The first half of the year was a story of strong demand and high commodity prices driven by a prolonged period of global economic expansion. Prices peaked in early July, only to be followed by the sharp contrast of rapid commodity price decline and deteriorating world economic conditions. Through the ensuing credit freeze, no sector of the market was left untouched.

Recognizing the severity of the situation, we took swift action to begin positioning SandRidge for this extreme change in conditions by reducing our rig count, hedging future production, reducing our 2009 capital expenditures budget and issuing preferred stock.

Our singular focus on one primary area of production – the West Texas Overthrust (WTO) region of Pecos and Terrell counties, Texas – makes SandRidge a unique company and allows us to react very quickly to changes in the environment. We moved from having 47 rigs operating in August to 13 rigs in December, and in so doing, significantly reduced our capital expenditures. In March 2009, we reached an operated rig count of 7 rigs and expect to remain at or below that level throughout 2009.

Our management team was also quick to react to the rapidly changing commodity pricing environment by locking in very favorable prices for the majority of our expected 2009 and 2010 natural gas production. For 2009, 85 percent of our projected natural gas production is hedged at an average price of $8.42 per thousand cubic feet (Mcf). In addition, we have hedged 80 billion cubic feet (Bcf) of natural gas for 2010, at an average price of $7.70 per Mcf. With the predictable cash flow afforded by our hedge program and the continued success of our low findingcost drilling program, SandRidge continues to maintain a strong financial outlook.

Capital discipline is essential to the long-term health of any company, regardless of what happens within the overall marketplace. It is even more critical during times of economic downturn. To this end, we reduced our 2009 budget from an initial projection of $2.0 billion to a range of $500-$700 million, and expect to remain at the low end of that range unless we see substantial upward movement in commodity prices. This budget allows us to remain within our cash resources while growing our annual production by 10 percent.

The West Texas Overthrust is a world class asset, defined by complex geology and enormous untapped potential. SandRidge holds more than 650,000 acres of contiguous leasehold upon which to explore – believed to be one of the largest contiguous blocks of onshore U.S. leasehold owned by one company. Significantly, the majority of this acreage is contracted under long-term lease agreements providing the company with great flexibility in our drilling activities.

Located within the northwest portion of this vast area is the Piñon Field, encompassing approximately 70 square miles and home to more than 5.7 trillion cubic feet of natural gas equivalent (Tcfe) of potential reserves. SandRidge has drilled over 700 wells in this field, more than 500 since 2006, and holds a portfolio of 3,100 additional drilling locations. While the current economic climate may not allow us to pursue an aggressive exploration budget this year, we will continue to increase our year-over-year production through our drilling activity within the Piñon Field.

We successfully completed the largest proprietary, onshore 3-D seismic shoot in U.S. history last fall, with the acquisition of nearly 1,300 square miles of 3-D seismic data. Our focus on low-cost drilling within the Piñon Field during 2009 will allow our geosciences team to continue their analysis of the seismic data and develop future exploratory drilling locations. We continue to believe there are other fields similar to Piñon to be found across the West Texas Overthrust using our 3-D data set.

During the summer of 2008, SandRidge signed a historic joint venture agreement with Occidental Petroleum Corporation (Oxy) to build the Century Plant – the largest CO2 treating plant in the world, in terms of the volume of CO2 removed and captured. Construction is currently under way, with Phase I scheduled for completion in the second quarter of 2010. Under the agreement, Oxy will spend $800 million for the construction of the plant and SandRidge will build the plant and drill the wells necessary to deliver the combined CO2 and methane gas stream to the plant for treatment. Once separated, Oxy will take the CO2 to the Permian Basin for environmentally-friendly sequestration in their tertiary oil recovery projects while we sell the methane into the marketplace. Our 30-year contract provides each company with a product that can be used separately but not together in the same gas stream. Oxy will get a waste gas that assists in their oil recovery projects, and SandRidge will receive pipeline-quality methane that could not otherwise be produced and sold without the capability to remove the CO2.

The Century Plant is a milestone in the continued expansion of SandRidge Energy. The plant will allow the company to further develop a reservoir that stands above any other in the U.S. – the prolific Warwick Thrust, which produces from a depth of approximately 6,500 feet, and averages 7.5 Bcfe of total gas (CO2 and methane) per well. The Warwick is a high-deliverability reservoir that contains an abundance of methane gas, but is contaminated with CO2. The ability to extract and dispose of the CO2 in a cost-effective and environmentally friendly manner is essential in order to drill and produce this formation. In fact, it is likely this reservoir would have been produced decades ago if not for the inability to treat large amounts of CO2.

The addition of the Century Plant will enable us to fully develop the Warwick Thrust within the Piñon Field. When Phase I of the Century Plant commences operations next spring, we will be able to increase our production by up to an additional 100 million cubic feet of natural gas equivalent per day (MMcfe/d)1. By the end of 2011, we expect to produce up to 1.1 Bcfe/d of total gas from this reservoir, which will yield approximately 290 MMcfe/d of net methane to SandRidge. This is a tremendous amount of gas to come from a single field – one that was virtually unknown two years ago – and in which only one company, SandRidge, has the right to more than 95 percent of the leasehold.

Overview of 2008

For the year, we recorded adjusted net income available to common stockholders2 of $151.5 million, or $0.97 per share, operating cash flow3 of $540 million, an increase of 83 percent over the prior year, and earnings before interest, taxes, depreciation, amortization and other non-cash items (Adjusted EBITDA)4 of $688 million, 74 percent higher than 2007.

SandRidge continues to grow production even in the midst of a difficult economy and shut-in production due to hurricanes and a plant fire. In 2008, we grew production by 58 percent for a total of 101.4 Bcfe. The company exited the year producing approximately 325 MMcfe/d, compared to 234 MMcfe/d at year-end 2007, an increase of 39 percent. Our proved reserves grew by 42 percent to end the year at 2.16 Tcfe. We replaced 734 percent of our reserves – 695 percent through drilling – at an all-in adjusted finding cost of $1.90 per Mcfe5.

SandRidge is well positioned to grow even through this time of economic uncertainty. We continue to believe in the long-term attractiveness of natural gas as a fuel, and our outlook for the industry and our company remains positive. SandRidge is known for our ability to extract natural gas at very low finding costs. This competitive edge will become even more evident as we bring the Century Plant on line next year and are able to expand production from our best reservoir, the Warwick Thrust.

Our laser focus on the WTO has enabled SandRidge to become the leader in an area with an untold amount of upside potential. SandRidge controls the leasehold, 3-D seismic data and infrastructure and, with the addition of the Century Plant, is the only company with the ability to explore, transport and treat natural gas as it is found in the West Texas Overthrust. Even in the face of world economic challenges, I am convinced the opportunities and potential our company has for significant growth are unique within our industry.

I am thankful to all of our fellow shareholders for your continued faith in the future of our company, to our talented workforce for their unmatched dedication and to our board of directors for their expertise, advice and leadership.

Tom L. Ward

The first half of the year was a story of strong demand and high commodity prices driven by a prolonged period of global economic expansion. Prices peaked in early July, only to be followed by the sharp contrast of rapid commodity price decline and deteriorating world economic conditions. Through the ensuing credit freeze, no sector of the market was left untouched.

Recognizing the severity of the situation, we took swift action to begin positioning SandRidge for this extreme change in conditions by reducing our rig count, hedging future production, reducing our 2009 capital expenditures budget and issuing preferred stock.

Our singular focus on one primary area of production – the West Texas Overthrust (WTO) region of Pecos and Terrell counties, Texas – makes SandRidge a unique company and allows us to react very quickly to changes in the environment. We moved from having 47 rigs operating in August to 13 rigs in December, and in so doing, significantly reduced our capital expenditures. In March 2009, we reached an operated rig count of 7 rigs and expect to remain at or below that level throughout 2009.

Our management team was also quick to react to the rapidly changing commodity pricing environment by locking in very favorable prices for the majority of our expected 2009 and 2010 natural gas production. For 2009, 85 percent of our projected natural gas production is hedged at an average price of $8.42 per thousand cubic feet (Mcf). In addition, we have hedged 80 billion cubic feet (Bcf) of natural gas for 2010, at an average price of $7.70 per Mcf. With the predictable cash flow afforded by our hedge program and the continued success of our low findingcost drilling program, SandRidge continues to maintain a strong financial outlook.

Capital discipline is essential to the long-term health of any company, regardless of what happens within the overall marketplace. It is even more critical during times of economic downturn. To this end, we reduced our 2009 budget from an initial projection of $2.0 billion to a range of $500-$700 million, and expect to remain at the low end of that range unless we see substantial upward movement in commodity prices. This budget allows us to remain within our cash resources while growing our annual production by 10 percent.

The West Texas Overthrust is a world class asset, defined by complex geology and enormous untapped potential. SandRidge holds more than 650,000 acres of contiguous leasehold upon which to explore – believed to be one of the largest contiguous blocks of onshore U.S. leasehold owned by one company. Significantly, the majority of this acreage is contracted under long-term lease agreements providing the company with great flexibility in our drilling activities.

Located within the northwest portion of this vast area is the Piñon Field, encompassing approximately 70 square miles and home to more than 5.7 trillion cubic feet of natural gas equivalent (Tcfe) of potential reserves. SandRidge has drilled over 700 wells in this field, more than 500 since 2006, and holds a portfolio of 3,100 additional drilling locations. While the current economic climate may not allow us to pursue an aggressive exploration budget this year, we will continue to increase our year-over-year production through our drilling activity within the Piñon Field.

We successfully completed the largest proprietary, onshore 3-D seismic shoot in U.S. history last fall, with the acquisition of nearly 1,300 square miles of 3-D seismic data. Our focus on low-cost drilling within the Piñon Field during 2009 will allow our geosciences team to continue their analysis of the seismic data and develop future exploratory drilling locations. We continue to believe there are other fields similar to Piñon to be found across the West Texas Overthrust using our 3-D data set.

During the summer of 2008, SandRidge signed a historic joint venture agreement with Occidental Petroleum Corporation (Oxy) to build the Century Plant – the largest CO2 treating plant in the world, in terms of the volume of CO2 removed and captured. Construction is currently under way, with Phase I scheduled for completion in the second quarter of 2010. Under the agreement, Oxy will spend $800 million for the construction of the plant and SandRidge will build the plant and drill the wells necessary to deliver the combined CO2 and methane gas stream to the plant for treatment. Once separated, Oxy will take the CO2 to the Permian Basin for environmentally-friendly sequestration in their tertiary oil recovery projects while we sell the methane into the marketplace. Our 30-year contract provides each company with a product that can be used separately but not together in the same gas stream. Oxy will get a waste gas that assists in their oil recovery projects, and SandRidge will receive pipeline-quality methane that could not otherwise be produced and sold without the capability to remove the CO2.

The Century Plant is a milestone in the continued expansion of SandRidge Energy. The plant will allow the company to further develop a reservoir that stands above any other in the U.S. – the prolific Warwick Thrust, which produces from a depth of approximately 6,500 feet, and averages 7.5 Bcfe of total gas (CO2 and methane) per well. The Warwick is a high-deliverability reservoir that contains an abundance of methane gas, but is contaminated with CO2. The ability to extract and dispose of the CO2 in a cost-effective and environmentally friendly manner is essential in order to drill and produce this formation. In fact, it is likely this reservoir would have been produced decades ago if not for the inability to treat large amounts of CO2.

The addition of the Century Plant will enable us to fully develop the Warwick Thrust within the Piñon Field. When Phase I of the Century Plant commences operations next spring, we will be able to increase our production by up to an additional 100 million cubic feet of natural gas equivalent per day (MMcfe/d)1. By the end of 2011, we expect to produce up to 1.1 Bcfe/d of total gas from this reservoir, which will yield approximately 290 MMcfe/d of net methane to SandRidge. This is a tremendous amount of gas to come from a single field – one that was virtually unknown two years ago – and in which only one company, SandRidge, has the right to more than 95 percent of the leasehold.

Overview of 2008

For the year, we recorded adjusted net income available to common stockholders2 of $151.5 million, or $0.97 per share, operating cash flow3 of $540 million, an increase of 83 percent over the prior year, and earnings before interest, taxes, depreciation, amortization and other non-cash items (Adjusted EBITDA)4 of $688 million, 74 percent higher than 2007.

SandRidge continues to grow production even in the midst of a difficult economy and shut-in production due to hurricanes and a plant fire. In 2008, we grew production by 58 percent for a total of 101.4 Bcfe. The company exited the year producing approximately 325 MMcfe/d, compared to 234 MMcfe/d at year-end 2007, an increase of 39 percent. Our proved reserves grew by 42 percent to end the year at 2.16 Tcfe. We replaced 734 percent of our reserves – 695 percent through drilling – at an all-in adjusted finding cost of $1.90 per Mcfe5.

SandRidge is well positioned to grow even through this time of economic uncertainty. We continue to believe in the long-term attractiveness of natural gas as a fuel, and our outlook for the industry and our company remains positive. SandRidge is known for our ability to extract natural gas at very low finding costs. This competitive edge will become even more evident as we bring the Century Plant on line next year and are able to expand production from our best reservoir, the Warwick Thrust.

Our laser focus on the WTO has enabled SandRidge to become the leader in an area with an untold amount of upside potential. SandRidge controls the leasehold, 3-D seismic data and infrastructure and, with the addition of the Century Plant, is the only company with the ability to explore, transport and treat natural gas as it is found in the West Texas Overthrust. Even in the face of world economic challenges, I am convinced the opportunities and potential our company has for significant growth are unique within our industry.

I am thankful to all of our fellow shareholders for your continued faith in the future of our company, to our talented workforce for their unmatched dedication and to our board of directors for their expertise, advice and leadership.

Tom L. Ward