parties, net of any applicable margin and actual costs the Company charges to gather, compress and treat the natural gas. In general, natural gas purchased and sold by the Company's midstream gas business is priced at a published daily or monthly index price. The primary factors affecting the results of the Company's midstream gas services segment are the quantity of natural gas the Company gathers, treats and markets and the prices it pays and receives for natural gas.

The Company owns and operates two gas treating plants in west Texas, which remove CO2 from natural gas production and deliver residue gas to nearby pipelines. During 2011, the Company continued with the operational assessment phase of the Century Plant, in Pecos County, Texas, including diverting some of the Company's natural gas from the Company's two existing gas treating plants and processing it at the Century Plant during this time. As a result of this assessment, the Century Plant has been taken off line from time to time to resolve certain operational issues. The Company is currently in the process of diverting its high CO2 natural gas production back through the Century Plant and commencing performance testing for Train I of the Century Plant. Upon successful completion of the performance testing, the use of the Company's two gas treating plants in west Texas may be limited, the extent of which will depend on certain variables, including natural gas prices and the expected need for such plants to supplement treating capacity at the Century Plant going forward. During the second quarter of 2011, the Company evaluated its gas treating plants for impairment in connection with the operational phase of Train I of the Century Plant and concluded no impairment was necessary. The Company continued to monitor the status of the Century Plant, the related impact on its gas treating plants and CO2 compression facilities and natural gas prices during the second half of 2011 and first quarter of 2012. As of March 31, 2012, no impairment of these plants or facilities was deemed necessary.

Midstream Gas Services Segment - Three months ended March 31, 2012 compared to the three months ended March 31, 2011

Midstream gas services segment revenues for the three-month period ended March 31, 2012 were $7.9 million compared to $21.9 million in the same period in 2011. The decrease in revenue was due to a decrease in third-party volumes the Company marketed of approximately 2.7 Bcf, a decrease in natural gas prices and a decrease in natural gas volumes processed in the Company's gas treating plants. The decrease in revenue and related expense resulted in a loss from operations of $2.7 million for the three-month period ended March 31, 2012 compared to a loss from operations of $2.5 million in the same period in 2011.

Consolidated Results of Operations

Three months ended March 31, 2012 compared to the three months ended March 31, 2011

Revenues. Total revenues increased 22.0% for the three months ended March 31, 2012 from the same period in 2011. This increase was primarily due to the increase in oil and natural gas sales.