SandRidge today is a company whose oil reserves comprise over 50 percent of its total PV-10 value basis. Even as natural gas prices remained low in 2009, oil prices recovered to an attractive level and currently provide a much higher return on invested capital. Although we remain positive about the future, we suspect that near-term pricing of natural gas could face significant challenges.

Our management team has focused SandRidge on natural gas and worked to increase our production – from 20 million cubic feet of gas equivalent per day (Mmcfe/d) in June 2006 to 325 Mmcfe/d at year-end 2008. However, as commodity prices dropped sharply in the latter half of 2008 in reaction to the severe decline in U.S. and world economies, we knew we would have to modify our strategies.

The first step was to slow our drilling program. We moved from a planned $2 billion budget for 2009, to $500 million in drilling, and went from a high of 47 active rigs in August 2008 to a low of just four rigs running in early 2009. This enabled us to cut our capital expenditures (CAPEX) without dramatically affecting our earnings before interest, taxes, depreciation and amortization (EBITDA) thanks to the effectiveness of our hedging program, which locked in our natural gas prices through 2010. Next, we moved to diversify the company and in late 2009 successfully completed an $800 million acquisition of Permian Basin oil properties.

In addition, we strengthened our balance sheet through private and public debt and equity transactions and the sale of noncore assets, raising $1.8 billion in 2009. These transactions enabled us to pay down our credit revolver, finance our CAPEX budget and fund the Permian Basin acquisition.

In 2009, we hedged 77 percent of our total production at an average price of $8.59 per thousand cubic feet of natural gas equivalent (Mcfe). In 2010, we have 80 billion cubic feet (Bcf) of natural gas hedged at an average price of $7.70 per Mcf, and 4.38 million barrels of oil (MMBbls) hedged at an average price of $82.04 per barrel. This accounts for approximately 80 percent of our expected 2010 production at an average price of $9.17 per Mcfe.

In November 2008, we broke ground on the Century Plant CO2 treating facility located just outside of Fort Stockton, Texas. Built in partnership with Occidental Petroleum (Oxy), the Century Plant will be the largest CO2 treating plant in the world in terms of volume of CO2 removed and captured. Under the agreement, Oxy will pay for the construction while 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, SandRidge will deliver the methane for sale into the marketplace and Oxy will take the CO2 to the Permian Basin for environmentally-friendly sequestration in its tertiary oil recovery projects.

The opening of the plant this summer will allow us to increase drilling in our primary target in the Piñon Field, the Warwick Thrust. The shallow decline curve inherent in the Warwick allows us to maintain our production much more easily than reservoirs with steep initial declines. Because of its high CO2 content, however, the ability to separate the gas stream is key to our ability to access this prolific natural gas zone. Phase II of the Century Plant, scheduled for completion in late 2011, will potentially add another 400 MMcf per day of CO2 treating capacity, giving SandRidge a total capacity exceeding one Bcf per day of total inlet gas.

In late 2009, SandRidge acquired 80 MMboe (482 Bcfe) of proved reserves and more than 90 MMboe (540 Bcfe) of resource potential in the Central Basin Platform of the Permian Basin. This acquisition raises our leasehold position in the area to more than 150,000 acres and significantly increases our ability to develop and produce oil and natural gas from our core West Texas properties. This transaction was particularly unique because it allowed us to acquire a package of quality oil properties for an amount that will be largely recouped over the next three years by hedging the proved developed production, while also obtaining the undeveloped resource potential upside for a nominal amount.

We are particularly excited about the opportunities we now have in the Central Basin Platform where we are expanding our successful Clear Fork and San Andres drilling programs. Thanks to attractive oil prices and low drilling costs, the Clear Fork and San Andres currently generate the company’s highest returns on invested capital. Both formations are proven, producing billions of barrels of oil since being discovered in the early 1900s.

Wells drilled in the San Andres reach a total depth of 4,500 feet in just four days while Clear Fork wells reach a total depth of 6,200 feet in seven days. Both reservoirs have long established decline curves for trusted economic returns.

We have reduced the commodity price risk associated with the acquisition of these properties by entering into oil hedges, which lock in over $1.3 billion of future revenue through 2012. In addition, we believe there is a tremendous amount of upside remaining in these properties.

Our exploration program is focused within our 500,000 acres of leasehold in the West Texas Overthrust, and seeks to find structures similar to the Piñon Field. In 2008, we completed the largest contiguous proprietary onshore 3-D seismic shoot in the U.S., acquiring 1,300 square miles of data. During 2009, we processed and analyzed the data collected and found leads to 20 distinct structures to potentially explore.

Because of the inherent risk involved in exploratory drilling, SandRidge is taking a tempered approach to testing the leads defined through our 3-D seismic analysis. In 2010, we plan to drill six exploratory wells, testing several separate structures. With just $25 million of our $860 million total CAPEX budget dedicated to exploration, and with each well having the potential of finding multiple Tcf of natural gas, we believe this to be an appropriate balance between risk and reward.

With the steps taken over the past several months, SandRidge is now poised to grow through the development of both oil and natural gas properties, and we expect the percentage of revenues from oil sales to continue to increase in the future. We now have an enviable base to develop natural gas in the Piñon Field, develop oil in the Central Basin Platform and explore for new natural gas fields in the West Texas Overthrust. We are fortunate to be able to maximize earnings by running an appropriate mix of rigs in our oil and natural gas plays while having the option to adjust further from natural gas to oil drilling as dictated by project economics and return on investment.

I would like to express my appreciation to our talented and hardworking employees for their unmatched dedication, to our board of directors for its stewardship and counsel, and finally to all of our fellow shareholders for their continued faith in the future of our company.

Tom L. Ward

Chairman and Chief Executive Officer

SandRidge today is a company whose oil reserves comprise over 50 percent of its total PV-10 value basis. Even as natural gas prices remained low in 2009, oil prices recovered to an attractive level and currently provide a much higher return on invested capital. Although we remain positive about the future, we suspect that near-term pricing of natural gas could face significant challenges.

Our management team has focused SandRidge on natural gas and worked to increase our production – from 20 million cubic feet of gas equivalent per day (Mmcfe/d) in June 2006 to 325 Mmcfe/d at year-end 2008. However, as commodity prices dropped sharply in the latter half of 2008 in reaction to the severe decline in U.S. and world economies, we knew we would have to modify our strategies.

The first step was to slow our drilling program. We moved from a planned $2 billion budget for 2009, to $500 million in drilling, and went from a high of 47 active rigs in August 2008 to a low of just four rigs running in early 2009. This enabled us to cut our capital expenditures (CAPEX) without dramatically affecting our earnings before interest, taxes, depreciation and amortization (EBITDA) thanks to the effectiveness of our hedging program, which locked in our natural gas prices through 2010. Next, we moved to diversify the company and in late 2009 successfully completed an $800 million acquisition of Permian Basin oil properties.

In addition, we strengthened our balance sheet through private and public debt and equity transactions and the sale of noncore assets, raising $1.8 billion in 2009. These transactions enabled us to pay down our credit revolver, finance our CAPEX budget and fund the Permian Basin acquisition.

In 2009, we hedged 77 percent of our total production at an average price of $8.59 per thousand cubic feet of natural gas equivalent (Mcfe). In 2010, we have 80 billion cubic feet (Bcf) of natural gas hedged at an average price of $7.70 per Mcf, and 4.38 million barrels of oil (MMBbls) hedged at an average price of $82.04 per barrel. This accounts for approximately 80 percent of our expected 2010 production at an average price of $9.17 per Mcfe.

In November 2008, we broke ground on the Century Plant CO2 treating facility located just outside of Fort Stockton, Texas. Built in partnership with Occidental Petroleum (Oxy), the Century Plant will be the largest CO2 treating plant in the world in terms of volume of CO2 removed and captured. Under the agreement, Oxy will pay for the construction while 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, SandRidge will deliver the methane for sale into the marketplace and Oxy will take the CO2 to the Permian Basin for environmentally-friendly sequestration in its tertiary oil recovery projects.

The opening of the plant this summer will allow us to increase drilling in our primary target in the Piñon Field, the Warwick Thrust. The shallow decline curve inherent in the Warwick allows us to maintain our production much more easily than reservoirs with steep initial declines. Because of its high CO2 content, however, the ability to separate the gas stream is key to our ability to access this prolific natural gas zone. Phase II of the Century Plant, scheduled for completion in late 2011, will potentially add another 400 MMcf per day of CO2 treating capacity, giving SandRidge a total capacity exceeding one Bcf per day of total inlet gas.

In late 2009, SandRidge acquired 80 MMboe (482 Bcfe) of proved reserves and more than 90 MMboe (540 Bcfe) of resource potential in the Central Basin Platform of the Permian Basin. This acquisition raises our leasehold position in the area to more than 150,000 acres and significantly increases our ability to develop and produce oil and natural gas from our core West Texas properties. This transaction was particularly unique because it allowed us to acquire a package of quality oil properties for an amount that will be largely recouped over the next three years by hedging the proved developed production, while also obtaining the undeveloped resource potential upside for a nominal amount.

We are particularly excited about the opportunities we now have in the Central Basin Platform where we are expanding our successful Clear Fork and San Andres drilling programs. Thanks to attractive oil prices and low drilling costs, the Clear Fork and San Andres currently generate the company’s highest returns on invested capital. Both formations are proven, producing billions of barrels of oil since being discovered in the early 1900s.

Wells drilled in the San Andres reach a total depth of 4,500 feet in just four days while Clear Fork wells reach a total depth of 6,200 feet in seven days. Both reservoirs have long established decline curves for trusted economic returns.

We have reduced the commodity price risk associated with the acquisition of these properties by entering into oil hedges, which lock in over $1.3 billion of future revenue through 2012. In addition, we believe there is a tremendous amount of upside remaining in these properties.

Our exploration program is focused within our 500,000 acres of leasehold in the West Texas Overthrust, and seeks to find structures similar to the Piñon Field. In 2008, we completed the largest contiguous proprietary onshore 3-D seismic shoot in the U.S., acquiring 1,300 square miles of data. During 2009, we processed and analyzed the data collected and found leads to 20 distinct structures to potentially explore.

Because of the inherent risk involved in exploratory drilling, SandRidge is taking a tempered approach to testing the leads defined through our 3-D seismic analysis. In 2010, we plan to drill six exploratory wells, testing several separate structures. With just $25 million of our $860 million total CAPEX budget dedicated to exploration, and with each well having the potential of finding multiple Tcf of natural gas, we believe this to be an appropriate balance between risk and reward.

With the steps taken over the past several months, SandRidge is now poised to grow through the development of both oil and natural gas properties, and we expect the percentage of revenues from oil sales to continue to increase in the future. We now have an enviable base to develop natural gas in the Piñon Field, develop oil in the Central Basin Platform and explore for new natural gas fields in the West Texas Overthrust. We are fortunate to be able to maximize earnings by running an appropriate mix of rigs in our oil and natural gas plays while having the option to adjust further from natural gas to oil drilling as dictated by project economics and return on investment.

I would like to express my appreciation to our talented and hardworking employees for their unmatched dedication, to our board of directors for its stewardship and counsel, and finally to all of our fellow shareholders for their continued faith in the future of our company.

Tom L. Ward

Chairman and Chief Executive Officer