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 and six-month periods ended June 30, 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 in the Mid-Continent, west Texas and Gulf of Mexico. The Company's primary areas of focus are the Mississippian formation in the Mid-Continent area of Oklahoma and Kansas and the Permian Basin in west Texas. The Company owns and operates additional interests in the Mid-Continent, Gulf of Mexico, WTO and 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, including a drilling rig 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

Dynamic Acquisition. In April 2012, the Company completed the Dynamic Acquisition for approximately $1.2 billion, comprised of approximately $680.0 million in cash and approximately 74 million shares of the Company's common stock. Dynamic is an oil and natural gas exploration, development and production company with operations in the Gulf of Mexico. The Dynamic Acquisition expanded the Company's holdings in state and federal waters of the Gulf of Mexico and added 1,807 MBoe to the Company's production in the second quarter of 2012.

Issuance of 8.125% Senior Notes due 2022. In April 2012, concurrent with the closing of the Dynamic Acquisition, the Company issued $750.0 million of unsecured 8.125% Senior Notes. Net proceeds from the offering were approximately $730.1 million after deducting offering expenses, and were used to finance the cash portion of the Dynamic Acquisition purchase price and to pay related fees and expenses, with any remaining amount being used for general corporate purposes.

SandRidge Mississippian Trust II. In April 2012, the Mississippian Trust II 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 $587.1 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 of beneficial interest, 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 partially 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 development wells, which are also subject to the 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. The Mississippian Trust II is a VIE of which the Company has determined it is the primary beneficiary. As such, its activities were consolidated with those of the Company beginning in April 2012.

Sale of Tertiary Recovery Properties. In June 2012, the Company sold its tertiary recovery properties located in the Permian Basin area of west Texas for approximately $130.0 million, subject to post-closing adjustments. Approximately 1.3% of the Company's combined production volumes for the year ended December 31, 2011 was produced from the tertiary properties.

Acquisition of Gulf of Mexico Properties. In June 2012, the Company acquired oil and natural gas properties in the Gulf of Mexico located on approximately 184,000 gross (103,000 net) acres for approximately $38.5 million, net of purchase price adjustments and subject to post-closing adjustments.

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. These segments represent the Company's three main business units, each offering different products and services. The exploration and production segment is engaged in the acquisition, development and production of oil and natural gas properties and includes the activities of the Mississippian Trust I, the Permian Trust and the Mississippian Trust II. The drilling and oil field services segment is engaged in the contract drilling of oil and natural gas wells. The midstream gas services segment is engaged in the purchasing, gathering, treating and selling of natural gas. The All Other column in the tables below includes items not related to the Company's reportable segments, including its CO2 gathering and sales and corporate operations.

Management evaluates the performance of the Company's business segments based on income (loss) from operations, 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.

The following table sets forth financial information regarding each of the Company's business segments for the three and six-month periods ended June 30, 2012 and 2011 (in thousands).

                          Exploration and    Drilling and Oil Field     Midstream Gas
                            Production              Services               Services        All Other      Consolidated Total
Three Months Ended June
30, 2012
Revenues                 $     434,834       $          104,076        $     24,798       $    1,543     $         565,251
Inter-segment revenue              (77 )                (70,444 )           (16,296 )              -               (86,817 )
Total revenues           $     434,757       $           33,632        $      8,502       $    1,543     $         478,434
Income (loss) from
operations(1)            $     786,335       $            4,678        $     (3,631 )     $  (24,969 )   $         762,413
Interest income
(expense)                          416                        -                (137 )        (68,848 )             (68,569 )
Bargain purchase gain          124,446                        -                   -                -               124,446
Other income (expense),
net                                242                        -                   -             (323 )                 (81 )
Income (loss) before
income taxes             $     911,439       $            4,678        $     (3,768 )     $  (94,140 )   $         818,209
Three Months Ended June
30, 2011
Revenues                 $     317,768       $           96,443        $     48,278       $    2,886     $         465,375
Inter-segment revenue              (66 )                (67,906 )           (32,473 )           (156 )            (100,601 )
Total revenues           $     317,702       $           28,537        $     15,805       $    2,730     $         364,774
Income (loss) from
operations(1)            $     301,197       $            4,098        $     (2,570 )     $  (23,009 )   $         279,716
Interest income
(expense)                           15                        4                (141 )        (61,565 )             (61,687 )
Loss on extinguishment
of debt                              -                        -                   -           (2,051 )              (2,051 )
Other income (expense),
net                                  3                        -                 216              (81 )                 138
Income (loss) before
income taxes             $     301,215       $            4,102        $     (2,495 )     $  (86,706 )   $         216,116



                          Exploration and    Drilling and Oil Field    Midstream Gas                    Consolidated
                            Production              Services              Services       All Other         Total
Six Months Ended June
30, 2012
Revenues                 $     777,955       $          202,408        $     50,960     $    2,949     $  1,034,272
Inter-segment revenue             (155 )               (139,467 )           (34,591 )           10         (174,203 )
Total revenues           $     777,800       $           62,941        $     16,369     $    2,959     $    860,069
Income (loss) from
operations(2)            $     662,499       $            8,157        $     (6,358 )   $  (53,541 )   $    610,757
Interest income
(expense)                          559                        -                (293 )     (135,800 )       (135,534 )
Bargain purchase gain          124,446                        -                   -              -          124,446
Other income, net                2,010                        -                   -            377            2,387
Income (loss) before
income taxes             $     789,514       $            8,157        $     (6,651 )   $ (188,964 )   $    602,056
Six Months Ended June
30, 2011
Revenues                 $     585,004       $          163,992        $    104,256     $    6,106     $    859,358
Inter-segment revenue             (133 )               (114,421 )           (66,511 )         (672 )       (181,737 )
Total revenues           $     584,871       $           49,571        $     37,745     $    5,434     $    677,621
Income (loss) from
operations(2)            $     116,990       $            3,990        $     (5,098 )   $  (43,995 )   $     71,887
Interest income
(expense)                          120                     (101 )              (313 )     (120,830 )       (121,124 )
Loss on extinguishment
of debt                              -                        -                   -        (38,232 )        (38,232 )
Other income (expense),
net                              1,679                        -                (485 )          141            1,335
Income (loss) before
income taxes             $     118,789       $            3,889        $     (5,896 )   $ (202,916 )   $    (86,134 )


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(2) Exploration and production segment income from operations includes a net gain of $415.2 million and a net loss of $107.6 million on commodity derivative contracts for the six-month periods ended June 30, 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 from the 2011 periods to the 2012 periods are the result of increased oil production throughout 2011 and continuing in 2012 due to the Company's focus on the development of its oil properties located in the Mid-Continent and Permian Basin and the purchase of oil and natural gas properties through the Dynamic Acquisition in April 2012.

                                       Three Months Ended June 30,                Change
                                           2012              2011          Amount        Percent
Production data
Oil (MBbls)(1)                                 4,556          2,767          1,789          64.7  %
Natural gas (MMcf)                            21,903         17,239          4,664          27.1  %
Total volumes (MBoe)                           8,206          5,640          2,566          45.5  %
Average daily total volumes (MBoe/d)              90             62             28          45.2  %
Average prices - as reported(2)
Oil (per Bbl)(1)                     $         85.35     $    89.09     $    (3.74 )        (4.2 )%
Natural gas (per Mcf)                $          1.87     $     3.81     $    (1.94 )       (50.9 )%
Total (per Boe)                      $         52.37     $    55.34     $    (2.97 )        (5.4 )%
Average prices - including impact of
derivative contract settlements
Oil (per Bbl)(1)                     $         89.76     $    76.26     $    13.50          17.7  %
Natural gas (per Mcf)                $          2.39     $     3.31     $    (0.92 )       (27.8 )%
Total (per Boe)                      $         56.21     $    47.52     $     8.69          18.3  %


                                       Six Months Ended June 30,                Change
                                          2012             2011          Amount        Percent
Production data
Oil (MBbls)(1)                               7,982          5,348          2,634          49.3  %
Natural gas (MMcf)                          37,648         34,505          3,143           9.1  %
Total volumes (MBoe)                        14,257         11,099          3,158          28.5  %
Average daily total volumes (MBoe/d)            78             61             17          27.9  %
Average prices - as reported(2)
Oil (per Bbl)(1)                     $       87.34     $    84.59     $     2.75           3.3  %
Natural gas (per Mcf)                $        1.96     $     3.67     $    (1.71 )       (46.6 )%
Total (per Boe)                      $       54.09     $    52.17     $     1.92           3.7  %
Average prices - including impact of
derivative contract settlements
Oil (per Bbl)(1)                     $       88.26     $    74.33     $    13.93          18.7  %
Natural gas (per Mcf)                $        2.37     $     3.46     $    (1.09 )       (31.5 )%
Total (per Boe)                      $       55.68     $    46.58     $     9.10          19.5  %


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(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 June 30, 2012 compared to the three months ended June 30, 2011

Exploration and production segment revenues increased $117.1 million, or 36.8%, to $434.8 million in the three-month period ended June 30, 2012 from the same period in 2011, as a result of a 1,789 MBbl, or 64.7%, increase in oil production, and a 4,664 MMcf, or 27.1%, increase in natural gas production. These increases were slightly offset by a $3.74 per Bbl, or 4.2%, decrease in the average price received for oil production and a $1.94 per Mcf, or 50.9%, 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. Additionally, the acquisition of oil and natural gas properties through the Dynamic Acquisition in April 2012 resulted in higher oil production during the three-month period ended June 30, 2012. The increase in natural gas production was primarily a result of the acquisition of oil and natural gas properties through the Dynamic Acquisition in April 2012.

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 derivative contracts prior to their respective contractual maturities ("early settlements") are not considered in the calculation of effective prices. The effective price received for oil for the three-month period ended June 30, 2012 was $89.76 per Bbl compared to $76.26 per Bbl during the same period in 2011. The effective price received for natural gas for the three-month period ended June 30, 2012 was $2.39 per Mcf compared to $3.31 per Mcf during the same period in 2011.

During the three-month period ended June 30, 2012, the exploration and production segment reported a $669.8 million net gain on its commodity derivative positions ($89.1 million realized gain and $580.7 million unrealized gain) compared to a $170.0 million net gain on its commodity derivative positions ($18.3 million realized loss and $188.3 million unrealized gain) in the same period in 2011. The realized gain for the three-month period ended June 30, 2012 was due to lower oil prices at the time of settlement compared to the contract price for the Company's oil price swaps. The realized loss for the three-month period ended June 30, 2011 was due to higher oil prices at the time of settlement compared to the contract price for the Company's oil price swaps. Realized gains of $57.3 million resulting from early settlements were included in the realized gain for the three-month period ended June 30, 2012. Realized gains totaling $25.8 million resulting from early settlements were included in the net realized loss for the three-month period ended June 30, 2011. Unrealized gains or losses on derivative contracts represent the change in fair value of open derivative contracts during the period. The unrealized gain on the Company's commodity contracts recorded during the three-month period ended June 30, 2012 was attributable to a decrease in average oil prices at June 30, 2012 compared to the average oil prices at March 31, 2012 or the contract price for contracts entered into during the second quarter of 2012. The unrealized gain on the Company's commodity contracts recorded during the three months ended June 30, 2011 was attributable to a decrease in average oil prices at June 30, 2011 compared to the average oil prices at March 31, 2011 or the contract price for contracts entered into during the second quarter of 2011.

For the three-month period ended June 30, 2012, the Company had income from operations of $786.3 million in its exploration and production segment compared to income from operations of $301.2 million in the same period in 2011. Increases of $117.6 million in oil and natural gas revenues and $499.9 million in gain on derivative contracts were partially offset by increases of $40.6 million in production expense and $65.4 million in depreciation and depletion on oil and natural gas properties along with $9.9 million of acquisition costs related to the Dynamic Acquisition included in general and administrative expenses during the three-month period ended June 30, 2012. See further discussion of these changes under "Consolidated Results of Operations" below.

Exploration and Production Segment - Six months ended June 30, 2012 compared to the six months ended June 30, 2011

Exploration and production segment revenues increased $192.9 million, or 33.0%, to $777.8 million in the six-month period ended June 30, 2012 from the same period in 2011, as a result of a 2,634 MBbl, or 49.3%, increase in oil production, a $2.75 per Bbl, or 3.3%, increase in the average price received for oil production and a 3,143 MMcf, or 9.1%, increase in natural gas production. These increases were slightly offset by a $1.71 per Mcf, or 46.6%, 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. Additionally, the acquisition of oil and natural gas properties through the Dynamic Acquisition in April 2012 resulted in higher oil production during the six-month period ended June 30, 2012. The increase in natural gas production was primarily a result of the acquisition of oil and natural gas properties through the Dynamic

Acquisition in April 2012.

The effective price received for oil for the six-month period ended June 30, 2012 was $88.26 per Bbl compared to $74.33 per Bbl during the same period in 2011. The effective price received for natural gas for the six-month period ended June 30, 2012 was $2.37 per Mcf compared to $3.46 per Mcf during the same period in 2011.

During the six-month period ended June 30, 2012, the exploration and production segment reported a $415.2 million net gain on its commodity derivative positions ($36.3 million realized loss and $451.5 million unrealized gain) compared to a $107.6 million net loss on its commodity derivative positions ($26.9 million realized loss and $80.7 million unrealized loss) in the same period in 2011. The realized loss for the six-month periods ended June 30, 2012 and 2011 was due to higher oil prices at the time of settlement compared to the contract price for the Company's oil price swaps. Realized gains of $57.3 million resulting from early settlements were included in the net realized loss for the six-month period ended June 30, 2012. Additionally, 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 six-month period ended June 30, 2012. Realized gains totaling $38.2 million resulting from early settlements were included in the net realized loss for the six-month period ended June 30, 2011. The unrealized gain on the Company's commodity contracts recorded during the six-month period ended June 31, 2012 was attributable to a decrease in average oil prices at June 30, 2012 compared to the average oil prices at December 31, 2011, or the contract price for contracts entered into during the first six months of 2012. The unrealized loss on the Company's commodity contracts recorded during the six-month period ended June 31, 2011 was attributable to an increase in average oil prices at June 30, 2011 compared to the average oil prices at December 31, 2010, or the contract price for contracts entered into during the first six months of 2011.

For the six-month period ended June 30, 2012, the Company had income from operations of $662.5 million in its exploration and production segment compared to income from operations of $117.0 million in the same period in 2011. An increase of $192.1 million in oil and natural gas revenues was partially offset by increases of $50.0 million in production expense and $81.0 million in depreciation and depletion on oil and natural gas properties along with increased general and administrative expenses as a result of the Dynamic Acquisition during the six-month period ended June 30, 2012. See further discussion of these changes under "Consolidated Results of Operations" below. Additionally, the Company recorded a $415.2 million net gain on its commodity derivative contracts for the six months ended June 30, 2012 compared to a $107.6 million net loss for the same period in 2011.

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 June 30, 2012, the Company owned 31 drilling rigs. The table below presents a summary of the Company's rigs as of June 30, 2012 and 2011:

                              June 30,
                            2012     2011
Rigs
Working for SandRidge       21         20
Working for third parties    8         11
Total operational           29         31
Non-operational(1)           2          -
Total rigs                  31         31


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