SandRidge Energy
Annual Report 2019

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR For the transition period from to Commission File Number: 001-33784 SANDRIDGE ENERGY, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 123 Robert S. Kerr Avenue Oklahoma City, Oklahoma (Address of principal executive offices) 20-8084793 (I.R.S. Employer Identification No.) 73102 (Zip Code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $0.001 par value Trading Symbol SD Name of each exchange on which registered New York Stock Exchange (405) 429-5500 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Non-accelerated filer ☐ Accelerated filer ☑ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ The aggregate market value of our common stock held by non-affiliates on June 28, 2019 was approximately $211.1 million based on the closing price as quoted on the New York Stock Exchange. As of February 21, 2020, there were 35,772,204 shares of our common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company’s definitive proxy statement for the 2019 Annual Meeting of Stockholders, which will be filed with the SEC within 120 days of December 31, 2019, are incorporated by reference in Part III. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures SANDRIDGE ENERGY, INC. 2019 ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PART I PART II Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 1 1A. 1B. 2 3 4 5 6 7 7A. Quantitative and Qualitative Disclosures About Market Risk 8 9 9A. 9B. 10 11 12 13 14 15 16 Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions and Director Independence Principal Accounting Fees and Services PART IV Exhibits and Financial Statement Schedules Form 10-K Summary Signatures Page 7 27 40 41 41 41 42 43 45 59 61 99 99 100 101 101 101 101 101 102 104 105 Table of Contents GLOSSARY OF TERMS References in this report to the “Company,” “SandRidge,” “we,” “our,” and “us” mean SandRidge Energy, Inc., including its consolidated subsidiaries and variable interest entities of which it is the primary beneficiary. References to the “Successor” or the “Successor Company” relate to SandRidge subsequent to October 1, 2016. References to the “Predecessor” or “Predecessor Company” refer to SandRidge on and prior to October 1, 2016. In addition, the following is a description of the meanings of certain terms used in this report. 2-D seismic or 3-D seismic. Geophysical data that depict the subsurface strata in two dimensions or three dimensions, respectively. 3-D seismic typically provides a more detailed and accurate interpretation of the subsurface strata than 2-D seismic. ASC. Accounting Standards Codification. ASU. Accounting Standards Update. Bankruptcy Code. United States Bankruptcy Code. Bankruptcy Court. United States Bankruptcy Court for the Southern District of Texas. Bankruptcy Petitions. Voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to oil or other liquid hydrocarbons. Bcf. Billion cubic feet of natural gas. Bench. A geological horizon; a distinctive stratum useful for stratigraphic correlation. Boe. Barrels of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil. Although an equivalent barrel of condensate or natural gas may be equivalent to a barrel of oil on an energy basis, it is not equivalent on a value basis as there may be a large difference in value between an equivalent barrel and a barrel of oil. For example, based on the commodity prices used to prepare the estimate of the Company’s reserves at year-end 2019 of $55.69/Bbl for oil and $2.58/Mcf for natural gas, the ratio of economic value of oil to natural gas was approximately 22 to 1, even though the ratio for determining energy equivalency is 6 to 1. Boe/d. Boe per day. Bonanza Creek. Bonanza Creek Energy, Inc. Btu or British thermal unit. The quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit. Building Note. Note with a principal amount of $35.0 million, as amended in February 2017, which was secured by first priority mortgages on the Company’s real estate in Oklahoma City, Oklahoma. CBP. Central Basin Platform. Ceiling limitation. Present value of future net revenues from proved oil, natural gas and NGL reserves, discounted at 10% per annum, plus the lower of cost or fair value of unproved properties, plus estimated salvage value, less related tax effects. CO2. Carbon dioxide. Completion. The process of treating a drilled well, primarily through hydraulic fracturing, followed by the installation of permanent equipment for the production of oil or natural gas, or in the case of a dry well, the reporting to the appropriate authority that the well has been abandoned. 1 Table of Contents Counterparty. Counterparty to the Company’s drilling participation agreement. Credit facility. Senior credit facility dated February 10, 2017. Debtors. The Company and certain of its direct and indirect subsidiaries which collectively filed for reorganization under the Bankruptcy Code on May 16, 2016. Developed acreage. The number of acres that are assignable to productive wells. Developed oil, natural gas and NGL reserves. Reserves of any category that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. Development costs. Costs incurred to obtain access to proved reserves, complete wells and provide facilities for extracting, treating, gathering and storing the oil and natural gas. More specifically, development costs, including depreciation and applicable operating costs of support equipment and facilities and other costs of development activities, are costs incurred to (i) gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, road building and relocating public roads, gas lines and power lines, to the extent necessary in developing the proved reserves, (ii) drill, equip and complete development wells, development-type stratigraphic test wells and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment, and the wellhead assembly, (iii) acquire, construct and install production facilities such as lease flow lines, separators, treaters, heaters, manifolds, measuring devices and production storage tanks, natural gas cycling and processing plants, and central utility and waste disposal systems, and (iv) provide improved recovery systems. Development well. A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive. Dry well. An exploratory, development or extension well that proves to be incapable of producing either oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well. Early settlements. Settlements of commodity derivative contracts prior to contractual maturity. Emergence Date. Date the Debtors emerged from bankruptcy, October 4, 2016. Exchange Act. Securities Exchange Act of 1934, as amended. Exploratory well. A well drilled to find a new field or to find a new reservoir in a field previously found to produce oil or natural gas in another reservoir. Extended-reach lateral (“XRL”). Extended-reach lateral wells are horizontal wells where the horizontal segment or lateral is at least approximately 9,000-9,500 feet in length and may extend further. When referencing lateral counts, XRL’s are counted as more than one lateral depending on the relationship of length to an SRL length. E.g. a 9,000 foot lateral would be counted as two laterals. FASB. Financial Accounting Standards Board. Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field which are separated vertically by intervening impervious strata, or laterally by local geological barriers, or both. Reservoirs that are associated by being in overlapping or adjacent fields may be treated as a single or common operational field. The geological terms “structural feature” and “stratigraphic condition” are intended to identify localized geological features as opposed to the broader terms of basins, trends, provinces, plays, areas of interest, etc. Gross acres or gross wells. The total acres or wells, as the case may be, in which a working interest is owned. Horizontal well. A well that is turned horizontally at depth, providing access to oil and gas reserves at a wide range of angles. 2 Table of Contents Hydraulic fracturing. Procedure to stimulate production by forcing a mixture of fluid and proppant into the formation under high pressure. Hydraulic fracturing creates artificial fractures in the reservoir rock to increase permeability and porosity. IRS. Internal Revenue Service. Lease. A contract in which the owner of minerals gives a company or working interest owner temporary and limited rights to explore for, develop, and produce minerals from the property, or; any transfer where the owner of a mineral interest assigns all or a part of the operating rights to another party but retains a continuing nonoperating interest in production from the property. MBbls. Thousand barrels of oil or other liquid hydrocarbons. MBoe. Thousand barrels of oil equivalent. Mcf. Thousand cubic feet of natural gas. MMBbls. Million barrels of oil or other liquid hydrocarbons. MMBoe. Million barrels of oil equivalent. MMBtu. Million British Thermal Units. MMcf. Million cubic feet of natural gas. MMcf/d. MMcf per day. Mississippian Trust I. SandRidge Mississippian Trust I. Mississippian Trust II. SandRidge Mississippian Trust II. Net acres or net wells. The sum of the fractional working interest owned in gross acres or gross wells, as the case may be. Netherland Sewell. Netherland, Sewell & Associates, Inc. NGL. Natural gas liquids, such as ethane, propane, butanes and natural gasoline that are extracted from natural gas production streams. NYMEX. The New York Mercantile Exchange. NYSE. New York Stock Exchange. Omnibus Incentive Plan. SandRidge Energy, Inc. 2016 Omnibus Incentive Plan. Permian Divestiture. The November 1, 2018 sale of substantially all of the Company's oil and natural gas properties, rights and related assets in the CBP region of the Permian Basin, along with 13,125,000 common units representing a 25% equity interest in the Permian Trust to an independent third party. Permian Trust. SandRidge Permian Trust. Plugging and abandonment. Refers to the sealing off of fluids in the strata penetrated by a well so that the fluids from one stratum will not escape into another or to the surface. Regulations of all states require plugging of abandoned wells. Present value of future net revenues. The present value of estimated future revenues to be generated from the production of proved reserves, before income taxes, calculated in accordance with SEC guidelines, net of estimated production and future development costs, using prices and costs as of the date of estimation without future escalation and without giving effect to hedging activities, non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization. PV-10 is calculated using an annual discount rate of 10% and PV-9 is calculated using an annual discount rate of 9%. 3 Table of Contents Production costs. Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities that become part of the cost of oil and natural gas produced. Productive well. A well that is found to be capable of producing oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well. Prospect. A specific geographic area that, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons. Proved developed reserves. Reserves that are both proved and developed. Proved oil, natural gas and NGL reserves. Those quantities of oil, natural gas and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. For additional information, see the SEC’s definition in Rule 4-10(a) (22) of Regulation S-X, a link for which is available at the SEC’s website. Proved undeveloped reserves. Reserves that are both proved and undeveloped. PV-9. See “Present value of future net revenues” above. PV-10. See “Present value of future net revenues” above. Reserves. Estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a certain date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market, and all permits and financing required to implement the project. Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir, or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations). Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. Royalty Interest. An interest in an oil and natural gas property entitling the owner to a share of oil, natural gas or NGL production free of costs of production. Royalty Trust. Individually, the SandRidge Mississippian Trust I, the SandRidge Mississippian Trust II and the SandRidge Permian Trust. Royalty Trusts. Collectively, the SandRidge Mississippian Trust I, the SandRidge Mississippian Trust II and the SandRidge Permian Trust for the periods prior to November 1, 2018, and the SandRidge Mississippian Trust I and the SandRidge Mississippian Trust II for periods thereafter. Ryder Scott. Ryder Scott Company, L.P. SEC. Securities and Exchange Commission. SEC prices. Unweighted arithmetic average oil and natural gas prices as of the first day of the month for the most recent 12 months as of the balance sheet date. Securities Act. Securities Act of 1933, as amended. 4 Table of Contents Standard-reach lateral (“SRL”). Standard-reach lateral wells are horizontal wells where the horizontal segment or lateral is approximately 4,000- 4,500 feet in length. Standardized measure or standardized measure of discounted future net cash flows. The present value of estimated future cash inflows from proved oil, natural gas and NGL reserves, less future development and production costs and future income tax expenses, discounted at 10% per annum to reflect timing of future cash flows and using the same pricing assumptions as were used to calculate PV-10. Standardized Measure differs from PV-10 because Standardized Measure includes the effect of future income taxes on future net revenues. Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit the production of economic quantities of oil or natural gas regardless of whether such acreage contains proved reserves. Undeveloped oil, natural gas and NGL reserves. Reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. i. ii. iii. Reserves on undrilled acreage are limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. Undrilled locations are classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology establishing reasonable certainty. Warrants. Series A warrants and Series B warrants with initial exercise prices of $41.34 and $42.03 per share, respectively, which expire on October 4, 2022. Working interest. The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and receive a share of production and requires the owner to pay a share of the costs of drilling and production operations. WTI. West Texas Intermediate. 5 Table of Contents Cautionary Note Regarding Forward-Looking Statements This report includes "forward-looking statements" as defined by the SEC. These forward-looking statements may include projections and estimates concerning our capital expenditures, liquidity, capital resources and debt profile, the timing and success of specific projects, outcomes and effects of litigation, claims and disputes, elements of our business strategy, compliance with governmental regulation of the oil and natural gas industry, including environmental regulations, acquisitions and divestitures and the potential effects on our financial condition and other statements concerning our operations, financial performance and financial condition. Forward- looking statements are generally accompanied by words such as “estimate,” “assume,” “target,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “could,” “may,” “foresee,” “plan,” “goal,” “should,” “intend” or other words that convey the uncertainty of future events or outcomes. These forward-looking statements are based on certain assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected. The Company disclaims any obligation to update or revise these forward-looking statements unless required by law, and cautions readers not to rely on them unduly. While we consider these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties relating to, among other matters, the risks and uncertainties discussed in “Risk Factors” in Item 1A of this report, as well as the following: • • • • • • • • • • • • • • • • • • • • • risks associated with drilling oil and natural gas wells; the volatility of oil, natural gas and NGL prices; uncertainties in estimating oil, natural gas and NGL reserves; the need to replace the oil, natural gas and NGL reserves the Company produces; our ability to execute our growth strategy by drilling wells as planned; the amount, nature and timing of capital expenditures, including future development costs, required to develop our undeveloped areas; concentration of operations in the Mid-Continent region of the United States; limitations of seismic data; the potential adverse effect of commodity price declines on the carrying value of our oil and natural properties; severe or unseasonable weather that may adversely affect production; availability of satisfactory oil, natural gas and NGL marketing and transportation options; availability and terms of capital to fund capital expenditures; amount and timing of proceeds of asset monetizations; potential financial losses or earnings reductions from commodity derivatives; potential elimination or limitation of tax incentives; risks and uncertainties related to the adoption and implementation of regulations restricting oil and gas development in states where we operate; competition in the oil and natural gas industry; general economic conditions, either internationally or domestically affecting the areas where we operate; costs to comply with current and future governmental regulation of the oil and natural gas industry, including environmental, health and safety laws and regulations, and regulations with respect to hydraulic fracturing and the disposal of produced water; risks and uncertainties related to the potential sale or lease of our corporate headquarters; and the need to maintain adequate internal control over financial reporting. 6 Table of Contents Item 1. Business GENERAL PART I We are an oil and natural gas company, organized in 2006 as a Delaware corporation, with a principal focus on exploration and production activities in the U.S. Mid-Continent and North Park Basin of Colorado. As of December 31, 2019, we had an interest in 1,728 gross (1,013.0 net) producing wells, approximately 1,169 of which we operate, and approximately 701,000 gross (511,000 net) total acres under lease. As of December 31, 2019, we had no rigs drilling. Total estimated proved reserves as of December 31, 2019, were 89.9 MMBoe, of which approximately 69% were proved developed. Our principal executive offices are located at 123 Robert S. Kerr Avenue, Oklahoma City, Oklahoma 73102 and our telephone number is (405) 429-5500. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are made available free of charge on our website at www.sandridgeenergy.com as soon as reasonably practicable after we file such material with, or furnish it to, the SEC. Any materials that we have filed with the SEC may be accessed via the SEC’s website address at www.sec.gov. Reorganization Under Chapter 11 and Emergence from Bankruptcy On May 16, 2016, the Debtors filed Bankruptcy Petitions for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Bankruptcy Court confirmed the reorganization plan, and the Debtors’ subsequently emerged from bankruptcy on October 4, 2016. Pursuant to the reorganization plan, all of the Predecessor Company's common stock and other equity and debt securities were cancelled and on October 4, 2016, the Successor Company issued an aggregate of 18.9 million shares of common stock at $.001 par value and commenced trading on the New York Stock Exchange. Our Business Strategy Our business strategy in 2020 will be focused on maximizing free cash flow through the strategic rationalization of corporate and field-level costs, limiting our drilling capital to locations that we believe will provide high rates of return in the present commodity price environment and that allow for near-term payouts. We will continue our pursuit of acquisitions and business combinations that are accretive to earnings and cash flow per share, and which provide high margin properties with attractive returns at current commodity prices. The execution of this strategy will be coupled with the continued exercise of financial discipline and prudent capital allocation. We intend to spend between $25.0 million and $30.0 million in our 2020 capital budget plan in contemplation of continued depressed commodity prices, and will be prepared to expand our capital program if commodity prices increase sufficiently. 7 Table of Contents PRIMARY BUSINESS OPERATIONS Our primary operations are the exploration, development and production of oil and natural gas. The following table presents information concerning our exploration and production activities by geographic area of operation as of December 31, 2019. Area Mid-Continent North Park Basin Other Total Estimated Net Proved Reserves (MMBoe) Daily Production (MBoe/d)(1) Reserves/ Production (Years)(2) Gross Acreage Net Acreage Capital Expenditures (In millions) (3) 61.4 28.5 — 89.9 23.9 4.6 — 28.5 7.0 16.9 — 8.6 578,667 117,564 4,628 700,859 399,912 $ 109,579 1,456 510,947 $ 29.2 129.3 3.3 161.8 ____________________ (1) Average daily net production for the month of December 2019. (2) Estimated net proved reserves as of December 31, 2019 divided by average daily net production for the month of December 2019, annualized. (3) Capital expenditures for the year ended December 31, 2019, on an accrual basis and including acquisitions. Properties Mid-Continent We held interests in approximately 579,000 gross (400,000 net) leasehold acres located primarily in Oklahoma and Kansas at December 31, 2019. Associated proved reserves at December 31, 2019 totaled 61.4 MMBoe, 91.0% of which were proved developed reserves. Our interests in the Mid-Continent as of December 31, 2019 included 1,675 gross (960.0 net) producing wells with an average working interest of 57%. We had no rigs operating in the Mid-Continent as of December 31, 2019. At December 31, 2019, our Mid-Continent properties included an inventory of 15 operated proved undeveloped wells. Additionally, we estimate there are approximately 100 undeveloped probable horizontal locations. During 2019, we completed a total of 12 horizontal producing wells in this area, which consisted primarily of SRLs. NW STACK. The Meramec and Osage formations are the primary targets in the NW STACK in Garfield, Major, Dewey, and Woodward Counties. These formations are Mississippian in age, lying above the Woodford Shale and below Chester formations. The Meramec is composed of interbedded shales, sands, and carbonates while the Osage is composed of low porosity, fractured limestone and chert. The top of these target formations ranges in depth from about 5,800 feet at the northern edge of the basin to greater than 14,000 feet toward the interior of the basin. Meramec formation thickness ranges from about 50 feet to over 400 feet and the Osage formation thickness ranges from about 450 to 1,400 feet. The Woodford Shale is the primary hydrocarbon source for both the Meramec and Osage. Similar to the STACK, there is an over-pressured area and normally pressured area in the NW STACK. We completed 12 wells in the Meramec formation during 2019 and no Osage wells. Of our total Mid- Continent acreage at December 31, 2019, approximately 99,000 gross (56,000 net) acres are associated with the NW STACK play area. In the third quarter of 2017, we entered into a $200.0 million drilling participation agreement with a Counterparty to jointly develop new horizontal wells on a wellbore only basis within certain dedicated sections of our undeveloped leasehold acreage within the Meramec formation in the NW STACK. Under this agreement, the Counterparty paid 90% of the net drilling and completion costs, up to $100.0 million in the first tranche, in exchange for an initial 80% net working interest in each new well, subject to certain reversionary hurdles. As a result, we received a 20% net working interest after funding 10% of the drilling and completion costs related to the subject wells. The last well under this agreement was completed in the second quarter of 2019. See "Operational Activities" included in Item 7 of this report for further discussion of the drilling participation agreement. Mississippian Lime Formation. The Mississippian Lime formation is an expansive carbonate hydrocarbon system located on the Anadarko Shelf in northern Oklahoma and southern Kansas, and is a target for exploration and development within the Mid-Continent. The top of this formation is encountered between approximately 4,000 and 7,000 feet and stratigraphically between various formations of Pennsylvanian age and the Devonian-aged Woodford Shale formation. The Mississippian formation is approximately 350 to 650 feet in gross thickness across our lease position and has targeted porosity 8 Table of Contents zone(s) ranging between 20 and 150 feet in thickness. At December 31, 2019, we had approximately 480,000 gross (344,000 net) acres under lease and 1,211 gross (776.7 net) producing wells in the Mississippian formation. We did not complete any wells in the Mississippian Lime formation in 2019. North Park Basin Our North Park Basin properties consisted of approximately 118,000 gross (110,000 net) acres, and 53 gross and net producing wells with a working interest of 100%, at December 31, 2019. Associated proved reserves at December 31, 2019 totaled approximately 28.5 MMBoe, of which 21.7% were proved developed reserves. The North Park Basin acreage is located in north central Colorado, and similar to the DJ Basin next to Colorado’s Front Range, has multiple potential pay targets in addition to the Niobrara Shale play, where our activity is currently focused. Although untested, zones shallower and deeper than the Niobrara have indications of potentially commercial hydrocarbons. The Niobrara Shale is characterized by stacked pay benches at depths of 5,500 to 9,000 feet with overall reservoir thickness over 450 feet. Based on our delineation drilling on acreage inside and outside federal units, we are developing a proved area where we have 55 operated proved undeveloped wells. Across our entire acreage position, we estimate there are approximately 900 undeveloped probable horizontal lateral locations. We had no rigs operating in the North Park Basin as of December 31, 2019. We completed a total of 16 horizontal producing wells, including 12 XRLs and four SRLs, in this area during 2019. Proved Reserves The portion of a reservoir considered to contain proved reserves includes (i) the portion identified by drilling and limited by fluid contacts, if any, and (ii) adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil, natural gas or NGLs on the basis of available geoscience and engineering data. In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons as seen in a well penetration unless geoscience, engineering or performance data and reliable technology establish a lower contact with reasonable certainty. Existing economic conditions include prices, costs, operating methods and government regulations existing at the time the reserve estimates are made. SEC prices are used to determine proved reserves, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. See further discussion of prices in “Risk Factors” included in Item 1A of this report. Preparation of Reserves Estimates Over 90% of the proved oil, natural gas and NGL reserves disclosed in this report are based on reserve estimates determined and prepared by independent reserve engineers primarily using decline curve analysis to determine the reserves of individual producing wells. A small portion of the proved reserves disclosed in this report were determined by internal reserve engineers. To establish reasonable certainty with respect to our estimated proved reserves, the independent and internal reserve engineers employed technologies that have been demonstrated to yield results with consistency and repeatability. Reserves attributable to producing wells with limited production history and for undeveloped locations were estimated using volumetric estimates or performance from analogous wells in the surrounding area. These wells were considered to be analogous based on production performance from the same formation and completions using similar techniques. The technologies and economic data used to estimate our proved reserves include, but are not limited to, well logs, geological maps, seismic data, well test data, production data, historical price and cost information and property ownership interests. This data was reviewed by various levels of management for accuracy before consultation with independent reserve engineers. This consultation included review of properties, assumptions and available data. Internal reserve estimates were compared to those prepared by independent reserve engineers to test the estimates and conclusions before the reserves were included in this report. The accuracy of the reserve estimates is dependent on many factors, including the following: • • • • the quality and quantity of available data and the engineering and geological interpretation of that data; estimates regarding the amount and timing of future costs, which could vary considerably from actual costs; the accuracy of economic assumptions; and the judgment of the personnel preparing the estimates. SandRidge’s Senior Vice President—Reserves, Technology and Business Development is the technical professional primarily responsible for overseeing the preparation of our reserves estimates. He has a Bachelor of Science degree in Petroleum Engineering with over 30 years of practical industry experience, including over 30 years of estimating and evaluating 9 Table of Contents reserve information. He has also been a certified professional engineer in the state of Oklahoma since 2007 and a member of the Society of Petroleum Engineers since 1980. SandRidge’s reserve engineers monitor well performance and make reserve estimate adjustments as necessary to ensure the most current information is reflected. The information used to prepare reserve estimates includes production histories as well as other geologic, economic, ownership and engineering data. The Corporate Reserves department currently has a total of three full-time employees, comprised of two degreed engineers and one engineering and business analyst with a four-year degree in mathematics. We encourage ongoing professional education for our engineers and analysts on new technologies and industry advancements as well as refresher training on basic skill sets. In order to ensure the reliability of reserves estimates, the Corporate Reserves department follows comprehensive SEC-compliant internal controls and policies to determine, estimate and report proved reserves including: • • • • • • confirming that we include reserves estimates for all properties owned and that they are based upon proper working and net revenue interests; ensuring the information provided by other departments within the Company such as Accounting is accurate; communicating, collaborating, and analyzing with technical personnel in our business units; comparing and reconciling the internally generated reserves estimates to those prepared by third parties; utilizing experienced reservoir engineers or those under their direct supervision to prepare reserve estimates; and ensuring compensation for the reserve engineers is not tied to the amount of reserves recorded. Each quarter, the Senior Vice President—Reserves, Technology and Business Development presents the status of the Company’s reserves to senior executives, and subsequently obtains approval of significant changes from key executives. Additionally, the five year PUD development plan is reviewed and approved annually by the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and the Senior Vice President - Reserves, Technology and Business Development. The Corporate Reserves department works closely with independent petroleum consultants at each fiscal year end to ensure the integrity, accuracy and timeliness of annual independent reserves estimates. These independently developed reserves estimates are presented to the Audit Committee. In addition to reviewing the independently developed reserve reports, the Audit Committee also periodically meets with the independent petroleum consultants that prepare estimates of proved reserves. The percentage of total proved reserves prepared by each of the independent petroleum consultants is shown in the table below. Cawley, Gillespie & Associates, Inc. Ryder Scott Company, L.P. Netherland, Sewell & Associates, Inc. Total 2019 December 31, 2018 2017 50.2 % 43.0 % — % 93.2 % 51.6 % 43.5 % — % 95.1 % 62.6 % 29.0 % 3.8 % 95.4 % The remaining 6.8%, 4.9% and 4.6% of estimated proved reserves as of December 31, 2019, 2018 and 2017, respectively, were based on internally prepared estimates, primarily for the Mid-Continent area. Copies of the reports issued by our independent reserve consultants with respect to our oil, natural gas and NGL reserves as of December 31, 2019 are filed with this report as Exhibits 99.1 and 99.2. The geographic location of our estimated proved reserves prepared by each of the independent reserve consultants as of December 31, 2019 is presented below. Cawley, Gillespie & Associates, Inc. Ryder Scott Company, L.P. Geographic Locations—by Area by State Mid-Continent—KS, OK North Park Basin—CO, Mid-Continent—OK 10 Table of Contents The qualifications of the technical personnel at each of these firms primarily responsible for overseeing the firm’s preparation of the Company’s reserves estimates included in this report are set forth below. These qualifications meet or exceed the Society of Petroleum Engineers’ standard requirements to be a professionally qualified Reserve Estimator and Auditor. Cawley, Gillespie & Associates, Inc. • more than 25 years of practical experience in the estimation and evaluation of petroleum reserves; • • a registered professional engineer in the state of Texas; and Bachelor of Science Degree in Petroleum Engineering. Ryder Scott Company, L.P. • more than 30 years of practical experience in the estimation and evaluation of petroleum reserves; • • a registered professional engineer in the states of Alaska, Colorado, Texas and Wyoming; and Bachelor of Science Degree in Petroleum Engineering and MBA in Finance; Netherland, Sewell & Associates, Inc. • • • practicing consultant in petroleum engineering since 2013 and over 14 years of prior industry experience; licensed professional engineers in the state of Texas; and Bachelor of Science Degree in Chemical Engineering Reporting of Natural Gas Liquids NGLs are recovered through further processing of a portion of our natural gas production stream. At December 31, 2019, NGLs comprised approximately 18% of total proved reserves on a barrel equivalent basis and represented volumes to be produced from properties where we have contracts in place for the extraction and sale of NGLs. NGLs are products sold by the gallon. In reporting proved reserves and production of NGLs, we have included production and reserves in barrels based on a conversion rate of 42 gallons per barrel. The extraction of NGLs in the processing of natural gas reduces the volume of natural gas available for sale. All production information related to natural gas is reported net of the effect of any reduction in natural gas volumes resulting from the processing and extraction of NGLs. 11 Table of Contents Reserve Quantities, PV-10 and Standardized Measure The following estimates of proved oil, natural gas and NGL reserves are based on reserve reports as of December 31, 2019, 2018 and 2017, over 90% of which were prepared by independent reserve engineers. The reserve reports were based on our drilling schedule at the time year-end reserve estimates were prepared. Our year-end 2019 PUD development plan established that 100% of our current proved undeveloped reserves will be developed within five years from when they were originally recorded. See “Critical Accounting Policies and Estimates” in Item 7 of this report for further discussion of uncertainties inherent to the reserves estimates. 2019 December 31, 2018 2017 Estimated Proved Reserves(1) Developed Oil (MMBbls) NGL (MMBbls) Natural gas (Bcf) Total proved developed (MMBoe) Undeveloped Oil (MMBbls) NGL (MMBbls) Natural gas (Bcf) Total proved undeveloped (MMBoe) Total Proved Oil (MMBbls) NGL (MMBbls) Natural gas (Bcf) Total proved (MMBoe) 14.1 14.5 200.9 62.1 21.2 1.3 31.5 27.8 35.3 15.9 232.3 89.9 18.7 22.3 307.9 92.3 45.3 5.9 100.0 67.9 64.0 28.2 407.9 160.2 Standardized Measure of Discounted Net Cash Flows (in millions)(2) PV-10 (in millions)(3) $ $ 364.3 $ 364.3 $ 1,045.6 $ 1,045.6 $ 25.9 29.9 408.0 123.8 35.9 4.4 80.9 53.8 61.8 34.3 488.9 177.6 749.3 749.3 ____________________ (1) Estimated proved reserves, PV-10 and Standardized Measure were determined using SEC prices, and do not reflect actual prices received or current market prices. All prices are held constant throughout the lives of the properties. The index prices and the equivalent weighted average wellhead prices used in the reserve reports are shown in the table below. December 31, 2019 December 31, 2018 December 31, 2017 Index prices (a) Oil (per Bbl) Natural gas (per Mcf) Oil (per Bbl) Weighted average wellhead prices (b) NGL (per Bbl) Natural gas (per Mcf) $ $ $ 55.69 65.56 51.34 $ $ $ 2.58 3.10 2.98 $ $ $ 50.63 60.86 48.47 $ $ $ 12.45 25.62 20.28 $ $ $ 1.16 1.77 1.90 ____________________ (a) Index prices are based on average West Texas Intermediate (“WTI”) Cushing spot prices for oil and average Henry Hub spot market prices for natural gas. (b) Average adjusted volume-weighted wellhead product prices reflect adjustments for transportation, quality, gravity, and regional price differentials. (2) Standardized Measure differs from PV-10 as standardized measure includes the effect of future income taxes. At December 31, 2019, 2018 and 2017, the difference between the standardized measure and PV-10 was insignificant due to an excess of tax basis in oil and natural gas properties over projected undiscounted future cash flows from our proved reserves. 12 Table of Contents (3) PV-10 is a non-GAAP financial measure. Neither PV-10 nor Standardized Measure represents an estimate of fair market value of our oil and natural gas properties. PV- 10 is used by the industry and by management as a reserve asset value measure to compare against past reserve bases and the reserve bases of other business entities. It is useful because its calculation is not dependent on the taxpaying status of the entity. The following table provides a reconciliation of our Standardized Measure to PV-10: Standardized Measure of Discounted Net Cash Flows Present value of future income tax discounted at 10% PV-10 2019 December 31, 2018 (In millions) 2017 $ $ 364.3 $ 1,045.6 $ — — 364.3 $ 1,045.6 $ 749.3 — 749.3 Proved Reserves - Mid-Continent. Proved reserves in the Mid-Continent, primarily the Mississippian formation, decreased from 110.9 MMBoe at December 31, 2018 to 61.4 MMBoe at December 31, 2019. This reserve reduction is due primarily to downward revisions of 26.1 MMBoe associated with the decrease in year-end SEC commodity pricing consisting of (i) 17.8 MMBoe from downgrading PUDs, and (ii) 8.3 MMBoe from remaining proved reserves, 11.3 MMBoe negative revisions associated with increased commodity price differentials, and 2019 production totaling 10.4 MMBoe. Additional reserve decreases amounting to 5.2 MMBoe were the result of wells being shut-in during 2019, largely due to economic conditions, sales, and other revisions to prior estimates. Partially offsetting these reductions were a 3.6 MMBoe increase associated with changes to lease operating costs, extensions, and other reserve parameters. Proved Reserves - North Park Basin. Our North Park Basin proved reserves in the Niobrara decreased from 49.3 MMBoe at December 31, 2018 to 28.5 MMBoe at December 31, 2019. This reserve reduction is due primarily to downward revisions of 24.8 MMBoe associated with the decrease in year-end SEC commodity pricing consisting of (i) 21.9 MMBoe from downgrading PUDs, and (ii) 2.9 MMBoe from remaining proved reserves, 3.7 MMBoe associated with changes to lease operating costs, 3.1 MMBoe negative revisions to prior estimates stemming from changes in well performance, 2019 production totaling 1.5 MMBoe, and other reductions amounting to 1.4 MMBoe. Partially offsetting these reductions are a 12.6 MMBoe increase associated with converting undeveloped well locations from SRLs to planned XRLs as well as reduced future estimated development capital on these undeveloped locations, and 1.0 MMBoe associated with extensions and commodity price differentials. Our Niobrara proved developed reserves are attributed to 51 horizontal producing wells. Reservoir characteristics of the Niobrara in the North Park Basin are similar to those of the Niobrara in the DJ Basin, consisting of multiple stratigraphic benches. In the North Park Basin, production performance and reservoir data gathered from Niobrara producing wells confirm consistency in reservoir properties such as porosity, thickness and stratigraphic conformity. Using the performance of the proved developed producing wells, proved undeveloped reserves were recorded for 20 sections of the 35 section proved development area predominantly at a well density of up to eight wells per section. Performance from recent spacing tests provide preliminary indications that a spacing density of up to 16 wells per section may be viable. Proved Undeveloped Reserves. The following table summarizes activity associated with proved undeveloped reserves during the periods presented: Reserves converted from proved undeveloped to proved developed (MMBoe) Drilling and infrastructure capital expended to convert proved undeveloped reserves to proved developed reserves (in millions) Year Ended December 31, 2019 2018 2017 3.7 4.2 $ 95.3 $ 63.2 $ 1.1 21.0 Total estimated proved undeveloped reserves were 27.8 MMBoe at December 31, 2019, which is a decrease of 40.1 MMBoe from the prior year. This decrease is primarily due to 39.8 MMBoe associated with removing PUDs due to the decrease in year-end SEC commodity pricing consisting of 17.8 MMBoe of Midcon PUD reserves and 21.9 MMBoe of North Park Basin PUD reserves. Additional decreases included 1.1 MMBoe associated with a minor type curve revision on the remaining 55 North Park PUDs to account for recent PDP performance, 3.7 MMBoe of 2019 PUD conversions, and 8.1 MMBoe related to revisions in estimates for operating expenses, differentials, and other reserve parameters. These were partially offset by a 12.6 MMBoe increase associated with converting undeveloped well locations from SRLs to planned XRLs as well as reduced future estimated development capital. 13 Table of Contents Total estimated proved undeveloped reserves were 67.9 MMBoe at December 31, 2018, which is an increase of 14.1 MMBoe from the prior year. This increase is primarily due to 18.0 MMBoe from extensions and discoveries which consisted largely of 8.5 MMBoe in the North Park Basin from increased well density and successful development drilling in the Niobrara shale, and 9.5 MMBoe in the Mid-Continent from horizontal drilling in our NW STACK play. These extensions were offset by 4.2 MMBoe of PUD conversions. Total estimated proved undeveloped reserves as of December 31, 2017 were 53.8 MMBoe, an increase of 10.6 MMBoe from the prior year. Reserves added from extensions and discoveries totaled 14.7 MMBoe, which consisted of 10.1 MMBoe in North Park from horizontal wells drilled in the Niobrara Shale, and 4.6 MMBoe in the Mid-Continent from horizontal drilling in our NW STACK play. These extensions were offset by 137 MBoe of proved undeveloped reserves at December 31, 2016 that were converted to proved developed reserves during 2017, and net downward revisions of 4.0 MMBoe primarily due to removing PUDs attributable to expiring Mid- Continent undeveloped acreage outside of our NW STACK play that was not scheduled to be developed prior to lease expiry. Approximately 1.0 MMBoe of proved undeveloped reserves were booked and converted during the year 2017. For additional information regarding changes in proved reserves during each of the three years ended December 31, 2019, 2018 and 2017 see “Note 22— Supplemental Information on Oil and Natural Gas Producing Activities” to the consolidated financial statements in Item 8 of this report. Significant Fields Oil, natural gas and NGL production for fields containing more than 15% of our total proved reserves at each year end are presented in the table below. The Mississippian Lime Horizontal field and the Niobrara field each contained more than 15% of total proved reserves at December 31, 2019, 2018 and 2017. Year Ended December 31, 2019 Mississippian Lime Horizontal Niobrara Year Ended December 31, 2018 Mississippian Lime Horizontal Niobrara Year Ended December 31, 2017 Mississippian Lime Horizontal Niobrara Oil (MBbls) NGL (MBbls) Natural Gas (MMcf) Total (MBoe) 1,312 1,531 1,558 1,034 2,382 673 2,535 2 2,477 — 2,995 — 28,447 — 31,663 — 38,834 — 8,588 1,533 9,312 1,034 11,849 673 Mississippian Lime Horizontal Field. The Mississippian Lime Horizontal Field is located on the Anadarko Shelf in northern Oklahoma and Kansas and produces from the Mississippian formation. Our interests in the Mississippian Lime Horizontal Field as of December 31, 2019 included 1,211 gross (776.7 net) producing wells and a 64% average working interest in the producing area. Niobrara Field. The Niobrara field is located in Colorado and produces from the Niobrara Shale. Currently only oil is marketed while evaluation and appraisal of midstream options for gas processing and marketing is ongoing, including engineering design work, pipeline route surveying, and permitting. Our interests in the Niobrara Field as of December 31, 2019, included 53 gross and net producing wells with a 100% average working interest in the producing area. 14 Table of Contents Production and Price History The following table includes information regarding our net oil, natural gas and NGL production and certain price and cost information for each of the periods indicated. Production data (in thousands) Oil (MBbls) NGL (MBbls) Natural gas (MMcf) Total volumes (MBoe) Average daily total volumes (MBoe/d) Average prices—as reported(1) Oil (per Bbl) NGL (per Bbl) Natural gas (per Mcf) Total (per Boe) Expenses per Boe Production costs(2) Year Ended December 31, 2018 2017 2019 3,519 2,910 33,164 11,956 32.8 3,477 2,829 36,175 12,335 33.8 52.96 $ 12.23 $ 1.33 $ 22.26 $ 61.73 $ 23.72 $ 1.85 $ 28.27 $ 4,157 3,376 44,237 14,906 40.8 48.72 18.16 2.09 23.90 7.60 $ 7.12 $ 6.64 $ $ $ $ $ __________________ (1) (2) Prices represent actual average prices for the periods presented and do not include effects of derivative transactions. Represents production costs per Boe excluding production and ad valorem taxes. Productive Wells The following table presents the number of productive wells in which we owned a working interest at December 31, 2019. We operate substantially all of our wells. Productive wells consist of producing wells and wells capable of producing, including oil wells awaiting connection to production facilities and natural gas wells awaiting pipeline connections to commence deliveries. Gross wells are the total number of producing wells in which we have a working interest and net wells are the sum of the fractional working interests owned in gross wells. Oil Natural Gas Total Gross Net Gross Net Gross Net Area Mid-Continent North Park Basin Total 262 — 262 126.1 — 126.1 1,675 53 1,728 960.0 53.0 1,013.0 1,413 53 1,466 833.9 53.0 886.9 15 Table of Contents Drilling Activity The following table presents information with respect to wells completed during the periods indicated. This information is not necessarily indicative of future performance, and should not be interpreted to present any correlation between the number of productive wells drilled and quantities or economic value of reserves found. Productive wells are those that produce commercial quantities of hydrocarbons, regardless of whether they produce a reasonable rate of return. As of December 31, 2019, we had no operated wells drilling, completing or awaiting completion. 2019 2018 2017 Gross Net Gross Net Gross Net Completed Wells Development Productive Dry Total Exploratory Productive Dry Total Total Productive Dry Total 28 — 28 — — — 28 — 28 20.6 — 20.6 — — — 20.6 — 20.6 29 — 29 — — — 29 — 29 15.5 — 15.5 — — — 15.5 — 15.5 22 — 22 1 — 1 23 — 23 16.4 — 16.4 1.0 — 1.0 17.4 — 17.4 We had no third-party rigs operating on our Mid-Continent or North Park Basin acreage at December 31, 2019. Developed and Undeveloped Acreage The following table presents information regarding our developed and undeveloped acreage at December 31, 2019: Area Mid-Continent North Park Basin Other Total Developed Acreage Undeveloped Acreage Gross Net Gross Net 489,411 18,079 1,440 508,930 357,673 18,054 389 376,116 89,256 99,485 3,188 191,929 42,239 91,525 1,067 134,831 Many of the leases included in the undeveloped acreage above will expire at the end of their respective primary terms. To prevent expiration, we may exercise our contractual rights to pay delay rentals to extend the terms of leases we value, or establish production from the leasehold acreage prior to expiration, which will keep the lease from expiring until production has ceased. 16 Table of Contents As of December 31, 2019, the gross and net acres subject to leases in the undeveloped acreage above are set to expire as follows: Twelve Months Ending December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 and later Other(1) Total Acres Expiring Gross Net 26,179 19,481 3,954 1,002 141,313 191,929 14,846 17,745 2,367 776 99,097 134,831 ____________________ (1) Leases remaining in effect until development efforts or production on the particular lease has ceased. The acreage due to expire during the twelve months ending December 31, 2020, includes approximately 19,146 gross (9,791 net) acres in the Mid-Continent and 7,033 gross (5,055 net) acres in the North Park Basin. Marketing and Customers We sell our oil, natural gas and NGLs to a variety of customers, including utilities, oil and natural gas companies and trading and energy marketing companies. We had three customers that individually accounted for more than 10% of our total revenue during the 2019 period. See “Note 1—Summary of Significant Accounting Policies” to the consolidated financial statements in Item 8 of this report for additional information on our major customers. The number of readily available purchasers in the areas where we sell our production makes it unlikely that the loss of a single customer would materially affect our sales. We do not have any material commitments to deliver fixed and determinable quantities of oil and natural gas in the future under existing sales contracts or sales agreements. Title to Properties As is customary in the oil and natural gas industry, we conduct a preliminary review of the title to our properties. Prior to commencing drilling operations on our properties, we conduct a thorough title examination and perform curative work with respect to significant defects typically at our expense. In addition, prior to completing an acquisition of producing oil and natural gas assets, we perform title reviews on the most significant leases and depending on the materiality of properties, may obtain a drilling title opinion or review previously obtained title opinions. To date, we have obtained drilling title opinions on substantially all of our producing properties and believe that we have good and defensible title to our producing properties. Our oil and natural gas properties are subject to customary royalty and other interests, liens for current taxes and other burdens, which we believe does not materially interfere with the use of, or affect the carrying value of the properties. COMPETITION We compete with major oil and natural gas companies and independent oil and natural gas companies for leases, equipment, personnel and markets for the sale of oil, natural gas and NGLs. We believe our leasehold acreage position, geographic concentration of operations and technical and operational capabilities enable us to compete effectively with other exploration and production operations. However, the oil and natural gas industry is intensely competitive. See “Item 1A. Risk Factors” for additional discussion of competition in the oil and natural gas industry. Oil, natural gas and NGLs compete with other forms of energy available to customers, including alternate forms of energy such as electricity, coal and fuel oils. Changes in the availability or price of oil, natural gas and NGLs or other forms of energy, as well as business conditions, conservation, legislation, regulations and the ability to convert to alternate fuels and other forms of energy may affect the demand for oil, natural gas and NGLs. SEASONAL NATURE OF BUSINESS Generally, demand for natural gas decreases during the summer months and increases during the winter months and demand for oil peaks during the summer months. Certain natural gas purchasers utilize natural gas storage facilities and acquire some of their anticipated winter requirements during the summer, which can lessen seasonal demand fluctuations. Seasonal weather conditions and lease stipulations can limit our drilling and producing activities and other oil and natural gas operations 17 Table of Contents in a portion of our operating areas. These seasonal anomalies can pose challenges for meeting our well drilling objectives, delay the installation of production facilities, and increase competition for equipment, supplies and personnel during certain times of the year, which could lead to shortages and increase costs or delay operations. ENVIRONMENTAL REGULATIONS General Our oil and natural gas exploration, development and production operations are subject to stringent and complex federal, state, tribal, regional and local laws and regulations governing worker safety and health, the discharge and disposal of substances into the environment, and the protection of the environment and natural resources. Numerous governmental entities, including the EPA and analogous state and local agencies, (and, under certain laws, private individuals) have the power to enforce compliance with these laws and regulations and any permits issued under them. These laws and regulations may, among other things: (i) require permits to conduct exploration, drilling, water withdrawal, wastewater disposal and other production related activities; (ii) govern the types, quantities and concentrations of substances that may be disposed or released into the environment or injected into formations in connection with drilling or production activities, and the manner of any such disposal, release, or injection; (iii) limit or prohibit construction or drilling activities or require formal mitigation measures in sensitive areas such as wetlands, wilderness areas or areas inhabited by endangered or threatened species; (iv) require investigatory and remedial actions to mitigate pollution conditions arising from the Company’s operations or attributable to former operations; (v) impose safety and health restrictions designed to protect employees from exposure to hazardous or dangerous substances; and (vi) impose obligations to reclaim and abandon well sites and pits. Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative, civil and criminal penalties, the imposition of investigatory, remedial or corrective action obligations, the occurrence of delays or restrictions in permitting or performance of projects and the issuance of orders enjoining operations in affected areas. The trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment. Any changes in or more stringent enforcement of these laws and regulations that result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management or completion activities or waste handling, storage, transport, remediation, or disposal emission or discharge requirements could have a material adverse effect on the Company. We may be unable to pass on increased compliance costs to our customers. Moreover, accidental releases, including spills, may occur in the course of our operations, and there can be no assurance that we will not incur significant costs and liabilities as a result of such releases or spills, including any third-party claims for damage to property and natural resources or personal injury. While we do not believe that compliance with existing environmental laws and regulations and that continued compliance with existing requirements will have an adverse material effect on us, we can provide no assurance that we will not incur substantial costs in the future related to revised or additional environmental regulations that could have a material adverse effect on our business, financial condition, and results of operations. The following is a summary of the more significant existing and proposed environmental and occupational safety and health laws and regulations, as amended from time to time, to which our business operations are subject and for which compliance may have a material adverse impact on the Company. Hazardous Substances and Wastes We currently own, lease, or operate, and in the past have owned, leased, or operated, properties that have been used in the exploration and production of oil and natural gas. We believe we have utilized operating and disposal practices that were standard in the industry at the applicable time, but hazardous substances, hydrocarbons, and wastes may have been disposed or released on, from or under the properties owned, leased, or operated by us or on or under other locations where these substances and wastes have been taken for treatment or disposal. In addition, certain of these properties have been operated by third parties whose storage treatment and disposal or release of hazardous substances, hydrocarbons, and wastes were not under our control. These properties and the substances or wastes disposed or released on them may be subject to the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (“CERCLA”), the federal Resource Conservation and Recovery Act, (“RCRA”), and analogous state laws. Under these laws, we could be required to remove or remediate previously disposed substances or wastes (including substances or wastes disposed of or released by prior owners or operators or third parties whose waste was commingled with ours), to investigate and clean up contaminated property, to perform corrective actions to prevent future contamination, or to pay some or all of the costs of any such action. CERCLA, also known as the Superfund law, and comparable state laws may impose strict, joint and several liability without regard to fault or legality of conduct on certain classes of persons who are considered to be responsible for the release 18 Table of Contents of a “hazardous substance” into the environment. These persons include current and prior owners or operators of the site where the release of a hazardous substance occurred as well as entities that disposed or arranged for the disposal of the hazardous substances released at the site. Under CERCLA, these “responsible persons” may be liable for the costs of cleaning up sites where the hazardous substances have been released into the environment, for damages to natural resources resulting from the release and for the costs of certain environmental and health studies. Additionally, landowners and other third parties may file claims for personal injury and natural resource and property damage allegedly caused by the release of hazardous substances into the environment. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment from a hazardous substance release and to pursue steps to recover costs incurred for those actions from responsible parties. Although petroleum, natural gas and natural gas liquids are excluded from the definition of "hazardous substance" under CERCLA, despite this so- called "petroleum exclusion,” certain products used in the course of our operations may be regulated as CERCLA hazardous substances. To date, no Company-owned or operated site has been designated as a Superfund site, and we have not been identified as a responsible party for any Superfund site. We also generate wastes that are subject to the requirements of RCRA and comparable state statutes. RCRA imposes strict “cradle-to-grave” requirements on the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Drilling fluids, produced waters and other wastes associated with the exploration, production and/or development of oil and natural gas, including naturally-occurring radioactive material, if properly handled, are currently excluded from regulation as hazardous wastes under RCRA and, instead, are regulated under RCRA’s less stringent non-hazardous waste requirements. However, it is possible that these wastes could be classified as hazardous wastes in the future. Any change in the exclusion for such wastes could potentially result in an increase in costs to manage and dispose of wastes which could have a material adverse effect on our results of operations and financial position. In addition, in the course of our operations, we generate petroleum hydrocarbon wastes and ordinary industrial wastes that are subject to regulation under RCRA if they have hazardous characteristics. Air Emissions The federal Clean Air Act (the “CAA”), as amended, and comparable state laws and regulations restrict the emission of air pollutants through emissions standards, construction and operating permitting programs and the imposition of other compliance requirements. These laws and regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce or significantly increase air emissions, obtain and strictly comply with air permit requirements or utilize specific equipment or technologies to control emissions. The need to acquire such permits has the potential to delay or limit the development of our oil and natural gas projects. Over the next several years, we may be required to incur certain capital expenditures for air pollution control equipment or other air emissions- related issues. For example, in October 2015, the EPA issued a final rule under the CAA, lowering the National Ambient Air Quality Standard for ground-level ozone to 70 parts per billion under both the primary and secondary standards to provide requisite protection of public health and welfare. The EPA was required to make attainment and non-attainment designations for specific geographic locations under the revised standards by October 1, 2017, but missed the deadline. Subsequently, in November 2017, the EPA published a list of areas that are in compliance with the new ozone standards and separately in December 2017 issued responses to state recommendation for designating non-attainment areas. In November 2018, the EPA issued final rules implementing the non-attainment area designations. While the EPA has determined that all counties in which we operate are in attainment with the new ozone standard, these determinations may be revised in the future. With the EPA lowering the ground-level ozone standard, certain states may be required to implement more stringent regulations, which could apply to our operations and result in the need to install new emissions controls, longer permitting timelines and significant increases in our capital or operating expenditures. In addition, in June 2016, the EPA finalized rules regarding criteria for aggregating multiple small surface sites into a single source for air-quality permitting purposes applicable to the oil and natural gas industry. This rule could cause small facilities to be aggregated for permitting purposes, resulting in treatment as a major source, and thereby triggering more stringent air permitting requirements. On August 28, 2019, the EPA proposed amendments that would remove all sources in the transmission and storage segment of the oil and natural gas industry from these rules; however, the rules still apply to the extraction sector. Compliance with these and other air pollution control and permitting requirements has the potential to delay the development of oil and natural gas projects and increase our costs of development and production, which costs could be significant. Water Discharges The federal Water Pollution Control Act, also known as the Clean Water Act (the “CWA”), and analogous state laws and implementing regulations, impose restrictions and strict controls regarding the discharge of pollutants into waters of the United States. Pursuant to these laws and regulations, the discharge of pollutants into regulated waters is prohibited unless it is permitted by the EPA, the Army Corps of Engineers ("Corps") or an analogous state or tribal agency. We do not presently 19 Table of Contents discharge pollutants associated with the exploration, development and production of oil and natural gas into federal or state waters. The CWA and analogous state laws and regulations also impose restrictions and controls regarding the discharge of sediment via storm water run-off from a wide variety of construction activities. Such activities are generally prohibited from discharging sediment unless permitted by the EPA or an analogous state agency. The EPA issued a final rule in September 2015 that attempts to clarify the federal jurisdictional reach over waters of the United States (“WOTUS”). The EPA and the Corps then proposed a rulemaking in June 2017 to repeal the June 2015 WOTUS rule and also announced their intent to issue a new rule redefining the CWA’s jurisdiction. The EPA and the Corps issued a final rule in January 2018 staying implementation of the 2015 WOTUS rule for two years. Subsequently, on December 11, 2018, the EPA and the Corps proposed a new rule defining the CWA’s jurisdiction. On October 22, 2019, EPA and the Corps published a final rule repealing the 2015 WOTUS rule and recodifying the regulatory language that existed prior to that rule. This action, which became effective on December 23, 2019, resolved a nationwide patchwork of jurisdictional applicability that had developed due to litigation and court rulings regarding the WOTUS rules. The 2019 final rule has been challenged in federal court, however, and the scope of the CWA’s jurisdiction may remain fluid until all litigation is concluded. To the extent the litigation over the new rule is successful, it may yet result in an expansion of the scope of the CWA’s jurisdiction, and we could face increased costs and delays with respect to obtaining permits for dredge and fill activities in wetland areas in connection with any expansion activities. Also, in June 2016, the EPA issued a final rule implementing wastewater pretreatment standards that prohibit onshore unconventional oil and natural gas extraction facilities from sending wastewater to publicly-owned treatment works. This restriction of disposal options for hydraulic fracturing waste and other changes to CWA requirements may result in increased costs. Finally, the Oil Pollution Act of 1990 (“OPA”), which amends the CWA, establishes standards for prevention, containment and cleanup of oil spills into waters of the United States. The OPA requires measures to be taken to prevent the accidental discharge of oil into waters of the United States from onshore production facilities. Measures under the OPA and/or the CWA include inspection and maintenance programs to minimize spills from oil storage and conveyance systems; the use of secondary containment systems to prevent spills from reaching nearby water bodies; proof of financial responsibility to cover environmental cleanup and restoration costs that could be incurred in connection with an oil spill; and the development and implementation of spill prevention, control and countermeasure (“SPCC”) plans to prevent and respond to oil spills. The OPA also subjects owners and operators of facilities to strict, joint and several liability for all containment and cleanup costs and certain other damages arising from a spill. We have developed and implemented SPCC plans for properties as required under the CWA. Subsurface Injections Underground injection operations performed by us are subject to the Safe Drinking Water Act (“SDWA”), as well as analogous state laws and regulations. Under the SDWA, the EPA established the Underground Injection Control (“UIC”) program, which established the minimum program requirements for state and local programs regulating underground injection activities. The UIC program includes requirements for permitting, testing, monitoring, record keeping and reporting of injection well activities, as well as a prohibition against the migration of fluid containing any contaminant into underground sources of drinking water. State regulations require a permit from the applicable regulatory agencies to operate underground injection wells. Although the Company monitors the injection process of its wells, any leakage from the subsurface portions of the injection wells could cause degradation of fresh groundwater resources, potentially resulting in suspension of our UIC permit, issuance of fines and penalties from governmental agencies, incurrence of expenditures for remediation of the affected resource and imposition of liability by third-parties claiming damages for alternative water supplies, property damages and personal injuries. Some states have considered laws mandating flowback and produced water recycling. Other states have undertaken studies, in some cases such as New Mexico in conjunction with the EPA, to assess the feasibility of recycling produced water on a large scale. If such laws are adopted in areas where we conduct operations, our operating costs may increase significantly. Furthermore, in response to recent seismic events near underground disposal wells used for the disposal by injection of produced water resulting from oil and natural gas activities, federal and some state agencies are investigating whether such wells have caused increased seismic activity, and some states have restricted, suspended or shut down the use of such disposal wells. For example, in Oklahoma, the Oklahoma Corporation Commission (“OCC”) has implemented a variety of measures including adopting the National Academy of Science’s “traffic light system,” pursuant to which the agency reviews new disposal well applications for proximity to faults, seismicity in the area and other factors in determining whether such wells should be permitted, permitted only with special restrictions, or not permitted. The OCC also evaluates existing wells to assess their continued operation, or operation with restrictions, based on location relative to such faults, seismicity and other factors, with certain of such existing wells required to make frequent, or even daily, volume and pressure reports. In addition, the OCC has issued rules requiring operators of certain saltwater disposal wells in the state to, among other things, conduct mechanical integrity testing or make certain demonstrations of such wells’ depth that, depending on the depth, could require the plugging back of such wells and/or the reduction of volumes disposed in such wells. As a result of these measures, the OCC from time to time has developed and implemented plans calling for wells within areas of interest where seismic incidents have occurred to restrict or suspend disposal well operations in an attempt to mitigate the occurrence of such incidents. For example, in February 20 Table of Contents 2016, the OCC issued a plan to reduce disposal well volume in the Arbuckle formation by 40 percent, covering approximately 5,281 square miles and 245 disposal wells injecting wastewater into the Arbuckle formation. In the plan, the OCC identified 76 SandRidge-operated disposals wells, prescribed a four stage volume reduction schedule and set April 30, 2016 as the final date for compliance with the tiered volume reduction plan. In March 2016, the OCC reduced the injection volume of additional Arbuckle disposal wells, including wells we operate. Following earthquakes in August, September and November 2016, the OCC and the EPA further limited the disposal volumes that can be disposed in Arbuckle wells, although these actions did not cover our disposal wells. While induced seismic events generally decreased in 2017, the OCC expanded restrictions on the use of existing Arbuckle disposal wells and imposed new reporting requirements related to disposal volumes on wells injecting produced water into the Arbuckle formation. In February 2018, the OCC instituted a new protocol to further address seismicity in the Sooner Trend Anadarko Basin Canadian and Kingfisher County and South Central Oklahoma Oil Province Plays which requires various actions, such as a pause in operations for several hours, when certain seismic data is observed. These and similar future protocols that may be adopted in response to future seismicity concerns may reduce the productivity of our operations in relevant areas. Additionally, the Governor of Kansas has established a task force composed of various administrative agencies to study and develop an action plan for addressing seismic activity in the state. The task force issued a recommended Seismic Action Plan calling for enhanced seismic monitoring and the development of a seismic response plan, and in November 2014, the Governor of Kansas announced a plan to enhance seismic monitoring in the state. In March 2015, the Kansas Corporation Commission issued its Order Reducing Saltwater Injection Rates (the "Order"). The Order identified five areas of heightened seismic concern within Harper and Sumner Counties and mandated that, within 100 days of the Order’s issuance, operators must limit saltwater injection volumes to no more than 8,000 barrels per day for any well located in one of these five areas. SandRidge and other operators of injection wells were required to reduce the injection volume, and any injection well drilled deeper than the Arbuckle Formation was required to be plugged back to a shallower formation in a manner approved by the Kansas Corporation Commission. In August 2016, the Kansas Corporation Commission issued an order that put a 16,000 barrels per day limit on additional Arbuckle disposal wells not previously identified in the Order. While no additional regulatory actions were taken in Kansas with respect to induced seismicity concerns since 2017, permit applications for new saltwater disposal well facilities have faced increased local opposition. Evaluation of seismic incidents and whether or to what extent those events are induced by the injection of saltwater into disposal wells continues to evolve, as governmental authorities consider new and/or past seismic incidents in areas where salt water disposal activities occur or are proposed to be performed. The adoption of any new laws, regulations, or directives that restrict our ability to dispose of saltwater generated by production and development activities , whether by plugging back the depths of disposal wells, reducing the volume of salt water disposed in such wells, restricting disposal well locations or otherwise, or by requiring us to shut down disposal wells, could significantly increase our costs to manage and dispose of this saltwater, which could negatively affect the economic lives of the affected properties. In addition, we could find ourselves subject to third party lawsuits alleging damages resulting from seismic events that occur in our areas of operation. Climate Change The EPA previously has published its findings that emissions of CO2, methane and certain other “greenhouse gases” ("GHGs") present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the earth’s atmosphere and other climatic changes. Based on its findings, the EPA has adopted and implemented regulations under existing provisions of the CAA that, among other things, establish Prevention of Significant Deterioration (“PSD”) construction and Title V operating permit reviews for GHG emissions from certain large stationary sources that already are potential major sources of certain principal, or criteria, pollutant emission. Facilities required to obtain PSD permits for their GHG emissions also will be required to meet “best available control technology” standards that typically are established by the states. This rule could adversely affect our operations and restrict or delay its ability to obtain air permits for new or modified facilities that exceed GHG emission thresholds. In addition, the EPA has adopted rules requiring the reporting of GHG emissions from oil and natural gas production and processing facilities on an annual basis, as well as reporting GHG emissions from gathering and boosting systems, oil well completions and workovers using hydraulic fracturing. More recently, in June 2016, the EPA finalized rules to reduce methane emissions from new, modified or reconstructed sources in the oil and natural gas sector, including implementation of a leak detection and repair (“LDAR”) program to minimize methane emissions, under the CAA’s New Source Performance Standards, Subpart OOOOa (“Quad Oa”). In June 2017, the EPA proposed a two-year stay of the rules and in October 2018 the EPA proposed revisions to Quad Oa, such as changes to the frequency for monitoring fugitive emissions at well sites and changes to requirements that a professional engineer certify when meeting certain Quad Oa requirements is technically infeasible. Regardless of the stay and potential regulatory revisions, it is possible that these rules will continue to require oil and gas operators to expend material sums. In addition, in November 2016, the U.S. Department of the Interior Bureau of Land Management (“BLM”) issued final rules to reduce methane emissions from venting, flaring, and leaks during oil and natural gas operations on public lands that are substantially similar to the EPA Quad Oa requirements. However, in December 2017, the BLM published a final rule to temporarily suspend or delay certain 21 Table of Contents requirements contained in the November 2016 final rule until January 17, 2019, including those requirements relating to venting, flaring and leakage from oil and gas production activities. Further, in September 2018, the BLM published a final rule revising or rescinding certain provisions of the 2016 rule, however, the 2018 rule is currently being challenged in federal court. As a result of these developments, future implementation of the EPA and the BLM methane rules remains uncertain, but given the long-term trend towards increasing regulation, future federal GHG regulations for the oil and gas industry remain a possibility. Moreover, several states where we operate, including Colorado, have already adopted rules requiring operators of both new and existing sources to develop and implement a LDAR program and to install devices on certain equipment to capture 95 percent of methane emissions. Compliance with these rules could require us to purchase pollution control equipment and optical gas imaging equipment for LDAR inspections, and to hire additional personnel to assist with inspection and reporting requirements. In addition, a number of state and regional efforts are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs. On an international level, the United States is one of almost 200 nations that agreed in December 2015 to an international climate change agreement in Paris, France that calls for countries to set their own GHG emissions targets and be transparent about the measure each country will use to achieve its GHG emissions targets, (the “Paris Agreement”). However, the Paris Agreement does not impose any binding obligations on the United States. Moreover, in June 2017, President Trump announced that the United States would withdraw from the Paris Agreement, but may enter into a future international agreement related to GHGs. In August 2017, the U.S. State Department officially informed the United Nations of the intent of the United States to withdraw from the Paris Agreement. The United States formally initiated withdrawal proceedings on November 4, 2019. The withdrawal cannot be effective before November 4, 2020; thus, whether the United States may reenter the Paris Agreement or a separately negotiated agreement is unclear at this time. Further, several states and local governments remain committed to the principles of the Paris Agreement in their effectuation of policy and regulations. It is not possible at this time to predict how or when the United States might impose restrictions on GHGs as a result of the Paris Agreement. The adoption and implementation of any laws or regulations imposing reporting obligations on, or limiting emissions of GHG from, our equipment and operations could require additional expenditures to reduce emissions of GHGs associated with its operations or could adversely affect demand for the oil and natural gas we produce, and thus possibly have a material adverse effect on our revenues, as well as having the potential effect of lowering the value of our reserves. Recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities. Ultimately, this could make it more difficult to secure funding for exploration and production activities. Notwithstanding potential risks related to climate change, the International Energy Agency estimates that global energy demand will continue to rise and will not peak until after 2040 and that oil and gas will continue to represent a substantial percentage of global energy use over that time. Finally, to the extent increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, such events could have a material adverse effect on the Company and potentially subject the Company to further regulation. Endangered or Threatened Species The federal Endangered Species Act (the “ESA”) restricts activities that may affect endangered or threatened species or their habitats without first obtaining an incidental take permit and implementing mitigation measures. Similar protections are offered to migratory birds under the federal Migratory Bird Treaty Act. While compliance with the ESA has not had an adverse effect on our exploration, development and production operations in areas where threatened or endangered species or their habitat are known to exist, it may require us to incur increased costs to implement mitigation or protective measures and also may delay, restrict or preclude drilling activities in those areas or during certain seasons, such as breeding and nesting seasons. In addition, certain of our federal and state leases may contain stipulations that require us to take measures to safeguard certain species, including the sage grouse, and their habitats known to be located within the area of the lease. Although the U.S. Fish and Wildlife Service (“USFWS”) declined to list the sage grouse under the ESA in 2015 and subsequently developed a conservation plan to protect existing habit, some environmental groups have continued to raise concerns about sufficient protections for the sage grouse population. Under the plan, the USFWS committed to review the status of the species every five years to evaluate conservation actions, with the plan to be next reviewed and revised if necessary in 2020. In addition, the U.S. Department of Interior (“DOI”) proposed in December 2018 revisions to the existing sage grouse conservation plan that, amongst other things, was intended to give the DOI and individual states flexibility to allow for increased activity in grouse habitat management areas encompassing parts of Colorado, Idaho, Nevada, Northern California, Oregon, Utah and Wyoming. Several conservation groups challenged the rules, and on October 16, 2019, the U.S. District Court for the District of Idaho issued a preliminary injunction blocking implementation of the new rules in Idaho, Wyoming, Colorado, Utah, Nevada, Oregon, and part of California. While the BLM can still issue new permits in these areas, it must follow the restrictions included in the 2015 management plans. It is also possible that the ongoing litigation could result in the sage grouse being re-listed under the ESA in the future. If endangered or otherwise protected species are located in areas where we wish to conduct seismic surveys, development activities or abandonment operations, the work could be prohibited or delayed or expensive 22 Table of Contents mitigation may be required. For example, certain of our operations in Colorado are in proximity to sage grouse habitat and we are prohibited from performing operations in those areas during certain hours from March to mid-July of each year. Further, in February 2016, the USFWS published a final policy which alters how it identifies critical habitats for endangered and threatened species. In August 2019, the USFWS issued three final rules revising its ESA regulations, consisting of changes to the procedures and criteria for listing or delisting species and designating critical habitat, removal of the automatic take prohibition for species listed as threatened, and regulations for protection of threatened species, (ii) criteria for listing and delisting of species and designation of critical habitat, and new procedures and time frames for required consultations by other federal agencies. In general these rules were designed to alleviate some of the burdens of the ESA and streamline its implementation, but the prospect of new species listings and critical habitat designations remains. A critical habitat designation could result in further material restrictions to federal and private land use and could delay or prohibit land access or development. Moreover, a settlement approved by the U.S. District Court for the District of Columbia in 2011 required the USFWS to consider listing numerous species as endangered under the ESA by the end of its 2017 fiscal year; however, the agency has not yet completed this process. The designation of previously unprotected species as threatened or endangered in areas where we operate could cause us to incur increased costs arising from species protection measures or could result in limitations on our exploration and production activities that could have an adverse impact on our ability to develop and produce our reserves. We are an active participant on various agency and industry committees that are developing or addressing various USFWS and other federal and state agency programs to minimize potential impacts to business activity relating to the protection of any endangered or threatened species. Employee Health and Safety Our operations are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act (“OSHA”), and comparable state statutes, whose purpose is to protect the health and safety of workers. In addition, the OSHA Hazard Communication Standard requires us to maintain information concerning hazardous materials used or produced in our operations and to provide this information to employees. Pursuant to the Federal Emergency Planning and Community Right-to-Know Act, facilities that store threshold amounts of chemicals that are subject to OSHA’s Hazard Communication Standard above certain threshold quantities must submit information regarding those chemicals by March 1 of each year to state and local authorities in order to facilitate emergency planning and response. That information is generally available to employees, state and local governmental authorities, and the public. We do not believe that compliance with applicable laws and regulations relating to worker health and safety will have a material adverse effect on our business and results of operations. State Regulation The states in which we operate, along with some municipalities and Native American tribal areas, regulate some or all of the following activities: the drilling for, and the production and gathering of, oil and natural gas, including requirements relating to drilling permits, the location, spacing and density of wells, unitization and pooling of interests, the method of drilling, casing and equipping of wells, the protection of fresh water sources, the orderly development of common sources of supply of oil and natural gas, the operation of wells, allowable rates of production, the use of fresh water in oil and natural gas operations, saltwater injection and disposal operations, the plugging and abandonment of wells and the restoration of surface properties, the prevention of waste of oil and natural gas resources, the protection of the correlative rights of oil and natural gas owners and, where necessary to avoid unfair, unjust or discriminatory service, the fees, terms and conditions for the gathering of natural gas. These regulations may affect the number and location of our wells and the amounts of oil and natural gas that may be produced from our wells, and increase the costs of our operations. Moreover, obtaining or renewing permits and other approvals for operating on Native American lands can take substantial amounts of time, and could result in increased costs or delays to our operations. Hydraulic Fracturing Hydraulic fracturing is a practice in the oil and natural gas industry used to stimulate production of natural gas and/or oil from low permeability subsurface rock formations. Oil and natural gas may be recovered from certain of our oil and natural gas properties through the use of hydraulic fracturing, combined with sophisticated drilling. Hydraulic fracturing, which involves the injection of water, sand and chemicals under pressure into formations to fracture the surrounding rock and stimulate production, is typically regulated by state oil and natural gas commissions. However, several federal agencies have asserted federal regulatory authority over certain aspects of the hydraulic fracturing process. For example, the EPA published permitting guidance in February 2014 addressing the use of diesel fuel in fracturing operations; issued CAA final regulations in 23 Table of Contents 2012 and additional CAA regulations in June 2016 governing performance standards for the oil and natural gas industry; and in June 2016 issued final effluent limitations guidelines under the CWA that waste water from shale natural gas extraction operations must meet before discharging to a publicly-owned treatment plant. The EPA also issued an Advance Notice of Proposed Rulemaking under the Toxic Substances Control Act (“TSCA”) in 2014 regarding reporting of the chemical substances and mixtures used in hydraulic fracturing but, to date, has taken no further action. Separately, the BLM published a final rule in March 2015 that establishes new or more stringent standards for performing hydraulic fracturing on federal and Indian lands. However, the U.S. District Court of Wyoming struck down this rule in June 2016. The June 2016 decision was appealed by the BLM to the U.S. Circuit Court of Appeals for the Tenth Circuit. However, following issuance of a presidential executive order to review rules related to the energy industry, in July 2017, the BLM published a proposed rule to rescind the 2015 final rule. In September 2017, the Tenth Circuit issued a ruling to vacate the Wyoming trial court decision and dismiss the lawsuit challenging the 2015 rule in light of the BLM’s proposed rulemaking. The BLM issued a final rule repealing the 2015 hydraulic fracturing rule in December 2017. Congress has from time to time considered legislation to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process but, at this time, federal legislation related to hydraulic fracturing appears unlikely. At the state level, some states, including Oklahoma and Colorado, have adopted, and other states are considering adopting, legal requirements that could impose more stringent permitting, disclosure, operational or well construction requirements on hydraulic fracturing activities, or that prohibit hydraulic fracturing altogether. Local government may also seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular. If new laws or regulations that significantly restrict hydraulic fracturing are adopted at the local, state or federal level, our fracturing activities could become subject to additional permit and financial assurance requirements, more stringent construction requirements, increased reporting or plugging and abandoning requirements or operational restrictions, and associated permitting delays and potential increases in costs. These delays or additional costs could adversely affect the determination of whether a well is commercially viable, and could cause us to incur substantial compliance costs. Restrictions on hydraulic fracturing could also reduce the amount of oil and natural gas that we are ultimately able to produce in commercial quantities. In addition to asserting regulatory authority, certain government agencies have conducted reviews focusing on environmental issues associated with hydraulic fracturing practices. For example, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources in December 2016. The EPA report concluded that “water cycle” activities associated with hydraulic fracturing may impact drinking water sources “under some circumstances,” noting that the following hydraulic fracturing water cycle activities and local- or regional-scale factors are more likely than others to result in more frequent or more severe impacts: water withdrawals for fracturing in times or areas of low water availability; surface spills during the management of fracturing fluids, chemicals or produced water; injection of fracturing fluids into wells with inadequate mechanical integrity; injection of fracturing fluids directly into groundwater resources; discharge of inadequately treated fracturing wastewater to surface waters; and disposal or storage of fracturing wastewater in unlined pits. Since the report did not find a direct link between hydraulic fracturing itself and contamination of groundwater resources, this years-long study report does not appear to provide any basis for further regulation of hydraulic fracturing at the federal level. We diligently review best practices and industry standards, serve on industry association committees and comply with all regulatory requirements in the protection of potable water sources. Protective practices include, but are not limited to, setting multiple strings of protection pipe across the potable water sources and cementing these pipes from setting depth to surface, continuously monitoring the hydraulic fracturing process in real time and disposing of all non-commercially produced fluids in certified disposal wells at depths below the potable water sources. There have not been any incidents, citations or suits related to our hydraulic fracturing activities involving environmental concerns. OTHER REGULATION OF THE OIL AND NATURAL GAS INDUSTRY The oil and natural gas industry is extensively regulated by numerous federal, state, local, and regional authorities, as well as Native American tribes. Legislation affecting the oil and natural gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, and Native American tribes are authorized by statute to issue rules and regulations affecting the oil and natural gas industry and its individual members, some of which carry substantial penalties for noncompliance. Although the regulatory burden on the oil and natural gas industry increases the Company’s cost of doing business and, consequently, affects its profitability, these burdens generally do not affect the Company any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations of production. 24 Table of Contents The price of oil, natural gas and NGLs is not currently regulated and are made at market prices. Although oil, natural gas and NGL prices are currently unregulated, Congress historically has been active in the area of oil and natural gas regulation. We cannot predict whether new legislation to regulate oil, natural gas and NGL prices might be proposed, what proposals, if any, might actually be enacted by Congress or the various state legislatures, and what effect, if any, the proposals might have on our operations. Drilling and Production Our operations are subject to various types of regulation at federal, state, local and Native American tribal levels. These types of regulation include requiring permits for the drilling of wells, drilling bonds and reports concerning operations. Most states, and some counties, municipalities and Native American tribal areas where we operate also regulate one or more of the following activities: • • • • • • • • the location of wells; the method of drilling and casing wells; the timing of construction or drilling activities; the rates of production, or “allowables”; the use of surface or subsurface waters; the surface use and restoration of properties upon which wells are drilled; the plugging and abandoning of wells; and the notice to surface owners and other third parties. State laws regulate the size and shape of drilling and spacing units or proration units governing the pooling of oil and natural gas properties. Some states allow forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce our interest in the unitized properties. In addition, state conservation laws establish maximum rates of production from oil and natural gas wells, generally prohibit the venting or flaring of natural gas and impose requirements regarding the ratability of production. These laws and regulations may limit the amount of oil and natural gas we can produce from our wells or limit the number of wells or the locations at which we can drill. Moreover, each state generally imposes a production or severance tax with respect to the production and sale of oil, natural gas, and NGLs within its jurisdiction. State agencies in Colorado, Kansas, Oklahoma and Texas impose financial assurance requirements on operators. The Corps and many other state and local authorities also have regulations for plugging and abandonment, decommissioning and site restoration. Natural Gas Sales and Transportation The availability, terms and cost of transportation significantly affect sales of oil and natural gas. The interstate transportation and sale for resale of oil and natural gas is subject to federal regulation, including regulation of the terms, conditions and rates for interstate transportation, storage and various other matters, primarily by the Federal Energy Regulatory Commission (“FERC”). Federal and state regulations govern the price and terms for access to oil and natural gas pipeline transportation. The FERC’s regulations for interstate oil and natural gas transmission in some circumstances may also affect the intrastate transportation of oil and natural gas. Historically, federal legislation and regulatory controls have affected the price of the natural gas we produce and the manner in which we market our production. FERC has jurisdiction over the transportation and sale for resale of natural gas in interstate commerce by natural gas companies under the Natural Gas Act of 1938 (the “NGA”) and the Natural Gas Policy Act of 1978. Various federal laws enacted since 1978 have resulted in the removal of all price and non-price controls for sales of domestic natural gas sold in first sales, which include all of our sales of our own production. Under the Energy Policy Act of 2005 (the “EPAct 2005”), FERC has substantial enforcement authority to prohibit the manipulation of natural gas markets and enforce its rules and orders, including the ability to assess substantial civil penalties of up to $1,269,500 per day for each violation and disgorgement of profits associated with any violation. While our systems have not been regulated by FERC as a natural gas company under the NGA, we are required to report aggregate volumes of natural gas purchased or sold at wholesale to the extent such transactions utilize, contribute to, or may contribute to the formation of price indices. In addition, Congress 25 Table of Contents may enact legislation or FERC may adopt regulations that may subject certain of our otherwise non-FERC jurisdictional facilities to further regulation. Failure to comply with those regulations in the future could subject us to civil penalty liability. The Commodity Futures Trading Commission (the “CFTC”) also holds authority to monitor certain segments of the physical and futures energy commodities market including oil and natural gas. With regard to physical purchases and sales of natural gas and other energy commodities, and any related hedging activities that we undertake, we are thus required to observe anti-market manipulation laws and related regulations enforced by FERC and/or the CFTC. The CFTC also holds substantial enforcement authority, including the ability to assess civil penalties of up to $1,212,866 per day per violation. FERC also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which we may use interstate natural gas pipeline capacity, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas and release of our natural gas pipeline capacity. Commencing in 1985, FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas. Currently, interstate pipeline companies are required to provide nondiscriminatory transportation services to producers, marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company. FERC’s initiatives have led to the development of a competitive, open access market for natural gas purchases and sales that permits all purchasers of natural gas to buy gas directly from third-party sellers other than pipelines. However, the natural gas industry historically has been very heavily regulated; therefore, the less stringent regulatory approach currently pursued by FERC and Congress might not continue indefinitely into the future. The Company is unable to determine what effect, if any, future regulatory changes might have on the Company’s natural gas related activities. Under FERC’s current regulatory regime, transmission services must be provided on an open-access, nondiscriminatory basis at cost-based rates or at market-based rates if the transportation market at issue is sufficiently competitive. Gathering service, which occurs upstream of jurisdictional transmission services, is regulated by the states onshore and in-state waters. Although its policy is still in flux, in the past FERC has reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which has the tendency to increase our cost of transporting gas to point-of-sale locations. Oil Price Controls and Transportation Rates Sales prices of oil and NGLs are not currently regulated and are made at market prices. Our sales of these commodities are, however, subject to laws and to regulations issued by the Federal Trade Commission (the “FTC”) prohibiting manipulative or fraudulent conduct in the wholesale petroleum market. The FTC holds substantial enforcement authority under these regulations, including the ability to assess civil penalties of up to $1,231,690 per day per violation. Our sales of these commodities, and any related hedging activities, are also subject to CFTC oversight as discussed above. The price we receive from the sale of these products may be affected by the cost of transporting the products to market. Some of our transportation of oil, natural gas and NGLs is through interstate common carrier pipelines. Effective as of January 1, 1995, the FERC implemented regulations generally grandfathering all previously approved interstate transportation rates and establishing an indexing system for those rates by which adjustments are made annually based on the rate of inflation, subject to certain conditions and limitations. The FERC’s regulation of crude oil and natural gas liquids transportation rates may tend to increase the cost of transporting crude oil and natural gas liquids by interstate pipelines, although the annual adjustments may result in decreased rates in a given year. Every five years, the FERC must examine the relationship between the annual change in the applicable index and the actual cost changes experienced in the oil pipeline industry. We are not able at this time to predict the effects of these regulations or FERC proceedings, if any, on the transportation costs associated with crude oil production from our crude oil producing operations. EMPLOYEES As of December 31, 2019, the Company had 270 full-time employees, including 43 geologists, geophysicists, petroleum engineers, technicians, land and regulatory professionals. Of our 270 employees, 130 were located at the Company’s headquarters in Oklahoma City, Oklahoma at December 31, 2019, and the remaining employees worked in our various field offices and drilling sites. 26 Table of Contents Item 1A. Risk Factors An investment in our common stock involves certain risks. If any of the following key risks were to develop into actual events, it could have a material adverse effect on our financial position, results of operations and cash flows. In any such circumstance and others described below, the trading price of our securities could decline and you could lose part or all of your investment. ‎ Risks Related to the Oil and Natural Gas Industry and Our Business Oil, natural gas and NGL prices fluctuate widely due to a number of factors that are beyond our control. Declines in oil, natural gas or NGL prices significantly affect our financial condition and results of operations. Our revenues, profitability and cash flow are highly dependent upon the prices we realize from the sale of oil, natural gas and NGLs. Historically, the markets for these commodities are very volatile. Prices for oil, natural gas and NGLs can move quickly and fluctuate widely in response to a variety of factors that are beyond our control. These factors include, among others: • • • • • • • • • • • • • changes in regional, domestic and foreign supply of, and demand for, oil, natural gas and NGLs, as well as perceptions of supply of, and demand for, oil, natural gas and NGLs generally; the price and quantity of foreign imports; the ability of other companies to complete and commission liquefied natural gas export facilities in the U.S.; U.S. and worldwide political and economic conditions; the level of global and U.S. inventories; weather conditions and seasonal trends; anticipated future prices of oil, natural gas and NGLs, alternative fuels and other commodities; technological advances affecting energy consumption and energy supply; the proximity, capacity, cost and availability of pipeline infrastructure, treating, transportation and refining capacity; natural disasters and other extraordinary events; domestic and foreign governmental regulations and taxation; energy conservation and environmental measures; and the price and availability of alternative fuels. These factors and the volatility of the energy markets, which we expect will continue, make it extremely difficult to predict future oil, natural gas and NGL price movements with any certainty. For oil, from January 2015 through December 2019, the NYMEX settled price fluctuated between a high of $76.41 per Bbl and a low of $26.21 per Bbl. For natural gas, from January 2015 through December 2019, the month-end NYMEX settled price fluctuated between a high of $4.72 per MMBtu and a low of $1.71 per MMBtu. In addition, the market price of natural gas is generally higher in the winter months than during other months of the year due to increased demand for natural gas for heating purposes during the winter season. A buildup in inventories, lower sustained global demand, or other unexpected factors could cause prices for U.S. oil, natural gas and NGLs to further weaken, which could negatively affect our cash flows and results of operations. For instance, crude oil prices have experienced downward pressure in the first quarter of 2020 as a result of decreasing demand from the growing impact of the cornonavirus epidemic. Under such conditions, revenues may be negatively affected, and the amount of oil, natural gas and NGLs we can produce economically may be reduced, causing us to make substantial downward adjustments to our estimated proved reserves and having a material adverse effect on our financial condition and results of operations. Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations. Drilling for oil and natural gas can be unprofitable if dry wells are drilled and if productive wells do not produce sufficient revenues to return a profit. Furthermore, even if sufficient amounts of oil or natural gas exist, we may damage the potentially productive hydrocarbon bearing formation or experience mechanical difficulties while drilling or completing the well, resulting in a reduction in production from the well or abandonment of the well. Decisions to develop properties depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, 27 Table of Contents the results of which are often inconclusive or subject to varying interpretations. The estimated cost of drilling, completing and operating wells is uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. In addition, our drilling and producing operations may be curtailed, delayed or canceled as a result of various factors, including the following: • • • • • • • • • • • • • • • • • • • • • reductions in oil, natural gas and NGL prices; delays imposed by or resulting from compliance with regulatory requirements including permitting; unusual or unexpected geological formations and miscalculations; shortages of or delays in obtaining equipment and qualified personnel; shortages of or delays in obtaining water and sand for hydraulic fracturing operations; equipment malfunctions, failures or accidents; lack of available gathering or midstream facilities or delays in construction of gathering or midstream facilities; lack of available capacity on interconnecting transmission pipelines; lack of adequate electrical infrastructure and water disposal capacity; unexpected operational events and drilling conditions; pipe or cement failures and casing collapses; pressures, fires, blowouts and explosions; lost or damaged drilling and service tools; loss of drilling fluid circulation; uncontrollable flows of oil, natural gas, brine, water or drilling fluids; natural disasters; environmental hazards, such as oil spills and natural gas leaks, pipeline or tank ruptures, encountering naturally occurring radioactive materials and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment; high costs, shortages or delivery delays of equipment, labor or other services, or water used in hydraulic fracturing; compliance with environmental and other governmental requirements; adverse weather conditions such as extreme cold, fires caused by extreme heat or lack of rain, and severe storms, tornadoes or hurricanes; oil and natural gas property title problems; and • market and midstream limitations for oil, natural gas and NGLs. Certain of these risks can cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, environmental contamination or loss of wells and regulatory fines or penalties. Market conditions or operational impediments may hinder our access to oil, natural gas and NGL markets or delay production of oil, natural gas and NGLs. Market conditions or a lack of satisfactory oil and natural gas transportation arrangements may hinder our access to oil, natural gas and NGL markets or delay production of oil, natural gas and NGLs. The availability of a ready market for our oil, natural gas and NGL production depends on a number of factors, including the demand for and supply of oil, natural gas and NGLs and the proximity of reserves to pipelines and terminal facilities. Our ability to market our production depends, in substantial part, on the availability and capacity of gathering systems, pipelines and treating facilities for oil, natural gas and NGLs as well as gathering systems, treating facilities and disposal wells for water produced alongside the hydrocarbons. Our failure to obtain such services on acceptable terms in the future or to expand our midstream assets could have a material adverse effect on our business. We may be required to shut in wells for a lack of a market or because access to natural gas pipelines, gathering system capacity, treating facilities or disposal wells may be limited or unavailable. We would be unable to realize revenue from any shut-in wells until production arrangements were made to deliver the production to market. 28 Table of Contents Our North Park Basin acreage may require the construction of significant gathering systems and pipelines as we increase drilling and development activity. Failure to obtain these services or expanding our midstream assets with acceptable commercial terms could adversely affect our ability to develop this acreage in a timely manner. Our identified drilling locations are scheduled to be drilled over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling. In addition, we may not be able to raise the substantial amount of capital necessary to drill such locations or construct the midstream infrastructure required to make such development profitable. Our management team has specifically identified and scheduled certain drilling locations as an estimation of our future multi-year drilling activities on our existing acreage. These locations represent a significant part of our business strategy. Our ability to drill and develop these locations depends on a number of uncertainties, including oil and natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, gathering and midstream system and pipeline transportation constraints, access to and availability of water sourcing and distribution systems, regulatory approvals (including renewal of annual permits that allow for the combustion of produced gas until such time as midstream takeaway infrastructure or other gas disposition options are available) and other factors. Because of these uncertain factors, we do not know if the numerous potential well locations we have identified will ever be drilled or if we will be able to produce natural gas or oil from these or any other potential locations. We may not be able to raise the substantial amount of capital necessary to fully realize our North Park Basin assets. For example, our North Park Basin assets are in the delineation phase of the development cycle and may require significant investment over the next several years, including the construction of midstream and pipeline takeaway infrastructure, as we progress toward full field development with more activity and an expanded development footprint. Additionally, lack of midstream takeaway infrastructure for produced gas could impact our ability to continue producing currently existing wells for extended periods under current operating conditions if regulatory approval for gas combustion is not renewed. In addition, unless production is established within the spacing units covering the undeveloped acres on which some of the potential locations are obtained, the leases for such acreage will expire. As such, our actual drilling activities may materially differ from those presently identified. Our acreage not contained within federal units must be drilled before lease expiration, generally within three to five years of the original date of the lease, in order to hold the acreage by production, and our acreage committed to federal units must be drilled pursuant to the federal unit timelines provided within the unit agreements. In a highly competitive market for acreage, failure to drill sufficient wells to hold acreage may result in a substantial lease renewal cost, or if renewal is not feasible, loss of our lease and prospective drilling opportunities. Leases on our oil and natural gas properties that are not federal units typically have a term of three to five years, after which they expire unless, prior to expiration, production is established within the spacing units covering the undeveloped acres, or the leases are renewed. The cost to renew such leases may increase significantly, and we may not be able to renew such leases on commercially reasonable terms or at all. Acreage committed to federal units must be drilled pursuant to the federal unit timelines provided within the unit agreements, typically requiring two unit wells within the first five years and two more wells within the next five years. At the end of the second five-year term the unit begins to reduce in size to designated participating areas within the Federal Units. Unless we increase our current drilling program, we could lose undeveloped acreage through lease expirations. Our reserves and future production and, therefore, our future cash flow and income are highly dependent on successfully developing our undeveloped leasehold acreage and the loss of any leases could materially and adversely affect our ability to so develop such acreage. Our development and exploration operations require substantial capital. We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a loss of properties and a decline in our oil, natural gas and NGL reserves, which would adversely affect our business, financial condition and results of operations. The oil and natural gas industry is capital intensive. Our future oil, natural gas and NGL reserves and production, and therefore our cash flow and income, are highly dependent on our success in efficiently developing and exploiting our current estimated proved reserves and finding or acquiring additional economically recoverable reserves. We make substantial capital expenditures in our business and operations for the exploration, development, production and acquisition of oil, natural gas and NGL reserves. Historically, we have financed capital expenditures primarily with cash generated by operations, borrowings on 29 Table of Contents our credit facility and proceeds from asset sales. In particular, cash flow from operations was $121.3 million, $145.5 million and $181.2 million for the years ended December 31, 2019, 2018, and 2017, respectively. The capital markets that we have historically accessed have recently been and may continue to be constrained to such an extent that debt or equity capital raises are practically unfeasible. If the debt and equity capital markets are not accessible or if our ability to draw on our credit facility is compromised, we may be unable to implement our drilling and development plans or otherwise carry out our business strategy as expected. Our cash flow from operations and access to capital are subject to a number of variables, including: • • • • • the prices at which oil, natural gas and NGLs are sold; our proved reserves; the level of oil, natural gas and NGLs we are able to produce from existing wells; our ability to acquire, locate and produce new reserves; and our capital and operating costs. Declining cash flows from operations, as a result of lower commodity prices, could require us to reduce expenditures to develop and acquire additional reserves, which could lead to rapid declines in the reserve base supporting our credit facility. Based on our 2020 capital spending plans, we estimate that our production will experience a 25%- 30% decline. This decline in production as well as other factors such as lower oil, natural gas and NGL prices, declines in reserves, or for any other reason may lead to reductions in our revenues and cash flow from operations and may limit our ability to obtain the capital necessary, or maintain a sufficient borrowing base on our credit facility, to sustain our operations at desired levels. In order to fund capital expenditures, we may seek alternative sources of financing. Further, we may not be able to develop, find or acquire additional reserves to replace our current and future production at acceptable costs, which could adversely affect our business, financial condition and results of operations. Disruptions in the global financial and capital markets could also adversely affect our ability to obtain debt or equity financing on favorable terms, or at all. The failure to obtain additional financing could result in a curtailment of our operations relating to exploration and development of its prospects, which in turn could lead to a possible loss of properties and a decline in our oil, natural gas and NGL reserves. We may not be able to refinance or replace our maturing debt on favorable terms, or at all, which will materially adversely affect our financial condition and our ability to develop our oil and gas assets. Our credit facility, which consists of all of our funded debt, matures on April 1, 2021. In November 2019, the borrowing base was reduced to $225.0 million, and as of December 31, 2019, we had $57.5 million outstanding under our credit facility. We have been involved in discussions with our current lenders and other financing sources regarding alternatives that would include the replacement or refinancing of the credit facility, prior to its maturity date on April 1, 2021. There is no assurance, however, that such discussions will result in a refinancing of the credit facility on acceptable terms, if at all, or provide any specific amount of additional liquidity for future capital expenditures. Alternative sources of capital could involve the issuance of debt or equity on unfavorable terms or that would result in significant dilution. While we review such liquidity-enhancing alternative sources of capital, we intend to continue to minimize our drilling program capital expenditures, which could limit our ability to develop our properties. If we are unable to refinance or replace our debt on favorable terms, we may not be able to maintain adequate liquidity, and may have to limit our drilling program, sell core and non-core assets, and further reduce general and administrative expenses in order to pay down outstanding debt under the credit facility, or a combination of the foregoing. These actions could have a material adverse effect on our financial condition and results of operations and the trading price of our common stock. Future price declines may result in reductions of the asset carrying values of our oil and natural gas properties. We utilize the full cost method of accounting for costs related to our oil and natural gas properties. Under this accounting method, all costs for both productive and nonproductive properties are capitalized and amortized on an aggregate basis over the estimated lives of the properties using the unit-of-production method. However, the amount of these costs that can be carried as capitalized assets is subject to a ceiling, which limits such pooled costs to the aggregate of the present value of future net revenues of proved oil, natural gas and NGL reserves attributable to proved properties, discounted at 10%, plus the lower of cost or market value of unevaluated properties. The full cost ceiling is evaluated at the end of each quarter using the SEC prices, adjusted for the impact of derivatives accounted for as cash flow hedges, if any. The Company incurred full cost ceiling impairment charges of $409.6 million for the year ended December 31, 2019. The Company did not incur any full cost 30 Table of Contents ceiling impairment charges for the years ended December 31, 2018 or 2017. Cumulative full cost ceiling impairment from the Emergence date through December 31, 2019 totaled $728.7 million. If oil, natural gas and NGL prices decline further in the near term, and without other mitigating circumstances, we may experience additional losses of future net revenues, including losses attributable to quantities that cannot be economically produced at lower prices, which would likely cause us to record additional write-downs of capitalized costs of oil and natural gas properties and non-cash charges against future earnings. The amount of such future write-downs and non-cash charges could be substantial. Further, the borrowing base under our credit facility is calculated by reference to the value of our oil and natural gas reserves, as determined by the lenders under the credit facility, and declines in the value of such reserves as a result of sustained low commodity prices could reduce the amount available to be borrowed under our credit facility if prices decline from current levels. Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any significant inaccuracies in these reserve estimates or underlying assumptions could materially affect the quantities and present value of our reserves. Our current estimates of reserves could change, potentially in material amounts, in the future. The process of estimating oil, natural gas and NGL reserves is complex and inherently imprecise, requiring interpretations of available technical data and many assumptions, including assumptions relating to production rates and economic factors such as historic oil and natural gas prices, drilling and operating expenses, capital expenditures, the assumed effect of governmental regulation and availability of funds for development expenditures. Inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of our reserves. See “Business—Primary Business Operations” in Item 1 of this report for information about our oil, natural gas and NGL reserves. Actual future production, oil, natural gas and NGL prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil, natural gas and NGL reserves will vary and could vary significantly from our estimates shown in this report, which in turn could have a negative effect on the value of our assets. In addition, from time to time in the future, we will adjust estimates of proved reserves, potentially in material amounts, to reflect production history, results of exploration and development, changes in oil, natural gas and NGL prices and other factors, many of which are beyond our control. The ability to attract and retain key personnel is critical to the success of our business and the loss of senior management or technical personnel or our inability to hire additional qualified personnel could adversely affect our operations. The success of our business depends on key personnel, including members of senior management and technical personnel. The ability to attract and retain these key personnel may be difficult in light of the uncertainties currently facing the business and changes we may make to the organizational structure to adjust to changing circumstances. The market for qualified personnel has historically been, and we expect that it will continue to be, intensely competitive. We cannot assure you that we will be successful in attracting or retaining such personnel. We may need to enter into retention or other arrangements that could be costly to maintain. If executives, managers or other key personnel resign, retire or are terminated, or their service is otherwise interrupted, we may not be able to replace them in a timely manner and we could experience significant declines in productivity. We are subject to litigation and adverse outcomes in such litigation could have a material effect on our financial condition. We are, and from time to time may become, subject to litigation and various legal proceedings, including stockholder derivative suits, class action lawsuits and other matters, that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations. Additionally, we remain a nominal defendant in certain litigation matters discussed in Item 3. “Legal Proceedings,” for the purposes of fulfilling indemnification obligations for legal expenses, including any settlement amounts, to certain former officers of the Company and the SandRidge Mississippian Trust I. The defense of these actions has been and may continue to be both time consuming and expensive. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we may establish reserves and/or disclose the relevant litigation claims or legal proceedings, as and when required or appropriate. These assessments and estimates are based on information available to management at the time of such assessment or estimation and involve a significant amount of judgment. As a result, actual outcomes or losses could differ materially from those envisioned by our current assessments and estimates. Our failure to successfully defend or settle any litigation or legal proceedings could result in liability that, to the extent not covered by our insurance, could have a material effect on our business, financial condition and results of operations. 31 Table of Contents The agreements governing our credit facility have restrictions, financial covenants and borrowing base redeterminations, which could adversely affect our operations. The agreements governing our credit facility restrict our ability to, among other things, obtain additional financing, incur liens, enter into sale and lease back transactions, make certain investments, lease equipment, merge, dissolve, liquidate or consolidate with another entity, pay dividends or make other distributions or repurchase or redeem our stock, enter into transactions with our affiliates, create additional subsidiaries, amend or modify certain provisions of our organizational documents, enter into new transactions with our affiliates, sell assets and engage in business combinations. The credit facility also requires us to comply with certain financial covenants and ratios. See additional discussion of the credit facility under “Indebtedness—Credit Facilities.” Persistent depressed oil or natural gas prices or further declines in such prices, without other mitigating circumstances, could prevent us from complying with the financial covenants under the credit facility. Our failure to comply with any of the restrictions and covenants under the credit facility or other debt financings could result in a default under those instruments, which, if left uncured, could lead to an event of default. Such an event of default could, among other things, result in all of our existing indebtedness becoming immediately due and payable. Additionally, an event of default under one of our financing instruments could trigger cross-default provisions under our other financing instruments. The application of the remedies under the financing instruments could have a material adverse effect on our financial position. Our credit facility limits the amounts we can borrow to a borrowing base amount. The borrowing base is subject to review semi-annually; however, the lenders reserve the right to have one additional redetermination of the borrowing base per calendar year. Unscheduled redeterminations may be made at our request, but are limited to two requests per year. Borrowing base determinations are based upon proved developed producing reserves, proved developed non-producing reserves and proved undeveloped reserves. Outstanding borrowings exceeding the borrowing base must be repaid promptly, or we must pledge other oil and natural gas properties as additional collateral. The borrowing base is also subject to reductions upon the incurrence of junior debt, hedge terminations, dispositions of assets and casualty events which may require us to repay any deficiencies or pledge additional collateral. We may not have the financial resources in the future to make any mandatory principal prepayments under the credit facility, which are required, for example, when the committed line of credit is exceeded, proceeds of asset sales in new oil and natural gas properties are not reinvested, or indebtedness that is not permitted by the terms of the credit facility is incurred. If any future indebtedness under our credit facility were to be accelerated, our assets may not be sufficient to repay such indebtedness in full. It is unclear how changes in the regulation of LIBOR or the discontinuation of LIBOR all together may affect our financing costs in the future. ‎ Our credit facility bears interest based on a pricing grid tied, in part, to the London Interbank Offered Rate (“LIBOR”). On July 27, 2017, the United Kingdom’s Financial Conduct Authority (the "FCA"), which regulates LIBOR, announced that it does not intend to continue to persuade, or use its powers to compel, panel banks to submit rates for the calculation of LIBOR after 2021. It is not possible to predict whether, and to what extent, panel banks will continue to provide LIBOR submissions to the administrator of LIBOR after this time, which may cause LIBOR to perform differently than it did in the past and have other consequences which cannot be predicted. In addition, any other legal or regulatory changes made by the FCA, ICE Benchmark Administration Limited, the European Money Markets Institute (formerly Euribor-EBF), the European Commission or any other successor governance or oversight body, or future changes adopted by such body, in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination. This could result in LIBOR no longer being determined and published. If a published U.S. dollar LIBOR rate is unavailable after 2021, the interest rate on our credit facility will need to be determined using alternative methods, which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on any outstanding debt under the facility if U.S. dollar LIBOR was available in its current form. Further, the same costs and risks that may lead to the discontinuation or unavailability of U.S. dollar LIBOR may make one or more alternative methods of calculating interest impossible or impracticable to determine. As a result, any of these consequences may have an adverse effect on our financing costs. ‎ The present value of future net cash flows from our proved reserves calculated in accordance with SEC guidelines are not the same as the current market value of our estimated oil, natural gas and NGL reserves. We base the estimated discounted future net cash flows from our proved reserves on 12-month average index prices and costs, as is required by SEC rules and regulations. Actual future net cash flows from our oil and natural gas properties will be affected by actual prices we receive for oil, natural gas and NGLs, as well as other factors such as: 32 Table of Contents • • • • the actual cost of development and production expenditures; the amount and timing of actual production; supply of and demand for oil, natural gas and NGLs; and changes in governmental regulation or taxation. The timing of both our production and incurrence of expenses in connection with the development and production of oil and natural gas properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, we use a 10% discount factor when calculating discounted future net cash flows, which may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and natural gas industry in general. We will not know conclusively prior to drilling whether oil or natural gas will be present in sufficient quantities to be economically producible. The cost of drilling, completing and operating any well is often uncertain, and new wells may not be productive or may suffer from declining production faster than anticipated. The use of seismic data and other technologies and the study of producing fields in the same area do not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in sufficient quantities to be economically viable. During 2019, we completed a total of 28 gross wells, none of which were identified as dry wells. If we drill additional wells that we identify as dry wells in our current and future prospects, our drilling success rate may decline and materially harm our business. Production of oil, natural gas and NGLs could be materially and adversely affected by natural disasters or severe weather. Production of oil, natural gas and NGLs could be materially and adversely affected by natural disasters or severe weather. Repercussions of natural disasters or severe weather conditions may include: • • • • evacuation of personnel and curtailment of operations; damage to drilling rigs or other facilities, resulting in suspension of operations; inability to deliver materials to worksites; and damage to, or shutting in of, pipelines and other transportation facilities. In addition, our hydraulic fracturing operations require significant quantities of water. Regions in which we operate may experience drought conditions from time to time. Any diminished access to water for use in hydraulic fracturing, whether due to usage restrictions or drought or other weather conditions, could curtail our operations or otherwise result in delays in operations or increased costs. The capital markets could be volatile, and such volatility could adversely affect our ability to obtain capital, cause us to incur additional financing expense or affect the value of certain assets. During and following the 2008 global financial crisis, financial and capital markets were volatile due to multiple factors, including significant losses in the financial services sector and uncertain and rapidly changing economic conditions both in the U.S. and globally. In some cases, financial markets produced downward pressure on stock prices and credit capacity for certain issuers without regard to those issuers’ underlying financial and/or operating strength. Volatility in the capital markets can significantly increase the cost of raising money in the debt and equity capital markets. Future market volatility, generally, and persistent weakness in commodity prices may adversely affect our ability to access capital and credit markets or to obtain funds at low interest rates or on other advantageous terms. These factors may adversely affect our business, results of operations or liquidity. These factors may also adversely affect the value of certain of our assets and ability to draw on our credit facility. Adverse credit and capital market conditions may require us to reduce the carrying value of assets associated with derivative contracts to account for non-performance by, or increased credit risk from, counterparties to those contracts. If financial institutions that extended credit commitments to us are adversely affected by volatile conditions of the U.S. and international capital markets, they may become unable to fund borrowings under their credit commitments to us, which could have a material adverse effect on our financial condition and ability to borrow additional funds, if needed, for working capital, capital expenditures and other corporate purposes. 33 Table of Contents Properties we acquire may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties or obtain protection from sellers against them. Our initial technical reviews of properties we acquire are necessarily limited because an in-depth review of every individual property involved in each acquisition generally is not feasible. Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well and environmental problems, such as soil or ground water contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, we may assume certain environmental and other risks and liabilities in connection with acquired properties, and such risks and liabilities could have a material adverse effect on our results of operations and financial condition. The development of our proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. As of December 31, 2019, approximately 30.9% of our total reserves were proved undeveloped reserves. Development of these reserves may take longer and require higher levels of capital expenditures than we currently anticipate. Therefore, recoveries from these undeveloped properties may not match current expectations. Delays in the development of our reserves or increases in costs to drill and develop such reserves will reduce the PV-10 value of our estimated proved undeveloped reserves and future net revenues estimated for such reserves. A significant portion of our operations are located in the Mid-Continent region, making us vulnerable to risks associated with operating in a limited number of major geographic areas. As of December 31, 2019, approximately 68.3% of our proved reserves and approximately 87.2% of our annual production was located in the Mid-Continent. This concentration could disproportionately expose us to operational and regulatory risk in these areas. This relative lack of diversification in location of our key operations could expose us to adverse developments in the Mid-Continent or the oil and natural gas markets, including, for example, transportation or treatment capacity constraints, curtailment of production due to weather, electrical outages, treatment plant closures for scheduled maintenance, changes in the regulatory environment or other factors. These factors could have a significantly greater impact on our financial condition, results of operations and cash flows than if our properties were more diversified. Oil and natural gas wells are subject to operational hazards that can cause substantial losses for which we may not be adequately insured. There are a variety of operating risks inherent in oil, natural gas and NGL production and associated activities, such as fires, leaks, explosions, mechanical problems, major equipment failures, blowouts, uncontrollable flow of oil, natural gas and NGLs, water or drilling fluids, casing collapses, abnormally pressurized formations and natural disasters. The occurrence of any of these or similar accidents that temporarily or permanently halt the production and sale of oil, natural gas and NGLs at any of our properties could have a material adverse impact on our business activities, financial condition and results of operations. Additionally, if any of such risks or similar accidents occur, we could incur substantial losses as a result of injury or loss of life, severe damage or destruction of property, natural resources and equipment, regulatory investigation and penalties and environmental damage and clean-up responsibility. If we experience any of these problems, our ability to conduct operations could be adversely affected. While we maintain insurance coverage that we deem appropriate for these risks, our operations may result in liabilities exceeding such insurance coverage or liabilities not covered by insurance. Shortages or increases in costs of equipment, services and qualified personnel could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget. The demand for qualified and experienced personnel to conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil and natural gas prices, causing periodic shortages. Additionally, higher oil and natural gas prices generally stimulate demand and result in increased prices for drilling rigs, crews and associated supplies, equipment and services. Shortages of field personnel and equipment or price increases could significantly affect our ability to execute our exploration and development plans as projected. 34 Table of Contents Competition in the oil and natural gas industry is intense, which may adversely affect our ability to succeed. The oil and natural gas industry is intensely competitive, and we compete with many companies that have greater financial and other resources than we do. Many of these companies not only explore for and produce oil and natural gas, but also conduct refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for productive oil and natural gas properties and exploratory prospects or identify, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low oil and natural gas market prices. Our larger competitors may be able to absorb the burden of present and future federal, state, local and other laws and regulations more easily than we can, which would adversely affect our competitive position. Our use of 2-D and 3-D seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas. In addition, the use of such technology requires greater predrilling expenditures, which could adversely affect the results of our drilling operations. A significant aspect of our exploration and development plan involves seismic data. Even when properly used and interpreted, 2-D and 3-D seismic data and visualization techniques are only tools used to assist geoscientists in identifying subsurface structures and hydrocarbon indicators and do not enable the interpreter to know whether hydrocarbons are present in those structures. Other geologists and petroleum professionals, when studying the same seismic data, may have significantly different interpretations than our professionals. Our drilling activities may not be geologically successful or economical, and our overall drilling success rate or our drilling success rate for activities in a particular area may not improve as a result of using 2-D and 3-D seismic data. The use of 2-D and 3-D seismic and other advanced technologies requires greater predrilling expenditures than traditional drilling strategies, and we could incur losses due to such expenditures. In addition, we may often gather 2-D and 3-D seismic data over large areas in order to help us delineate those portions of an area that we believe are desirable for drilling. Therefore, we may choose not to acquire option or lease rights prior to acquiring seismic data, and in many cases, we may identify hydrocarbon indicators before seeking option or lease rights in such location. If we are not able to lease those locations on acceptable terms, we will have made substantial expenditures to acquire and analyze 2-D and 3-D seismic data without having an opportunity to benefit from those expenditures. We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations or expose us to significant liabilities. Our oil and natural gas exploration, production, transportation and treatment operations are subject to complex and stringent laws and regulations. In order to conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities. We may incur substantial costs in order to maintain compliance with these laws and regulations. As a result of recent incidents involving the release of oil and natural gas and fluids as a result of drilling activities in the United States, there have been a variety of regulatory initiatives at the federal and state levels to restrict oil and natural gas drilling operations in certain locations. Any increased regulation or suspension of oil and natural gas exploration and production, or revision or reinterpretation of existing laws and regulations, that arises out of these incidents or otherwise could result in delays and higher operating costs. Such costs or significant delays could have a material adverse effect on our business, financial condition and results of operations. We must also comply with laws and regulations prohibiting fraud and market manipulations in energy markets. To the extent we are a shipper on interstate pipelines, we must comply with the FERC-approved tariffs of such pipelines and with federal policies related to the use of interstate capacity. Laws and regulations governing oil and natural gas exploration and production may also affect production levels. We are required to comply with federal and state laws and regulations governing conservation matters, including provisions related to the unitization or pooling of our oil and natural gas properties; the establishment of maximum rates of production from wells; the spacing of wells; and the plugging and abandonment of wells. These and other laws and regulations can limit the amount of oil and natural gas we can produce from our wells, limit the number of wells we can drill, or limit the locations at which we can conduct drilling operations. Additionally, state and federal regulatory authorities may expand or alter applicable pipeline safety laws and regulations, compliance with which may increase capital costs for us and third-party downstream oil and natural gas transporters. These and other potential regulations could increase our operating costs, reduce our liquidity, delay our operations, increase direct and third-party post production costs or otherwise alter the way we conduct our business, which could have a material adverse effect on our financial condition, results of operations and cash flows and which could reduce cash received by or available for distribution, including any amounts paid for transportation on downstream interstate pipelines. 35 Table of Contents Risks and uncertainties related to the adoption and implementation of regulations restricting oil and gas development in Colorado. We have substantial undeveloped reserves and acreage in the North Park Basin area of Jackson County, Colorado. Recently, various initiatives have been promoted by interest groups in Colorado to increase regulations restricting oil and gas development. For example, on November 6, 2018, Coloradans considered Proposition 112, a ballot initiative that would have established a new statewide minimum distance requirement for new oil and gas development far in excess of existing Colorado Oil and Gas Conservation Commission (“COGCC”) setback regulations. Although Coloradans did not approve Proposition 112, future similar initiatives, if implemented, could pose operational challenges, substantially limit our development activity and require higher levels of capital expenditures than we currently anticipate, and therefore have a significant adverse effect on our ability to develop proved undeveloped reserves in the North Park Basin. Such restrictions, additional costs and delays could adversely impact our financial condition, results of operations and/or cash flows. Should we fail to comply with all applicable statutes, rules, regulations and orders of the FERC, the CFTC, or the FTC, we could be subject to substantial penalties and fines. Under the EPAct 2005 and implementing regulations, the FERC prohibits market manipulation in connection with the purchase or sale of natural gas. The CFTC has similar authority under the Commodity Exchange Act and regulations it has promulgated thereunder with respect to certain segments of the physical and futures energy commodities market including oil and natural gas. The FTC also prohibits manipulative or fraudulent conduct in the wholesale petroleum market with respect to sales of commodities, including crude oil, condensate and natural gas liquids. These agencies have substantial enforcement authority, including the ability to impose penalties for current violations in excess of $1 million per day for each violation. The FERC has also imposed requirements related to reporting of natural gas sales volumes that may impact the formation of prices indices. Additional rules and legislation pertaining to these and other matters may be considered or adopted from time to time. Our failure to comply with these or other laws and regulations administered by these agencies could subject us to criminal and civil penalties, as described in Item 1. “Business— Other Regulation of the Oil and Natural Gas Industry.” Our operations are subject to environmental and occupational safety and health laws and regulations that could adversely affect the cost, manner or feasibility of conducting operations or result in significant costs and liabilities. Our oil and natural gas exploration and production operations are subject to stringent and complex federal, state, tribal, regional and local laws and regulations governing worker safety and health, the discharge and disposal of substances into the environment or otherwise relating to environmental protection. Failure to comply with these laws and regulations may result in litigation; the assessment of sanctions, including administrative, civil or criminal penalties; the imposition of investigatory, remedial or corrective action obligations; the occurrence of delays or restrictions in permitting or performance of projects; and the issuance of orders and injunctions limiting or preventing some or all of our operations in affected areas. Under certain environmental laws and regulations, we could be subject to strict, and/or joint and several liability for the investigation, removal or remediation of previously released materials or property contamination, regardless of whether we were responsible for the release or contamination or whether the operations were in compliance with all applicable laws at the time those actions were taken. Private parties, including the owners of properties upon which our wells are drilled or facilities where our petroleum hydrocarbons or wastes are taken for reclamation or disposal may also have the right to pursue legal actions to enforce compliance, to seek damages for contamination, for personal injury, natural resources damage or property damage. Changes in environmental laws and regulations occur frequently, and any changes that result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management, or completion activities or waste handling, storage, transport, remediation or disposal, emission or discharge requirements could require significant expenditures by us to attain and maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition. Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays and adversely affect our production. Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from tight formations. The process involves the injection of water, sand and additives under pressure into targeted subsurface formations to stimulate oil and natural gas production. We routinely utilize hydraulic fracturing techniques in the majority of our drilling and completion programs. The process is typically regulated by state oil and gas commissions, but several federal 36 Table of Contents agencies have asserted regulatory authority over certain aspects of the process. For example, the EPA published permitting guidance in February 2014 addressing the use of diesel fuel in fracturing operations; issued CAA final regulations in 2012 and additional CAA regulations in June 2016 governing performance standards for the oil and natural gas industry; and in June 2016 issued final effluent limitations guidelines under the CWA that waste-water from shale natural gas extraction operations must meet before discharging to a publicly-owned treatment plant. The EPA also issued an Advance Notice of Proposed Rulemaking under TSCA in 2014 regarding reporting of the chemical substances and mixtures used in hydraulic fracturing, but, to date, has taken no further action. Separately, the BLM published a final rule in March 2015 that establishes more stringent standards for performing hydraulic fracturing on federal and Indian lands. However, the U.S. District Court of Wyoming struck down this rule in June 2016, and after various appeals and a presidential executive order directing it to review rules related to the energy industry, the BLM published a final rule rescinding the 2015 rule in December 2017. From time to time, the U.S. Congress has considered adopting legislation intended to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process but, at this time, federal legislation related to hydraulic fracturing appears unlikely. In addition, certain states, including Oklahoma and Colorado, have adopted regulations that could impose new or more stringent permitting, disclosure, and well-construction requirements on hydraulic fracturing operations. If new laws or regulations that significantly restrict or regulate hydraulic fracturing are adopted at the local, state or federal level, fracturing activities with respect to our properties could become subject to additional permit requirements, reporting requirements or operational restrictions, which may result in permitting delays and potential increases in costs. These delays or additional costs could adversely affect the determination of whether a well is commercially viable. Restrictions on hydraulic fracturing could also reduce the amount of oil, natural gas or NGLs that are ultimately produced in commercial quantities from our properties. Legislation or regulatory initiatives intended to address seismic activity are restricting and could restrict our ability to dispose of saltwater produced alongside our hydrocarbons, which could limit our ability to produce oil and natural gas economically and have a material adverse effect on our business. Large volumes of saltwater produced alongside our oil, natural gas and NGLs in connection with drilling and production operations are disposed of pursuant to permits issued by governmental authorities overseeing such disposal activities. While these permits are issued pursuant to existing laws and regulations, these legal requirements are subject to change, which could result in the imposition of more stringent operating constraints or new monitoring and reporting requirements, owing to, among other things, concerns of the public or governmental authorities regarding such gathering or disposal activities. Evaluation of seismic incidents and whether or to what extent those events are induced by the injection of saltwater into disposal wells continues to evolve, as governmental authorities consider new and/or past seismic incidents in areas where salt water disposal activities occur or are proposed to be performed. The adoption of any new laws, regulations, or directives that restrict our ability to dispose of saltwater generated by production and development activities, whether by plugging back the depths of disposal wells, reducing the volume of salt water disposed in such wells, restricting disposal well locations or otherwise, or by requiring us to shut down disposal wells, which could negatively affect the economic lives of our properties. Refer to “—Environmental Regulations— Subsurface Injections” included in Item 1 of this report for additional discussion of the current and potential impacts of legislation or regulatory initiatives related to seismic activity on our operations. Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce. The EPA previously published its findings that emissions of GHGs present a danger to public health and the environment because such gases are, according to the EPA, contributing to warming of the Earth’s atmosphere and other climatic changes. Based on these findings, the EPA has adopted various rules to address GHG emissions under existing provisions of the CAA. For example, the EPA has adopted rules requiring the reporting of GHG emissions from various oil and natural gas operations on an annual basis, which includes certain of our operations. In addition, in June 2016, the EPA finalized rules to reduce methane emissions from new, modified or reconstructed sources in the oil and natural gas sector, including implementation of an LDAR program to minimize methane emissions, under the CAA’s New Source Performance Standards Quad Oa. However, the EPA has taken several steps to delay implementation of the Quad Oa standards. The agency proposed a rulemaking in June 2017 to stay the requirements for a period of two years and in October 2018, the EPA proposed revisions to Quad Oa, such as changes to the frequency for monitoring fugitive emissions at well sites and changes to requirements that a professional engineer certify when meeting certain Quad Oa requirements is technically infeasible. Regardless of the stay and potential regulatory revisions, it is possible that these rules will continue to require oil and gas operators to expend material sums. 37 Table of Contents In addition, in November 2016, the BLM issued final rules to reduce methane emissions from venting, flaring, and leaks during oil and gas operations on public lands that are substantially similar to the EPA Quad Oa requirements. However, on December 8, 2017, the BLM published a final rule to temporarily suspend or delay certain requirements contained in the November 2016 final rule until January 17, 2019, including those requirements relating to venting, flaring and leakage from oil and gas production activities. Further, in September 2018, the BLM published a final rule to revise or rescind certain provisions of the 2016 rule. While, as a result of these developments, future implementation of the EPA and BLM methane rules is uncertain, given the long-term trend towards increasing regulation, future federal GHG regulations of the oil and gas industry remain a possibility. Moreover, several states where we operate, including Colorado, have already adopted rules requiring operators of both new and existing sources to develop and implement an LDAR program and install devices on certain equipment to capture 95% of methane emissions. Compliance with these rules could require us to purchase pollution control equipment, optical gas imaging equipment for LDAR inspections, and to hire additional personnel to assist with inspection and reporting requirements. In addition, there are a number of state and regional efforts that are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs that typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs. On an international level, the United States was one of almost 200 nations that agreed in December 2015 to the Paris Agreement. However, the Paris Agreement did not impose any binding obligations on the United States. Moreover, in June 2017, President Trump stated that the United States would withdraw from the Paris Agreement but may enter into a future international agreement related to GHGs. In August 2017, the U.S. State Department officially informed the United Nations of the intent of the United States to withdraw from the Paris Agreement. The United States formally initiated withdrawal proceedings on November 4, 2019. The withdrawal cannot be effective before November 4, 2020; thus, whether the United States may reenter the Paris Agreement or a separately negotiated agreement are unclear at this time. Further, several states and local governments remain committed to the principles of the Paris Agreement in their effectuation of policy and regulations. It is not possible at this time to predict how or when the United States might impose restrictions on GHGs as a result of the international climate change agreement. The adoption and implementation of any laws or regulations imposing reporting obligations on, or limiting emissions of GHGs from, our equipment and our operations could require us to incur additional costs to monitor, report and potentially reduce emissions of GHGs associated with our operations or could adversely affect demand for the oil and natural gas that we produce, and thus possibly have a material adverse effect on our revenues, as well as having the potential effect of lowering the value of our reserves. Recently, activists concerned about the potential effects of climate change have directed their attention at sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in oil and natural gas activities. Ultimately, this could make it more difficult to secure funding for exploration and production activities. Notwithstanding potential risks related to climate change, the International Energy Agency estimates that global energy demand will continue to rise and will not peak until after 2040 and that oil and gas will continue to represent a substantial percentage of global energy use over that time. Finally, to the extent increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that could have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, such events could have a material adverse effect on our assets and operations, and potentially subject us to greater regulation. Risks and uncertainties related to the potential sale or lease of our corporate headquarters. Our corporate headquarters building in downtown Oklahoma City, OK, is substantially underutilized. We previously entered into a brokerage agreement to seek to lease the unutilized portion of the building. We may seek and/or receive offers to purchase the entire building in the future. Any alternative we pursue is subject to certain risks and uncertainties, including, among other things, the possibility that any alternative we select will not be completed on terms that are advantageous to us and the likelihood that an outright sale of our corporate headquarters will be at a sales price significantly below its current carrying value on our books. Our failure to maintain an adequate system of internal control over financial reporting, could adversely affect our ability to accurately report our results. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies, in our internal control over financial reporting that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and deter and 38 Table of Contents detect any material fraud. If we cannot provide reliable financial reports or prevent material fraud, our reputation and operating results would be harmed. We maintained effective internal control over financial reporting as of December 31, 2019, as further described in Part II “Item 9A—Controls and Procedures” and “Management’s Report on Internal Control over Financial Reporting.” Our efforts to develop and maintain our internal controls and to remediate material weaknesses in our controls may not be successful, and we may be unable to maintain adequate controls over our financial processes and reporting in the future, including future compliance with the obligations under Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to develop or maintain effective controls, or difficulties encountered in their implementation, including those related to acquired businesses, or other effective improvement of our internal controls could harm our operating results. Ineffective internal controls could also cause investors to lose confidence in our reported financial information. Our derivative activities could result in financial losses and are subject to new derivatives legislation and regulation, which could adversely affect our ability to hedge risks associated with our business. We may enter into financial derivative instruments with respect to a portion of our production to manage our exposure to oil, gas, and NGL price volatility. To the extent that we engage in price risk management activities to protect the Company from commodity price declines, we would be prevented from fully realizing the benefits of commodity price increases above the prices established by our hedging contracts. In addition, our hedging arrangements may expose us to the risk of financial loss in certain circumstances, including instances in which the contract counterparties fail to perform under the contracts. Further, to date, we have not designated and do not currently plan to designate any of our derivative contracts as hedges for accounting purposes and, as a result, record all derivative contracts on our balance sheet at fair value with changes in fair value recognized in current period earnings. Accordingly, our earnings may fluctuate significantly as a result of changes in the fair value of our derivative contracts. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") Act created a new regulatory framework for oversight of derivatives transactions by the CFTC and the SEC. Among other things, the Dodd-Frank Act subjects certain swap participants to new capital, margin and business conduct standards. In addition, the Dodd-Frank Act contemplates that where appropriate in light of outstanding exposures, trading liquidity and other factors, swaps (broadly defined to include most hedging instruments other than futures) will be required to be cleared through a registered clearing facility and traded on a designated exchange or swap execution facility, unless the “end-user” exception from clearing applies. The Dodd-Frank Act also established a new Energy and Environmental Markets Advisory Committee to make recommendations to the CFTC regarding matters of concern to exchanges, firms, end users and regulators with respect to energy and environmental markets and also expands the CFTC’s power to impose position limits on specific categories of swaps (excluding swaps entered into for bona fide hedging purposes). There are some exceptions to these requirements for entities that use swaps to hedge or mitigate commercial risk. However, although we may qualify for exceptions, our derivatives counterparties may be subject to new capital, margin and business conduct requirements imposed as a result of the Dodd-Frank Act, which may increase our transaction costs or make it more difficult for us to enter into hedging transactions on favorable terms. The full impact of the Dodd-Frank Act and related regulatory requirements upon our business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted. The Dodd-Frank Act and any new regulations could significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks we encounter and reduce our ability to monetize or restructure our existing derivative contracts. If we reduce our use of derivatives as a result of the Dodd-Frank Act and regulations, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures. Finally, the Dodd-Frank Act was intended, in part, to reduce the volatility of oil and gas prices, which some legislators attributed to speculative trading in derivatives and commodity instruments related to oil and gas. Our revenues could therefore be adversely affected if a consequence of the Dodd-Frank Act and implementing regulations is to lower commodity prices. Any of these consequences could have a material adverse effect on us, our financial condition and our results of operations. In addition, the European Union and other non-U.S. jurisdictions are implementing regulations with respect to the derivatives market. To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such regulations. At this time, the impact of such regulations is not clear. Cyber-attacks or other failures in telecommunications or IT systems could result in information theft, data corruption and significant disruption of our business operations. In recent years, we have increasingly relied on information technology systems and networks in connection with our business activities, including certain of our exploration, development and production activities. We rely on digital technology, 39 Table of Contents including information systems and related infrastructure, as well as cloud applications and services, to, among other things, estimate quantities of oil and natural gas reserves, analyze seismic and drilling information, process and record financial and operating data and communicate with employees and third parties. As dependence on digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks, the confidentiality, availability and integrity of our data and the physical security of our employees and assets. We have experienced, and expect to continue to confront, attempts from hackers and other third parties to gain unauthorized access to our information technology systems and networks. Although prior cyber-attacks have not had a material adverse impact on our operations or financial performance, there can be no assurance that we will be successful in preventing cyber-attacks or successfully mitigating their effect. Any cyber-attack could have a material adverse effect on our reputation, competitive position, business, financial condition and results of operations. Cyber-attacks or security breaches also could result in litigation or regulatory action, as well as significant additional expense to implement further data protection measures. In addition to the risks presented to our systems and networks, cyber-attacks affecting oil and natural gas distribution systems maintained by third parties, or the networks and infrastructure on which they rely, could delay or prevent delivery of our production to markets. A cyber-attack of this nature would be outside our control, but could have a material, adverse effect on our business, financial condition and results of operations. We have programs, processes and technologies in place to attempt to prevent, detect, contain, respond to and mitigate security-related threats and potential incidents. We undertake ongoing improvements to our systems, connected devices and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards; however, because the techniques used to obtain unauthorized access change frequently and can be difficult to detect and anticipating, identifying or preventing these intrusions or mitigating them if and when they occur is challenging and makes us more vulnerable to cyber-attacks than other companies not similarly situated. If our security measures are circumvented, proprietary information may be misappropriated, our operations may be disrupted, and our computers or those of our customers or other third parties may be damaged. Compromises of our security may result in an interruption of operations, violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures. Repercussions from terrorist activities or armed conflict could harm our business. Terrorist activities, anti-terrorist efforts or other armed conflict involving the United States or its interests abroad may adversely affect the United States and global economies and could prevent us from meeting our financial and other obligations. If events of this nature occur and persist, the attendant political instability and societal disruption could reduce overall demand for oil and natural gas, potentially putting downward pressure on prevailing oil and natural gas prices and causing a reduction in our revenues. Oil and natural gas production facilities, transportation systems and storage facilities could be direct targets of terrorist attacks, and/or operations could be adversely impacted if infrastructure integral to our operations is destroyed by such an attack. Costs for insurance and other security may increase as a result of these threats, and some insurance coverage may become more difficult to obtain, if available at all. Risks Relating to our Common Stock The exercise of all or any number of outstanding Warrants or the issuance of stock-based awards may dilute your holding of shares of our common stock. As of the date of filing this report, we have outstanding Warrants to purchase approximately 6.7 million shares of our common stock at average exercise prices of either $41.34 and $42.03 per share. In addition, we have as of the date of this report, 3.0 million shares of common stock reserved for future issuance under the SandRidge Energy, Inc. 2016 Omnibus Incentive Plan (the, “Omnibus Incentive Plan”). The exercise of equity awards, including any stock options that we may grant in the future, the Warrants, and the sale of shares of our common stock underlying any such options or the Warrants, could have an adverse effect on the market for our common stock, including the price that an investor could obtain for their shares. Investors may experience dilution in the net tangible book value of their investment upon the exercise of the Warrants and any stock options that may be granted or issued pursuant to the Omnibus Incentive Plan in the future. Item 1B. Unresolved Staff Comments None. 40 Table of Contents Item 2. Properties Information regarding the Company’s properties is included in Item 1. Item 3. Legal Proceedings As previously disclosed, on May 16, 2016, the Debtors filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court. The Bankruptcy Court confirmed the Plan on September 9, 2016, and the Debtors subsequently emerged from bankruptcy on October 4, 2016. Pursuant to the Plan, claims against the Company were discharged without recovery in each of the following consolidated cases (the "Cases"): • • In re SandRidge Energy, Inc. Securities Litigation, Case No. 5:12-cv-01341-LRW, USDC, Western District of Oklahoma; and Ivan Nibur, Lawrence Ross, Jase Luna, Matthew Willenbucher, and the Duane & Virginia Lanier Trust v. SandRidge Mississippian Trust I, et al., Case No. 5:15- cv-00634-SLP, USDC, Western District of Oklahoma The lead plaintiffs in both In re SandRidge Energy, Inc. Securities Litigation and Lanier Trust assert claims on behalf of themselves and (i) in In re SandRidge Energy, Inc. Securities Litigation, a class of all purchasers of SandRidge common stock from February 24, 2011 and November 8, 2012 under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and (ii) in Lanier Trust, a putative class of purchasers of SandRidge Mississippian Trust I and SandRidge Mississippian Trust II common units between April 7, 2011 and November 8, 2012 under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, both based on allegations that defendants, which include certain former officers of the Company and the SandRidge Mississippian Trust I, made misrepresentations or omissions concerning various topics including the performance of wells operated by the Company in the Mississippian region. Discovery in each of the Cases closed on June 19, 2019. Following a hearing on class certification in each of the Cases on September 6, 2019, the court granted class certification in In re SandRidge Energy, Inc. Securities Litigation on September 30, 2019. The motion for class certification in Lanier Trust remains pending. In each of the Cases, lead plaintiffs seek to recover unspecified damages, interest, costs and expenses incurred in the litigation on behalf of themselves and class members. Although the claims against the Company in each Case have been discharged pursuant to the Plan, the Company remains a nominal defendant in each of the Cases to the extent necessary to allow recovery from applicable insurance policies or proceeds. In addition, the Company owes indemnity obligations and/or the obligation to advance legal fees, to certain former officers who remain as defendants in each action. The Company may also be contractually obligated to indemnify the SandRidge Mississippian Trust I against losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and attorney’s fees and expenses, arising out of the Cases, and such indemnification is not covered by insurance. In light of the status of the Cases, and the facts, circumstances and legal theories relating thereto, the Company is not able to determine the likelihood of an outcome in either case or provide an estimate of any reasonably possible loss or range of possible loss related thereto. However, considering the erosion of insurance coverage available to the Company, such losses, if incurred, could be material. The Company has not established any liabilities relating to the Cases and believes that the plaintiffs’ claims are without merit. The Company intends to continue to vigorously defend against the Cases in its capacity as a nominal defendant. In addition to the matters described above, the Company is involved in various lawsuits, claims and proceedings which are being handled and defended by the Company in the ordinary course of business, none of which is deemed to be individually material at this time. Due to the inherent uncertainty of litigation, however, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or liquidity. Item 4. Mine Safety Disclosures Not applicable. 41 Table of Contents Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities PRICE RANGE OF COMMON STOCK PART II Since October 4, 2016, the Successor Company’s common stock has been listed on the New York Stock Exchange (“NYSE”) under the symbol “SD.” During the period from January 7, 2016 through October 3, 2016, our common stock was quoted for public trading on the Pink Sheets quotations system, an over-the-counter market, under the symbol “SDOCQ.PK.” The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Prior to January 7, 2016, the Predecessor Company’s common stock was also listed on the NYSE under the symbol “SD.” On February 21, 2020, there were 314 record holders of the Company’s common stock. We have neither declared nor paid any cash dividends on our common stock, and we do not anticipate declaring any dividends in the foreseeable future. We expect to retain cash for the operation and expansion of our business, including exploration, development and production activities. In addition, the terms of our credit facility restrict our ability to pay dividends. If our dividend policy changes in the future, our ability to pay dividends would be subject to these restrictions and then-existing conditions, including results of operations, financial condition, contractual obligations, capital requirements, business prospects and other factors deemed relevant by the Company’s board of directors. PERFORMANCE GRAPH The following graph compares the cumulative total return to stockholders on SandRidge common stock relative to the cumulative total returns of the S&P Oil and Gas Exploration and Production Index and the S&P 500 Index from October 4, 2016, the date of the Company's emergence from Chapter 11, through December 31, 2019. The graph assumes that the value of the investment in the Company’s common stock and in each of the indexes was $100.00 on October 4, 2016. The performance graph above is furnished and not filed for purposes of Section 18 of the Exchange Act and will not be incorporated by reference into any registration statement filed under the Securities Act unless specifically identified therein as being incorporated therein by reference. The performance graph is not soliciting material subject to Regulation 14A. 42 Table of Contents ISSUER PURCHASES OF EQUITY SECURITIES The following table presents a summary of share repurchases made during the three-month period ended December 31, 2019. Period October 1, 2019 - October 31, 2019 November 1, 2019 - November 30, 2019 December 1, 2019 - December 31, 2019 Total Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In millions) — $ — $ 1,501 $ 1,501 — — 4.08 N/A N/A N/A — N/A N/A N/A ____________________ (1) Includes shares of common stock tendered by employees in order to satisfy tax withholding requirements upon vesting of their stock awards. Item 6. Selected Financial Data The following table sets forth, as of the dates and for the periods indicated, our selected financial information, which is derived from our audited consolidated financial statements for the respective periods. The information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this report and our consolidated financial statements and notes thereto contained in “Financial Statements and Supplementary Data” in Item 8 of this report. The following information is not necessarily indicative of future results. Statement of Operations Data (in thousands, except per share data) Revenues Total operating expenses(2) (Loss) income from operations Other (expense) income Interest expense Gain on extinguishment of debt Gain on reorganization items, net Other income, net Total other income (expense) (Loss) income before income taxes Income tax (benefit) expense Net (loss) income Less: net loss attributable to noncontrolling interest(3) Net (loss) income attributable to SandRidge Energy, Inc. Preferred stock dividends (Loss applicable) income available to SandRidge Energy, Inc. common stockholders (Loss) earnings per share Basic Diluted Successor(1) Predecessor(1) Year Ended December 31, Period from October 2, 2016 through December 31, Period from January 1, 2016 through October 1, Year Ended December 31, 2019 2018 2017 2016 2016 2015 $ 266,845 $ 349,395 $ 357,299 $ 98,456 $ 293,809 $ 768,709 713,612 (446,767) 359,770 (10,375) 317,668 39,631 434,801 (336,345) 1,200,012 5,411,387 (906,203) (4,642,678) (2,974) — — 436 (2,538) (449,305) — (449,305) — (449,305) — (2,787) 1,151 — 2,865 1,229 (9,146) (71) (9,075) — (9,075) — (3,868) — — 2,550 (1,318) 38,313 (8,749) 47,062 — (372) — — 2,744 2,372 (126,099) 41,179 2,430,599 1,332 (321,421) 641,131 — 2,040 2,347,011 321,750 (333,973) 1,440,808 (4,320,928) 9 11 123 (333,982) 1,440,797 (4,321,051) — — (623,506) 47,062 (333,982) 1,440,797 (3,697,545) — — 16,321 37,950 $ $ $ (449,305) $ (9,075) $ 47,062 $ (333,982) (12.68) $ (0.26) $ 1.45 $ (12.68) $ (0.26) $ 1.44 $ (17.61) (17.61) $ $ $ 1,424,476 $ (3,735,495) 2.01 $ 2.01 $ (7.16) (7.16) 43 Table of Contents ____________________ (1) Upon emergence from Chapter 11, the Company elected to apply fresh start accounting effective October 1, 2016, to coincide with the timing of the normal fourth quarter reporting period, which resulted in SandRidge becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the reorganization plan, the financial statements after October 1, 2016 are not comparable with the financial statements prior to that date. (2) Includes full cost ceiling limitation impairments of $409.6 million, $319.1 million, $657.4 million, and $4.5 billion for the year ended December 31, 2019, the Successor 2016 Period, the Predecessor 2016 Period and the year ended December 31, 2015, respectively. No full cost ceiling limitation impairments were recorded for the years ended December 31, 2018 and 2017. (3) Information presented for the year ended December 31, 2015, includes 100% of the interests and activities of the Royalty Trusts, including amounts attributable to noncontrolling interest. On January 1, 2016, we adopted the provisions of ASU 2015-02, “Amendments to the Consolidation Analysis,” which led to the conclusion that the Royalty Trusts were no longer variable interest entities, and a cumulative-effect adjustment was made to equity to remove the effect of any previously recorded noncontrolling interest. Prior periods were not restated. For the 2016, 2017, and 2018, and 2019 periods, we have proportionately consolidated only our share of each Royalty Trust. Balance Sheet Data (in thousands) Cash and cash equivalents Property, plant and equipment, net Total assets(1) Total debt(1) Total stockholders’ equity (deficit) Total liabilities and stockholders’ equity (deficit) ____________________ Successor As of December 31, Predecessor As of December 31, 2019 2018 2017 2016 2015 $ $ $ $ $ $ 4,275 $ 17,660 $ 99,143 $ 567,943 $ 949,949 $ 923,240 $ 121,231 817,932 607,689 $ 1,024,338 $ 1,119,627 $ 1,081,392 57,500 $ — $ 37,502 $ 402,452 $ 847,721 $ 839,940 $ 305,308 512,917 607,689 $ 1,024,338 $ 1,119,627 $ 1,081,392 $ $ $ $ $ $ 435,588 2,234,702 2,922,027 3,562,378 (1,187,733) 2,922,027 (1) Reflects the reclassification of certain debt issuance costs from other assets to long-term debt of $69.1 million for the year ended December 31, 2015, as a result of the retrospective adoption of ASU 2015-03 on January 1, 2016. 44 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with other sections of this report, including: “Business” in Item 1, “Selected Financial Data” in Item 6 and “Financial Statements and Supplementary Data” in Item 8. Additionally, discussion of our operating and financial data for 2018 compared to 2017 can be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" under Part II of our previously filed 2018 Annual Report on Form 10-K, which was filed with the SEC on March 5, 2019. Our discussion and analysis includes the following subjects: • • • • • Overview; Consolidated Results of Operations; Liquidity and Capital Resources; Valuation Allowance; and Critical Accounting Policies and Estimates. Overview We are an oil and natural gas company with a principal focus on exploration and production activities in the U.S. Mid-Continent and North Park Basin of Colorado. Operational Activities Operational activities for the years ended December 31, 2019, and 2018 include the following: Area Mid-Continent (1) North Park Basin Total 2019 2018 Year Ended December 31, Gross Wells Drilled(2) Net Wells Drilled(2) Average Rigs Drilling Gross Wells Drilled(2) Net Wells Drilled(2) Average Rigs Drilling 11 10 21 3.9 10.0 13.9 0.6 0.4 1.0 22 14 36 8.0 14.0 22.0 1.7 0.7 2.4 ____________________ (1) Eight and fifteen wells were drilled under our previous drilling participation agreement in the NW STACK during the years ended December 31, 2019 and 2018. Under this agreement, we receive a 20% net working interest after funding 10% of the drilling and completion costs related to the subject wells. The last well under this agreement was completed in the second quarter of 2019. (2) Includes wells with a rig release date during the years ended December 31, 2019 or 2018, respectively. 45 Table of Contents The chart below shows production by product for the years ended December 31, 2019 and 2018, and 2017: Total production for 2019 was comprised of approximately 29.4% oil, 46.2% natural gas and 24.4% NGLs compared to 28.2% oil, 48.9% natural gas and 22.9% NGLs in 2018. Recent Events On December 12, 2019, the Board appointed John P. Suter as Interim President and Chief Executive Officer in addition to his current role as Chief Operating Officer. Mr. Suter succeeds Mr. Paul D. McKinney, who resigned from his position as President and Chief Executive Officer and as a director of the Company. On February 4, 2020, the Company issued Workers Adjustment and Retraining Notification (WARN) Act notices to approximately 63 of its 120 Oklahoma City based employees as a result of its workforce reduction at its corporate headquarters. • • Outlook As discussed in “Business— Our Business Strategy” in Item 1 of this report, we will focus on maximizing free cash flow in 2020 through a combination of cost control measures and the continued exercise of financial discipline and prudent capital allocation, which includes limiting our drilling capital to locations we believe will provide high rates of return in the currently depressed commodity price environment. As a result, we have reduced our planned capital expenditures for 2020 to between $25.0 million and $30.0 million. Given this expected level of capital expenditures, our oil, natural gas and NGL production will likely decline in 2020. We will be prepared to expand our capital program if commodity prices increase sufficiently. We will also continue our pursuit of acquisitions and business combinations which provide high margin properties with attractive returns at current commodity prices. Consolidated Results of Operations The majority of our consolidated revenues and cash flow are generated from the production and sale of oil, natural gas and NGLs. Our revenues, profitability and future growth depend substantially on prevailing prices received for our production, the quantity of oil, natural gas and NGLs we produce, and our ability to find and economically develop and produce our reserves. Prices for oil, natural gas and NGLs fluctuate widely and are difficult to predict. To provide information on the general trend in pricing, the average annual NYMEX prices for oil and natural gas for recent years are presented in the table below: Oil (per Bbl) Natural gas (per Mcf) Year Ended December 31, 2019 2018 2017 2016 2015 $ $ 57.04 $ 64.90 $ 50.85 $ 43.47 $ 2.53 $ 3.07 $ 3.02 $ 2.55 $ 48.75 2.62 46 Table of Contents In order to reduce our exposure to price fluctuations, we have historically entered into commodity derivative contracts for a portion of our anticipated future oil and natural gas production as discussed in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” Reducing the Company’s exposure to price volatility helps mitigate the risk that we will not have adequate funds available for our capital expenditure programs. During periods where the strike prices for our commodity derivative contracts are below market prices at the time of settlement, we may not fully benefit from increases in the market price of oil and natural gas. Conversely, during periods of declining market prices of oil and natural gas, our commodity derivative contracts may partially offset declining revenues and cash flow to the extent strike prices for our contracts are above market prices at the time of settlement. Acquisitions and Divestitures of Oil and Gas Properties Nonmonetary transaction. During the three-month period ended September 30, 2019, the Company transferred its interest in certain proved oil and natural gas properties located in Comanche, Harper and Sumner counties in Kansas along with associated electrical infrastructure and an insignificant amount of accounts receivable with an aggregate estimated fair value of $5.4 million, for an interest in certain other proved oil and natural gas properties located in Comanche, Harper and Barber counties in Kansas. The fair value of the non-oil and gas assets given in the transaction approximated their carrying value, therefore no gain or loss was recognized on the transfer. Divestiture of Permian Basin Properties. On November 1, 2018, we sold substantially all of our oil and natural gas properties, rights and related assets in the CBP region of the Permian Basin, primarily located in Andrews County, TX, along with all of our 13,125,000 common units representing a 25% equity interest in the Permian Trust, to an independent third party for $14.5 million in cash, subject to certain remaining post-closing adjustments, and reduced our asset retirement obligations by approximately $26.9 million. The CBP assets and interest in the Permian Trust include 1,066 producing wells within the Permian Trust's area of mutual interest, certain wells not associated with the Permian Trust, a field office, and all equipment, inventory and yards associated with our CBP operations. As a result of this divestiture, we no longer have any obligations associated with the Permian Trust. This transaction did not result in a significant alteration of the relationship between our capitalized costs and proved reserves and, accordingly, the divestiture was accounted for as an adjustment to the full cost pool with no gain or loss recognized on the sale. Acquisition of Oil and Natural Gas Interests. On November 2, 2018, we acquired certain interests in oil and natural gas properties, rights and related assets in the Mississippian Lime and NW STACK areas of Oklahoma and Kansas for approximately $22.5 million in net consideration, net of post-closing adjustments, and assumed asset retirement obligations of approximately $6.4 million. The acquired assets primarily consist of interests in 1,199 producing wells, approximately 80% of which we operate, an additional 11.1% working interest in approximately 397,000 gross (44,000 net) acres across the Mid-Continent, and an additional 13.2% working interest ownership in our saltwater gathering and disposal system in the Mississippian Lime. Acquisition of NW STACK Properties. On February 10, 2017, we acquired assets consisting of approximately 13,000 net acres in Woodward County, Oklahoma for approximately $47.8 million in cash, net of post-closing adjustments. Also included in the acquisition were working interests in four wells previously drilled on the acreage. 2017 Oil and Natural Gas Property Divestitures. In 2017, we divested various non-core oil and natural gas properties for approximately $17.1 million in cash. All of these divestitures were accounted for as adjustments to the full cost pool with no gain or loss recognized. 47 Table of Contents Oil, Natural Gas and NGL Production and Pricing The table below presents production and pricing information for the years ended December 31, 2019, 2018, and 2017. Production data (in thousands) Oil (MBbls) NGL (MBbls) Natural gas (MMcf) Total volumes (MBoe) Average daily total volumes (MBoe/d) Average prices—as reported(1) Oil (per Bbl) NGL (per Bbl) Natural gas (per Mcf) Total (per Boe) Average prices—including impact of derivative contract settlements(2) Oil (per Bbl) NGL (per Bbl) Natural gas (per Mcf) Total (per Boe) 2019 Year Ended December 31, 2018 2017 3,519 2,910 33,164 11,956 32.8 52.96 $ 12.23 $ 1.33 $ 22.26 $ 53.30 $ 12.23 $ 1.48 $ 22.78 $ 3,477 2,829 36,175 12,335 33.8 61.73 $ 23.72 $ 1.85 $ 28.27 $ 51.35 $ 23.72 $ 1.89 $ 25.47 $ 4,157 3,376 44,237 14,906 40.8 48.72 18.16 2.09 23.90 49.75 18.16 2.15 24.38 $ $ $ $ $ $ $ $ ____________________ (1) (2) Prices represent actual average prices for the periods presented and do not include the impact of derivative transactions. Excludes early settlements of commodity derivative contracts prior to their contractual maturity, if any. For a discussion of reserves, PV-10 and reconciliation to Standardized Measure, see “Business— Primary Operations—Proved Reserves” in Item 1 of this report. The table below presents production by area of operation for the years ended December 31, 2019, 2018 and 2017, and illustrates the impact of (i) natural declines in existing producing wells in the Mid-Continent, (ii) the Permian Divestiture in November 2018 and drilling no new wells in the Permian and other regions during 2019, 2018 and 2017, and (ii) continued development of the North Park Basin properties, which were acquired in December 2015 and the NW STACK, which was acquired in February 2017. Mississippian Lime NW STACK North Park Basin Permian Basin Total 2019 Production (MBoe) 9,403 1,020 1,533 — 11,956 Year Ended December 31, 2018 2017 % of Total Production Production (MBoe) % of Total Production Production (MBoe) % of Total Production 78.6 % 8.6 % 12.8 % — % 100.0 % 10,003 925 1,034 373 12,335 81.1 % 7.5 % 8.4 % 3.0 % 100.0 % 12,838 882 673 513 14,906 86.2 % 5.9 % 4.5 % 3.4 % 100.0 % 48 Table of Contents Revenues Consolidated revenues for the years ended December 31, 2019, 2018, and 2017 are presented in the table below (in thousands). Revenues Oil NGL Natural gas Other Total revenues Year Ended December 31, 2019 2018 2017 $ $ 186,360 $ 214,651 $ 35,598 44,146 741 67,111 66,964 669 266,845 $ 349,395 $ 202,539 61,322 92,349 1,089 357,299 Variances in oil, natural gas and NGL revenues attributable to changes in the average prices received for our production and total production volumes sold for the years ended December 31, 2019 and 2018 are shown in the table below (in thousands): 2017 oil, natural gas and NGL revenues Change due to production volumes in 2018 Change due to average prices in 2018 2018 oil, natural gas and NGL revenues Change due to production volumes in 2019 Change due to average prices in 2019 2019 oil, natural gas and NGL revenues $ $ 356,210 (59,897) 52,413 348,726 (1,059) (81,563) 266,104 Oil, natural gas and NGL revenues decreased by a combined $82.6 million, or 23.7% for the year ended December 31, 2019, compared to 2018 due largely to a decrease in average prices received for our oil, natural gas, and NGL production in 2019, and a 0.4 MMBoe decrease in total production, primarily resulting from natural declines in existing producing wells and as a result of selling our Permian properties in the fourth quarter of 2018. Partially offsetting these production declines were 10 wells drilled and brought to production within North Park and 11 wells brought to production in the NW STACK areas during 2019. Additionally, in the fourth quarter of 2018 we acquired working interests in certain oil and natural gas properties in the Mississippian Lime and NW STACK areas of Oklahoma and Kansas. Operating Expenses Operating expenses for the years ended December 31, 2019, 2018, and 2017 consisted of the following (in thousands): Lease operating expenses Production, ad valorem, and other taxes Depreciation and depletion—oil and natural gas Depreciation and amortization—other Total operating expenses Lease operating expenses ($/Boe) Production, ad valorem, and other taxes ($/Boe) Depreciation and amortization—oil and natural gas ($/Boe) Production, ad valorem, and other taxes (% of oil, natural gas, and NGL revenue) $ $ $ $ $ Year Ended December 31, 2019 2018 2017 90,938 $ 87,786 $ 19,394 146,874 11,684 268,890 $ 7.61 $ 1.62 $ 12.28 $ 7.3 % 25,434 127,281 11,982 252,483 7.12 $ 2.06 $ 10.32 $ 7.3 % 99,052 18,211 118,035 13,852 249,150 6.65 1.22 7.92 5.1 % Lease operating expenses for 2019 increased $3.2 million, or $0.49/Boe from 2018. This increase is primarily due to (i) an increase in workover expense in 2019 compared to 2018 largely resulting from artificial lift repairs in the Mid-Continent, 49 Table of Contents and (ii) bringing on several multi-well pads in the North Park Basin during 2019 which resulted in additional expenditures for trucking produced water to disposal wells in 2019. Production, ad valorem, and other taxes as a percentage of oil, natural gas, and NGL revenue remained consistent in 2019 compared to 2018. Depreciation and depletion for oil and natural gas properties increased by $19.6 million for the year ended December 31, 2019 compared to 2018 due to an increase in the average depreciation and depletion rate to $12.28 per Boe in 2019 compared to an average rate of $10.32 in 2018. This rate increase is primarily due to a decrease in the trailing twelve-month weighted average SEC prices for oil and natural gas during 2019, which resulted in a decrease in reserve volumes. The rate increase is also a result of development activities in 2019 taking place in areas where our finding and development costs are higher than those included in historical depreciation and depletion rates. Impairment Impairment expense for the years ended December 31, 2019, 2018, and 2017 consisted of the following (in thousands): Impairment Full cost pool ceiling limitation Drilling assets Midstream assets Total impairment Year Ended December 31, 2019 2018 2017 $ $ 409,574 $ — — — $ 22 4,148 409,574 $ 4,170 $ — 4,019 — 4,019 Full cost pool impairment. Impairment for the year ended December 31, 2019 largely resulted from a decrease in the trailing twelve-month weighted average SEC prices for oil and natural gas in 2019, lower NGL prices, increases in expected operating expenses, and a decrease in PUDs due to a decrease in year-end SEC commodity pricing. Calculation of the full cost ceiling test is based on, among other factors, trailing twelve-month SEC prices as adjusted for price differentials and other contractual arrangements. The SEC prices utilized in the calculation of proved reserves included in the full cost ceiling test at December 31, 2019 were $55.69 per barrel of oil and $2.58 per Mcf of natural gas, before price differential adjustments. Based on the SEC prices over the eleven months ended February 1, 2020, as well as the short-term pricing outlook for the remainder of the first quarter 2020, we anticipate the SEC prices utilized in the March 31, 2020 full cost ceiling test may be $56.71 per barrel of oil and $2.32 per Mcf of natural gas, (the "estimated first quarter prices"). Applying these estimated first quarter prices, and holding all other inputs constant to those used in the calculation of our December 31, 2019 ceiling test, an additional full cost ceiling limitation impairment is not indicated for the first quarter of 2020. However, a full cost ceiling limitation impairment may still be realized in the first quarter of 2020 and in subsequent quarters based on the outcome of numerous other factors such as additional declines in the actual trailing twelve-month SEC prices, lower NGL pricing, changes in estimated future development costs and operating expenses, and other adjustments to our levels of proved reserves. Any such ceiling test impairments in 2020 could be material to our net earnings. Midstream asset impairment. Impairment recorded on midstream assets in 2018 primarily reflects the write-down of midstream generator assets classified as held for sale to estimated net realizable value. 50 Table of Contents Non-Operating Expenses Non-operating expenses for the years ended December 31, 2019, 2018, and 2017 consisted of the following (in thousands): General and administrative Accelerated vesting of employment compensation Proxy contest Terminated merger costs Employee termination benefits (Gain) loss on derivative contracts Other operating (income) expense Total non-operating expenses Year Ended December 31, 2019 2018 2017 $ 32,058 $ — — — 4,792 (1,094) (608) 35,148 $ 40,619 6,545 7,139 — 32,657 17,155 (998) 103,117 75,133 — — 8,162 4,815 (24,090) 479 64,499 General and administrative expenses decreased $8.6 million, or 21.1%, for the year ended December 31, 2019 compared to 2018 due primarily to a $7.5 million decrease in compensation-related costs largely resulting from a reduction in force during the second quarter of 2019 and additional declines in headcount throughout 2019. The remainder of the decrease is substantially related to reductions in other corporate office and technology expenses. Employee termination benefits for the year ended December 31, 2019, include cash and share-based severance costs incurred related to (i) a reduction in force in the second quarter of 2019 and (ii) severance costs associated with the departure of our former Executive Vice President, General Counsel and Corporate Secretary, Phil Warman, and former CEO, Paul McKinney. Employee termination benefits for the year ended December 31, 2018, include cash and share-based severance costs incurred primarily as a result of (i) the reduction in force in the first quarter of 2018 and (ii) severance costs associated with the departure of our former CEO, James Bennett, former CFO, Julian Bott, and other senior officers. See "Note 20 - Employee Termination Benefits" to the consolidated financial statements in Item 8 of this report for additional information. We recorded net (gain) loss on commodity derivative contracts of $(1.1) million and $17.2 million for the years ended December 31, 2019, and 2018, respectively, as reflected in the accompanying consolidated statements of operations, which includes net cash (receipts) payments upon settlement of $(6.3) million and $35.3 million, respectively. On November 14, 2017, we entered into an Agreement and Plan of Merger with Bonanza Creek. In contemplation of the proposed merger, which would have been partially financed with debt, we entered into several oil derivative contracts in November 2017. Approximately $8.0 million of the total 2018 loss reported above related to net cash payments upon settlement for these oil derivatives. Our derivative contracts are not designated as accounting hedges and, as a result, changes in the fair value of our commodity derivative contracts are recorded each quarter as a component of operating expenses. Internally, management views the settlement of commodity derivative contracts at contractual maturity as adjustments to the price received for oil and natural gas production to determine “effective prices.” In general, cash is received on settlement of contracts due to lower oil and natural gas prices at the time of settlement compared to the contract price for our commodity derivative contracts, and cash is paid on settlement of contracts due to higher oil and natural gas prices at the time of settlement compared to the contract price for our commodity derivative contracts. See Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” of this report for additional discussion of our commodity derivatives. Accelerated vesting of employment compensation costs incurred during the year ended December 31, 2018 include compensation costs recognized for the accelerated vesting of certain share and incentive-based awards granted to our employees and directors related to the change in the composition of the Board resulting from the 2018 annual meeting as discussed in "Note 19 - Proxy Contest" to the consolidated financial statements in Item 8 of this report. 51 Table of Contents Proxy contest costs for the year ended December 31, 2018 include legal, consulting and advisory fees incurred in the proxy contest which were initiated in response to shareholder actions in 2018. See "Note 19 - Proxy Contest" to the consolidated financial statements in Item 8 of this report for additional discussion of this matter. Other Income (Expense) Other income (expense) for the years ended December 31, 2019, 2018, and 2017 is reflected in the table below (in thousands): Other (expense) income Interest expense, net Gain on extinguishment of debt Other income, net Total other (expense) income Year Ended December 31, 2019 2018 2017 $ $ (2,974) $ (2,787) $ — 436 (2,538) 1,151 2,865 1,229 $ (3,868) — 2,550 (1,318) Interest expense for the years ended December 31, 2019, 2018, and 2017 consisted of the following (in thousands): Interest expense Interest expense on debt Interest expense on right of use assets Write off of debt issuance costs Amortization of debt issuance costs, premium and discounts Capitalized interest Total Less: interest income Total interest expense, net Year Ended December 31, 2019 2018 2017 $ $ 3,658 $ 2,747 $ 4,786 160 142 558 (1,453) 3,065 (91) — — 423 (22) 3,148 (361) 2,974 $ 2,787 $ — — 100 — 4,886 (1,018) 3,868 Interest expense incurred during the year ended December 31, 2019 is primarily comprised of interest and fees paid on the credit facility. Interest expense incurred during the year ended December 31, 2018 is primarily comprised of interest recorded on the Building Note and commitment fees on the undrawn portion of the credit facility. Gain on extinguishment of debt was recognized for the year ended December 31, 2018 as a result of writing off the unamortized premium in conjunction with the repayment of the Building Note during the first quarter of 2018. See “Note 11 - Long-Term Debt” to the consolidated financial statements in Item 8 of this report for additional discussion of our long-term debt transactions. 52 Table of Contents Liquidity and Capital Resources At December 31, 2019, our cash and cash equivalents, excluding restricted cash, were $4.3 million. Additionally, we had $57.5 million outstanding under our $225.0 million credit facility which matures on April 1, 2021, and $2.9 million in outstanding letters of credit, which reduce the amount available under the credit facility. As of February 21, 2020, the Company had approximately $2.7 million in cash and cash equivalents, excluding restricted cash, $48.5 million outstanding under our credit facility, and $2.9 million in outstanding letters of credit. Working Capital and Sources and Uses of Cash Our principal sources of liquidity for 2020 include cash flow from operations, cash on hand and amounts available under our credit facility, as discussed in “— Credit Facility” below. Our working capital deficit decreased to $49.8 million at December 31, 2019, compared to $63.9 million at December 31, 2018, largely due to a reduction in accounts payable and accrued expenses outstanding on those dates, which is primarily due to a decline in drilling and completions activity in the fourth quarter of 2019 compared to 2018. This reduction was partially offset by fluctuations in the timing and amount of payments and borrowings on our revolving credit facility and in the levels of accounts receivable largely due to the decline in oil, natural gas and NGL revenues in 2019 compared to 2018. We intend to spend between $25.0 million and $30.0 million in our 2020 capital budget plan, excluding any expenditures for acquisitions. We intend to fund capital expenditures and other commitments for the next 12 months using cash flows from our operations, borrowings under our credit facility and cash on hand. We intend to reduce our capital spending below our projected cash flows from operations for the year, subject to changing industry conditions or events. Cash Flows Our cash flows from operations are substantially dependent on current and future prices for oil and natural gas, which historically have been, and may continue to be, volatile. For example, during the period from January 2015 through December 2019, the NYMEX settled price for oil fluctuated between a high of $76.41 per Bbl and a low of $26.21 per Bbl, and the month-end NYMEX settled price for gas fluctuated between a high of $4.72 per MMBtu and a low of $1.71 per MMBtu. If oil or natural gas prices decline from current levels, they could have a material adverse effect on our financial position, results of operations, cash flows and quantities of oil, natural gas and NGL reserves that may be economically produced. This could result in full cost pool ceiling impairments. Further, if our future capital expenditures are limited or deferred, or we are unsuccessful in developing reserves and adding production through our capital program, the value of our oil and natural gas properties, financial condition and results of operations could be adversely affected. Cash flows for the years ended December 31, 2019, 2018, and 2017 are presented in the following table and discussed below (in thousands): Cash flows provided by operating activities Cash flows used in investing activities Cash flows (used in) provided by financing activities Net (decrease) increase in cash and cash equivalents Cash Flows from Operating Activities Year Ended December 31, 2019 2018 2017 $ $ 121,324 $ 145,514 $ (189,849) 54,848 (183,453) (43,724) (13,677) $ (81,663) $ 181,179 (245,724) (8,218) (72,763) The $24.2 million decrease in operating cash flows for the year ended December 31, 2019 compared to 2018, is primarily due to (i) the decline in oil, natural gas and NGL revenues, and (ii) a decrease in accounts payable and accrued expenses outstanding resulting from a reduction in drilling and completions activity in the fourth quarter of 2019 compared to the fourth quarter of 2018. These decreases in cash flow were partially offset by (i) receiving cash on the settlement of derivatives in 2019 compared to paying cash in 2018 (ii) a reduction in cash paid for employee termination benefits, (iii) a reduction in 2019 payroll, benefits and other headcount driven costs resulting from reductions in force during 2018 and 2019, and (iv) a reduction in production, ad valorem and other taxes largely resulting from declining production levels. Additionally, in 2018 we incurred costs related to the proxy contest, which were non-recurring in 2019. 53 Table of Contents See “—Consolidated Results of Operations” for further analysis of the changes in revenues and operating expenses, and see “Note 20 - Employee Termination Benefits” to the accompanying consolidated financial statements included in Item 8 of this report for additional detail on cash paid for employee termination benefits. Cash Flows from Investing Activities During the year ended December 31, 2019, cash flows used in investing activities primarily consisted of capital expenditures for drilling and completion activities. During the year ended December 31, 2018, cash flows used in investing activities primarily consisted of capital expenditures for drilling and completion activities and cash paid for the acquisition of interests in certain Mid-Continent properties. These expenditures were partially offset by cash proceeds received for the Permian Divestiture and other non-core asset divestitures in 2018. Capital Expenditures. Our capital expenditures for the years ended December 31, 2019, 2018, and 2017, are summarized below (in thousands): Capital Expenditures Drilling and completion Leasehold and geophysical Other - operating Other - corporate Capital expenditures, excluding acquisitions (on an accrual basis) Acquisitions(1) Current year total capital expenditures, including acquisitions Change in capital accruals(2) Total cash paid for capital expenditures 2019 Year Ended December 31, 2018 2017 $ 157,999 $ 158,695 $ 3,790 — 245 162,034 (236) 161,798 29,644 11,680 419 392 171,186 24,764 195,950 15,861 $ 191,442 $ 211,811 $ 194,388 51,645 854 1,358 248,245 48,312 296,557 (28,999) 267,558 ____________________ (1) (2) Excludes $5.4 million for the year ended December 31, 2019 related to a nonmonetary transaction. Reflects cash paid during the period presented for expenditures related to the prior year's capital program. Capital expenditures, excluding acquisitions, for exploration and development activities decreased for the year ended December 31, 2019 compared to 2018, which is in line with the planned decrease in drilling and completion activity and related costs as reflected in our lower capital expenditures budget in 2019. Due to continued depressed market prices for oil, natural gas and NGL prices, we have again reduced our expected capital expenditures budget and drilling plan for 2020 in order to focus on generating free cash flow in future periods. Cash Flows from Financing Activities Our financing activities provided $54.8 million of cash for the year ended December 31, 2019, which consisted primarily of proceeds from borrowings from our credit facility during each period. Our financing activities used $43.7 million of cash for the year ended December 31, 2018, which consisted primarily of repaying the Building Note and cash paid for employee tax obligations in connection with the withholding of common shares upon vesting of employee share-based compensation awards. 54 Table of Contents Indebtedness Credit Facility We have approximately $164.6 million of available borrowing capacity under our credit facility at December 31, 2019. The borrowing base under the credit facility is $225.0 million, which was reduced from $300.0 million during the borrowing base redetermination completed in November 2019. The level of our credit facility's borrowing base is determined by our lenders in their sole discretion, and is largely based on the estimated value of our oil and natural gas properties in the Company's most recently delivered reserve report. This reserve report takes into account the prevailing oil, natural gas, NGL prices at that time. If future commodity prices are consistent or lower than those experienced in 2019, planned reductions in our 2020 drilling and completions capital budget may lead to a decrease in our future reserve base as we will continue to deplete our reserves with production from existing wells without adding significant additional reserves through capital development. This may result in additional reductions in our borrowing capacity in future periods. The credit facility has two significant covenants which require us to maintain (i) a maximum consolidated total net leverage ratio, measured as of the end of any fiscal quarter, of no greater than 3.50 to 1.00 and (ii) a minimum consolidated interest coverage ratio, measured as of the end of any fiscal quarter, of no less than 2.25 to 1.00. These financial covenants are subject to customary cure rights. We were in compliance with all applicable financial covenants under the credit facility as of December 31, 2019. See “Note 11 - Long-Term Debt” to the accompanying consolidated financial statements included in Item 8 of this report for additional discussion of the Company’s debt during 2019 and 2018. Contractual Obligations and Off-Balance Sheet Arrangements At December 31, 2019, our contractual obligations included asset retirement obligations, operating leases, and other individually insignificant obligations. Additionally, we have certain financial instruments representing potential commitments that were incurred in the normal course of business to support our operations, including standby letters of credit and surety bonds. The underlying liabilities insured by these instruments are reflected in our balance sheets, where applicable. Therefore, no additional liability is reflected for the letters of credit and surety bonds. As of December 31, 2019, we had future contractual payment commitments under various agreements, which are summarized below. The operating leases are not recorded in the accompanying consolidated balance sheets. Asset retirement obligations(1) Long-term debt obligations (2) Leases and other(3) Total Total Less than 1 year 75,016 57,500 5,124 22,119 — 2,074 Payments Due by Period 1-3 years (In thousands) 13,773 57,500 2,014 3-5 years More than 5 years 2,636 — 399 36,488 — 637 $ 137,640 $ 24,193 $ 73,287 $ 3,035 $ 37,125 ____________________ (1) Asset retirement obligations are based on estimates and assumptions that affect the reported amounts as of December 31, 2019. These estimates and assumptions can be inherently unpredictable and may differ from actual results given the uncertainty of when we may be required to plug and abandon a well or retire an asset. As a result, we do not expect to incur all of the estimated costs for the current asset retirement obligation shown above in the next twelve months, and have budgeted $4.5 million for actual expected plugging and abandonment costs in 2020. Includes debt principal amounts and assumes debt principal amounts will be outstanding until their last contractual maturity. Includes trustee fees for SandRidge Mississippian Trust II, which announced on January 23, 2020, that it will be required to dissolve and commence winding up in the first quarter of 2020. As a result, certain trustee fees included in the table above may not be incurred in future years. (2) (3) Valuation Allowance Upon emergence from bankruptcy and the application of fresh start accounting, our tax basis in property, plant, and equipment exceeded the book carrying value of our assets. Additionally, we had significant U.S. federal net operating losses remaining after the attribute reduction caused by the restructuring transactions. As such, the Successor Company had significant 55 Table of Contents deferred tax assets to consume upon emergence. We considered all available evidence and concluded that it was more likely than not that some or all of the deferred tax assets would not be realized and established a valuation allowance against our net deferred tax asset upon emergence and maintained the valuation allowance for the subsequent periods through September 30, 2019. We continue to closely monitor all available evidence in considering whether to maintain a valuation allowance on our net deferred tax asset. Factors considered include, but are not limited to, the reversal periods of existing deferred tax liabilities and deferred tax assets, our historical earnings and the prospects of future earnings. For purposes of the valuation allowance analysis, “earnings” is defined as pre-tax earnings as adjusted for permanent tax adjustments. In determining whether to maintain the valuation allowance at December 31, 2019, we concluded that the objectively verifiable negative evidence of the presumption of cumulative negative earnings upon emergence and actual cumulative negative earnings for the Successor Company period ending December 31, 2019, is difficult to overcome with any forms of positive evidence that may exist. Accordingly, we have not changed our judgment regarding the need for a full valuation allowance against our net deferred tax asset for the period ending December 31, 2019. See “Note 14 - Income Taxes” to the accompanying consolidated financial statements for additional discussion of income tax related matters. Critical Accounting Policies and Estimates The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the Company’s financial statements requires management to make assumptions and prepare estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Estimates are based on historical experience and various other assumptions believed to be reasonable; however, actual results may differ significantly. The Company’s critical accounting policies and additional information on significant estimates are discussed below. See “Note 1—Summary of Significant Accounting Policies” to the Company’s consolidated financial statements in Item 8 of this report for additional discussion of significant accounting policies. Derivative Financial Instruments. To manage risks related to fluctuations in prices attributable to its expected oil and natural gas production, the Company enters into oil and natural gas derivative contracts. Entrance into such contracts is dependent upon prevailing or anticipated market conditions. The Company may also, from time to time, enter into interest rate swaps in order to manage risk associated with its exposure to variable interest rates and issue long-term debt that contains embedded derivatives. The Company recognizes its derivative instruments as either assets or liabilities at fair value with changes in fair value recognized in earnings unless designated as a hedging instrument. The Company has elected not to designate price risk management activities as accounting hedges under applicable accounting guidance, and, accordingly, accounts for its commodity derivative contracts at fair value with changes in fair value reported currently in earnings. The Company’s earnings may fluctuate significantly as a result of changes in fair value. Derivative assets and liabilities are netted whenever a legally enforceable master netting agreement exists with the counterparty to a derivative contract. The related cash flow impact of the Company’s derivative activities are reflected as cash flows from operating activities unless the derivative contract contains a significant financing element, in which case, cash settlements are classified as cash flows from financing activities in the consolidated statements of cash flows. Fair values of the substantial majority of the Company’s commodity derivative financial instruments are determined primarily by using discounted cash flow calculations or option pricing models, and are based upon inputs that are either readily available in the public market, such as oil and natural gas futures prices, volatility factors, interest rates and discount rates, or can be corroborated from active markets. Estimates of future prices are based upon published forward commodity price curves for oil and natural gas instruments. Valuations also incorporate adjustments for the nonperformance risk of the Company or its counterparties, as applicable. Proved Reserves. Approximately 93.2% of the Company’s reserves were estimated by independent petroleum engineers for the year ended December 31, 2019. Estimates of proved reserves are based on the quantities of oil, natural gas and NGLs that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions. However, there are numerous uncertainties inherent in 56 Table of Contents estimating quantities of proved reserves and in projecting future revenues, rates of production and timing of development expenditures, including many factors beyond the Company’s control. Estimating reserves is a complex process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner and relies on assumptions and subjective interpretations of available geologic, geophysical, engineering and production data. The accuracy of reserve estimates is a function of the quality and quantity of available data, engineering and geological interpretation and judgment. In addition, as a result of volatility and changing market conditions, commodity prices and future development costs will change from period to period, causing estimates of proved reserves to change, as well as causing estimates of future net revenues to change. For the years ended December 31, 2019, 2018 and 2017, the Company revised its proved reserves from prior years’ reports by approximately (58.5) MMBoe, (33.2) MMBoe and 10.9 MMBoe, respectively, due to decreases in SEC prices used to value reserves at the end of the applicable period, production performance indicating more (or less) reserves in place, larger (or smaller) reservoir size than initially estimated or additional proved reserve bookings within the original field boundaries. Estimates of proved reserves are key components of the Company’s financial estimates used to determine depreciation and depletion on oil and natural gas properties and its full cost ceiling limitation. Future revisions to estimates of proved reserves may be material and could materially affect the Company’s future depreciation, depletion and impairment expenses. Method of Accounting for Oil and Natural Gas Properties. The Company’s business is subject to accounting rules that are unique to the oil and natural gas industry. There are two allowable methods of accounting for oil and natural gas business activities: the successful efforts method and the full cost method. The Company uses the full cost method to account for its oil and natural gas properties. All direct costs and certain indirect costs associated with the acquisition, exploration and development of oil and natural gas properties are capitalized. Exploration and development costs include dry well costs, geological and geophysical costs, direct overhead related to exploration and development activities and other costs incurred for the purpose of finding oil, natural gas and NGL reserves. Amortization of oil and natural gas properties is calculated using the unit-of-production method based on estimated proved oil, natural gas and NGL reserves. Sales and abandonments of oil and natural gas properties being amortized are accounted for as adjustments to the full cost pool, with no gain or loss recognized, unless the adjustments would significantly alter the relationship between capitalized costs and proved oil, natural gas and NGL reserves. A significant alteration would not ordinarily be expected to occur upon the sale of reserves involving less than 25% of the proved reserve quantities of a cost center. Under the successful efforts method, geological and geophysical costs and costs of carrying and retaining undeveloped properties are charged to expense as incurred. Costs of drilling exploratory wells that do not result in proved reserves are charged to expense. Depreciation, depletion and impairment of oil and natural gas properties are generally calculated on a well by well, lease or field basis versus the aggregated “full cost” pool basis. Additionally, gain or loss is generally recognized on all sales of oil and natural gas properties under the successful efforts method. As a result, the Company’s financial statements will differ from companies that apply the successful efforts method since the Company will generally reflect a higher level of capitalized costs as well as a higher oil and natural gas depreciation and depletion rate, and the Company will not have exploration expenses that successful efforts companies frequently have. Impairment of Oil and Natural Gas Properties. In accordance with full cost accounting rules, capitalized costs are subject to a limitation. The capitalized cost of oil and natural gas properties and electrical infrastructure costs, net of accumulated depreciation, depletion and impairment, less related deferred income taxes, may not exceed an amount equal to the ceiling limitation. The Company calculates its full cost ceiling limitation using SEC prices adjusted for basis or location differentials, held constant over the life of the reserves. If capitalized costs exceed the ceiling limitation, the excess must be charged to expense. Once incurred, a write-down cannot be reversed at a later date. The Company recorded full cost ceiling impairment of $409.6 million for the year ended December 31, 2019. No full cost ceiling impairment was recorded for the years ended December 31, 2018 and 2017. See “—Consolidated Results of Operations” for additional discussion of full cost ceiling impairments. Unproved Properties. The balance of unproved properties consists primarily of costs to acquire unproved acreage. These costs are initially excluded from the Company’s amortization base until it is known whether proved reserves will or will not be assigned to the property. The Company assesses all properties, on an individual basis or as a group if properties are individually insignificant, classified as unproved on a quarterly basis for possible impairment or reduction in value. The assessment includes consideration of various factors, including, but not limited to, the following: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization. Costs of seismic data are allocated to various unproved leaseholds and transferred to the amortization base with the associated leasehold costs on a specific project basis. For leases that do not have existing production that would otherwise extend the lease term, the Company estimates that any associated unproved costs will be evaluated and transferred to the amortization base of the full cost pool within a three to five year period from the original lease date. For leases that are held by production, the Company 57 Table of Contents estimates that any associated unproved costs will be evaluated and transferred to the amortization base of the full cost pool within a 10-year period from the original lease date. Property, Plant and Equipment, Net. Other capitalized costs including other property and equipment, such as electrical infrastructure assets and buildings, are carried at cost or the amortized fair value established on the Emergence Date. Renewals and improvements are capitalized while repairs and maintenance are expensed. Depreciation of such property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 7 to 39 years for buildings and 1 to 27 years for the electrical infrastructure assets and other equipment. When property and equipment components are disposed of, the cost and the related accumulated depreciation are removed and any resulting gain or loss is reflected in operations. The carrying value of property and equipment, other than the electrical infrastructure assets, is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying value of such asset or asset group may not be recoverable. Assets are considered to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset or asset group including disposal value, if any, is less than the carrying amount of the asset or asset group. If an asset or asset group is determined to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset or asset group exceeds its fair value. Fair value may be estimated using comparable market data, a discounted cash flow method, or a combination of the two as considered appropriate based on the circumstances. The Company may also determine fair value by using the present value of estimated future cash inflows and/or outflows, or third-party offers or prices of comparable assets with consideration of current market conditions to value its non-financial assets and liabilities when circumstances dictate determining fair value is necessary. Changes in such estimates could cause the Company to reduce the carrying value of property and equipment. See “—Consolidated Results of Operations” and “Note 9—Impairment” to the Company’s consolidated financial statements in Item 8 of this report for a discussion of the Company’s impairments. Asset Retirement Obligations. Asset retirement obligations represent the estimate of fair value of the cost to plug, abandon and remediate the Company’s wells at the end of their productive lives, in accordance with applicable federal and state laws. The Company estimates the fair value of an asset’s retirement obligation in the period in which the liability is incurred (at the time the wells are drilled or acquired). Estimating future asset retirement obligations requires management to make estimates and judgments regarding timing, existence of a liability and what constitutes adequate restoration. The Company employs a present value technique to estimate the fair value of an asset retirement obligation, which reflects certain assumptions and requires significant judgment, including an inflation rate, its credit-adjusted, risk-free interest rate, the estimated settlement date of the liability and the estimated current cost to settle the liability based on third-party quotes and current actual costs. Inherent in the present value calculation are the timing of settlement and changes in the legal, regulatory, environmental and political environments, which are subject to change. Changes in timing or to the original estimate of cash flows will result in changes to the carrying amount of the liability. Revenue Recognition. Sales of oil, natural gas and NGLs are recorded at a point in time when control of the oil, natural gas and NGL production passes to the customer at the inlet of the processing plant or pipeline, or the delivery point for onloading to a delivery truck, net of royalties, discounts and allowances, as applicable. The Company deducts transportation costs from oil, natural gas and NGL revenues. Taxes assessed by governmental authorities on oil, natural gas and NGL sales are included in production, ad valorem and other taxes in the consolidated statements of operations. See "Note 16—Revenues" to the Company's consolidated financial statements in Item 8 of this report for further information on the Company's accounting policies related to revenues. Income Taxes. Deferred income taxes are recorded for temporary differences between the financial statement and income tax basis of assets and liabilities. Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. As of December 31, 2019, the Company had a full valuation allowance against its net deferred tax asset. The valuation allowance serves to reduce the tax benefits recognized from the net deferred tax asset to an amount that is more likely than not to be realized based on the weight of all available evidence. New Accounting Pronouncements. For a discussion of recently adopted accounting standards and recent accounting standards not yet adopted, see “Note 1— Summary of Significant Accounting Policies” to the Company’s consolidated financial statements in Item 8 of this report. 58 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk General This discussion provides information about the financial instruments we use to manage commodity prices. All contracts are settled in cash and do not require the actual delivery of a commodity at settlement. Additionally, our exposure to credit risk and interest rate risk is also discussed. Commodity Price Risk. Our most significant market risk relates to the prices we receive for oil, natural gas and NGLs. Due to the historical price volatility of these commodities, from time to time, depending upon our view of opportunities under the then-prevailing market conditions, we enter into commodity pricing derivative contracts for a portion of our anticipated production volumes for the purpose of reducing the variability of oil and natural gas prices we receive. Our credit facility limits our ability to enter into derivative transactions to 90% of expected production volumes from estimated proved reserves. We use, and may continue to use, a variety of commodity-based derivative contracts, including fixed price swaps, basis swaps and collars. At December 31, 2019, our commodity derivative contracts consisted of oil fixed price swaps under which we receive a fixed price for the contract and pay a floating market price to the counterparty over a specified period for a contracted volume. Our oil fixed price swap transactions are settled based upon the last day settlement of the first nearby month futures contract of the contract period and are settled in the production month. At December 31, 2019, our open commodity derivative contracts consisted of the following: Oil Price Swaps January 2020 - March 2020 Notional (MBbls) Weighted Average Fixed Price 273 $ 61.05 In addition to the contracts outstanding at December 31, 2019 shown above, in January 2020, we executed oil swap contracts with two counterparties covering 182 MBbls of second quarter 2020 oil sales at a weighted average strike price of $60.00/Bbl. Because we have not designated any of our derivative contracts as hedges for accounting purposes, changes in fair values of our derivative contracts are recognized as gains and losses in current period earnings. As a result, our current period earnings may be significantly affected by changes in the fair value of our commodity derivative contracts. Changes in fair value are principally measured based on a comparison of future prices to the contract price at the period-end. The following table summarizes derivative activity for the years ended December 31, 2019, 2018 and 2017 (in thousands): (Gain) loss on commodity derivative contracts Cash (received) paid on settlements Year Ended December 31, 2019 2018 2017 $ $ (1,094) $ (6,266) $ 17,155 $ 35,325 $ (24,090) (7,260) See “Note 6—Derivatives” to the consolidated financial statements in Item 8 of this report for additional information regarding our commodity derivatives. Credit Risk. We are exposed to credit risk related to counterparties to our derivative financial contracts. All of our derivative transactions have been carried out in the over-the-counter market. The use of derivative transactions in over-the-counter markets involves the risk that the counterparties may be unable to meet the financial terms of the transactions. The counterparties for all of our derivative transactions have an “investment grade” credit rating. We monitor the credit ratings of our derivative counterparties and consider our counterparties’ credit default risk ratings in determining the fair value of our derivative contracts. Our derivative contracts are with multiple counterparties to minimize exposure to any individual counterparty. 59 Table of Contents We do not require collateral or other security from counterparties to support derivative instruments. We have master netting agreements with each of our derivative contract counterparties, which allow us to net our derivative assets and liabilities by commodity type with the same counterparty. As a result of the netting provisions, our maximum amount of loss under derivative transactions due to credit risk is limited to the net amounts due from the counterparties under the commodity derivative contracts. Our loss is further limited as any amounts due from a defaulting counterparty that is a lender under the credit facility can be offset against amounts owed, if any, to such counterparty. As of December 31, 2019, the counterparties to our open commodity derivative contracts consisted of three financial institutions, all of which are also lenders under the credit facility. As a result, we are not required to post additional collateral under our commodity derivative contracts. We are also exposed to credit risk related to the collection of receivables from our joint interest partners for their proportionate share of expenditures made on projects we operate. Historically, our credit losses on joint interest receivables have been immaterial. Interest Rate Risk. We are exposed to interest rate risk on our credit facility. This variable interest rate on our credit facility fluctuates, and exposes us to short-term changes in market interest rates as our interest obligations on this instrument is periodically redetermined based on prevailing market interest rates, primarily LIBOR and the federal funds rate. We had $57.5 million in outstanding variable rate debt as of December 31, 2019. 60 Table of Contents Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Management’s Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at December 31, 2019 and 2018 Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2019, 2018 and 2017 Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017 Notes to Consolidated Financial Statements Page(s) 62 63 66 67 68 69 70 61 Table of Contents Management’s Report on Internal Control over Financial Reporting Management of SandRidge Energy, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a- 15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) (the COSO criteria). Based on management’s assessment using the COSO criteria, management concluded the Company’s internal control over financial reporting was effective as of December 31, 2019. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by Deloitte & Touche LLP an independent registered public accounting firm, as stated in its report which appears herein. /s/ JOHN P. SUTER John P. Suter Chief Operating Officer and Interim President and Chief Executive Officer /s/ MICHAEL A. JOHNSON Michael A. Johnson Senior Vice President and Chief Financial Officer 62 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of SandRidge Energy, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of SandRidge Energy, Inc. and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019, of the Company and our report dated February 27, 2020 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Houston, Texas February 27, 2020 63 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of SandRidge Energy, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of SandRidge Energy, Inc. and subsidiaries (the "Company") as of December 31, 2019, the related consolidated statement of operations, changes in stockholders' equity (deficit), and cash flows for the year ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Houston, Texas February 27, 2020 We have served as the Company's auditor since 2019. 64 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of SandRidge Energy, Inc. Opinion on the Financial Statements We have audited the consolidated balance sheet of SandRidge Energy, Inc. and its subsidiaries (the “Company”) as of December 31, 2018, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Oklahoma City, Oklahoma March 5, 2019 We served as the Company's auditor from 2005 to 2019. 65 Table of Contents Current assets Cash and cash equivalents Restricted cash - other Accounts receivable, net Derivative contracts Prepaid expenses Other current assets Total current assets SandRidge Energy, Inc. and Subsidiaries Consolidated Balance Sheets ASSETS Oil and natural gas properties, using full cost method of accounting Proved Unproved Less: accumulated depreciation, depletion and impairment Other property, plant and equipment, net Other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses Asset retirement obligations Other current liabilities Total current liabilities Long-term debt Asset retirement obligations Other long-term obligations Total liabilities Commitments and contingencies (Note 13) Stockholders’ Equity Common stock, $0.001 par value; 250,000 shares authorized; 35,772 issued and outstanding at December 31, 2019 and 35,687 issued and outstanding at December 31, 2018 Warrants Additional paid-in capital Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity The accompanying notes are an integral part of these consolidated financial statements. 66 December 31, 2019 2018 (In thousands, except per share data) $ 4,275 $ 1,693 28,644 114 3,342 538 38,606 1,484,359 24,603 (1,129,622) 379,340 188,603 1,140 17,660 1,985 45,503 5,286 2,628 265 73,327 1,269,091 60,152 (580,132) 749,111 200,838 1,062 $ 607,689 $ 1,024,338 $ 64,937 $ 22,119 1,367 88,423 57,500 52,897 6,417 111,797 25,393 — 137,190 — 34,671 4,756 205,237 176,617 36 88,520 1,059,253 (745,357) 402,452 36 88,516 1,055,164 (295,995) 847,721 $ 607,689 $ 1,024,338 Table of Contents SandRidge Energy, Inc. and Subsidiaries Consolidated Statements of Operations Revenues Oil, natural gas and NGL Other Total revenues Expenses Lease operating expenses Production, ad valorem, and other taxes Depreciation and depletion—oil and natural gas Depreciation and amortization—other Impairment General and administrative Accelerated vesting of employment compensation Proxy contest Terminated merger costs Employee termination benefits (Gain) loss on derivative contracts Other operating (income) expense Total expenses (Loss) income from operations Other (expense) income Interest expense, net Gain on extinguishment of debt Other income, net Total other (expense) income (Loss) income before income taxes Income tax benefit Net (loss) income (Loss) earnings per share Basic Diluted Weighted average number of common shares outstanding Basic Diluted Year Ended December 31, 2019 2018 2017 (In thousands, except per share amounts) $ 266,104 $ 348,726 $ 356,210 741 266,845 90,938 19,394 146,874 11,684 409,574 32,058 — — — 4,792 (1,094) (608) 713,612 (446,767) (2,974) — 436 (2,538) (449,305) — 669 349,395 87,786 25,434 127,281 11,982 4,170 40,619 6,545 7,139 — 32,657 17,155 (998) 359,770 (10,375) (2,787) 1,151 2,865 1,229 (9,146) (71) $ $ $ (449,305) $ (9,075) $ (12.68) $ (12.68) $ (0.26) $ (0.26) $ 35,427 35,427 35,057 35,057 1,089 357,299 99,052 18,211 118,035 13,852 4,019 75,133 — — 8,162 4,815 (24,090) 479 317,668 39,631 (3,868) — 2,550 (1,318) 38,313 (8,749) 47,062 1.45 1.44 32,442 32,663 The accompanying notes are an integral part of these consolidated financial statements. 67 Table of Contents SandRidge Energy, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (Deficit) Common Stock Warrants Shares Amount Shares Amount Additional Paid-In Capital Accumulated Deficit Total Balance at December 31, 2016 Issuance of stock awards, net of cancellations Common stock issued for debt Common stock issued for general unsecured claims Stock-based compensation Issuance of warrants for general unsecured claims Cash paid for tax withholdings on vested stock awards Net income Balance at December 31, 2017 Issuance of stock awards, net of cancellations Common stock issued for general unsecured claims Stock-based compensation Issuance of warrants for general unsecured claims Cash paid for tax withholdings on vested stock awards Net loss Balance at December 31, 2018 Issuance of stock awards, net of cancellations Common stock issued for general unsecured claims Stock-based compensation Issuance of warrants for general unsecured claims Cash paid for tax withholdings on vested stock awards Cumulative effect of adoption of ASU 2016-02 Net loss Balance at December 31, 2019 19,635 $ 1,583 14,328 104 — — — — 35,650 9 28 — — — — 35,687 40 45 — — — — — 35,772 $ 20 2 14 — — — — — 36 — — — — — — 36 — — — — — — — 36 (In thousands) 6,442 $ 88,381 $ 758,498 $ (333,982) $ 512,917 — — — — 128 — — — — — — 119 — — (2) 268,765 — 17,912 (119) (6,730) — — — — — — — 47,062 — 268,779 — 17,912 — (6,730) 47,062 6,570 88,500 1,038,324 (286,920) 839,940 — — — 34 — — — — — 16 — — — — 24,276 (16) (7,420) — — — — — — (9,075) — — 24,276 — (7,420) (9,075) 6,604 88,516 1,055,164 (295,995) 847,721 — — — 55 — — — — — — 4 — — — — — 4,460 (4) (367) — — — — — — — (57) — — 4,460 — (367) (57) (449,305) (449,305) 6,659 $ 88,520 $ 1,059,253 $ (745,357) $ 402,452 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents SandRidge Energy, Inc. and Subsidiaries Consolidated Statements of Cash Flows CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income Adjustments to reconcile net (loss) income to net cash provided by operating activities Provision for doubtful accounts Depreciation, depletion and amortization Impairment Debt issuance costs amortization Amortization of discount, net of premium, on debt Gain on extinguishment of debt Write off of debt issuance costs (Gain) loss on derivative contracts Cash received (paid) on settlement of derivative contracts Stock-based compensation Other Changes in operating assets and liabilities increasing (decreasing) cash Receivables Prepaid expenses Other current assets Other assets and liabilities, net Accounts payable and accrued expenses Asset retirement obligations Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures for property, plant and equipment Acquisitions of assets Proceeds from sale of assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayments of borrowings Debt issuance costs Reduction of financing lease liability Cash paid for tax withholdings on vested stock awards Net cash provided by (used in) financing activities NET DECREASE IN CASH, CASH EQUIVALENTS and RESTRICTED CASH CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of year CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of year Year Ended December 31, 2019 2018 (In thousands) 2017 $ (449,305) $ (9,075) $ 47,062 16 158,558 409,574 558 — — 142 (1,094) 6,266 4,254 (187) 15,829 (714) (301) (610) (17,217) (4,445) 121,324 (191,678) 236 1,593 (189,849) 211,096 (153,596) (911) (1,374) (367) 54,848 (13,677) 19,645 (462) 139,263 4,170 470 (47) (1,151) — 17,155 (35,325) 23,377 (1,571) 16,560 2,620 170 (1,754) (4,257) (4,629) 406 131,887 4,019 430 (330) — — (24,090) 7,260 15,750 344 115 127 191 4,186 (2,199) (3,979) 145,514 181,179 (187,047) (24,764) 28,358 (183,453) 10,000 (46,304) — — (7,420) (43,724) (81,663) 101,308 (219,246) (48,312) 21,834 (245,724) — — (1,488) — (6,730) (8,218) (72,763) 174,071 101,308 $ 5,968 $ 19,645 $ The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Nature of Business. SandRidge Energy, Inc. is an oil and natural gas company with a principal focus on the acquisition, exploration and development of hydrocarbon resources in the United States. Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly owned or majority owned subsidiaries, including its proportionate share of the Royalty Trusts. All intercompany accounts and transactions have been eliminated in consolidation. Reclassifications. Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. These reclassifications have no effect on the Company’s previously reported results of operations. Use of Estimates. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of assumptions, judgments and estimates include: oil, natural gas and NGL reserves; impairment tests of long-lived assets; the carrying value of unproved oil and natural gas properties; depreciation, depletion and amortization; asset retirement obligations; determinations of significant alterations to the full cost pool and related estimates of fair value used to allocate the full cost pool net book value to divested properties, as necessary; valuation allowances for deferred tax assets; income taxes; valuation of derivative instruments; contingencies; and accrued revenue and related receivables. Although management believes these estimates are reasonable, actual results could differ significantly from those estimates. Cash and Cash Equivalents. The Company considers all highly-liquid instruments with an original maturity of three months or less to be cash equivalents as these instruments are readily convertible to known amounts of cash and bear insignificant risk of changes in value due to their short maturity period. Restricted Cash. The Company maintains restricted escrow funds as required by certain contractual arrangements in accordance with the Plan. Accounts Receivable, Net. The Company has receivables for sales of oil, natural gas and NGLs, as well as receivables related to the drilling, completion, and production of oil and natural gas, which have a contractual maturity of one year or less. An allowance for doubtful accounts has been established based on management’s review of the collectibility of the receivables in light of historical experience, the nature and volume of the receivables and other subjective factors. Accounts receivable are charged against the allowance, upon approval by management, when they are deemed uncollectible. Refer to Note 5 for further information on the Company’s accounts receivable and allowance for doubtful accounts. Fair Value of Financial Instruments. Certain of the Company’s financial assets and liabilities are measured at fair value. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company’s financial instruments, not otherwise recorded at fair value, consist primarily of cash, restricted cash, trade receivables, prepaid expenses, and trade payables and accrued expenses. The carrying values of cash, trade receivables and trade payables are considered to reflect fair values due to the short-term maturity of these instruments. See Note 4 for further discussion of the Company’s fair value measurements. Fair Value of Non-financial Assets and Liabilities. The Company also applies fair value accounting guidance to initially, or as events dictate, measure non- financial assets and liabilities such as those obtained through business acquisitions, property, plant and equipment and asset retirement obligations. These assets and liabilities are subject to fair value adjustments only in certain circumstances and are not subject to recurring revaluations. Fair value may be estimated using comparable market data, a discounted cash flow method, or a combination of the two as considered appropriate based on the circumstances. Under the discounted cash flow method, estimated future cash flows are based on management’s expectations for the future and include estimates of future oil and natural gas production or other applicable sales estimates, operational costs and a risk-adjusted discount rate. The Company may use the present value of estimated future cash inflows and/or outflows, third-party offers or prices of comparable assets with consideration of current market conditions to fair value its non-financial assets and liabilities when necessary. 70 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Derivative Financial Instruments. The Company enters into oil and natural gas derivative contracts to manage risks related to fluctuations in prices of its expected oil and natural gas production. The Company considers current and anticipated market conditions, planned capital expenditures, and any debt service requirements when determining whether to enter into oil and gas derivative contracts. The Company may also, from time to time, enter into interest rate swaps in order to manage risk associated with its exposure to variable interest rates. The Company recognizes its derivative instruments as either assets or liabilities at fair value with changes in fair value recognized in earnings unless designated as a hedging instrument. The Company has elected not to designate price risk management activities as accounting hedges under applicable accounting guidance. The Company nets derivative assets and liabilities whenever it has a legally enforceable master netting agreement with the counterparty to a derivative contract. The related cash flow impact of the Company’s derivative activities are reflected as cash flows from operating activities unless the derivative contract contains a significant financing element, in which case, cash settlements are classified as cash flows from financing activities in the consolidated statements of cash flows. See Note 6 for further discussion of the Company’s derivatives. Oil and Natural Gas Operations. The Company uses the full cost method to account for its oil and natural gas properties. Under full cost accounting, all costs directly associated with the acquisition, exploration and development of oil, natural gas and NGL reserves are capitalized into a full cost pool. These capitalized costs include costs of unproved properties and internal costs directly related to the Company’s acquisition, exploration and development activities and capitalized interest. The Company capitalized gross internal costs of $5.7 million, $8.8 million and $14.8 million during the years ended December 31, 2019, 2018 and 2017, respectively. Capitalized costs are amortized using the unit-of-production method. Under this method, depreciation and depletion is computed at the end of each quarter by multiplying total production for the quarter by a depletion rate. The depletion rate is determined by dividing the total unamortized cost base plus future development costs by net equivalent proved reserves at the beginning of the quarter. Costs associated with unproved properties are excluded from the amortizable cost base until it has been determined that proved reserves exist or a lease is impaired. Unproved properties are reviewed at the end of each quarter to determine whether the costs incurred should be reclassified to the full cost pool and amortized. The costs associated with unproved properties are primarily the costs to acquire unproved acreage. All items classified as unproved property are assessed, on an individual basis or as a group if properties are individually insignificant, on a quarterly basis for possible impairment. The assessment includes consideration of various factors, including, but not limited to, the following: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and whether the proved reserves can be developed economically. During any period in which these factors indicate an impairment, all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization. Costs of seismic data are allocated to unproved leaseholds and transferred to the amortization base with the associated leasehold costs on a specific project basis. Under the full cost method of accounting, total capitalized costs of oil and natural gas properties and electrical infrastructure assets, net of accumulated depreciation, depletion and impairment, less related deferred income taxes may not exceed the ceiling limitation. A ceiling limitation calculation is performed at the end of each quarter. If the ceiling limitation is exceeded, a write-down or impairment of the full cost pool is required. A write-down of the carrying value of the full cost pool is a non-cash charge that reduces earnings and impacts stockholders’ equity and typically results in lower depreciation and depletion expense in future periods. Once incurred, a write-down cannot be reversed at a later date. The ceiling limitation calculation is prepared using SEC prices adjusted for basis or location differentials, held constant over the life of the reserves. If applicable, these prices would be further adjusted to include the effects of any fixed price arrangements for the sale of oil and natural gas. Derivative contracts that qualify and are designated as cash flow hedges are included in estimated future cash flows, although the Company historically has not designated any of its derivative contracts as cash flow hedges. The future cash outflows associated with future development or abandonment of wells are included in the computation of the discounted present value of future net revenues for purposes of the ceiling limitation calculation. Sales and abandonments of oil and natural gas properties being amortized are accounted for as adjustments to the full cost pool, with no gain or loss recognized, unless the adjustments would significantly alter the relationship between capitalized costs and proved oil, natural gas and NGL reserves. A significant alteration would not ordinarily be expected to occur upon the sale of reserves involving less than 25% of the proved reserve quantities of a cost center. Property, Plant and Equipment, Net. Other capitalized costs, including other property and equipment, such as electrical infrastructure assets and buildings, are carried at cost or the fair value established on the Emergence Date. Renewals 71 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements and improvements are capitalized while repairs and maintenance are expensed. Depreciation of such property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 7 to 39 years for buildings and 1 to 27 years for the electrical infrastructure assets and other equipment. When property and equipment components are disposed, the cost and the related accumulated depreciation are removed and any resulting gain or loss is reflected in the consolidated statements of operations. Realization of the carrying value of property and equipment, other than electrical infrastructure assets, is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying value of such asset may not be recoverable. Assets are considered to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset or asset group including disposal value is less than the carrying amount of the asset or asset group. Impairment is measured as the excess of the carrying amount of the impaired asset or asset group over its fair value. See Note 9 for further discussion of impairments. Capitalized Interest. Interest is capitalized on assets being made ready for use using a weighted average interest rate based on the Company’s borrowings outstanding during that time. During the year ended December 31, 2019 the Company capitalized interest of approximately $1.5 million on unproved properties that were not currently being depreciated or depleted and on which exploration activities were in progress. During the year ended December 31, 2018, the Company capitalized an insignificant amount of interest costs and did not capitalize any interest costs in the year ended December 31, 2017, as capital expenditures were largely funded through sources other than debt during these periods. Debt Issuance Costs. The Company includes unamortized line-of-credit debt issuance costs, if any, related to its credit facility in other assets in the consolidated balance sheets. Other debt issuance costs related to long-term debt, if any, are presented in the balance sheets as a direct deduction from the associated debt liability. Debt issuance costs are amortized to interest expense over the term of the related debt. When debt is retired, any unamortized costs are written off and included in gain or loss on extinguishment of debt. Asset Retirement Obligations. The Company owns oil and natural gas assets that require expenditures to plug, abandon and remediate associated property at the end of their productive lives, in accordance with applicable federal and state laws. Liabilities for these asset retirement obligations are recorded at the estimated present value at the time the wells are drilled or acquired, with the offsetting increase to property cost. These property costs are depreciated on a unit-of-production basis within the full cost pool. The liability accretes each period until it is settled or the asset is sold and the liability is removed. Both the accretion and the depreciation are included in the consolidated statements of operations. The Company determines its asset retirement obligations by calculating the present value of estimated expenses related to the liability. Estimating future asset retirement obligations requires management to make estimates and judgments regarding timing, existence of a liability and what constitutes adequate restoration. Inherent in the present value calculation are the timing of settlement and changes in the legal, regulatory, environmental and political environments, which are subject to change. See Note 12 for further discussion of the Company’s asset retirement obligations. Revenue Recognition and Natural Gas Balancing. Sales of oil, natural gas and NGLs are recorded at a point in time when control of the oil, natural gas and NGL production passes to the customer at the inlet of the processing plant or pipeline, or the delivery point for onloading to a delivery truck, net of royalties, discounts and allowances, as applicable. Additionally, the Company deducts transportation costs from oil, natural gas and NGL revenues. Taxes assessed by governmental authorities on oil, natural gas and NGL sales are included in production, ad valorem and other taxes in the consolidated statements of operations. See Note 16 for further information on the Company's accounting policies related to revenues. The Company accounts for natural gas production imbalances using the sales method, which recognizes revenue on all natural gas sold even though the natural gas volumes sold may be more or less than the Company's ownership entitles it to sell. Liabilities are recorded for imbalances greater than the Company’s proportionate share of remaining estimated natural gas reserves. The Company has recorded a liability for natural gas imbalance positions of $1.6 million and $1.7 million at December 31, 2019 and 2018, respectively. The Company includes the gas imbalance positions in other long-term obligations in the consolidated balance sheets. Allocation of Share-Based Compensation. Equity compensation provided to employees directly involved in exploration and development activities is capitalized to the Company’s oil and natural gas properties. Equity compensation not capitalized is recognized in general and administrative expenses, production expenses, and other operating expense in the accompanying consolidated statements of operations. 72 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the amounts of assets and liabilities reported for financial statement purposes and their tax basis. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. The Company has elected an accounting policy in which interest and penalties on income taxes resulting from the underpayment or late payment of income taxes due to a taxing authority or relating to income tax contingencies are presented as a component of the income tax provision, rather than as interest expense. Earnings per Share. Basic earnings per common share is calculated by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing earnings available to common stockholders by the weighted average number of diluted common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities consist of unvested restricted stock awards, performance share units, warrants, and stock options using the treasury method. Under the treasury method, the amount of unrecognized compensation expense related to unvested stock-based compensation grants or the proceeds that would be received if the warrants were exercised are assumed to be used to repurchase shares at the average market price. When a loss exists, all potentially dilutive securities are anti-dilutive and are therefore excluded from the computation of diluted earnings per share. See Note 21 for the Company’s earnings per share calculation. Commitments and Contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation or other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Environmental expenditures are expensed or capitalized, as appropriate, depending on future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefit are expensed. Environmental liabilities related to future costs are recorded on an undiscounted basis when assessments and/or remediation activities are probable and costs can be reasonably estimated. See Note 13 for discussion of the Company’s commitments and contingencies. Concentration of Risk. All of the Company’s commodity derivative transactions have been carried out in the over-the-counter market, which involves the risk that the counterparties may be unable to meet the financial terms of the transactions. The counterparties for all of the Company’s commodity derivative transactions have an “investment grade” credit rating. The Company monitors the credit ratings of its commodity derivative counterparties on an ongoing basis and considers their credit default risk ratings in determining the fair value of its commodity derivative contracts. The Company’s commodity derivative contracts are with multiple counterparties to minimize exposure to any individual counterparty. If the Company defaults on its credit facility it will also default on commodity derivative contracts with counterparties that are lenders under the credit facility. The Company does not require collateral or other security from counterparties to support commodity derivative instruments. The Company has master netting agreements with all of its commodity derivative counterparties, which allow the Company to net its commodity derivative assets and liabilities for like commodities and derivative instruments with the same counterparty. As a result of the netting provisions, the Company’s maximum amount of loss under commodity derivative transactions due to credit risk is limited to the net amounts due from the counterparties under the commodity derivative contracts. The Company’s loss is further limited as any amounts due from a defaulting counterparty that is a lender under the credit facility can be offset against any amounts owed to the same counterparty under the credit facility. The Company operates a substantial portion of its oil and natural gas properties. As the operator of a property, the Company makes full payment for costs associated with the property and seeks reimbursement from the other working interest owners in the property for their share of those costs. The Company’s joint interest partners are primarily independent oil and natural gas producers. If the oil and natural gas exploration and production industry in general was adversely affected, the ability of the joint interest partners to reimburse the Company could be adversely affected. Purchasers of the Company’s oil, natural gas and NGL production consist primarily of independent marketers, large oil and natural gas companies and gas pipeline companies. The Company believes alternate purchasers are available in its areas of operations and does not believe the loss of any one purchaser would materially affect its ability to sell the oil, natural gas and NGLs it produces. 73 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The Company had sales exceeding 10% of total revenues to the following oil and natural gas purchasers (in thousands): Sales % of Revenue December 31, 2019 Targa Pipeline Mid-Continent West OK LLC Sinclair Crude Company Plains Marketing, L.P. December 31, 2018 Targa Pipeline Mid-Continent West OK LLC Plains Marketing, L.P. Sinclair Crude Company December 31, 2017 Targa Pipeline Mid-Continent West OK LLC Plains Marketing, L.P. $ $ $ $ $ $ $ $ 85,780 74,810 69,214 126,548 102,182 62,623 144,583 117,927 32.1 % 28.0 % 25.9 % 36.2 % 29.2 % 17.9 % 40.5 % 33.0 % Recent Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016- 02, “Leases (Topic 842),” and subsequently issued other associated ASU's related to Topic 842 which supersede Accounting Standards Codification ("ASC") 840 and require lessees to recognize right of use ("ROU") lease assets and liabilities on the balance sheet for long-term leases formerly classified as operating leases under ASC 840, and to disclose key information about leasing arrangements. The Company adopted this ASU on January 1, 2019 using a modified retrospective approach for all ROU leases that existed at the period of adoption and did not restate its comparative periods. See Note 7 for additional discussion of the new leasing standard. Recent Accounting Pronouncements Not Yet Adopted. The FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments,” and subsequently issued other associated ASU's related to Topic 326, which change how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the currently required incurred loss approach with an expected loss model for instruments measured at amortized cost. The standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for the interim and annual periods beginning after December 31, 2018, and will be applied using a modified retrospective approach resulting in a cumulative effect adjustment to retained earnings upon adoption. The Company does not plan to early adopt and is currently evaluating the effect the guidance will have on its consolidated financial statements; however, the impact is not expected to be material. In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which simplifies various aspects of accounting for income taxes, including requirements related to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax laws, and year-to-date loss limitation in interim-period tax accounting. The standard is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted, and will be applied on a prospective basis. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements. 74 Table of Contents 2. Supplemental Cash Flow Information SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Supplemental disclosures to the consolidated statements of cash flows are presented below (in thousands): Supplemental Disclosure of Cash Flow Information Cash paid for interest, net of amounts capitalized Cash received for income taxes Supplemental Disclosure of Noncash Investing and Financing Activities Purchase of PP&E in accounts payable Right-of-use assets obtained in exchange for financing lease obligations Carrying value of properties exchanged Equity issued for debt 3. Acquisitions and Divestitures of Oil and Gas Properties 2019 Acquisitions and Divestitures Year Ended December 31, 2019 2018 2017 (2,157) $ — $ (4,045) $ 4,381 $ (2,438) 4,348 4,592 $ 3,347 $ 5,384 $ — $ 34,235 $ 50,096 — $ — $ — $ — — (268,779) $ $ $ $ $ $ Nonmonetary transaction. During the third quarter of 2019, the Company transferred its interest in certain proved oil and natural gas properties located in Comanche, Harper and Sumner counties in Kansas along with associated electrical infrastructure and an insignificant amount of accounts receivable with an aggregate estimated fair value of $5.4 million, for an interest in certain other proved oil and natural gas properties located in Comanche, Harper and Barber counties in Kansas. The fair value of the assets given in the transaction approximated their carrying value, therefore no gain or loss was recognized on the transfer. 2018 Divestitures Divestiture of Permian Basin Properties. On November 1, 2018, the Company sold substantially all of its oil and natural gas properties, rights and related assets in the CBP region of the Permian Basin, primarily located in Andrews County, TX, along with 13,125,000 common units representing a 25% equity interest in the Permian Trust, to an independent third party for $14.5 million in cash, subject to certain remaining post-closing adjustments, and reduced its asset retirement obligations by approximately $26.9 million. The CBP assets and interest in the Permian Trust included 1,066 producing wells within the Permian Trust's area of mutual interest, certain wells not associated with the Permian Trust, a field office, and all equipment, inventory and yards associated with the Company's CBP operations. As a result of this divestiture, the Company no longer has any obligations associated with the Permian Trust. This transaction did not result in a significant alteration of the relationship between the Company’s capitalized costs and proved reserves and, accordingly, the divestiture was accounted for as an adjustment to the full cost pool with no gain or loss recognized on the sale. 2018 Acquisitions Acquisition of Oil and Natural Gas Interests. On November 2, 2018, the Company acquired an interest in certain oil and natural gas properties, rights and related assets in the Mississippian Lime and NW STACK areas of Oklahoma and Kansas for approximately $22.5 million in net consideration, net of post-closing adjustments, and assumed asset retirement obligations of approximately $6.4 million. The acquired assets primarily consist of interests in 1,199 producing wells, approximately 80% of which are operated by the Company, an additional 11.1% working interest in approximately 397,000 gross (44,000 net) acres across the Mid-Continent, and an additional 13.2% working interest ownership in the Company's saltwater gathering and disposal system in the Mississippian Lime. 75 Table of Contents 2017 Acquisitions SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Acquisition of Properties. On February 10, 2017, the Company acquired assets consisting of approximately 13,000 net acres in Woodward County, Oklahoma for approximately $47.8 million in cash, net of post-closing adjustments. Also included in the acquisition were working interests in four wells previously drilled on the acreage. 2017 Divestitures 2017 Property Divestitures. In 2017, the Company divested various non-core oil and natural gas properties for approximately $17.1 million in cash. All of these divestitures were accounted for as adjustments to the full cost pool with no gain or loss recognized. 4. Fair Value Measurements The Company measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the levels of the fair value hierarchy noted below. The carrying values of cash, restricted cash, accounts receivable, prepaid expenses, certain other current and non-current assets, accounts payable and accrued expenses and other current liabilities and other long-term obligations included in the consolidated balance sheets approximated fair value at December 31, 2019, and December 31, 2018. Additionally, the carrying amount of debt associated with borrowings outstanding under the credit facility approximates fair value as borrowings bear interest at variable rates. As a result, these financial assets and liabilities are not discussed below. The fair values of property, plant and equipment classified as assets held for sale and related impairments and nonmonetary transactions, which are calculated using Level 3 inputs, are discussed in Note 8 and Note 9. Level 1 Level 2 Level 3 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable for objective sources (i.e., supported by little or no market activity). Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, considers the market for the Company's financial assets and liabilities, the associated credit risk and other factors. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company has assets and liabilities classified in Level 2 of the hierarchy as of December 31, 2019 and 2018, as described below. Level 2 Fair Value Measurements Commodity Derivative Contracts. The fair values of the Company’s oil and natural gas fixed price swaps are based upon inputs that are either readily available in the public market, such as oil and natural gas futures prices, volatility factors and discount rates, or can be corroborated from active markets. Fair value is determined through the use of a discounted cash flow model or option pricing model using the applicable inputs discussed above. The Company applies a weighted average credit default risk rating factor for its counterparties or gives effect to its credit default risk rating, as applicable, in determining the fair value of these derivative contracts. Credit default risk ratings are based on current published credit default swap rates. 76 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Fair Value - Recurring Measurement Basis The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis by the fair value hierarchy (in thousands): December 31, 2019 Assets Commodity derivative contracts December 31, 2018 Assets Commodity derivative contracts Fair Value Measurements Level 1 Level 2 Level 3 Netting(1) Assets/Liabilities at Fair Value — $ — $ 114 $ 114 $ — $ — $ — $ — $ 114 114 Fair Value Measurements Level 1 Level 2 Level 3 Netting(1) Assets/Liabilities at Fair Value — $ — $ 5,286 $ 5,286 $ — $ — $ — $ — $ 5,286 5,286 $ $ $ $ ____________________ (1) Represents the impact of netting assets and liabilities with counterparties where the right of offset exists. Transfers. During the years ended December 31, 2019, 2018 and 2017, the Company did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements. Fair Value of Non-Financial Assets and Liabilities See Note 9 for discussion of the Company’s impairment valuations. 5. Accounts Receivable A summary of accounts receivable is as follows (in thousands): Oil, natural gas and NGL sales Joint interest billing Other Total accounts receivable Less: allowance for doubtful accounts Total accounts receivable, net December 31, 2019 2018 22,281 $ 5,165 2,315 29,761 (1,117) 28,644 $ 31,780 13,083 1,935 46,798 (1,295) 45,503 $ $ The following table presents the balance and activity in the allowance for doubtful accounts for the years ended December 31, 2019, 2018 and 2017 (in thousands): Beginning balance Additions charged to costs and expenses Deductions(1) Ending balance Year Ended December 31, 2019 2018 2017 1,295 $ 1,274 $ 6 (184) 758 (737) 880 397 (3) 1,117 $ 1,295 $ 1,274 $ $ ____________________ (1) Deductions represent the write-off of receivables and collections of amounts for which an allowance had previously been established. 77 Table of Contents 6. Derivatives Commodity Derivatives SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The Company is exposed to commodity price risk, which impacts the predictability of its cash flows from the sale of oil and natural gas. On occasion, the Company has attempted to manage this risk on a portion of its forecasted oil or natural gas production sales through the use of commodity derivative contracts. The Company has not designated any of its derivative contracts as hedges for accounting purposes. All derivative contracts are recorded at fair value with changes in derivative contract fair values recognized as gain or loss on derivative contracts in the condensed consolidated statements of operations. None of the Company’s commodity derivative contracts may be terminated prior to contractual maturity solely as a result of a downgrade in the credit rating of a party to the contract. Commodity derivative contracts are settled on a monthly basis, and the commodity derivative contract valuations are adjusted to the mark-to-market valuation on a quarterly basis. The following table summarizes derivative activity for the years ended December 31, 2019, 2018 and 2017 (in thousands): (Gain) loss on commodity derivative contracts Cash (received) paid on settlements Year Ended December 31, 2019 2018 2017 $ $ (1,094) $ (6,266) $ 17,155 $ 35,325 $ (24,090) (7,260) Master Netting Agreements and the Right of Offset. The Company has master netting agreements with all of its commodity derivative counterparties and has presented its derivative assets and liabilities with the same counterparty on a net basis by commodity type in the consolidated balance sheets. As a result of the netting provisions, the Company's maximum amount of loss under commodity derivative transactions due to credit risk is limited to the net amounts due from its counterparties. As of December 31, 2019, the counterparties to the Company’s open commodity derivative contracts consisted of three financial institutions, all of which are also lenders under the Company’s credit facility. The Company is not required to post additional collateral under its commodity derivative contracts as all of the counterparties to the Company’s commodity derivative contracts share in the collateral supporting the Company’s credit facility. The following tables summarize (i) the Company's commodity derivative contracts on a gross basis, (ii) the effects of netting assets and liabilities for which the right of offset exists based on master netting arrangements and (iii) for the Company’s net derivative liability positions, the applicable portion of shared collateral under the credit facility as of December 31, 2019 and 2018 (in thousands): December 31, 2019 Assets Derivative contracts - current Total December 31, 2018 Assets Derivative contracts - current Total $ $ $ $ Gross Amounts Gross Amounts Offset Amounts Net of Offset Financial Collateral Net Amount 114 $ 114 $ — $ — $ 114 $ 114 $ — $ — $ 114 114 Gross Amounts Gross Amounts Offset Amounts Net of Offset Financial Collateral Net Amount 5,286 $ 5,286 $ — $ — $ 5,286 $ 5,286 $ — $ — $ 5,286 5,286 At December 31, 2019, the Company’s open commodity derivative contracts consisted of the following: Oil Price Swaps January 2020 - March 2020 Notional (Bbl) Weighted Average Fixed Price 273,000 $ 61.05 78 Table of Contents Fair Value of Derivatives SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The following table presents the fair value of the Company’s derivative contracts on a gross basis without regard to same-counterparty netting (in thousands): Type of Contract Derivative assets Oil price swaps Natural gas price swaps Total net derivative contracts Balance Sheet Classification Derivative contracts - current Derivative contracts - current December 31, 2019 December 31, 2018 $ $ $ 114 $ — $ 114 $ — 5,286 5,286 See Note 4 for additional discussion of the fair value measurement of the Company’s derivative contracts. 7. Leases As discussed in Note 1, the Company adopted ASU 2016-02, "Leases (Topic 842)" on January 1, 2019 using a modified retrospective approach for all ROU leases that existed at the period of adoption and did not restate its comparative periods. Topic 842 provides practical expedients to assist with the transition to the new standard. The Company elected the 'package of practical expedients,' and therefore did not have to reassess prior conclusions about lease identification, lease classification and initial indirect costs. The Company also elected the land easement practical expedient and short-term lease recognition exemption, under which leases with initial terms less than 12 months are not required to be presented on the balance sheet. The Company further elected the practical expedient to combine lease and non-lease components for asset classes including drilling rigs, compressors and various office equipment. The Company determines if an arrangement is or contains a lease at inception. A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Lease liabilities were recognized based on the present value of the lease payments not yet paid over the lease term at January 1, 2019 for existing leases and at the commencement date for any new leases entered into subsequent to January 1, 2019. As most of the Company's leases do not provide an implicit rate, the Company's incremental borrowing rate was used as the discount rate when determining the present value of future payments. Lease assets are recognized based on the lease liability plus any prepaid lease payments and excluding lease incentives and initial direct costs incurred for the same periods. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Adoption of this standard resulted in additional ROU lease assets and lease liabilities of approximately $2.3 million and $2.4 million, respectively, as of January 1, 2019, which did not materially impact the Company's consolidated financial statements. The difference between the net lease assets and liabilities was recognized as a cumulative-effect adjustment to the opening balance of retained earnings. Operating leases are included in other assets, other current liabilities and other long-term obligations, and finance leases are included in other property, plant and equipment, other current liabilities and other long-term obligations on the accompanying condensed consolidated balance sheet as of December 31, 2019. The Company had no significant capital or operating leases with terms longer than 12 months at December 31, 2018. The Company had operating and financing leases for vehicles, drilling rigs and equipment outstanding during the year ended December 31, 2019, which were not significant to the consolidated financial statements. 79 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The components of lease costs recognized for the Company's ROU leases are shown below (in thousands): Short-term lease cost (1) Financing lease cost Operating lease cost Total lease cost ___________________ Year Ended December 31, 2019 $ $ 9,994 1,397 188 11,579 (1) $4.8 million of short-term lease cost was capitalized as part of oil and natural gas properties during the year ended December 31, 2019. Portions of these costs were reimbursed to the Company by other working interest owners. 8. Property, Plant and Equipment Property, plant and equipment consists of the following (in thousands): Oil and natural gas properties Proved Unproved Total oil and natural gas properties Less accumulated depreciation, depletion and impairment Net oil and natural gas properties capitalized costs Land Electrical infrastructure Non-oil and natural gas equipment Buildings and structures Financing Leases Total Less accumulated depreciation and amortization Other property, plant and equipment, net Total property, plant and equipment, net December 31, 2019 2018 $ 1,484,359 $ 1,269,091 24,603 1,508,962 (1,129,622) 379,340 4,400 126,482 12,665 77,148 2,109 222,804 (34,201) 188,603 $ 567,943 $ 60,152 1,329,243 (580,132) 749,111 4,400 131,176 13,458 77,148 — 226,182 (25,344) 200,838 949,949 The average rates used for depreciation and depletion of oil and natural gas properties were $12.28 per Boe in 2019, $10.32 per Boe in 2018 and $7.92 per Boe in 2017. See Note 9 for discussion of impairment of other property, plant and equipment. Costs Excluded from Amortization The following table summarizes the costs, by year incurred, related to unproved properties, which were excluded from oil and natural gas properties subject to amortization at December 31, 2019 (in thousands): Property acquisition Exploration Total costs incurred Total 2019 2018 2017 2016 and Prior $ $ 23,973 $ 2,653 $ 2,353 $ 630 10 16 24,603 $ 2,663 $ 2,369 $ 4,280 $ 564 4,844 $ 14,687 40 14,727 Year Cost Incurred 80 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements For leases that do not have existing production that would otherwise extend the lease term, the Company estimates that any associated unproved costs will be evaluated and transferred to the amortization base of the full cost pool within a three to five year period from the original lease date. For leases that are held by production, the Company estimates that any associated unproved costs will be evaluated and transferred to the amortization base of the full cost pool within a 10-year period from the original lease date. In addition, the Company’s internal engineers evaluate all properties on a quarterly basis. 9. Impairment The Company assesses the need to impair its oil and gas properties during its quarterly full cost pool ceiling limitation calculation. The Company analyzes various property, plant and equipment for impairment when certain triggering events occur by comparing the carrying values of the assets to their estimated fair values. The full cost pool ceiling limitation and estimated fair values of drilling, midstream, and other assets were determined in accordance with the policies discussed in Note 1. Impairment for the years ended December 31, 2019, 2018 and 2017 consists of the following (in thousands): Full cost pool ceiling limitation(1) Drilling assets(2) Midstream assets(3) Year Ended December 31, 2019 2018 2017 409,574 $ — $ — — 22 4,148 409,574 $ 4,170 $ — 4,019 — 4,019 $ $ ____________________ (1) Impairment recorded in the year ended December 31, 2019 largely resulted from a decrease in the trailing twelve-month weighted average SEC prices for oil and natural gas prices in 2019, lower NGL prices, increases in expected operating expenses, and other less significant inputs. See Note 22 for additional discussion of our oil and gas producing properties. (2) Impairment recorded in the years ended December 31, 2018 and 2017 reflects the write-down of remaining drilling and oilfield services assets classified as held for sale to net realizable value. (3) Impairment recorded in 2018 reflects the write down of $5.7 million in midstream generator assets classified as held for sale to their net realizable value of $1.6 million. 10. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following (in thousands): Accounts payable and other accrued expenses Production payable Payroll and benefits Taxes payable Drilling advances Accrued interest Total accounts payable and accrued expenses 11. Long-Term Debt Long-term debt consists of the following (in thousands): Credit facility Total debt Less: current maturities of long-term debt Long-term debt 81 December 31, 2019 2018 29,423 $ 22,530 7,021 4,988 514 461 62,733 28,253 12,891 5,350 2,031 539 64,937 $ 111,797 December 31, 2019 2018 57,500 $ 57,500 — 57,500 $ — — — — $ $ $ $ Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Credit Facility. On June 21, 2019, the Company amended and restated its existing $600.0 million reserve-based revolving credit facility. The initial borrowing base of the restated credit facility was $300.0 million, which was reduced to $225.0 million during the semi-annual redetermination concluded in November 2019. The next borrowing base redetermination is scheduled for April 2020. The restatement extended the credit facility maturity date to April 1, 2021 from March 31, 2020. The Company has $57.5 million outstanding under the credit facility at December 31, 2019, and $2.9 million in outstanding letters of credit, which reduce availability under the restated credit facility on a dollar-for-dollar basis. The interest rate on outstanding borrowings under the restated credit facility was determined by a pricing grid tied to borrowing base utilization of (a) LIBOR plus an applicable margin that varies from 2.00% to 3.00% per annum, or (b) the base rate plus an applicable margin that varies from 1.00% to 2.00% per annum. Interest on base rate borrowings is payable quarterly in arrears and interest on LIBOR borrowings is payable every one, two, three or six months, at the election of the Company. Quarterly, the Company pays commitment fees assessed at annual rates of 0.50% on any available portion of the credit facility. During the year ended December 31, 2019, the weighted average interest rate paid for borrowings outstanding under both the previously outstanding credit facility and the amended and restated credit facility was approximately 4.7%. The Company has the right to prepay loans under the credit facility at any time without a prepayment penalty, other than customary “breakage” costs with respect to LIBOR loans. The restated credit facility is secured by (i) first-priority mortgages on at least 85% of the PV-9 valuation of all proved reserves included in the most recently delivered reserve report of the Company, (ii) a first-priority perfected pledge of substantially all of the capital stock owned by each credit party and equity interests in the Royalty Trusts that are owned by a credit party and (iii) a first-priority perfected security interest in substantially all the cash, cash equivalents, deposits, securities and other similar accounts, and other tangible and intangible assets of the credit parties (including but not limited to as-extracted collateral, accounts receivable, inventory, equipment, general intangibles, investment property, intellectual property, real property and the proceeds of the foregoing). The restated facility includes events of default and certain customary affirmative and negative covenants. The Company is required to maintain certain financial covenants including (i) a maximum consolidated total net leverage ratio, measured as of the end of any fiscal quarter, of no greater than 3.50 to 1.00 and (ii) a minimum consolidated interest coverage ratio, measured as of the end of any fiscal quarter, of no less than 2.25 to 1.00. As of December 31, 2019, the Company was in compliance with all applicable covenants and had a consolidated total net leverage ratio of 0.38 and consolidated interest coverage ratio of 37.89. The credit facility previously outstanding from February 10, 2017 through June 21, 2019 had an initial borrowing base of $425.0 million, which was reduced to $350.0 million during a borrowing base redetermination in October 2018. The previously outstanding credit facility had materially similar terms and covenants to the current amended and restated credit facility, but was secured by first-priority mortgages on at least 95% of the PV-9 valuation of the Company's proved reserves and interest was calculated based on a pricing grid tied to the borrowing base utilization rate of (a) LIBOR plus an applicable margin that varied from 3.00% to 4.00% per annum, or (b) the base rate plus an applicable margin that varied from 2.00% to 3.00% per annum. The Company incurred an immaterial amount of interest expense on the previously outstanding credit facility during the years ended December 31, 2018 and 2017. Building Note. In February 2018, the Company fully repaid the Building Note in the amount of $36.3 million, which was comprised of an initial principal amount of $35.0 million and $1.3 million in in-kind interest costs that were previously added to the principal. An unamortized premium of $1.2 million was recognized as a gain on extinguishment of debt in the condensed consolidated statement of operations for the year ended December 31, 2018 in connection with the repayment. 82 Table of Contents 12. Asset Retirement Obligations SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The following table presents the balance and activity of the Company’s asset retirement obligations (in thousands): Year Ended December 31, 2019 2018 2017 Beginning balance Liability incurred upon acquiring and drilling wells Revisions in estimated cash flows(1) Liability settled or disposed in current period(2) Accretion Ending balance Less: current portion $ 60,064 $ 77,544 $ 2,771 12,208 (5,379) 5,352 75,016 22,119 7,079 870 (31,967) 6,538 60,064 25,393 Asset retirement obligations, net of current $ 52,897 $ 34,671 $ 106,481 1,336 (28,565) (11,308) 9,600 77,544 41,017 36,527 ____________________ (1) Revisions for the years ended December 31, 2019, 2018 and 2017 relate primarily to changes in estimated well lives due to changes in oil and natural gas prices and changes in plugging cost estimates. (2) Liability settled or disposed for the year ended December 31, 2018 includes $26.9 million associated with the Permian Properties sold in November 2018. 13. Commitments and Contingencies Included below is a discussion of the Company's various future commitments and contingencies as of December 31, 2019. The commitments and contingencies under these arrangements are not recorded in the accompanying consolidated balance sheets. At December 31, 2019 the Company's only material commitment in each of the next five years and beyond is its asset retirement obligations. See Note 12 for additional discussions. Litigation and Claims. As previously disclosed, on May 16, 2016, the Debtors filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Bankruptcy Court confirmed the Plan on September 9, 2016, and the Debtors subsequently emerged from bankruptcy on October 4, 2016. Pursuant to the Plan, claims against the Company were discharged without recovery in each of the following consolidated cases (the “Cases”): • In re SandRidge Energy, Inc. Securities Litigation, Case No. 5:12-cv-01341-LRW, USDC, Western District of Oklahoma; and • Ivan Nibur, Lawrence Ross, Jase Luna, Matthew Willenbucher, and the Duane & Virginia Lanier Trust v. SandRidge Mississippian Trust I, et al., Case No. 5:15-cv-00634-SLP, USDC, Western District of Oklahoma The lead plaintiffs in both In re SandRidge Energy, Inc. Securities Litigation and Lanier Trust assert claims on behalf of themselves and (i) in In re SandRidge Energy, Inc. Securities Litigation, a class of all purchasers of SandRidge common stock from February 24, 2011 and November 8, 2012 under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and (ii) in Lanier Trust, a putative class of purchasers of SandRidge Mississippian Trust I and SandRidge Mississippian Trust II common units between April 7, 2011 and November 8, 2012 under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, both based on allegations that defendants, which include certain former officers of the Company and the SandRidge Mississippian Trust I, made misrepresentations or omissions concerning various topics including the performance of wells operated by the Company in the Mississippian region. Discovery in each of the Cases closed on June 19, 2019. Following a hearing on class certification in each of the Cases on September 6, 2019, the court granted class certification in In re SandRidge Energy, Inc. Securities Litigation on September 30, 2019. The motion for class certification in Lanier Trust remains pending. In each of the Cases, lead plaintiffs seek to recover unspecified damages, interest, costs and expenses incurred in the litigation on behalf of themselves and class members. Although the claims against the Company in each Case have been discharged pursuant to the Plan, the Company remains a nominal defendant in each of the Cases to the extent necessary to allow 83 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements recovery from applicable insurance policies or proceeds. In addition, the Company owes indemnity obligations and/or the obligation to advance legal fees, to certain former officers who remain as defendants in each action. The Company may also be contractually obligated to indemnify the SandRidge Mississippian Trust I against losses, claims, damages, liabilities and expenses, including reasonable costs of investigation and attorney’s fees and expenses, arising out of the Cases, and such indemnification is not covered by insurance. In light of the status of the Cases, and the facts, circumstances and legal theories relating thereto, the Company is not able to determine the likelihood of an outcome in either case or provide an estimate of any reasonably possible loss or range of possible loss related thereto. However, considering the erosion of insurance coverage available to the Company, such losses, if incurred, could be material. The Company has not established any liabilities relating to the Cases and believes that the plaintiffs’ claims are without merit. The Company intends to continue to vigorously defend against the Cases in its capacity as a nominal defendant. In addition to the matters described above, the Company is involved in various lawsuits, claims and proceedings which are being handled and defended by the Company in the ordinary course of business, none of which is deemed to be individually material at this time. Due to the inherent uncertainty of litigation, however, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or liquidity. 14. Income Taxes The Company’s income tax (benefit) provision consisted of the following components (in thousands): Current Federal State Deferred Federal State Total (benefit) provision Year Ended December 31, 2019 2018 2017 $ $ — $ — — — — — (33) $ (38) (71) — — — (8,719) (30) (8,749) — — — — $ (71) $ (8,749) A reconciliation of the (benefit) provision for income taxes at the statutory federal tax rate to the Company’s actual income tax (benefit) provision is as follows (in thousands): Computed at federal statutory rate State taxes, net of federal benefit Non-deductible expenses Stock-based compensation Discharge of debt and other reorganization related items Return to provision adjustments (1) Impact of legislative changes Release of valuation allowance Change in valuation allowance Other Total (benefit) provision Year Ended December 31, 2019 2018 2017 $ $ (94,354) $ (20,500) 137 602 — (6,096) — — 120,211 — — $ (1,921) $ 119 849 1,874 206 (1,292) — — 132 (38) (71) $ 13,409 (284) 1,711 1,109 1,018 341,681 243,801 (8,719) (602,452) (23) (8,749) 84 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements ____________________ (1) The adjustment for the period ended December 31, 2017, primarily related to the Company’s decision to file its 2016 income tax returns using an alternate method than previously estimated with respect to its Chapter 11 related transactions. Deferred income taxes are provided to reflect the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Company’s deferred tax assets have been reduced by a valuation allowance due to a determination made that it is more likely than not that some or all of the deferred assets will not be realized based on the weight of all available evidence. The Company continues to closely monitor and weigh all available evidence, including both positive and negative, in making its determination whether to maintain a valuation allowance. During the year ended December 31, 2017, the Company reduced the valuation allowance associated with deferred tax assets related to alternative minimum tax ("AMT") credits that became realizable as a result of a special tax election. Accordingly, the Company recorded an income tax benefit of $8.7 million in the year ended December 31, 2017. As a result of the significant weight placed on the Company’s cumulative negative earnings position, the Company continued to maintain the full valuation allowance against its remaining net deferred tax asset at December 31, 2017, December 31, 2018 and December 31, 2019. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): Deferred tax liabilities Investments(1) Derivative contracts Total deferred tax liabilities Deferred tax assets Property, plant and equipment Net operating loss carryforwards Tax credits and other carryforwards Asset retirement obligations Other Total deferred tax assets Valuation allowance Net deferred tax liability December 31, 2019 December 31, 2018 $ 109,289 $ 29 109,318 300,704 383,418 34,148 18,747 2,290 739,307 (629,989) $ — $ 112,343 1,128 113,471 267,865 302,190 35,640 15,016 3,816 624,527 (511,056) — ____________________ (1) Includes the Company’s deferred tax liability resulting from its investment in the Royalty Trusts. The "Tax Cuts and Jobs Act" (the "TCJA") enacted in December 2017 includes significant changes to the taxation of business entities, most of which are effective for taxable years beginning after December 31, 2017. These changes include, among others, a permanent reduction to the corporate income tax rate from a maximum 35% to a flat 21% rate, expansion of expensing capital expenditures for a period of time, new limitations on the utilization of net operating losses ("NOLs"), and limitations on the deduction of interest expense and executive compensation. Based on our analysis of the TCJA and guidance currently available we recorded income tax expense of approximately $243.8 million in the period ended December 31, 2017, which was completely offset by a decrease in the corresponding valuation allowance. The provisional amount primarily related to the remeasurement of our gross deferred tax assets and liabilities existing at December 31, 2017 at the appropriate tax rate expected to exist at the time of their reversal. We completed our analysis of the impact of the TCJA and recorded an immaterial adjustment to income tax expense in the year ended December 31, 2018, which was completely offset by an increase in the corresponding valuation allowance. Internal Revenue Code (“IRC”) Section 382 addresses company ownership changes and specifically limits the utilization of certain deductions and other tax attributes on an annual basis following an ownership change. As a result of the Chapter 11 reorganization and related transactions, the Company experienced an ownership change within the meaning of IRC Section 382 during 2016 that subjected certain of the Company’s tax attributes, including net operating losses ("NOLs"), to an IRC Section 382 limitation. This limitation has not resulted in cash taxes for any period subsequent to the ownership change. Since the 2016 ownership change, the Company has generated additional NOLs and other tax attributes that are not currently subject to an IRC Section 382 limitation. The Company's ability to use NOLs and other tax attributes to reduce taxable income and income taxes could be materially impacted by a future IRC 382 ownership change. Future transactions involving the 85 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Company's stock including those outside of the Company's control could cause an IRC 382 ownership change resulting in a limitation on tax attributes currently not limited and a more restrictive limitation on tax attributes currently subject to the previous IRC 382 limitation. As of December 31, 2019, the Company had approximately $1.4 billion of federal NOL carryforwards, net of NOLs expected to expire unused due to the 2016 IRC Section 382 limitation. Of the $1.4 billion of federal NOL carryforwards, $0.8 billion expire during the years 2025 through 2037, while $0.6 billion do not have an expiration date. Additionally, the Company had federal tax credits in excess of $32.0 million which begin expiring in 2029. The Company did not have unrecognized tax benefits at December 31, 2019 or 2018. The Company’s only taxing jurisdiction is the United States (federal and state). The Company’s tax years 2016 to present remain open for federal examination. Additionally, tax years 2005 through 2015 remain subject to examination for the purpose of determining the amount of federal NOL and other carryforwards. The number of years open for state tax audits varies, depending on the state, but is generally from three to five years. 15. Equity Common Stock and Performance Share Units. At December 31, 2019, the Company had 35.8 million shares of common stock, par value $0.001 per share, issued and outstanding, including 0.2 million shares of unvested restricted stock awards, and 250.0 million shares of common stock authorized. The Company also had restricted stock awards and an immaterial amount of performance share units and stock options outstanding at December 31, 2019 as discussed further in Note 17. Warrants. Since the fourth quarter of 2016, the Company has issued approximately 4.7 million Series A warrants and 2.0 million Series B warrants to certain holders of general unsecured claims as defined in the Plan. These warrants are exercisable until October 4, 2022 for one share of common stock per warrant at initial exercise prices of $41.34 and $42.03 per share, respectively, subject to adjustments pursuant to the terms of the warrants. The warrants contain customary anti-dilution adjustments in the event of any stock split, reverse stock split, reclassification, stock dividend or other distributions. Shares Withheld for Taxes. The following table shows the number of shares withheld for taxes and the associated value of those shares (in thousands). These shares were accounted for as treasury stock when withheld, and then immediately retired. Number of shares withheld for taxes Value of shares withheld for taxes Year Ended December 31, 2019 2018 2017 $ 56 367 $ 495 7,420 $ 349 6,730 86 Table of Contents 16. Revenues SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The Company adopted ASC 606 on January 1, 2018, using the modified retrospective method for all contracts outstanding on that date. Adoption of ASC 606 had no impact on the Company’s consolidated balance sheet, results of operations, equity or cash flows as of the adoption date. The following table disaggregates the Company’s revenue by source for the years ended December 31, 2019, 2018, and 2017 (in thousands): Oil NGL Natural gas Other Total revenues Year Ended December 31, 2019 2018 2017 $ $ 186,360 $ 214,651 $ 35,598 44,146 741 67,111 66,964 669 266,845 $ 349,395 $ 202,539 61,322 92,349 1,089 357,299 Oil, natural gas and NGL revenues. A majority of the Company’s revenues come from sales of oil, natural gas and NGLs. In accordance with the contracts governing these sales, performance obligations to customers are satisfied and revenues are recorded at a point in time when control of the oil, natural gas and NGL production passes to the customer at the inlet of the processing plant or pipeline, or the delivery point for onloading to a delivery truck. As the Company’s customers obtain control of the production prior to selling it to other end customers, the Company presents its revenues on a net basis, rather than on a gross basis. Pricing for the Company’s oil, natural gas and NGL contracts is variable and is based on volumes sold multiplied by either an index price, net of deductions, or a percentage of the sales price obtained by the customer, which is also based on index prices. The transaction price is allocated on a pro-rata basis to each unit of oil, natural gas or NGL sold based on the terms of the contract. Oil, natural gas and NGL revenues are also recorded net of royalties, discounts and allowances, and transportation costs, as applicable. Taxes assessed by governmental authorities on oil, natural gas and NGL sales are presented separately from revenues and are included in production, ad valorem, and other taxes expense in the consolidated statements of operations. Revenues Receivable. The Company records an asset in accounts receivable, net on its consolidated balance sheet for revenues receivable from contracts with customers at the end of each period. Pricing for revenues receivable is estimated using current month crude oil, natural gas and NGL prices, net of deductions. Revenues receivable are typically collected the month after the Company delivers the related production to its customers. As of December 31, 2019 and 2018 the Company had revenues receivable of $22.3 million and $31.8 million, respectively, and did not record any bad debt expense on revenues receivable during the year ended December 31, 2019. 17. Share-Based Compensation Share-Based Compensation Omnibus Incentive Plan. The Omnibus Incentive Plan became effective on October 4, 2016 and authorizes the issuance of up to 4.6 million shares of SandRidge common stock. Persons eligible to receive awards under the Omnibus Incentive Plan include non-employee directors of the Company, employees of the Company or any of its affiliates, and certain consultants and advisors to the Company or any of its affiliates. The types of awards that may be granted under the Omnibus Incentive Plan include stock options, restricted stock, performance awards and other forms of awards granted or denominated in shares of common stock, as well as certain cash-based awards. At December 31, 2019, the Company had restricted stock awards and immaterial amounts of performance share units and stock options outstanding under the Omnibus Incentive Plan. Forfeitures for these awards are recognized as they occur. Restricted Stock Awards. The Company’s restricted stock awards are equity-classified awards and are valued based upon the market value of the Company’s common stock on the date of grant. Vesting for certain restricted stock awards was accelerated in connection with executive terminations and reductions in force in the first quarter of 2018 and second quarter of 87 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements 2019. Additionally, certain restricted stock awards vested in June 2018 as a result of the accelerated vesting event related to the change in the composition of the Board resulting from the 2018 annual meeting discussed in Note 19. The Company granted additional restricted stock awards in the second half of 2018. Outstanding restricted shares at December 31, 2019 will generally vest over either a one-year period or three-year period with a remaining weighted average contractual period of 1.3 years and have an insignificant amount of associated unrecognized compensation cost. The following table presents a summary of the Company’s unvested restricted stock awards: Unvested restricted shares outstanding at December 31, 2016 Granted Vested Forfeited / Canceled Unvested restricted shares outstanding at December 31, 2017 Granted Vested Forfeited / Canceled Unvested restricted shares outstanding at December 31, 2018 Granted Vested (1) Forfeited / Canceled Unvested restricted shares outstanding at December 31, 2019 Number of Shares (In thousands) Weighted- Average Grant Date Fair Value 1,407 $ 671 $ (827) $ (146) $ 1,105 $ 370 $ (1,066) $ (44) $ 365 $ 93 $ (210) $ (15) $ 233 $ 24.32 19.97 23.23 23.52 22.62 16.00 22.63 21.04 16.07 8.06 16.29 16.25 12.66 ____________________ (1) The aggregate intrinsic value of restricted stock that vested during 2019 was approximately $1.5 million based on the stock price at the time of vesting. 88 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Performance Share Units. In February 2017, the Company granted equity-classified awards in the form of performance share units. The vesting for certain performance share units was accelerated in connection with executive terminations and a reduction in force in the first quarter of 2018. All remaining units vested in June 2018 as a result of the accelerated vesting as discussed in Note 19 and were settled in shares of the Company's common stock with one share of common stock being issued per performance share unit. In September 2018, the Company granted an immaterial amount of additional performance share units. The following table presents a summary of the Company's performance share units: Unvested performance share units outstanding at December 31, 2016 Granted Vested Forfeited / Canceled Unvested performance share units outstanding at December 31, 2017 Granted Vested Forfeited / Canceled Unvested performance share units outstanding at December 31, 2018 Granted Vested Forfeited / Canceled Number of Units (In thousands) Fair Value per Unit at December 31, 2019 — 199 — (16) 183 111 (177) (6) 111 — (19) — Unvested performance share units outstanding at December 31, 2019 92 $ 20.41 Incentive-Based Compensation Performance Units. In October 2016, the Company granted liability-classified awards in the form of performance units. The vesting for certain performance units was accelerated in connection with executive terminations and a reduction in force in the first quarter of 2018. All remaining units vested in June 2018 as a result of the accelerated vesting as discussed in Note 19 and were paid at the issuance value of $100 each. The value for previous vestings was determined by annual scorecard results. The following table presents a summary of the Company's performance units: Unvested performance units outstanding at December 31, 2016 Granted Vested Forfeited / Canceled Unvested performance units outstanding at December 31, 2017 Granted Vested Forfeited / Canceled Number of Units (In thousands) Fair Value per Unit at December 31, 2018 87 — (32) (6) 49 — (48) (1) Unvested performance units outstanding at December 31, 2018 — $ — 89 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The following tables summarize the Company's share and incentive-based compensation for the years ended December 31, 2019, 2018, and 2017 (in thousands): Recurring Compensation Expense(1) Executive Terminations(2) Reduction in Force(2) Accelerated Vesting(3) Total Year Ended December 31, 2019 Equity-classified awards: Restricted stock awards Performance share units Stock options Total share-based compensation expense Less: Capitalized compensation expense Share and incentive-based compensation expense, net Year Ended December 31, 2018 Equity-classified awards: Restricted stock awards Performance share units Total share-based compensation expense Liability-classified awards: Performance units Total share and incentive-based compensation expense Less: Capitalized compensation expense Share and incentive-based compensation expense, net Year Ended December 31, 2017 Equity-classified awards: Restricted stock awards Performance share units Total share-based compensation expense Liability-classified awards: Performance units Total share and incentive-based compensation expense Less: Capitalized compensation expense $ $ $ $ $ 2,526 $ 197 $ 500 $ — $ 3,223 282 661 3,469 (204) 281 12 490 — — — 500 — — — — — 3,265 $ 490 $ 500 $ — $ 4,735 $ 619 5,354 756 6,110 (482) 8,140 $ 3,777 $ 5,181 $ 1,056 9,196 2,151 11,347 — 158 3,935 558 4,493 — 610 5,791 1,309 7,100 (555) 5,628 $ 11,347 $ 4,493 $ 6,545 $ 14,731 $ 1,356 16,087 2,574 18,661 (2,521) 1,825 $ — $ — $ — 1,825 — 1,825 — — — — — — — — — — — 563 673 4,459 (204) 4,255 21,833 2,443 24,276 4,774 29,050 (1,037) 28,013 16,556 1,356 17,912 2,574 20,486 (2,521) 17,965 Share and incentive-based compensation expense, net $ 16,140 $ 1,825 $ — $ — $ ____________________ (1) (2) (3) Recorded in general and administrative expense in the accompanying consolidated statements of operations. Recorded in employee termination benefits in the accompanying consolidated statements of operations. Recorded in accelerated vesting of employment compensation in the accompanying consolidated statements of operations. 90 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements 18. Incentive and Deferred Compensation Plans Annual Incentive Plan. The Annual Incentive Plan ("AIP") incorporates quantitative performance measures, strategic qualitative goals and competitive target award levels for management and employees for the 2018 and 2017 performance years. Incentive bonus awards for 2019 will be provided at the discretion of the Board of Directors and will be paid quarterly during 2020. Payout percentages ranged from 0% to 200% of specified target levels based on actual performance in 2018 and 2017. As of December 31, 2019, the Company had accrued approximately $2.7 million for the 2019 AIP. Payment of $7.1 million was made in the first quarter of 2019 for the 2018 performance year. 401(k) Plan. The Company maintains a 401(k) retirement plan for its employees. Under this plan, eligible employees may elect to defer a portion of their earnings up to the maximum allowed by IRS. For the years ended December 31, 2019, 2018, and 2017, the Company made matching contributions to the plan equal to 100% on the first 10% of employee deferred wages, excluding incentive compensation, totaling $2.2 million, $2.8 million, and $3.6 million, respectively. The decrease in contributions is due primarily to reductions in force that occurred in each of those years. Participants in the plan are immediately 100% vested in the discretionary employee contributions and related earnings on those contributions. The Company's matching contributions and related earnings vest based on years of service, with full vesting occurring on the fourth anniversary of employment. 19. Proxy Contest In the second quarter of 2018, the Company engaged in a proxy contest with its largest shareholder, Carl C. Icahn and certain affiliated entities, which resulted in the election of a majority of non-incumbent directors to the Company's Board of Directors. As confirmed by general counsel, the election of a majority of non-incumbent directors nominated in connection with the proxy contest resulted in the accelerated vesting of certain share and incentive-based compensation awards granted to the Company's employees and directors as discussed further in Note 17. The Company incurred legal, consulting and advisory fees of $7.1 million related to the proxy contest during the year ended December 31, 2018. 20. Employee Termination Benefits The following table presents a summary of employee termination benefits for the years ended December 31, 2019, 2018, and 2017 (in thousands): Year Ended December 31, 2019 Executive Employee Termination Benefits(1) Other Employee Termination Benefits(2) Year Ended December 31, 2018 Executive Employee Termination Benefits(3) Other Employee Termination Benefits(4) Year Ended December 31, 2017 Executive Employee Termination Benefits(5) Other Employee Termination Benefits Cash Share-Based Compensation (6) Number of Shares Total Employee Termination Benefits $ $ $ $ $ $ 1,194 $ 2,608 3,802 $ 11,945 $ 7,581 19,526 $ 2,500 $ 490 2,990 $ 490 500 990 9,196 3,935 13,131 1,825 — 1,825 37 $ 44 81 $ 554 $ 209 763 $ 96 $ — 96 $ 1,684 3,108 4,792 21,141 11,516 32,657 4,325 490 4,815 ____________________ (1) On December 12, 2019, the Company's then current CEO, Paul McKinney, separated employment from the Company, and on June 14, 2019, the Company’s then current Executive Vice President, General Counsel and Corporate 91 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Secretary, Philip Warman, separated employment from the Company. As a result, the Company paid cash severance costs and incurred share-based compensation costs associated with these separations during 2019. (2) As a result of a reduction in workforce in the second quarter of 2019, certain employees received termination benefits including cash severance and accelerated share- based compensation upon separation of service from the Company. (3) On February 8, 2018, the Company’s then current CEO, James Bennett, separated employment from the Company, and on February 22, 2018, the Company’s then current CFO, Julian Bott, also separated employment from the Company. In accordance with the terms of their respective employment agreements, the Company incurred cash severance costs and share-based compensation costs associated with the accelerated vesting of awards during the first quarter of 2018. (4) As a result of a reduction in workforce in the first quarter of 2018, certain employees received termination benefits including cash severance and accelerated share and incentive-based compensation vesting upon separation of service from the Company. (5) Includes cash severance costs and share-based compensation costs associated with the accelerated vesting of awards related to the departure of the Company's former Executive Vice President of Investor Relations and Strategy, Duane Grubert. (6) Share-based compensation recognized in connection with the accelerated vesting of restricted stock awards and performance share units upon the departure of certain executives and the reductions in workforce in 2019 and 2018 reflects the remaining unrecognized compensation expense associated with these awards at the date of termination. The unrecognized compensation expense was calculated using the grant date fair value for restricted stock awards and performance share units. One share of the Company’s common stock was issued per performance share unit. See Note 17 for additional discussion of the Company’s share-based compensation awards. 21. (Loss) Earnings per Share The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted (loss) earnings per share: Year Ended December 31, 2019 Basic loss per share Effect of dilutive securities Restricted stock awards(1) Performance share units(1) Warrants(1) Diluted loss per share Year Ended December 31, 2018 Basic loss per share Effect of dilutive securities Restricted stock awards(1) Performance share units(1) Warrants(1) Diluted loss per share Year Ended December 31, 2017 Basic earnings per share Effect of dilutive securities Restricted stock awards Performance share units(2) Warrants(2) Diluted earnings per share Net (Loss) Income Weighted Average Shares (Loss) Earnings Per Share (In thousands, except per share amounts) $ (449,305) 35,427 $ (12.68) — — — — — — (449,305) 35,427 $ (12.68) (9,075) 35,057 $ (0.26) — — — — — — (9,075) 35,057 $ (0.26) 47,062 32,442 $ 1.45 — — — 221 — — 47,062 32,663 $ 1.44 $ $ $ $ $ ____________________ (1) No incremental shares of potentially dilutive restricted stock awards, performance share units or warrants were included for the year ended December 31, 2019 and 2018, as their effect was antidilutive under the treasury stock method. (2) No incremental shares of potentially dilutive performance share units or warrants were included for the year ended December 31, 2017, as their effect was antidilutive under the treasury stock method. 92 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements See Note 17 for discussion of the Company’s share-based compensation awards. 22. Supplemental Information on Oil and Natural Gas Producing Activities (Unaudited) The supplemental information below includes capitalized costs related to oil and natural gas producing activities; costs incurred in oil and natural gas property acquisition, exploration and development; and the results of operations for oil and natural gas producing activities. Supplemental information is also provided for oil, natural gas and NGL production and average sales prices; the estimated quantities of proved oil, natural gas and NGL reserves; the standardized measure of discounted future net cash flows associated with proved oil, natural gas and NGL reserves; and a summary of the changes in the standardized measure of discounted future net cash flows associated with proved oil, natural gas and NGL reserves. Capitalized Costs Related to Oil and Natural Gas Producing Activities The Company’s capitalized costs for oil and natural gas activities consisted of the following (in thousands): Oil and natural gas properties Proved Unproved Total oil and natural gas properties Less accumulated depreciation, depletion and impairment Net oil and natural gas properties capitalized costs 2019 December 31, 2018 2017 $ 1,484,359 $ 1,269,091 $ 1,056,806 24,603 1,508,962 (1,129,622) 60,152 1,329,243 (580,132) 100,884 1,157,690 (460,431) $ 379,340 $ 749,111 $ 697,259 Costs Incurred in Oil and Natural Gas Property Acquisition, Exploration and Development Costs incurred in oil and natural gas property acquisition, exploration and development activities which have been capitalized are summarized as follows (in thousands): Acquisitions of properties Proved Unproved Exploration Development Total cost incurred Year Ended December 31, 2019 2018 2017 $ $ (210) $ 30,641 $ 2,653 2,900 156,210 161,553 $ 4,197 1,940 158,361 195,139 $ 7,092 91,139 8,850 187,264 294,345 93 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Results of Operations for Oil and Natural Gas Producing Activities The following table presents the Company’s results of operations from oil and natural gas producing activities (in thousands), which exclude any interest costs or indirect general and administrative costs and, therefore, are not necessarily indicative of the impact the Company’s operations have on actual net earnings. Revenues Expenses Production costs Depreciation and depletion Impairment Total expenses Income (loss) before income taxes Income tax (benefit) expense (1) Results of operations for oil and natural gas producing activities (excluding corporate overhead and interest costs) Year Ended December 31, 2019 2018 2017 $ 266,104 $ 348,726 $ 356,210 110,711 146,874 409,574 667,159 (401,055) (105,477) 112,173 127,281 — 239,454 109,272 28,520 116,372 118,035 — 234,407 121,803 47,722 $ (295,578) $ 80,752 $ 74,081 ____________________ (1) Income tax (benefit) expense is hypothetical and is calculated by applying the Company’s statutory tax rate to (loss) income before income taxes attributable to our oil and natural gas producing activities, after giving effect to permanent differences and tax credits. Oil, Natural Gas and NGL Reserve Quantities Proved oil, natural gas and NGL reserves are those quantities, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible, based on oil, natural gas and NGL prices used to estimate reserves, from a given date forward from known reservoirs, and under existing economic conditions, operating methods, and government regulation prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. The term “reasonable certainty” implies a high degree of confidence that the quantities of oil, natural gas and NGLs actually recovered will equal or exceed the estimate. To achieve reasonable certainty, the Company’s engineers and independent petroleum consultants relied on technologies that have been demonstrated to yield results with consistency and repeatability. The technologies and economic data used to estimate the Company’s proved reserves include, but are not limited to, well logs, geologic maps, seismic data, well test data, production data, historical price and cost information and property ownership interests. The accuracy of the reserve estimates is dependent on many factors, including the following: • • • • the quality and quantity of available data and the engineering and geological interpretation of that data; estimates regarding the amount and timing of future costs, which could vary considerably from actual costs; the accuracy of mandated economic assumptions; and the judgment of the personnel preparing the estimates. Proved developed reserves are proved reserves expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well. Proved undeveloped reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively large major expenditure is required for recompletion. The following table represents the Company’s estimate of proved oil, natural gas and NGL reserves attributable to the Company’s net interest in oil and natural gas properties, all of which are located in the continental United States, based upon the evaluation by the Company and its independent petroleum engineers of pertinent geoscience and engineering data in accordance with the SEC’s regulations. Over 90% of the Company’s proved reserves estimates have been prepared by independent reservoir engineers and geoscience professionals and are reviewed by members of the Company’s senior management with 94 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements professional training in petroleum engineering to ensure that the Company consistently applies rigorous professional standards and the reserve definitions prescribed by the SEC. Cawley, Gillespie & Associates, Ryder Scott and Netherland Sewell, independent oil and natural gas consultants, prepared the estimates of proved reserves of oil, natural gas and NGLs for over 90% of the Company’s net interest in oil and natural gas properties as of the end of one or more of 2019, 2018 and 2017. Cawley, Gillespie & Associates, Ryder Scott and Netherland Sewell are independent petroleum engineers, geologists, geophysicists and petrophysicists and do not own an interest in the Company or its properties and are not employed on a contingent basis. The remaining proved reserves were based on Company estimates. The Company believes the geoscience and engineering data examined provides reasonable assurance that the proved reserves are economically producible in future years from known reservoirs, and under existing economic conditions, operating methods and governmental regulations. Estimates of proved reserves are subject to change, either positively or negatively, as additional information is available and contractual and economic conditions change. 2019 Activity. Proved reserves decreased from 160.2 MMBoe at December 31, 2018 to 89.9 MMBoe at December 31, 2019, primarily as a result of downward revisions of 50.9 MMBoe associated with the decrease in year-end SEC prices for oil and natural gas consisting of (i) 39.8 MMBoe from downgrading PUDs, and (ii) 11.1 MMBoe from remaining proved reserves. The Company also recorded a decrease of 10.9 MMBoe attributable to increased commodity price differentials, and a decrease of 3.2 MMBoe attributable to well performance. These reductions were partially offset by a 12.6 MMBoe increase associated with converting undeveloped well locations from SRLs to planned XRLs as well as reduced future estimated development capital on these undeveloped locations. 2018 Activity. Proved reserves decreased from 177.6 MMBoe at December 31, 2017 to 160.2 MMBoe at December 31, 2018, primarily as a result of a one-time adjustment to future workover costs in the Company's Mississippian Lime wells. As its large population of Mississippian Lime wells transition into late-life mature production, the Company has experienced increasing operating costs which have been incorporated into its 2018 reserve report. This estimate of future costs contributed to a 24.9 MMBoe decrease associated with shorter economic lives. The Company also recorded a decrease of 8.3 MMBoe attributable to well performance and a decrease of 6.6 MMBoe due to divestitures of proved reserves. These reductions were partially offset by the acquisition of 15.4 MMBoe associated with the purchase of interests in Mid- Continent wells, extensions and discoveries of 19.3 MMBoe from successful drilling in the North Park Basin and to a lesser extent the NW STACK play in the Mid- Continent, as well as recording proved undeveloped reserves at an increased well density in the North Park Basin. 2017 Activity. During 2017, the Company recorded extensions and discoveries of 19.4 MMBoe, primarily from successful drilling in its NW STACK play in the Mid-Continent area and its North Park Basin properties, sold 1.9 MMBoe of proved reserves, and recorded upward revisions of 10.9 MMBoe, primarily as a result of significantly higher commodity prices in 2017 and minor revisions due to well performance. 95 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The summary below presents changes in the Company’s estimated reserves. Proved developed and undeveloped reserves As of December 31, 2016 Revisions of previous estimates Acquisitions of new reserves Extensions and discoveries Sales of reserves in place Production As of December 31, 2017 Revisions of previous estimates Acquisitions of new reserves Extensions and discoveries Sales of reserves in place Production As of December 31, 2018 Revisions of previous estimates Extensions and discoveries Sales of reserves in place Production As of December 31, 2019 Proved developed reserves As of December 31, 2017 As of December 31, 2018 As of December 31, 2019 Proved undeveloped reserves As of December 31, 2017 As of December 31, 2018 As of December 31, 2019 Oil (MBbls) NGL (MBbls) Natural Gas (MMcf)(1) Total MBoe 52,884 804 18 12,446 (204) (4,157) 61,791 (2,316) 2,146 11,148 (5,273) (3,477) 64,019 (25,530) 635 (297) (3,519) 35,308 25,845 18,693 14,078 35,946 45,326 21,230 33,607 2,628 70 1,914 (529) (3,376) 34,314 (8,952) 4,131 2,320 (809) (2,829) 28,175 (9,277) 94 (223) (2,910) 15,859 29,922 22,302 14,532 4,392 5,873 1,327 464,782 44,679 683 30,080 (7,055) (44,237) 488,932 (131,518) 54,436 35,185 (2,969) (36,175) 407,891 (142,239) 2,127 (2,308) (33,164) 232,307 407,988 307,845 200,853 80,944 100,046 31,454 163,955 10,879 202 19,373 (1,909) (14,906) 177,594 (33,188) 15,350 19,332 (6,577) (12,335) 160,176 (58,514) 1,084 (905) (11,956) 89,885 123,765 92,303 62,086 53,829 67,873 27,799 _________________ (1) Natural gas reserves are computed at 14.65 pounds per square inch absolute and 60 degrees Fahrenheit. Standardized Measure of Discounted Future Net Cash Flows (Unaudited) The standardized measure of discounted cash flows and summary of the changes in the standardized measure computation from year to year are prepared in accordance with ASC Topic 932, Extractive Activities—Oil and Gas, ("ASC Topic 932"). The assumptions underlying the computation of the standardized measure of discounted cash flows may be summarized as follows: • • the standardized measure includes the Company’s estimate of proved oil, natural gas and NGL reserves and projected future production volumes based upon economic conditions; pricing is applied based upon SEC prices at December 31, 2019, 2018, and 2017 adjusted for fixed or determinable contracts that are in existence at year-end. The calculated weighted average per unit prices for the Company’s proved reserves and future net revenues were as follows: Oil (per Bbl) NGL (per Bbl) Natural gas (per Mcf) 2019 At December 31, 2018 $ $ $ 50.63 $ 12.45 $ 1.16 $ 60.86 $ 25.62 $ 1.77 $ 2017 48.47 20.28 1.90 96 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements • • • future development and production costs are determined based upon actual cost at year-end; the standardized measure includes projections of future abandonment costs based upon actual costs at year-end; and a discount factor of 10% per year is applied annually to the future net cash flows. The summary below presents the Company’s future net cash flows relating to proved oil, natural gas and NGL reserves based on the standardized measure in ASC Topic 932 (in thousands). Future cash inflows from production Future production costs Future development costs(1) Future income tax expenses (2) Undiscounted future net cash flows 10% annual discount December 31, 2019 2,254,530 $ 2018 5,339,265 $ $ (1,028,695) (536,081) — 689,754 (325,464) (1,996,689) (1,170,113) — 2,172,463 (1,126,860) 2017 4,621,615 (1,837,852) (966,203) (107) 1,817,453 (1,068,159) Standardized measure of discounted future net cash flows $ 364,290 $ 1,045,603 $ 749,294 ____________________ (1) Includes abandonment costs. (2) The future income tax expenses have been computed using statutory tax rates, giving effect to allowable tax deductions and tax credits under current laws, including expected tax benefits to be realized from the utilization of net operating loss carryforwards. The following table represents the Company’s estimate of changes in the standardized measure of discounted future net cash flows from proved reserves (in thousands): Beginning present value Changes during the year Revenues less production Net changes in prices, production and other costs Development costs incurred Net changes in future development costs(1) Extensions and discoveries Revisions of previous quantity estimates(1) Accretion of discount Net change in income taxes Purchases of reserves in-place Sales of reserves in-place Timing differences and other(2) Net change for the year Ending present value(3) Year Ended December 31, 2019 2018 2017 $ 1,045,603 $ 749,294 $ 438,364 (236,553) (239,838) (155,772) (491,035) 90,591 450,162 11,921 (478,238) 101,778 — — (3,331) (207,389) (681,313) 316,095 80,050 (11,483) 102,961 (91,038) 70,576 56 35,713 (2,029) 31,961 296,309 347,458 35,517 (64,484) 112,556 26,697 37,226 23 454 (2,977) 58,298 310,930 749,294 $ 364,290 $ 1,045,603 $ ____________________ (1) The change in estimated future development costs and revisions of previous quantity estimates primarily reflect a decrease in planned PUD development due to declining year end SEC prices for oil and natural gas. (2) The change in timing differences and other are related to revisions in the Company’s estimated time of production and development. (3) Standardized Measure was determined using SEC prices, and does not reflect actual prices received or current market prices. 97 Table of Contents 23. Quarterly Financial Results (Unaudited) SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements The Company’s operating results for each quarter of 2019 and 2018 are summarized below (in thousands, except per share data). 2019 Total revenues Loss from operations(1)(2)(3) Net loss(1)(2)(3) Loss applicable per share to SandRidge Energy, Inc. common stockholders Basic Diluted First Quarter Second Quarter Third Quarter Fourth Quarter $ $ $ $ $ 73,236 $ 75,388 $ 58,369 $ 59,852 (4,261) $ (12,556) $ (181,707) $ (248,243) (5,277) $ (13,284) $ (181,602) $ (249,142) (0.15) $ (0.15) $ (0.38) $ (0.38) $ (5.12) $ (5.12) $ (7.01) (7.01) ____________________ (1) Includes loss (gain) on derivative contracts of $0.2 million, $(1.8) million and $0.5 million for the first, third, and fourth quarters, respectively. (2) Includes employee termination benefits of $4.5 million and $0.3 million for the second quarter and fourth quarters, respectively. (3) Includes full cost ceiling limitation impairments of $165.5 million and $244.1 million for the third and fourth quarters, respectively. 2018 Total revenues (Loss) income from operations(1)(2) Net (loss) income(1)(2) (Loss applicable) income available per share to SandRidge Energy, Inc. common stockholders Basic Diluted First Quarter Second Quarter Third Quarter Fourth Quarter $ $ $ $ $ 87,128 $ 79,462 $ (41,967) $ (33,685) $ (40,894) $ (34,074) $ 97,660 $ 12,430 $ 11,715 $ (1.18) $ (1.18) $ (0.97) $ (0.97) $ 0.33 $ 0.33 $ 85,145 52,847 54,178 1.53 1.53 ____________________ (1) Includes loss (gain) on derivative contracts of $18.3 million, $30.1 million, $11.3 million and $(42.6) million for the first, second, third and fourth quarters, respectively. (2) Includes employee termination benefits of $31.6 million for the first quarter, accelerated vesting of employment compensation of $6.5 million for the second quarter, and proxy contest costs of $7.2 million for the second quarter. 24. Subsequent Events On February 4, 2020, the Company issued Workers Adjustment and Retraining Notification (WARN) Act notices to approximately 63 of its 120 Oklahoma City based employees as a result of its workforce reduction at its corporate headquarters. 98 Table of Contents SandRidge Energy, Inc. and Subsidiaries Notes to Consolidated Financial Statements Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures Disclosure Controls and Procedures. Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company performed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b) as of the end of the period covered by this annual report. Based on that evaluation, the Company’s Chief Executive Officer and its Chief Financial Officer concluded that its disclosure controls and procedures were effective as of December 31, 2019 to provide reasonable assurance that the information required to be disclosed by the Company in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control over Financial Reporting The information required to be filed pursuant to this item is set forth under the captions “Management’s Report on Internal Control over Financial Reporting” in Item 8 of this report. Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 99 Table of Contents Item 9B. Other Information On February 21, 2020, the Company entered into an at-will Letter Agreement with Mr. John Suter, the Company’s Interim Chief Executive Officer and President and Chief Operating Officer (the “Letter Agreement”). The Letter Agreement replaced a previous legacy employment contract with Mr. Suter that had been entered into in December 2016. The Company had previously announced Mr. Suter’s appointment as the Company’s Interim Chief Executive Officer and entered into the Letter Agreement to reflect the change in Mr. Suter’s role with the Company and to amend his cash compensation and certain terms of his equity compensation. A summary of the material terms and conditions of the Letter Agreement are as follows: • Mr. Suter will continue his current salary of $420,000 per annum. In addition, Mr. Suter is eligible to receive a one-time bonus in the amount of $210,000 to be paid within five days of the Company’s filing of its 2019 Annual Report on Form 10-K. • In the event of Mr. Suter’s termination from the Company without Cause, he will be entitled to receive the Company’s normal severance plan, however at 26 weeks payment irrespective of his actual years of service. After September 30, 2020, Mr. Suter may resign and still qualify for such severance payments. • Mr. Suter is eligible for a performance bonus of up to $210,000 on July 15, 2020 dependent on the Company’s achievement of certain performance criteria. • • If Mr. Suter is terminated by the Company without Cause, his existing stock grants will vest at the date of termination of employment. If he remains continuously employed by the Company until September 30, 2020, all stock grants will vest on such date. Mr. Suter’s existing stock grants will not vest if he resigns from employment with the Corporation before September 30, 2020. The Letter Agreement requires Mr. Suter to enter into a customary restrictive covenant agreement relating to matters of confidentiality, non-disclosure, non- competition, non-solicitation and non-disparagement restrictions. The foregoing description of the Letter Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the letter agreement, which is included as Exhibit 10.12 to this report and is incorporated herein by reference. 100 Table of Contents Item 10. Directors, Executive Officers and Corporate Governance PART III The information required by this item is incorporated herein by reference to the following sections of the Company’s definitive proxy statement, which will be filed no later than April 29, 2020: “Director Biographical Information,” “Executive Officers,” “Compliance with Section 16(a) of the Exchange Act” and “Corporate Governance Matters.” Item 11. Executive Compensation The information required by this item is incorporated herein by reference to the following sections of the Company’s definitive proxy statement, which will be filed no later than April 29, 2020: “Director Compensation,” “Outstanding Equity Awards” and “Executive Officers and Compensation.” Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated herein by reference to the following sections of the Company’s definitive proxy statement, which will be filed no later than April 29, 2020: “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management.” Item 13. Certain Relationships and Related Transactions and Director Independence The information required by this item is incorporated herein by reference to the following sections of the Company’s definitive proxy statement, which will be filed no later than April 29, 2020: “Related Party Transactions” and “Corporate Governance Matters.” Item 14. Principal Accounting Fees and Services The information required by this item is incorporated herein by reference to the section captioned “Ratification of Selection of Independent Registered Public Accounting Firm” in the Company’s definitive proxy statement, which will be filed no later than April 29, 2020. 101 Table of Contents Item 15. Exhibits and Financial Statement Schedules The following documents are filed as a part of this report: PART IV 1. 2. Consolidated Financial Statements Reference is made to the Index to Consolidated Financial Statements appearing on page 61. Financial Statement Schedules All financial statement schedules have been omitted because they are not applicable or the required information is presented in the consolidated financial statements or notes thereto. 3. Exhibits Filed Herewith EXHIBIT INDEX Incorporated by Reference Exhibit No. 2.1 3.1 3.2 3.3 4.1 4.2 4.3 4.4 4.5 Exhibit Description Amended Joint Chapter 11 Plan of Reorganization of SandRidge Energy, Inc., et al., dated September 19, 2016 Amended and Restated Certificate of Incorporation of SandRidge Energy, Inc. Amended and Restated Bylaws of SandRidge Energy, Inc. Certificate of Designations of Series B Participating Preferred Stock of SandRidge Energy, Inc. Form of specimen Common Stock certificate of SandRidge Energy, Inc. Warrant Agreement, dated as of October 4, 2016, between SandRidge Energy, Inc. and American Stock Transfer & Trust Company, LLC, as warrant agent Registration Rights Agreement dated as of October 4, 2016, among SandRidge Energy, Inc. and the holders party thereto Stockholder Rights Agreement, dated as of November 26, 2017, between SandRidge Energy, Inc. as the Company, and American Stock Transfer & Trust Company, LLC as Rights Agent Form 8-A 8-A 8-A 8-K 8-K 8-K 8-A 8-K SEC File No. 001-33784 001-33784 001-33784 001-33784 001-33784 001-33784 001-33784 001-33784 Exhibit 2.1 3.1 3.2 3.1 4.1 10.6 10.1 4.1 Filing Date 10/4/2016 10/4/2016 10/4/2016 11/27/2017 10/7/2016 10/7/2016 10/4/2016 11/27/2017 First Amendment to Stockholder Rights Agreement, dated as of January 22, 2018, by and between SandRidge Energy, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent 8-K 001-33784 4.1 1/23/2018 4.6 10.1† 10.1.1† 10.1.1.1† 10.1.2† Description of Registrant's Securities SandRidge Energy, Inc. 2016 Omnibus Incentive Plan Form of Restricted Stock Award Certificate and Agreement for SandRidge Energy, Inc. 2016 Omnibus Incentive Plan Form of Amendment No. 1 to the Restricted Stock Award Certificate and Agreement for SandRidge Energy, Inc. 2016 Omnibus Incentive Plan Form of Performance Share Unit Award Certificate and Agreement for SandRidge Energy, Inc. 2016 Omnibus Incentive Plan 8-K 10-K 001-33784 001-33784 10.8 10.1.4 10/7/2016 3/3/2017 10-Q 001-33784 10.1.4.1 11/3/2017 10-K 001-33784 10.1.5 3/3/2017 * 102 Table of Contents Exhibit No. 10.1.3† 10.1.3.1† Exhibit Description Form of Non-employee Director Restricted Stock Award Certificate and Agreement for SandRidge Energy, Inc. 2016 Omnibus Incentive Plan Form 10-Q Incorporated by Reference SEC File No. 001-33784 Exhibit 10.1.6 Filing Date 8/7/2017 Filed Herewith Form of Amendment No. 1 to the Non-employee Director Restricted Stock Award Certificate and Agreement for SandRidge Energy, Inc. 2016 Omnibus Incentive Plan 10-Q 001-33784 10.1.6.1 11/3/2017 10.1.4† Form of Restricted Stock Award Certificate and Agreement (Double Trigger) for SandRidge Energy, Inc. 2016 Omnibus Incentive Plan 10-K 001-33784 10.1.7 2/22/2018 10.1.5† 10.2† 10.2.1† 10.2.2† 10.2.3† 10.3† 10.4† 10.4.1† 10.4.2† 10.5† 10.6 10.7 10.8 10.9 Form of Non-employee Director Restricted Stock Award Agreement for SandRidge Energy, Inc. 2016 Omnibus Incentive Plan, dated July 17, 2018 10-Q 001-33784 10.1.1 11/8/2018 10-Q 001-33784 10.1 11/8/2018 10-Q 001-33784 10.1.2 11/8/2018 10-Q 001-33784 10.1.3 11/8/2018 10-K 001-33784 10.2.3 3/4/2019 10-Q 001-33784 10.3.4 11/5/2015 10-Q 10-Q 001-33784 001-33784 10.3.7 10.3.8 5/19/2019 5/19/2019 8-K 8-K 001-33784 001-33784 10.9 10.1 10/7/2016 6/27/2019 * 10-K 001-33784 10.6 3/3/2017 8-K 001-33784 10.4 10/7/2016 8-K 001-33784 10.5 10/7/2016 Amended and Restated SandRidge Energy, Inc. 2016 Omnibus Incentive Plan, dated August 8, 2018 Form of Executive Restricted Stock Award Agreement for Amended and Restated SandRidge Energy, Inc. 2016 Omnibus Incentive Plan Form of Performance Share Unit Award Agreement for Amended and Restated SandRidge Energy, Inc. 2016 Omnibus Incentive Plan Form of Option Award Agreement for Amended and Restated SandRidge Energy, Inc. 2016 Omnibus Incentive Plan 2015 Form of Employment Agreement for Executive Vice Presidents and Senior Vice Presidents of SandRidge Energy, Inc. The SandRidge Energy, Inc. Special Severance Plan First Amendment to the SandRidge Energy, Inc. Special Severance Plan Second Amendment to the SandRidge Energy, Inc. Special Severance Plan Form of Indemnification Agreement for directors and officers Amended and Restated Credit Agreement, dated as of June 21, 2019, among SandRidge Energy, Inc., Royal Bank of Canada, as Administrative Agent, and the other lenders party thereto filed as Exhibit A to the Refinancing Amendment No. 2 to the Existing Credit Agreement Pledge and Security Agreement, dated as of October 4, 2016, by SandRidge Energy, Inc., the other grantors party thereto, and Royal Bank of Canada, as Administrative Agent Intercreditor and Subordination Agreement, dated as of October 4, 2016, among SandRidge Energy, Inc., Royal Bank of Canada, as priority lien agent, and Wilmington Trust, National Association, as the subordinated collateral trustee Collateral Trust Agreement, dated as of October 4, 2016, among SandRidge Energy, Inc., the guarantors from time to time party thereto, Wilmington Trust, National Association, as Trustee under the Indenture, the other Parity Lien Representatives from time to time party thereto and Wilmington Trust, National Association, as Collateral Trustee 103 Table of Contents Exhibit No. 10.10.1 10.10.2 10.11**† 16.1 21.1 23.1 23.2 23.3 23.4 23.5 31.1 31.2 32.1 99.1 99.2 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE ** Exhibit Description Settlement Agreement, dated June 19, 2018, by and among SandRidge Energy, Inc., Carl C. Icahn, Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Enterprises G.P. Inc., Icahn Enterprises Holdings L.P., IPH GP LLC, Icahn Capital L.P., Icahn Onshore LP, Icahn Offshore LP, Beckton Corp., High River Limited Partnership, Hopper Investments LLC and Barberry Corp. and Bob Alexander, Sylvia K. Barnes, Jonathan Christodoro, William M. Griffin, Jr., John “Jack” Lipinski and Randolph Read Confidentiality Agreement, dated June 22, 2018, by and among SandRidge Energy, Inc., Carl C. Icahn, High River Limited Partnership, Hopper Investments LLC, Barberry Corp., Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Enterprises G.P. Inc., Icahn Enterprises Holdings L.P., IPH GP LLC, Icahn Capital LP, Icahn Onshore LP, Icahn Offshore LP, Beckton Corp, Jesse Lynn and Louie Pastor Letter Agreement, dated February 21, 2020, by and between the Company and John Suter Changes in Registrant's Certifying Accountant Subsidiaries of SandRidge Energy, Inc. Consent of Deloitte & Touche LLP Consent of PricewaterhouseCoopers LLP Consent of Cawley, Gillespie & Associates Consent of Ryder Scott Company, L.P. Consent of Netherland, Sewell & Associates, Inc. Section 302 Certification-Chief Executive Officer Section 302 Certification-Chief Financial Officer Section 906 Certifications of Chief Executive Officer and Chief Financial Officer Report of Cawley, Gillespie & Associates Report of Ryder Scott Company, L.P. XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document Incorporated by Reference Form 8-K SEC File No. 001-33784 Exhibit 10.1 Filing Date 6/19/2018 Filed Herewith 8-K 001-33784 10.2 6/19/2018 8-K 001-33784 16.1 5/13/2019 * * * * * * * * * * * * * * * * * * Portions of this exhibit have been redacted pursuant to a confidential treatment request filed with the SEC. † Management contract or compensatory plan or arrangement Item 16. Form 10-K Summary Not Applicable. 104 Table of Contents Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SANDRIDGE ENERGY, INC. SIGNATURES February 27, 2020 By /s/ John P. Suter John P. Suter Chief Operating Officer and Interim President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael A. Johnson and John P. Suter and each of them severally, his true and lawful attorney or attorneys-in-fact and agents, with full power to act with or without the others and with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, any or all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform in the name of on behalf of the undersigned, in any and all capacities, each and every act and thing necessary or desirable to be done in and about the premises, to all intents and purposes and as fully as they might or could do in person, hereby ratifying, approving and confirming all that said attorneys-in-fact and agents or their substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature /s/ John P. Suter John P. Suter Title Chief Operating Officer and Interim President and Chief Executive Officer (Principal Executive Officer) /s/ MICHAEL A. JOHNSON Michael A. Johnson Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ BOB G. ALEXANDER Director Bob G. Alexander /s/ JONATHAN CHRISTODORO Director Jonathan Christodoro /s/ JONATHAN FRATES Chairman Jonathan Frates /s/ JOHN J. LIPINSKI John J. Lipinski Director /s/ RANDOLPH C. READ Director Randolph C. Read 105 Date February 27, 2020 February 27, 2020 February 27, 2020 February 27, 2020 February 27, 2020 February 27, 2020 February 27, 2020  Exhibit 4.6 DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 The following summary describes the securities of SandRidge Energy, Inc., ("we," "our," and "us") registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of December 31, 2019, we have one class of securities; common stock. The following summary of the material terms of our securities is not intended to be a complete summary of the rights and preferences of such securities securities and is qualified in its entirety by reference to our Certificate of Incorporation and our Bylaws, and by applicable provisions of the Delaware General Corporation Law (the “DGCL”). We urge you to read our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) and our Amended and Restated Bylaws (the “Bylaws”) in their entirety for a complete description of the rights and preferences of our securities, copies of which have been filed with the SEC, as well as the applicable provisions of the DGCL for additional information. The Certificate of Incorporation and Bylaws are also incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.7 is a part. Description of Common Stock Authorized Capitalization Our authorized capital stock consists of 300,000,000 shares, which include 250,000,000 shares of common stock, par value $0.001 par value per share (the “common stock”) and 50,000,000 shares of preferred stock, par value $0.001 per share (the “preferred stock”). As of December 31, 2019, there were approximately 35,772,204 issued and outstanding shares of common stock and no shares of preferred stock issued and outstanding. All of the shares of common stock are duly authorized, validly issued, fully paid and non-assessable. Pursuant to the Bylaws and subject to any resolution of the stockholders, the Board is authorized to issue any of our authorized but unissued capital stock. Common Stock Dividends Subject to the rights granted to any holders of the preferred stock, holders of the common stock will be entitled to dividends in the amounts and at the times declared by our Board in our discretion out of any assets or our funds legally available for the payment of dividends. Voting Each holder of shares of the common stock is entitled to one vote for each share of the common stock on all matters presented to our stockholders (including the election of directors). Our common stock does not have cumulative voting rights. Uncontested elections of directors are decided by a majority of the votes cast with respect to that director’s election, and contested elections of directors are decided by a plurality of the votes cast present in person or represented by proxy, Liquidation The holders of the common stock will share equally and ratably in our assets on liquidation after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding. Other Rights The holders of the common stock do not have preemptive rights to purchase shares of our common stock. The common stock is not convertible, redeemable, assessable or entitled to the benefits of any sinking or repurchase fund. The rights, preferences and privileges of holders of the common stock will be subject to those of the holders of any shares of preferred stock that we may issue in the future. Under the terms of the Certificate of Incorporation and the Bylaws, we are prohibited from issuing any non-voting equity securities to the extent required under Section 1123(a)(6) of the Bankruptcy Code and only for so long as Section 1123 of the Bankruptcy Code is in effect and applicable to us. Listing The common stock is traded on the New York Stock Exchange under the trading symbol “SD.” Change in Control Effects of Certain Provisions Our Certificate of Incorporation, Bylaws, and the DGCL contain certain provisions that could delay, defer, or prevent a change in control by means of merger, reorganization, liquidation, tender offer, sale, transfer of substantially all of our assets, or otherwise. Advance Notice of Director Nominations and Matters to be Acted Upon at Meetings Our Bylaws contain advance notice requirements for nominations for directors to our Board of Directors and for proposing matters that can be acted upon by stockholders at stockholder meetings. Amendment to Bylaws Our Certificate of Incorporation provides that our Bylaws may be adopted, amended, restated, or repealed by the Board of Directors; provided no bylaw adopted by the stockholders can be amended, repealed, or readopted by the Board of Directors if such bylaw provides that it may not be amended, repealed, or readopted by the Board of Directors. The Certificate of Incorporation also provides that that the Bylaws may not be adopted, amended, restated or repealed by the stockholders except by the vote of holders of a majority in voting power of the outstanding shares of stock entitled to vote, voting together as a single class. Special Meeting of Stockholders Our Certificate of Incorporation provides that a special meeting of our stockholders may be called only by the Chief Executive Officer, the Chairman of the Board of Directors, the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors that the Corporation would have if there were no vacancies or by the Secretary of the Corporation at the written request or requests of holders of record of at least twenty-five percent (25%) of the voting power of the outstanding capital stock entitled to vote at the time of such written request pursuant to the procedures set forth in the Bylaws. Limits on Ability of Stockholders to Act by Written Consent Our Bylaws provide that any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of stockholders at an annual or special meeting duly noticed and called in accordance with the Bylaws, the Certificate of Incorporation, and the DGCL and may not be taken by written consent of the stockholders without a meeting. Exhibit 10.4.2 SECOND AMENDMENT TO THE SANDRIDGE ENERGY, INC. SPECIAL SEVERANCE PLAN THIS SECOND AMENDMENT TO THE SANDRIDGE ENERGY, INC. SPECIAL SEVERANCE PLAN (this “Second Amendment”), is effective November 6, 2019. WHEREAS, SandRidge Energy, Inc. (the “Company”) has adopted the SandRidge Energy, Inc. Special Severance Plan (the “Plan”), effective April 1, 2018 (the “Plan Effective Date”), and the First Amendment to the Plan effective December 17, 2018, to provide certain benefits to Eligible Employees, as defined therein, who are separated from employment following the Plan Effective Date through March 31, 2020 in circumstances that make them eligible for benefits under the Plan. WHEREAS, the Company intends to modify the benefits afforded under the Plan and therefore desires to amend the Plan; NOW, THEREFORE, the Plan is hereby amended as follows: 1. The Plan is hereby amended by deleting the phrase, “through March 31, 2020” of Paragraph 1. 2. The Plan is hereby amended by deleting Section 2 (n) Healthcare Stipend and replacing it with the following language: “Healthcare Stipend means the payment an Eligible Employee who is an active participant in the Company’s group health plan as of the Termination Date will receive as part of his/her Special Severance Benefits. If the Eligible Employee is in an officer position as of the Termination Date, the Healthcare Stipend will be in the amount of Fifteen Hundred Dollars ($1,500.00); if the Eligible Employee is not serving in an officer position as of the Termination Date, the Healthcare Stipend will be in an amount equal to Two Hundred and Fifty Dollars ($250.00) for each Year of Service, subject to a minimum payment of Two Hundred Fifty Dollars ($250.00) and a maximum payment of Fifteen Hundred Dollars ($1,500.00).” 3. The Plan is hereby amended by deleting Section 2(o) Long-Term Incentive Awards and replacing it with the following language: “Pro-Rated Long-Term Incentive Award Acceleration means, in the case of an Eligible Employee serving in an officer position as of the Termination Date, the accelerated vesting of an amount of such Eligible Employee’s outstanding restricted stock awards, performance awards and such other awards as may be granted under the Company’s 2016 Omnibus Incentive Plan, in each case, prorated for the time elapsed between such award’s grant date or most recent vesting date, as applicable, and the Termination Date. In the case of performance awards, the portion of the award subject to acceleration under this section shall be further modified by a performance factor determined in the Committee’s sole discretion, which may be calculated based on the Company’s actual performance over the elapsed performance period relative to the metrics established in applicable performance award. 4. The Plan is hereby amended by deleting Section 2(s) Pro-Rated AIP Payment and replacing it with the following language: “Pro-Rated AIP Payment means the payment an Eligible Employee will receive as part of his/her Special Severance Benefits which shall be based on the aggregate salary received by the Eligible Employee for the calendar year in which the Termination Date occurs multiplied by the Eligible Employee’s target annual incentive opportunity (expressed as a percentage) for the calendar year in which the Termination Date occurs multiplied by a corporate performance factor determined in the Committee’s sole discretion, which may be calculated based on the Company’s actual to date performance relative to the metrics established in the Company’s annual incentive program, if any, for the calendar year in which the Termination Date occurs.” 5. The Plan is hereby amended by deleting Section 2(u) Special Severance Benefits and replacing it with the following language: “Special Severance Benefit means the payments and benefits an Eligible Employee who becomes a Participant will receive under this Plan, which includes the Special Severance Payment, the Pro-Rated AIP Payment and, as applicable the Healthcare Stipend and/or the Pro-Rated Long-Term Incentive Award Acceleration.” 6. The Plan is hereby amended by deleting Section 2(v) Special Severance Payment and replacing it with the following language: “Special Severance Payment means the lump sum payment an Eligible Employee who becomes a Participant will receive under this Plan. If the Eligible Employee is serving in an officer position as of the Termination Date, the Special Severance Payment will be in an amount equal to four (4) weeks of Base Salary for each Year of Service, subject to a minimum payment equal to thirteen (13) weeks of Base Salary and a maximum payment equal to twenty-six (26) weeks of Base Salary; If the Eligible Employee is a Director (or the equivalent) as of the Termination Date, the Special Severance Payment will be in an amount equal to two (2) weeks of Base Salary for each Year of Service, subject to a minimum payment equal to eight (8) weeks of Base Salary and a maximum payment equal to twenty-six (26) weeks of Base Salary; If the Eligible Employee is in a position below Director, the Special Severance Payment will be in an amount equal to two (2) weeks of Base Salary for each Year of Service, subject to a minimum payment equal to two (2) weeks of Base Salary and a maximum of twenty-six (26) weeks of Base Salary.” 7. The Plan is hereby amended by deleting the second sentence of Section 2(y) Years of Service. For purposes of clarity, the following language shall be deleted: “For example, if the Eligible Employee has been employed by the Company for four years and four months as of the Termination Date, his/her Special Severance Payment would be calculated by multiplying 4 1/3 by 4 and his/her Special Severance Payment would be 17 1/3 weeks of Base Salary.” 8. The Plan is herby amended by deleting the last sentence of Section 9, which reads, “Unless specifically extended through an amendment as provided in this Section, the Plan will automatically terminate effective at 11:59 p.m. Central Standard/Daylight Time on March 31, 2020.” and replacing it with, “The Plan shall continue in full force and effect unless and until specifically terminated by the Committee.” 9. Exhibits A and A-1 at Section 2 are amended by deleting the second sentence of Section 2. For purposes of clarity, the following language shall be deleted: “Your final paycheck will include payment for any accrued and unused paid time off (“PTO”).” 10. Exhibits A and A-1 at Section 3 are hereby amended by deleting the first paragraph of Section 3 Special Severance Benefits, including clauses (a), (b), (c) and (d), and replacing it with the following language: “Special Severance Benefits. In consideration of your service to SandRidge and your execution of this Severance Agreement and the General Release, your not revoking the General Release during the seven day period described later in this Paragraph, and your compliance with the other terms of this Severance Agreement and the Plan, you will be entitled to receive the Special Severance Benefits in accordance with and as specifically provided for in the Plan.” 11. Exhibits B and B-1 are amended to add the following language, to be inserted at the end of Paragraph 3 of the General Releases: “Nothing in this Agreement is intended to prohibit An Eligible Employee from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General, or making other disclosures, including providing documents and other information, that are protected under the whistleblower provisions of federal law or regulation. In addition, an Eligible Employee does not need the prior authorization of the Company to make any such reports or disclosures, nor is an Eligible Employee required to notify the Company that an Eligible Employee is going to make or has made such reports or disclosures. This Agreement does not limit the Eligible Employee's right to receive a whistleblower reward or bounty for providing information to the Securities and Exchange Commission.” 12. Except as expressly amended hereby, the terms of the Plan shall be and remain unchanged and the Plan as amended hereby shall remain in full force and effect. [Remainder of page intentionally blank.] IN WITNESS WHEREOF, the Company has caused this Second Amendment to be executed by its duly authorized representative on the day and year first above written. SANDRIDGE ENERGY, INC. By: /s/ Michael A. Johnson Michael A. Johnson Senior Vice President and Chief Financial Officer CONFIDENTIAL TREATMENT HAS BEEN REQUESTED Exhibit 10.11 Certain portions of this exhibit, marked with [***], have been excluded from this exhibit, because it is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. February 21, 2020 Mr. John Suter ______________ ______________ Dear John: On behalf of the Board of Directors of SandRidge Energy, Inc. (the “Board”), I am pleased to offer you (“Executive”) continued employment in the position of Interim Chief Executive Officer and President and Chief Operating Officer of SandRidge Energy, Inc. (“Corporation”) from and after February 21, 2020 (the “Effective Date”). 1. 2. 3. 4. Agreement. This letter agreement (the “Agreement”) describes the terms and conditions of your employment and supersedes and preempts in all respects any prior understandings, agreements or representations by or between the parties, written or oral, which may have related in any manner to the subject matter hereof, including the Employment Agreement between Executive and the Corporation dated December 1, 2016 (the “Prior Agreement”). For avoidance of doubt, the Prior Agreement shall have no further force or effect. In the event of any inconsistency between the provisions of this Agreement and any other plan, program, practice or agreement in which Executive is a participant or a party, this Agreement shall control. On the Effective Date, Executive shall become an “at will” employee as defined under Oklahoma state law. Position. You will continue to serve as Interim Chief Executive Officer and President and Chief Operating Officer of the Corporation, reporting directly to the Board. Base Salary. Executive will continue at his current salary of $420,000 per annum, paid as is normally paid to existing employees. Stay Bonus. No later than five (5) business days after the Corporation files its 2019 Annual Report on Form 10-K (the “First Payment Date”), the Corporation will pay Executive $210,000. If Executive is terminated by the Corporation without Cause (as defined in the Prior Agreement) before the First Payment Date, he will receive said $210,000 following his termination date (to be paid within 5 business days). If Executive resigns before the First Payment Date, Executive will not receive this payment. If Executive is terminated by the Corporation without Cause at any time, Executive is to receive the Corporation’s normal severance plan, however at 26 weeks payment irrespective of his years of service. After September 30, 2020, Executive may resign and still qualify for such severance payments. Certain portions of this exhibit, marked with [***], have been excluded from this exhibit, because it is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. Mr. John Suter February 21, 2020 Page 2 5. 6. 7. 8. 9. Performance Bonus. If Executive achieves the “Basic Goals” set forth in the Corporation’s annual budget for 2020, and generally described in Appendix A, Executive will receive an additional $210,000 on July 15, 2020. If any of the five listed goals are not achieved, the payment will be reduced by 20% for each unattained goal. If Executive resigns before said date, he will not receive any Performance Bonus payment. If Executive is terminated by the Corporation without Cause prior to July 15, 2020, Executive will receive such $210,000 payment, if the Basic Goals have been reached before that date (attainment of goals under this scenario shall be determined using run-rate figures as of the date of termination). Outstanding Stock Grants. If Executive is terminated by the Corporation without Cause, Executive’s existing stock grants shall vest at the date of termination of employment. If Executive remains continuously employed by the Corporation until September 30, 2020, all such stock grants shall vest on said date. Executive’s existing stock grants shall not vest if he resigns from employment with the Corporation before September 30, 2020. Restrictive Covenants. As a condition to your employment with the Corporation, you will be required to sign a restrictive covenant agreement in a form satisfactory to the Corporation, which shall include confidentiality and non-disclosure obligations, non-competition, and employee and customer non-solicitation restrictions (“Restrictive Covenant Agreement”). Furthermore, Executive agrees not to disparage, or encourage or induce others to disparage, Carl Icahn and his family, the Corporation and its affiliates, related, parent, and subsidiary companies, and each of their officers, directors, employees, and clients (the “Released Parties”), with any third party, including, but not limited to, newspapers, authors, publicists, journalists, bloggers, gossip columnists, producers, directors, media personalities, and the like. For purposes of this Agreement, the term “disparage” includes, without limitation, comments or statements on the internet, to the press and/or media, to any Released Party or to any individual or entity with whom any of the Released Parties have a business relationship which would adversely affect in any manner (i) the conduct of the business of any of the Released Parties (including, without limitation, any business plans or prospects) or (ii) the business reputation of any the Released Parties. Withholding. The Corporation may withhold from any amounts payable under this Agreement all taxes that the Company reasonably determines to be required to be withheld pursuant to any law, regulation, or ruling. However, it is the Executive’s obligation to pay all required taxes on any amounts paid under this Agreement, regardless of the extent to which amounts are withheld. Governing Law. To the extent not preempted by federal law, the provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Oklahoma, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this provision to the substantive law of another jurisdiction. Each party hereby agrees that Oklahoma City, Oklahoma is the proper venue for any litigation seeking to enforce any provision of this Agreement, and each party hereby waives any right it otherwise might have to defend, oppose, or object to, on the basis of jurisdiction, venue, or forum nonconveniens, a suit filed by the other party in any federal or state court in Oklahoma City, Oklahoma to enforce any provision of this Agreement. [Signature Page Follows] Certain portions of this exhibit, marked with [***], have been excluded from this exhibit, because it is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. SandRidge Energy Inc. Agreed to and accepted by: By: /s/ Jonathan Frates Jonathan Frates Chairman of the Board /s/ John Suter John Suter Certain portions of this exhibit, marked with [***], have been excluded from this exhibit, because it is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. APPENDIX A The “Basic Goals” referenced in this letter and included in the 2020 budget shall constitute: 1. Reduction of Gross G&A to $[***]. Gross G&A is defined as fully burdened Corporate G&A expense before capitalized items, COPAS reimbursements and certain other adjustments, but adjusted for one-time severance and non-recurring items. More specifically: a. Reduce Company employment cost by $[***] G&A (salary, target annual bonus and benefits) by restructuring organization from 120 Oklahoma City G&A employees to [***]. b. Reduce Company gross Non-Payroll G&A cost to run-rate of $[***]. 2. Reduction of Lease Operating Expenses (LOE) from 1H 2019 to 1H 2020 by $[***], with full year run-rate reduction of $[***] by 2H 2020. 3. Create $[***] incremental cash in 1H 2020 from hedging and disposition of non-strategic land and seismic holdings. 4. Reduce abandonment obligations (all asset types) by $[***] through proactive divestitures of marginal properties. 5. Reach minimum full year production of [***]MMBoe. Exhibit 21.1 Entity Name Lariat Services, Inc. SandRidge Exploration and Production, LLC SandRidge Holdings, Inc. SandRidge Midstream, Inc. SandRidge Operating Company SandRidge Realty, LLC SANDRIDGE ENERGY, INC. SUBSIDIARIES State of Organization Texas Delaware Delaware Texas Texas Oklahoma Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement No. 333-232769 on Form S-3 and Registration Statement No. 333-214383 on Form S-8 of our reports dated February 27, 2020 relating to the consolidated financial statements of SandRidge Energy, Inc. and subsidiaries and the effectiveness of SandRidge Energy, Inc. and subsidiaries’ internal control over financial reporting appearing in this Annual Report on Form 10-K for the year ended December 31, 2019. /s/ Deloitte & Touche LLP Houston, Texas February 27, 2020 Exhibit 23.2 We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File No. 333-214383) and Form S-3 (File No. 333-232769) of SandRidge Energy, Inc. of our report dated March 5, 2019 relating to the financial statements, which appears in this Form 10-K. CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM /s/ PricewaterhouseCoopers LLP Oklahoma City, Oklahoma February 27, 2020 Exhibit 23.3 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS We hereby consent to the use by SandRidge Energy, Inc. (the “Company”), of our name and to the inclusion of information taken from the reports listed below in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, including any amendments thereto, filed with the U.S. Securities and Exchange Commission on or about February 27, 2020, as well as to the incorporation by reference thereof into the Company’s Registration Statement on Form S-8 (File No. 333- 214383) and Form S-3 (File No. 333-232769), including any amendments thereto, in accordance with the requirements of the Securities Act of 1933, as amended: December 31, 2019, SandRidge Energy, Inc. Interest in Certain Properties located in the United States — SEC Price Case December 31, 2018, SandRidge Energy, Inc. Interest in Certain Properties located in the United States — SEC Price Case December 31, 2017, SandRidge Energy, Inc. Interest in Certain Properties located in the United States — SEC Price Case CAWLEY, GILLESPIE & ASSOCIATES, INC. J. Zane Meekins Executive Vice President Fort Worth, Texas February 27, 2020 Exhibit 23.4 621 SEVENTEENTH STREET, SUITE 1550 DENVER, COLORADO 80293 (303) 623-9147 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS We hereby consent to the use by SandRidge Energy, Inc. (the “Company”), of our name and to the inclusion of information taken from the reports listed below in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission on or about February 27, 2020, as well as to the incorporation by reference thereof into the Company’s Registration Statement on Form S-8 (File No. 333-214383) and Form S-3 (File No. 333-232769), including any amendments thereto, in accordance with the requirements of the Securities Act of 1933, as amended: December 31, 2019, SandRidge Energy, Inc. Interest in Certain Properties located in the United States — SEC Price Case December 31, 2018, SandRidge Energy, Inc. Interest in Certain Properties located in the United States — SEC Price Case December 31, 2017, SandRidge Energy, Inc. Interest in Certain Properties located in the United States — SEC Price Case RYDER SCOTT COMPANY, L.P. Denver, Colorado February 27, 2020 1100 LOUISIANA, SUITE 4600 SUITE 800, 350 7th STREET, S.W. HOUSTON, TEXAS 77002-5218 CALGARY, ALBERTA T2P 3N9 TEL (713) 651-9191 TEL (403) 262-2799 FAX (713) 651-0849 FAX (403) 262-2790 Exhibit 23.5 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS We hereby consent to the use by SandRidge Energy, Inc. (the “Company”), of our name and to the inclusion of information taken from the reports listed below in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission on or about February 27, 2020, as well as to the incorporation by reference thereof into the Company’s Registration Statement on Form S-8 (File No. 333-214383), Form S-3 (File No. 333-232769), in accordance with the requirements of the Securities Act of 1933, as amended: December 31, 2017, SandRidge Energy, Inc. Proportional Consolidated Interest in Certain Properties located in Texas — SEC Price Case NETHERLAND, SEWELL & ASSOCIATES, INC. By: /s/ Joseph J. Spellman Joseph J. Spellman, P.E. Senior Vice President Dallas, Texas February 27, 2020 Please be advised that the digital document you are viewing is provided by Netherland, Sewell & Associates, Inc. (NSAI) as a convenience to our clients. The digital document is intended to be substantively the same as the original signed document maintained by NSAI. The digital document is subject to the parameters, limitations, and conditions stated in the original document. In the event of any differences between the digital document and the original document, the original document shall control and supersede the digital document. Exhibit 31.1 Certification of the Company’s Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241) I, John P. Suter, certify that: 1. I have reviewed this annual report on Form 10-K of SandRidge Energy, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ John P. Suter John P. Suter Chief Operating Officer and Interim President and Chief Executive Officer Date: February 27, 2020 Exhibit 31.2 I, Michael A. Johnson, certify that: 1. I have reviewed this annual report on Form 10-K of SandRidge Energy, Inc.; Certification of the Company’s Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241) 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ Michael A. Johnson Michael A. Johnson Senior Vice President and Chief Financial Officer Date: February 27, 2020 Certification of the Company’s Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) Pursuant to 18 U.S.C. § 1350, the undersigned officers of SandRidge Energy, Inc. (the “Company”), hereby certify that the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Exhibit 32.1 /s/ John P. Suter John P. Suter Chief Operating Officer and Interim President and Chief Executive Officer /s/ Michael A. Johnson Michael A. Johnson Senior Vice President and Chief Financial Officer February 27, 2020 February 27, 2020 Exhibit 99.1 Mr. Lance J. Galvin SandRidge Energy, Inc. 123 Robert S. Kerr Avenue Oklahoma City, Oklahoma 73102 Dear Mr. Galvin: January 22, 2020 Re: Evaluation Summary SandRidge Energy, Inc. Interests Proved Developed Producing Reserves As of January 1, 2020 As requested, we are submitting our estimates of proved developed producing reserves and our forecasts of the resulting economics attributable to the SandRidge Energy, Inc. (“SandRidge”) interests in certain oil and gas properties located in Kansas and Oklahoma. The net reserves and future net revenue for SandRidge have been estimated using the proportional consolidation method with respect to the SandRidge Mississippian Trust I and SandRidge Mississippian Trust II. Under the proportional consolidation method and for the properties in which the Trusts have an interest, SandRidge’s interest share of revenues, expenses, investments and liabilities includes both Sandridge’s direct interest in the properties and SandRidge’s revenue interest share of the Trusts. It is our understanding that the proved developed producing reserves estimated in this report constitute approximately 50 percent of all proved reserves owned by SandRidge. This report, completed on January 22, 2020, has been prepared for use in filings with the U.S. Securities and Exchange Commission by SandRidge. Composite reserve estimates and economic forecasts for the proved developed producing reserves to the SandRidge proportional consolidation interests are summarized below: Net Reserves Oil/Condensate Gas NGL Revenue Oil/Condensate Gas NGL Operating Income (BFIT) Discounted @ 10% - Mbbl - MMcf - Mbbl - M$ - M$ - Mbbl - M$ - M$ Proved Developed Producing 6,277 160,208 12,140 338,795 202,535 148,736 212,758 156,276 Evaluation Summary SandRidge Energy, Inc. Page 2 In accordance with the Securities and Exchange Commission guidelines, the operating income (BFIT) has been discounted at an annual rate of 10% to determine its “present worth”. The discounted value, “present worth”, shown above should not be construed to represent an estimate of the fair market value by Cawley, Gillespie & Associates, Inc. For the properties in which the Trusts have an interest, SandRidge is obligated to act as a reasonably prudent operator by disregarding the existence of the Trusts’ royalty interests as burdens affecting the properties. Therefore, the economic viability of these properties has been evaluated based on economic limits when combining the SandRidge direct interest and the Trusts’ total royalty interest. The detailed forecasts of reserves and economics are presented in the attached tables. Table I- I- PDP, is a summary of the reserves and associated economics by reserve category. Table II-PDP is a one- line summary of the ultimate recovery, gross and net reserves, ownership, revenue, expenses, investments, net income and discounted cash flows for the individual forecasts in each Table I. The entries in these tables are sorted by lease name. Page 1 of the appendix explains the types of data in these tables. The methods employed in estimating reserves are described in page 2 of the Appendix. The annual average Henry Hub spot market gas price of $2.58 per MMBtu and the annual average WTI Cushing spot oil price of $55.69 per barrel were used in this report. In accordance with the Securities and Exchange Commission guidelines, these prices are determined as an unweighted arithmetic average of the first-day-of-the-month price for each month of 2019. The oil and gas prices were held constant and were adjusted for gravity, heating value, quality, transportation and regional price differentials. The adjusted volume- weighted average product prices over the life of the properties are $53.97 per barrel of oil, $12.25 per barrel of NGL and $1.26 per Mcf of gas. Operating costs were based on operating expense records of SandRidge. For non-operated properties, these costs include the overhead expenses allowed under existing joint operating agreements. Drilling and completion costs were based on estimates provided by SandRidge and reviewed for reasonableness by Cawley, Gillespie & Associates. Abandonment costs used in the report are estimates prepared by SandRidge to abandon the wells and production facilities, net of salvage value. As per the Securities and Exchange Commission guidelines, neither expenses nor investments were escalated. The proved reserve classifications conform to criteria of the Securities and Exchange Commission as defined in pages 3-4 of the Appendix. The estimates of reserves in this report have been prepared in accordance with the definitions and disclosure guidelines set forth in the Securities and Exchange Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register (SEC regulations). The reserves and economics are predicated on the regulatory agency classifications, rules, policies, laws, taxes and royalties in effect on the date of this report as noted herein. In evaluating the information at our disposal concerning this report, we have excluded from our consideration all matters as to which the controlling interpretation may be legal or accounting, rather than engineering and geoscience. Therefore, the possible effects of changes in legislation or other Federal or State restrictive actions have not been considered. An on-site field inspection of the properties has not been performed. The mechanical operation or conditions of the wells and their related facilities have not been examined nor have the wells been tested by Cawley, Gillespie & Associates, Inc. Possible environmental liability related to the properties has not been investigated nor considered. Evaluation Summary SandRidge Energy, Inc. Page 3 The reserves were estimated using a combination of the production performance, volumetric and analogy methods, in each case as we considered to be appropriate and necessary to establish the conclusions set forth herein. All reserve estimates represent our best judgment based on data available at the time of preparation and assumptions as to future economic and regulatory conditions. It should be realized that the reserves actually recovered, the revenue derived therefrom and the actual cost incurred could be more or less than the estimated amounts. The reserve estimates were based on interpretations of factual data furnished by SandRidge. Ownership interests were supplied by SandRidge and were accepted as furnished. To some extent, information from public records has been used to check and/or supplement these data. The basic engineering and geological data were utilized subject to third party reservations and qualifications. Nothing has come to our attention, however, that would cause us to believe that we are not justified in relying on such data. Cawley, Gillespie & Associates, Inc. is independent with respect to SandRidge as provided in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information promulgated by the Society of Petroleum Engineers (“SPE Standards”). Neither Cawley, Gillespie & Associates, Inc. nor any of its employees has any interest in the subject properties. Neither the employment to make this study nor the compensation is contingent on the results of our work or the future production rates for the subject properties. Our work-papers and related data are available for inspection and review by authorized parties. The technical person responsible for the preparation of this report meets or exceeds the education, training, and experience requirements set forth in the SPE Standards. Respectfully submitted, CAWLEY, GILLESPIE & ASSOCIATES, INC. Texas Registered Engineering Firm F-693 JZM:ptn Exhibit 99.2 SandRidge Energy, Inc. Estimated Future Reserves and Income Attributable to Certain Leasehold and Royalty Interests SEC Parameters As of December 31, 2019 /s/ Scott James Wilson Scott J. Wilson, P.E., MBA Colorado License No. 36112 Senior Vice President RYDER SCOTT COMPANY, L.P. TBPE Firm Registration No. F-1580 RYDER SCOTT COMPANY PETROLEUM CONSULTANTS TBPE REGISTERED ENGINEERING FIRM F-1580 633 17TH STREET SUITE 1700 DENVER, COLORADO 80202 TELEPHONE (303) 339-8110 January 20, 2020 SandRidge Energy, Inc. 123 Robert S. Kerr Oklahoma City, OK 73102 Ladies and Gentlemen: At your request, Ryder Scott Company, L.P. (Ryder Scott) has prepared an estimate of the proved reserves, future production, and income attributable to certain leasehold and royalty interests of SandRidge Energy, Inc. (SandRidge) as of December 31, 2019. The subject properties are located in the states of Colorado and Oklahoma. The reserves and income data were estimated based on the definitions and disclosure guidelines of the United States Securities and Exchange Commission (SEC) contained in Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register (SEC regulations). Our third party study, completed on January 20, 2020 and presented herein, was prepared for public disclosure by SandRidge in filings made with the SEC in accordance with the disclosure requirements set forth in the SEC regulations. The properties evaluated by Ryder Scott account for a portion of SandRidge’s total net proved reserves as of December 31, 2019. Based on information provided by SandRidge, the third party estimate conducted by Ryder Scott addresses 78 percent of the total proved net oil reserves, 16 percent of total proved net plant products reserves, and 23 percent of the total proved net gas reserves of SandRidge. When considered in discounted cash flow terms, the reserve values evaluated represent 48 percent of the FNI discounted at 10 percent. The estimated reserves and future net income amounts presented in this report, as of December 31, 2019, are related to hydrocarbon prices. The hydrocarbon prices used in the preparation of this report are based on the average prices during the 12-month period prior to the “as of date” of this report, determined as the unweighted arithmetic averages of the prices in effect on the first-day-of- the-month for each month within such period, unless prices were defined by contractual arrangements, as required by the SEC regulations. Actual future prices may vary considerably from the prices required by SEC regulations. The recoverable reserves volumes and the income attributable thereto have a direct relationship to the hydrocarbon prices actually received; therefore, volumes of reserves actually recovered and the amounts of income actually received may differ significantly from the estimated quantities presented in this report. The results of this study are summarized as follows. SandRidge Energy, Inc. January 20, 2020 Page 2 SEC PARAMETERS Estimated Net Reserves and Income Data Certain Leasehold and Royalty Interests of SandRidge Energy, Inc. As of December 31, 2019 Net Reserves Oil/Condensate – MBarrels Plant Products – MBarrels Gas – MMCF Income Data ($M) Future Gross Revenue Deductions Future Net Income (FNI) Discounted FNI @ 10% Developed Producing Proved Undeveloped Total Proved 6,230 1,134 20,792 $333,319 180,027 $153,292 $102,634 21,230 1,328 31,454 $1,058,890 794,064 $ 264,826 27,460 2,462 52,246 $1,392,209 974,091 $ 418,118 $ 73,788 $ 176,422 Liquid hydrocarbons are expressed in standard 42 U.S. gallon barrels and shown herein as thousands of barrels (MBarrels). All gas volumes are reported on an “as sold basis” expressed in millions of cubic feet (MMCF) at the official temperature and pressure bases of the areas in which the gas reserves are located. In this report, the revenues, deductions, and income data are expressed as thousands of U.S. dollars ($M). The estimates of the reserves, future production, and income attributable to properties in this report were prepared using the economic software package ARIESTM Petroleum Economics and Reserves Software, a copyrighted program of Halliburton. The program was used at the request of SandRidge. Ryder Scott has found this program to be generally acceptable, but notes that certain summaries and calculations may vary due to rounding and may not exactly match the sum of the properties being summarized. Furthermore, one line economic summaries may vary slightly from the more detailed cash flow projections of the same properties, also due to rounding. The rounding differences are not material. The future gross revenue is after the deduction of production taxes. The deductions incorporate the normal direct costs of operating the wells, ad valorem taxes, and development costs. The future net income is before the deduction of state and federal income taxes and general administrative overhead, and has not been adjusted for outstanding loans that may exist, nor does it include any adjustment for cash on hand or undistributed income. Liquid hydrocarbon reserves account for approximately 97 percent and gas reserves account for the remaining 3 percent of total future gross revenue from proved reserves. The discounted future net income shown above was calculated using a discount rate of 10 percent per annum compounded monthly. Future net income was discounted at five other discount rates which were also compounded monthly. These results are shown in summary form as follows. RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SandRidge Energy, Inc. January 20, 2020 Page 3 Discount Rate Percent 7.5 9.0 15.0 20.0 25.0 Discounted Future Net Income ($M) As of December 31, 2019 Total Proved $214,445 $190,511 $122,527 $ 87,058 $ 62,619 The results shown above are presented for your information and should not be construed as our estimate of fair market value. Reserves Included in This Report The proved reserves included herein conform to the definition as set forth in the Securities and Exchange Commission’s Regulations Part 210.4-10(a). An abridged version of the SEC reserves definitions from 210.4-10(a) entitled “PETROLEUM RESERVES DEFINITIONS” is included as an attachment to this report. The reserves status categories are defined in the attachment entitled “PETROLEUM RESERVES STATUS DEFINITIONS AND GUIDELINES” in this report. No attempt was made to quantify or otherwise account for any accumulated gas production imbalances that may exist. The proved gas volumes presented herein do not include volumes of gas consumed in operations as reserves. Reserves are “estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations.” All reserves estimates involve an assessment of the uncertainty relating the likelihood that the actual remaining quantities recovered will be greater or less than the estimated quantities determined as of the date the estimate is made. The uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved. Unproved reserves are less certain to be recovered than proved reserves, and may be further sub-categorized as probable and possible reserves to denote progressively increasing uncertainty in their recoverability. At SandRidge’s request, this report addresses only the proved reserves attributable to the properties evaluated herein. Proved oil and gas reserves are “those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward.” The proved reserves included herein were estimated using deterministic methods. The SEC has defined reasonable certainty for proved reserves, when based on deterministic methods, as a “high degree of confidence that the quantities will be recovered.” Proved reserves estimates will generally be revised only as additional geologic or engineering data become available or as economic conditions change. For proved reserves, the SEC states that “as changes due to increased availability of geoscience (geological, geophysical, and geochemical), engineering, and economic data are made to the estimated ultimate recovery (EUR) with time, RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SandRidge Energy, Inc. January 20, 2020 Page 4 reasonably certain EUR is much more likely to increase or remain constant than to decrease.” Moreover, estimates of proved reserves may be revised as a result of future operations, effects of regulation by governmental agencies or geopolitical or economic risks. Therefore, the proved reserves included in this report are estimates only and should not be construed as being exact quantities, and if recovered, the revenues therefrom, and the actual costs related thereto, could be more or less than the estimated amounts. SandRidge’s operations may be subject to various levels of governmental controls and regulations. These controls and regulations may include, but may not be limited to, matters relating to land tenure and leasing, the legal rights to produce hydrocarbons, drilling and production practices, environmental protection, marketing and pricing policies, royalties, various taxes and levies including income tax and are subject to change from time to time. Such changes in governmental regulations and policies may cause volumes of proved reserves actually recovered and amounts of proved income actually received to differ significantly from the estimated quantities. The estimates of proved reserves presented herein were based upon a detailed study of the properties in which SandRidge owns an interest; however, we have not made any field examination of the properties. No consideration was given in this report to potential environmental liabilities that may exist nor were any costs included for potential liabilities to restore and clean up damages, if any, caused by past operating practices. Estimates of Reserves The estimation of reserves involves two distinct determinations. The first determination results in the estimation of the quantities of recoverable oil and gas and the second determination results in the estimation of the uncertainty associated with those estimated quantities in accordance with the definitions set forth by the Securities and Exchange Commission’s Regulations Part 210.4-10(a). The process of estimating the quantities of recoverable oil and gas reserves relies on the use of certain generally accepted analytical procedures. These analytical procedures fall into three broad categories or methods: (1) performance-based methods; (2) volumetric- based methods; and (3) analogy. These methods may be used individually or in combination by the reserves evaluator in the process of estimating the quantities of reserves. Reserves evaluators must select the method or combination of methods which in their professional judgment is most appropriate given the nature and amount of reliable geoscience and engineering data available at the time of the estimate, the established or anticipated performance characteristics of the reservoir being evaluated, and the stage of development or producing maturity of the property. In many cases, the analysis of the available geoscience and engineering data and the subsequent interpretation of this data may indicate a range of possible outcomes in an estimate, irrespective of the method selected by the evaluator. When a range in the quantity of reserves is identified, the evaluator must determine the uncertainty associated with the incremental quantities of the reserves. If the reserves quantities are estimated using the deterministic incremental approach, the uncertainty for each discrete incremental quantity of the reserves is addressed by the reserves category assigned by the evaluator. Therefore, it is the categorization of reserves quantities as proved, probable and/or possible that addresses the inherent uncertainty in the estimated quantities reported. For proved reserves, uncertainty is defined by the SEC as reasonable certainty wherein the “quantities actually recovered are much more likely to be achieved than not.” The SEC states that “probable reserves are those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.” The SEC states that “possible reserves are those additional reserves that are less certain to be recovered than probable reserves and the total quantities ultimately recovered from a project have a low probability of exceeding RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SandRidge Energy, Inc. January 20, 2020 Page 5 proved plus probable plus possible reserves.” All quantities of reserves within the same reserves category must meet the SEC definitions as noted above. Estimates of reserves quantities and their associated reserves categories may be revised in the future as additional geoscience or engineering data become available. Furthermore, estimates of reserves quantities and their associated reserves categories may also be revised due to other factors such as changes in economic conditions, results of future operations, effects of regulation by governmental agencies or geopolitical or economic risks as previously noted herein. The proved reserves for the properties included herein were estimated by performance methods, the volumetric method, analogy, or a combination of methods. All of the proved producing reserves attributable to producing wells and/or reservoirs were estimated by performance methods or a combination of methods. These performance methods include, but may not be limited to, decline curve analysis, material balance and/or reservoir simulation which utilized extrapolations of historical production and pressure data available through November 2019 in those cases where such data were considered to be definitive. The data utilized in this analysis were furnished to Ryder Scott by SandRidge or obtained from public data sources and were considered sufficient for the purpose thereof. All of the proved undeveloped reserves included herein were estimated by analogy, the volumetric method, or a combination of methods. The volumetric analysis utilized pertinent well data furnished to Ryder Scott by SandRidge or which we have obtained from public data sources that were available through November 2019. The data utilized from the analogues in addition to well data incorporated into our volumetric analysis were considered sufficient for the purpose thereof. To estimate economically recoverable proved oil and gas reserves and related future net cash flows, we consider many factors and assumptions including, but not limited to, the use of reservoir parameters derived from geological, geophysical and engineering data which cannot be measured directly, economic criteria based on current costs and SEC pricing requirements, and forecasts of future production rates. Under the SEC regulations 210.4-10(a)(22)(v) and (26), proved reserves must be anticipated to be economically producible from a given date forward based on existing economic conditions including the prices and costs at which economic producibility from a reservoir is to be determined. While it may reasonably be anticipated that the future prices received for the sale of production and the operating costs and other costs relating to such production may increase or decrease from those under existing economic conditions, such changes were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation. SandRidge has informed us that they have furnished us all of the material accounts, records, geological and engineering data, and reports and other data required for this investigation. In preparing our forecast of future proved production and income, we have relied upon data furnished by SandRidge with respect to property interests owned, production and well tests from examined wells, normal direct costs of operating the wells or leases, other costs such as transportation and/or processing fees, ad valorem and production taxes, and development costs, development plans, abandonment costs after salvage, product prices based on the SEC regulations, adjustments or differentials to product prices, geological structural and isochore maps, well logs, core analyses, and pressure measurements. Ryder Scott reviewed such factual data for its reasonableness; however, we have not conducted an independent verification of the data furnished by SandRidge. We consider the factual data used in this report appropriate and sufficient for the purpose of preparing the estimates of reserves and future net revenues herein. In summary, we consider the assumptions, data, methods and analytical procedures used in this report appropriate for the purpose hereof, and we have used all such methods and procedures that we consider necessary and appropriate to prepare the estimates of reserves herein. The proved reserves RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SandRidge Energy, Inc. January 20, 2020 Page 6 included herein were determined in conformance with the United States Securities and Exchange Commission (SEC) Modernization of Oil and Gas Reporting; Final Rule, including all references to Regulation S-X and Regulation S-K, referred to herein collectively as the “SEC Regulations.” In our opinion, the proved reserves presented in this report comply with the definitions, guidelines and disclosure requirements as required by the SEC regulations. Future Production Rates For wells currently on production, our forecasts of future production rates are based on historical performance data. If no production decline trend has been established, future production rates were held constant, or adjusted for the effects of curtailment where appropriate, until a decline in ability to produce was anticipated. An estimated rate of decline was then applied until depletion of the reserves. If a decline trend has been established, this trend was used as the basis for estimating future production rates. Test data and other related information were used to estimate the anticipated initial production rates for those locations that are not currently producing. For reserves not yet on production, sales were estimated to commence at an anticipated date furnished by SandRidge. Locations that are not currently producing may start producing earlier or later than anticipated in our estimates due to unforeseen factors causing a change in the timing to initiate production. Such factors may include delays due to weather, the availability of rigs, the sequence of drilling, well completions and/or constraints set by regulatory bodies. The future production rates from wells currently on production or locations that are not currently producing may be more or less than estimated because of changes including, but not limited to, reservoir performance, operating conditions related to surface facilities, compression and artificial lift, pipeline capacity and/or operating conditions, producing market demand and/or allowables or other constraints set by regulatory bodies. Hydrocarbon Prices The hydrocarbon prices used herein are based on SEC price parameters using the average prices during the 12-month period prior to the “as of date” of this report, determined as the unweighted arithmetic averages of the prices in effect on the first-day-of-the- month for each month within such period, unless prices were defined by contractual arrangements. For hydrocarbon products sold under contract, the contract prices, including fixed and determinable escalations, exclusive of inflation adjustments, were used until expiration of the contract. Upon contract expiration, the prices were adjusted to the 12-month unweighted arithmetic average as previously described. SandRidge furnished us with the above mentioned average prices in effect on December 31, 2019. These initial SEC hydrocarbon prices were determined using the 12-month average first-day-of-the-month benchmark prices appropriate to the geographic area where the hydrocarbons are sold. These benchmark prices are prior to the adjustments for differentials as described herein. The table below summarizes the “benchmark prices” and “price reference” used for the geographic area included in the report. In certain geographic areas, the price reference and benchmark prices may be defined by contractual arrangements. The product prices which were actually used to determine the future gross revenue for each property reflect adjustments to the benchmark prices for gravity, quality, local conditions, gathering and RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SandRidge Energy, Inc. January 20, 2020 Page 7 transportation fees and/or distance from market, referred to herein as “differentials.” The differentials used in the preparation of this report were furnished to us by SandRidge. The differentials furnished to us were accepted as factual data and reviewed by us for their reasonableness; however, we have not conducted an independent verification of the data used by SandRidge to determine these differentials. In addition, the table below summarizes the net volume weighted benchmark prices adjusted for differentials and referred to herein as the “average realized prices.” The average realized prices shown in the table below were determined from the total future gross revenue before production taxes and the total net reserves for the geographic area and presented in accordance with SEC disclosure requirements for the geographic area included in the report. Geographic Area Product Oil Price Reference WTI Cushing United States Plant Products WTI Cushing Average Benchmark Prices $55.69/BBL $55.69/BBL Gas Henry Hub $2.58/MMBTU Average Realized Prices $49.70/BBL $13.37/BBL (24% of WTI) $0.75/MCF The effects of derivative instruments designated as price hedges of oil and gas quantities are not reflected in our individual property evaluations. Costs Operating costs for the leases and wells in this report were furnished by SandRidge and are based on the operating expense reports of SandRidge and include only those costs directly applicable to the leases or wells. The operating costs furnished to us were accepted as factual data and reviewed by us for their reasonableness; however, we have not conducted an independent verification of the operating cost data used by SandRidge. No deduction was made for loan repayments, interest expenses, or exploration and development prepayments that were not charged directly to the leases or wells. Development costs were furnished to us by SandRidge and are based on authorizations for expenditure for the proposed work or actual costs for similar projects. The development costs furnished to us were accepted as factual data and reviewed by us for their reasonableness; however, we have not conducted an independent verification of these costs. SandRidge’s estimates of zero abandonment costs after salvage value for onshore properties were used in this report. Ryder Scott has not performed a detailed study of the abandonment costs or the salvage value and makes no warranty for SandRidge’s estimate. The proved developed undeveloped reserves in this report have been incorporated herein in accordance with SandRidge’s plans to develop these reserves as of December 31, 2019. The implementation of SandRidge’s development plans as presented to us and incorporated herein is subject to the approval process adopted by SandRidge’s management. As the result of our inquiries during the course of preparing this report, SandRidge has informed us that the development activities included herein have been subjected to and received the internal approvals required by SandRidge’s management at the appropriate local, regional and/or corporate level. In addition to the internal approvals as noted, certain development activities may still be subject to specific partner AFE RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SandRidge Energy, Inc. January 20, 2020 Page 8 processes, Joint Operating Agreement (JOA) requirements or other administrative approvals external to SandRidge. SandRidge has provided written documentation supporting their commitment to proceed with the development activities as presented to us. Additionally, SandRidge has informed us that they are not aware of any legal, regulatory or political obstacles that would significantly alter their plans. While these plans could change from those under existing economic conditions as of December 31, 2019, such changes were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation. Current costs used by SandRidge were held constant throughout the life of the properties. Standards of Independence and Professional Qualification Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world since 1937. Ryder Scott is employee-owned and maintains offices in Houston, Texas; Denver, Colorado; and Calgary, Alberta, Canada. We have approximately eighty engineers and geoscientists on our permanent staff. By virtue of the size of our firm and the large number of clients for which we provide services, no single client or job represents a material portion of our annual revenue. We do not serve as officers or directors of any privately-owned or publicly-traded oil and gas company and are separate and independent from the operating and investment decision-making process of our clients. This allows us to bring the highest level of independence and objectivity to each engagement for our services. Ryder Scott actively participates in industry-related professional societies and organizes an annual public forum focused on the subject of reserves evaluations and SEC regulations. Many of our staff have authored or co-authored technical papers on the subject of reserves related topics. We encourage our staff to maintain and enhance their professional skills by actively participating in ongoing continuing education. Prior to becoming an officer of the Company, Ryder Scott requires that staff engineers and geoscientists have received professional accreditation in the form of a registered or certified professional engineer’s license or a registered or certified professional geoscientist’s license, or the equivalent thereof, from an appropriate governmental authority or a recognized self-regulating professional organization. Regulating agencies require that, in order to maintain active status, a certain amount of continuing education hours be completed annually, including an hour of ethics training. Ryder Scott fully supports this technical and ethics training with our internal requirement mentioned above. We are independent petroleum engineers with respect to SandRidge. Neither we nor any of our employees have any financial interest in the subject properties and neither the employment to do this work nor the compensation is contingent on our estimates of reserves for the properties which were reviewed. The results of this study, presented herein, are based on technical analysis conducted by teams of geoscientists and engineers from Ryder Scott. The professional qualifications of the undersigned, the technical person primarily responsible for overseeing the evaluation of the reserves information discussed in this report, are included as an attachment to this letter. RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SandRidge Energy, Inc. January 20, 2020 Page 9 Terms of Usage The results of our third party study, presented in report form herein, were prepared in accordance with the disclosure requirements set forth in the SEC regulations and intended for public disclosure as an exhibit in filings made with the SEC by SandRidge. SandRidge makes periodic filings on Form 10-K with the SEC under the 1934 Exchange Act. Furthermore, SandRidge has certain registration statements filed with the SEC under the 1933 Securities Act into which any subsequently filed Form 10-K is incorporated by reference. We have consented to the incorporation by reference in the registration statements on Forms S-3 and S-8 of SandRidge, of the references to our name, as well as to the references to our third party report for SandRidge, which appears in the December 31, 2019 annual report on Form 10-K of SandRidge. Our written consent for such use is included as a separate exhibit to the filings made with the SEC by SandRidge. We have provided SandRidge with a digital version of the original signed copy of this report letter. In the event there are any differences between the digital version included in filings made by SandRidge and the original signed report letter, the original signed report letter shall control and supersede the digital version. The data and work papers used in the preparation of this report are available for examination by authorized parties in our offices. Please contact us if we can be of further service. Very truly yours, RYDER SCOTT COMPANY, L.P. TBPE Firm Registration No. F-1580 /s/ Scott James Wilson Scott J. Wilson, P.E., MBA Colorado License No. 36112 Senior Vice President RYDER SCOTT COMPANY PETROLEUM CONSULTANTS SJW (DCR)/pl Professional Qualifications of Primary Technical Person The conclusions presented in this report are the result of technical analysis conducted by teams of geoscientists and engineers from Ryder Scott Company, L.P. Mr. Scott James Wilson was the primary technical person responsible for the estimate of the reserves, future production, and income presented herein. Mr. Wilson, an employee of Ryder Scott Company L.P. (Ryder Scott) since 2000, is a Senior Vice President responsible for coordinating and supervising staff and consulting engineers of the company in ongoing reservoir evaluation studies worldwide. Before joining Ryder Scott, Mr. Wilson served in a number of engineering positions with Atlantic Richfield Company. For more information regarding Mr. Company website at https://www.ryderscott.com/company/employees/denver-employees. Wilson's geographic and job specific experience, please refer to the Ryder Scott Mr. Wilson earned a Bachelor of Science degree in Petroleum Engineering from the Colorado School of Mines in 1983 and an MBA in Finance from the University of Colorado in 1985, graduating from both with High Honors. He is a registered Professional Engineer by exam in the States of Alaska, Colorado, Texas, and Wyoming. He is also an active member of the Society of Petroleum Engineers; serving as co-Chairman of the SPE Reserves and Economics Technology Interest Group, and Gas Technology Editor for SPE's Journal of Petroleum Technology. He is a member and past chairman of the Denver section of the Society of Petroleum Evaluation Engineers. Mr. Wilson has published several technical papers, one chapter in Marine and Petroleum Geology and two in SPEE monograph 4, which was published in 2016. He is the primary inventor on four US patents and won the 2017 Reservoir Description and Dynamics award for the SPE Rocky Mountain Region. In addition to gaining experience and competency through prior work experience, several state Boards of Professional Engineers require a minimum number of hours of continuing education annually, including at least one hour in the area of professional ethics, which Mr. Wilson fulfills as part of his registration in four states. As part of his continuing education, Mr. Wilson attends internally presented training as well as public forums relating to the definitions and disclosure guidelines contained in the United States Securities and Exchange Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, and Final Rule released January 14, 2009 in the Federal Register. Mr. Wilson attends additional hours of formalized external training covering such topics as the SPE/WPC/AAPG/SPEE Petroleum Resources Management System, reservoir engineering and petroleum economics evaluation methods, procedures and software and ethics for consultants. Based on his educational background, professional training and more than 30 years of practical experience in the estimation and evaluation of petroleum reserves, Mr. Wilson has attained the professional qualifications as a Reserves Estimator and Reserves Auditor set forth in Article III of the “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information” promulgated by the Society of Petroleum Engineers as of February 19, 2007. RYDER SCOTT COMPANY PETROLEUM CONSULTANTS PETROLEUM RESERVES DEFINITIONS As Adapted From: RULE 4-10(a) of REGULATION S-X PART 210 UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC) PREAMBLE On January 14, 2009, the United States Securities and Exchange Commission (SEC) published the “Modernization of Oil and Gas Reporting; Final Rule” in the Federal Register of National Archives and Records Administration (NARA). The “Modernization of Oil and Gas Reporting; Final Rule” includes revisions and additions to the definition section in Rule 4-10 of Regulation S-X, revisions and additions to the oil and gas reporting requirements in Regulation S-K, and amends and codifies Industry Guide 2 in Regulation S-K. The “Modernization of Oil and Gas Reporting; Final Rule”, including all references to Regulation S-X and Regulation S-K, shall be referred to herein collectively as the “SEC regulations”. The SEC regulations take effect for all filings made with the United States Securities and Exchange Commission as of December 31, 2009, or after January 1, 2010. Reference should be made to the full text under Title 17, Code of Federal Regulations, Regulation S-X Part 210, Rule 4-10(a) for the complete definitions (direct passages excerpted in part or wholly from the aforementioned SEC document are denoted in italics herein). Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. All reserve estimates involve an assessment of the uncertainty relating the likelihood that the actual remaining quantities recovered will be greater or less than the estimated quantities determined as of the date the estimate is made. The uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved. Unproved reserves are less certain to be recovered than proved reserves and may be further sub-classified as probable and possible reserves to denote progressively increasing uncertainty in their recoverability. Under the SEC regulations as of December 31, 2009, or after January 1, 2010, a company may optionally disclose estimated quantities of probable or possible oil and gas reserves in documents publicly filed with the SEC. The SEC regulations continue to prohibit disclosure of estimates of oil and gas resources other than reserves and any estimated values of such resources in any document publicly filed with the SEC unless such information is required to be disclosed in the document by foreign or state law as noted in §229.1202 Instruction to Item 1202. Reserves estimates will generally be revised only as additional geologic or engineering data become available or as economic conditions change. Reserves may be attributed to either natural energy or improved recovery methods. Improved recovery methods include all methods for supplementing natural energy or altering natural forces in the reservoir to increase ultimate recovery. Examples of such methods are pressure maintenance, natural gas cycling, waterflooding, thermal methods, chemical flooding, and the use of miscible and immiscible RYDER SCOTT COMPANY PETROLEUM CONSULTANTS PETROLEUM RESERVES DEFINITIONS Page 2 displacement fluids. Other improved recovery methods may be developed in the future as petroleum technology continues to evolve. Reserves may be attributed to either conventional or unconventional petroleum accumulations. Petroleum accumulations are considered as either conventional or unconventional based on the nature of their in-place characteristics, extraction method applied, or degree of processing prior to sale. Examples of unconventional petroleum accumulations include coalbed or coalseam methane (CBM/CSM), basin-centered gas, shale gas, gas hydrates, natural bitumen and oil shale deposits. These unconventional accumulations may require specialized extraction technology and/or significant processing prior to sale. Reserves do not include quantities of petroleum being held in inventory. Because of the differences in uncertainty, caution should be exercised when aggregating quantities of petroleum from different reserves categories. RESERVES (SEC DEFINITIONS) Securities and Exchange Commission Regulation S-X §210.4-10(a)(26) defines reserves as follows: Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project. Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir, or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations). PROVED RESERVES (SEC DEFINITIONS) Securities and Exchange Commission Regulation S-X §210.4-10(a)(22) defines proved oil and gas reserves as follows: Proved oil and gas reserves. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. RYDER SCOTT COMPANY PETROLEUM CONSULTANTS PETROLEUM RESERVES DEFINITIONS Page 3 (i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data. (ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty. (iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty. (iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including governmental entities. (v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. RYDER SCOTT COMPANY PETROLEUM CONSULTANTS PETROLEUM RESERVES STATUS DEFINITIONS AND GUIDELINES As Adapted From: RULE 4-10(a) of REGULATION S-X PART 210 UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC) and 2018 PETROLEUM RESOURCES MANAGEMENT SYSTEM (SPE-PRMS) Sponsored and Approved by: SOCIETY OF PETROLEUM ENGINEERS (SPE) WORLD PETROLEUM COUNCIL (WPC) AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS (AAPG) SOCIETY OF PETROLEUM EVALUATION ENGINEERS (SPEE) SOCIETY OF EXPLORATION GEOPHYSICISTS (SEG) SOCIETY OF PETROPHYSICISTS AND WELL LOG ANALYSTS (SPWLA) EUROPEAN ASSOCIATION OF GEOSCIENTISTS & ENGINEERS (EAGE) Reserves status categories define the development and producing status of wells and reservoirs. Reference should be made to Title 17, Code of Federal Regulations, Regulation S-X Part 210, Rule 4-10(a) and the SPE-PRMS as the following reserves status definitions are based on excerpts from the original documents (direct passages excerpted from the aforementioned SEC and SPE- PRMS documents are denoted in italics herein). DEVELOPED RESERVES (SEC DEFINITIONS) Securities and Exchange Commission Regulation S-X §210.4-10(a)(6) defines developed oil and gas reserves as follows: Developed oil and gas reserves are reserves of any category that can be expected to be recovered: (i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. Developed Producing (SPE-PRMS Definitions) While not a requirement for disclosure under the SEC regulations, developed oil and gas reserves may be further sub-classified according to the guidance contained in the SPE-PRMS as Producing or Non-Producing. RYDER SCOTT COMPANY PETROLEUM CONSULTANTS PETROLEUM RESERVES STATUS DEFINITIONS AND GUIDELINES Page 2 Developed Producing Reserves Developed Producing Reserves are expected quantities to be recovered from completion intervals that are open and producing at the effective date of the estimate. Improved recovery reserves are considered producing only after the improved recovery project is in operation. Developed Non-Producing Developed Non-Producing Reserves include shut-in and behind-pipe Reserves. Shut-In Shut-in Reserves are expected to be recovered from: (1) completion intervals that are open at the time of the estimate but which have not yet started producing; (2) wells which were shut-in for market conditions or pipeline connections; or (3) wells not capable of production for mechanical reasons. Behind-Pipe Behind-pipe Reserves are expected to be recovered from zones in existing wells that will require additional completion work or future re-completion before start of production with minor cost to access these reserves. In all cases, production can be initiated or restored with relatively low expenditure compared to the cost of drilling a new well. UNDEVELOPED RESERVES (SEC DEFINITIONS) Securities and Exchange Commission Regulation S-X §210.4-10(a)(31) defines undeveloped oil and gas reserves as follows: Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. (i)Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. (ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time. (iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in paragraph (a)(2) of this section, or by other evidence using reliable technology establishing reasonable certainty. RYDER SCOTT COMPANY PETROLEUM CONSULTANTS 

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