Company Quick10K Filing
SandRidge Energy
Price5.46 EPS-4
Shares36 P/E-1
MCap195 P/FCF2
Net Debt56 EBIT-146
TEV251 TEV/EBIT-2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-07
10-Q 2020-03-31 Filed 2020-05-19
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-05
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-03
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
10-Q 2013-12-31 Filed 2015-01-08
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-06
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-03-01
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-06
10-Q 2012-03-31 Filed 2012-05-07
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-07
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-09
10-K 2010-12-31 Filed 2011-02-28
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-01
8-K 2020-09-10 M&A
8-K 2020-08-31 M&A, Exhibits
8-K 2020-08-05 Earnings, Exhibits
8-K 2020-07-30 Officers
8-K 2020-07-01 Officers, Exhibits
8-K 2020-07-01 Enter Agreement, Shareholder Rights, Amend Bylaw, Regulation FD, Exhibits
8-K 2020-06-05
8-K 2020-05-18
8-K 2020-05-15
8-K 2020-05-08
8-K 2020-04-14
8-K 2020-04-06
8-K 2020-04-05
8-K 2020-02-26
8-K 2020-02-04
8-K 2019-12-12
8-K 2019-11-12
8-K 2019-08-07
8-K 2019-06-21
8-K 2019-05-30
8-K 2019-05-23
8-K 2019-05-08
8-K 2019-05-08
8-K 2019-05-07
8-K 2019-04-03
8-K 2019-03-25
8-K 2019-03-04
8-K 2019-01-28
8-K 2018-11-07
8-K 2018-09-17
8-K 2018-09-10
8-K 2018-08-08
8-K 2018-06-19
8-K 2018-06-18
8-K 2018-06-15
8-K 2018-06-11
8-K 2018-06-06
8-K 2018-06-05
8-K 2018-06-04
8-K 2018-05-29
8-K 2018-05-22
8-K 2018-05-07
8-K 2018-05-07
8-K 2018-04-16
8-K 2018-04-09
8-K 2018-03-10
8-K 2018-02-21
8-K 2018-02-08
8-K 2018-01-22

SD 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex311ceo302certificati.htm
EX-31.2 ex312cfo302certificati.htm
EX-32.1 ex321section906certifi.htm

SandRidge Energy Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
10.07.54.92.4-0.2-2.72012201420172020
Assets, Equity
1.71.20.70.3-0.2-0.72012201420172020
Rev, G Profit, Net Income
2.21.61.10.5-0.0-0.62012201420172020
Ops, Inv, Fin

sd-20200630
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-33784

SANDRIDGE ENERGY, INC.
(Exact name of registrant as specified in its charter)

Delaware20-8084793
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
123 Robert S. Kerr Avenue
Oklahoma City, Oklahoma
73102
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (405429-5500
Former name, former address and former fiscal year, if changed since last report: Not applicable
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.001 par valueSDNew York Stock Exchange
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 þ No o
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 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
Accelerated filer
Non-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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No þ
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 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 o

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of the close of business on July 29, 2020, was 35,814,879.



Table of Contents
References in this report to the “Company,” “SandRidge,” “we,” “our,” and “us” mean SandRidge Energy, Inc., including its consolidated subsidiaries and its proportionately consolidated share of each of SandRidge Mississippian Trust I and SandRidge Mississippian Trust II, (collectively, the “Royalty Trusts”).

DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) of the Company 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 including the ability to continue as a going concern, the timing and success of specific projects, the potential impact of the COVID-19 pandemic on the Company's business, the potential impact of international negotiations on the supply and demand of oil and gas, 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 it 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”) and in Item 1A of this Quarterly Report.




Table of Contents
SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
FORM 10-Q
Quarter Ended June 30, 2020

INDEX

ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.



Table of Contents
PART I. Financial Information

ITEM 1. Financial Statements

SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except per share data) 
June 30,
2020
December 31, 2019
ASSETS
Current assets
Cash and cash equivalents$13,473  $4,275  
Restricted cash - other1,454  1,693  
Accounts receivable, net16,608  28,644  
Derivative contracts2,004  114  
Prepaid expenses2,218  3,342  
Assets held for sale35,447    
Other current assets80  538  
Total current assets71,284  38,606  
Oil and natural gas properties, using full cost method of accounting
Proved1,489,793  1,484,359  
Unproved22,753  24,603  
Less: accumulated depreciation, depletion and impairment(1,335,830) (1,129,622) 
176,716  379,340  
Other property, plant and equipment, net106,665  188,603  
Other assets766  1,140  
Total assets$355,431  $607,689  

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses$41,996  $64,937  
Current maturities of long-term debt59,000    
Asset retirement obligation22,055  22,119  
Liabilities held for sale403    
Other current liabilities1,120  1,367  
Total current liabilities124,574  88,423  
Long-term debt  57,500  
Asset retirement obligation52,879  52,897  
Other long-term obligations3,209  6,417  
Total liabilities180,662  205,237  
Commitments and contingencies (Note 9)
Stockholders’ Equity
Common stock, $0.001 par value; 250,000 shares authorized; 35,865 issued and outstanding at June 30, 2020 and 35,772 issued and outstanding at December 31, 2019
36  36  
Warrants88,520  88,520  
Additional paid-in capital1,060,019  1,059,253  
Accumulated deficit(973,806) (745,357) 
Total stockholders’ equity174,769  402,452  
Total liabilities and stockholders’ equity$355,431  $607,689  
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues
Oil, natural gas and NGL$16,448  $75,196  $56,587  $148,244  
Other207  192  397  380  
Total revenues16,655  75,388  56,984  148,624  
Expenses
Lease operating expenses8,698  25,076  24,340  47,855  
Production, ad valorem, and other taxes1,854  5,877  5,053  10,957  
Depreciation and depletion — oil and natural gas13,348  39,419  38,203  75,884  
Depreciation and amortization — other1,739  2,986  4,373  5,929  
Impairment201,784    209,754    
General and administrative4,314  10,084  9,797  20,023  
Restructuring expenses444    444    
Employee termination benefits1,993  4,465  5,247  4,465  
(Gain) loss on derivative contracts(2,241)   (12,467) 209  
Other operating expense108  37  385  119  
Total expenses232,041  87,944  285,129  165,441  
Loss from operations(215,386) (12,556) (228,145) (16,817) 
Other income (expense)
Interest expense, net(447) (702) (1,084) (1,287) 
Other income (expense), net58  (26) 134  (457) 
Total other expense(389) (728) (950) (1,744) 
Loss before income taxes(215,775) (13,284) (229,095) (18,561) 
Income tax expense (benefit)4    (646)   
Net loss$(215,779) $(13,284) $(228,449) $(18,561) 
Loss per share
Basic$(6.06) $(0.38) $(6.42) $(0.53) 
Diluted$(6.06) $(0.38) $(6.42) $(0.53) 
Weighted average number of common shares outstanding
Basic35,611  35,356  35,581  35,339  
Diluted35,611  35,356  35,581  35,339  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands) 
Common Stock
Warrants
Additional Paid-In Capital
Accumulated Deficit
Total
Shares
Amount
Shares
Amount
Six Months Ended June 30, 2020
Balance at December 31, 2019
35,772  $36  6,659  $88,520  $1,059,253  $(745,357) $402,452  
Stock-based compensation
—  —  —  —  185  —  185  
Issuance of common stock for general unsecured claims
38  —  —  —  —  —  —  
Issuance of warrants for general unsecured claims
—  —  47  —  —  —  —  
Cash paid for tax withholdings on vested stock awards
—  —  —  —  (1) —  (1) 
Net loss
—  —  —  —  —  (12,670) (12,670) 
Balance at March 31, 202035,810  $36  6,706  $88,520  $1,059,437  $(758,027) $389,966  
Stock-based compensation—  —  —  —  583  —  583  
Issuance of stock awards, net of
cancellations
55  —  —  —  —  —  —  
Cash paid for tax withholdings on vested
stock awards
—  —  —  —  (1) —  (1) 
Net loss—  —  —  —  (215,779) (215,779) 
Balance at June 30, 2020
35,865  $36  6,706  $88,520  $1,060,019  $(973,806) $174,769  



Common Stock
Warrants
Additional Paid-In Capital
Accumulated Deficit
Total
Shares
Amount
Shares
Amount
Six Months Ended June 30, 2019
Balance at December 31, 201835,687  $36  6,604  $88,516  $1,055,164  $(295,995) $847,721  
Stock-based compensation
—  —  —  —  1,073  —  1,073  
Issuance of warrants for general unsecured claims
—  —  1  2  (2) —  —  
Cumulative effect of adoption of
ASU 2016-02
—  —  —  —  —  (57) (57) 
Net loss
—  —  —  —  —  (5,277) (5,277) 
Balance at March 31, 201935,687  $36  6,605  $88,518  $1,056,235  $(301,329) $843,460  
Issuance of stock awards, net of
cancellations
75  —  —  —  —  —  —  
Stock-based compensation—  —  —  —  2,170  —  2,170  
Cash paid for whithholdings on vested
stock awards
—  —  —  —  (205) —  (205) 
Net loss—  —  —  —  —  (13,284) (13,284) 
Balance at June 30, 2019
35,762  $36  6,605  $88,518  $1,058,200  $(314,613) $832,141  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended June 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(228,449) $(18,561) 
Adjustments to reconcile net loss to net cash provided by operating activities
Provision for doubtful accounts283  (91) 
Depreciation, depletion, and amortization42,576  81,813  
Impairment209,754    
Debt issuance costs amortization318  238  
Write off of debt issuance costs  142  
(Gain) loss on derivative contracts(12,467) 209  
Cash received on settlement of derivative contracts10,577  5,078  
Loss (gain) on sale of assets78    
Stock-based compensation749  3,104  
Other68  (57) 
Changes in operating assets and liabilities(10,025) (9,402) 
Net cash provided by operating activities13,462  62,473  
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures for property, plant and equipment(6,814) (123,676) 
Acquisition of assets  236  
Proceeds from sale of assets1,506  852  
Net cash used in investing activities(5,308) (122,588) 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings39,000  112,596  
Repayments of borrowings(37,500) (60,596) 
Reduction of financing lease liability(694) (635) 
Debt issuance costs  (901) 
Cash paid for tax withholdings on vested stock awards(1) (205) 
Net cash provided by financing activities805  50,259  
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS and RESTRICTED CASH8,959  (9,856) 
CASH, CASH EQUIVALENTS and RESTRICTED CASH, beginning of year5,968  19,645  
CASH, CASH EQUIVALENTS and RESTRICTED CASH, end of period$14,927  $9,789  
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized$(812) $(949) 
Cash received for income taxes$616  $  
Supplemental Disclosure of Noncash Investing and Financing Activities
Purchase of PP&E in accounts payable$704  $17,224  
Right-of-use assets obtained in exchange for financing lease obligations$67  $2,655  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

Nature of Business. SandRidge Energy, Inc. is an oil and natural gas acquisition, development and production company headquartered in Oklahoma City, Oklahoma with a principal focus on developing and producing 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.

Interim Financial Statements. The accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited financial statements and notes contained in the Company’s 2019 Form 10-K. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. In the opinion of management, the financial statements include all adjustments, which consist of normal recurring adjustments unless otherwise disclosed, necessary to fairly state the Company’s unaudited condensed consolidated financial statements.  

Significant Accounting Policies. The unaudited condensed consolidated financial statements were prepared in accordance with the accounting policies stated in the 2019 Form 10-K as well as the items noted below.

Use of Estimates. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP 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 natural gas liquids (“NGL”) reserves; impairment tests of long-lived assets; the carrying value of unproved oil and natural gas properties and other property, plant and equipment; 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 the estimates used in the areas noted above are reasonable, actual results could differ significantly.

Going Concern Consideration. The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company currently has a borrowing base of $75.0 million under its credit facility and as of June 30, 2020 the Company had $59.0 million outstanding under its credit facility and $4.3 million in outstanding letters of credit, which reduces availability under the restated credit facility on a dollar-for-dollar basis. This leaves an additional $11.7 million available to be borrowed under the credit facility.

The Company is under contract to sell the Company's corporate headquarters building. In addition, management has begun communications with its lenders, and other capital providers, to refinance the balance of the outstanding credit facility, which matures on April 1, 2021. The due diligence period for the building sale has expired, and the sale is expected to close during the third quarter of 2020. In addition to using cash flows from operations, management's plans include repaying the outstanding credit facility borrowings, at or before maturity, using the proceeds from the contracted sale of the building, refinancing the credit facility, or both.

In its evaluation of going concern, in accordance with ASC 205-40, management evaluated relevant conditions and events regarding the Company's ability to meet future obligations without taking into consideration management's plans to refinance its existing debt or sell its corporate headquarters. Based on that evaluation, the Company currently does not project that it will have sufficient cash on hand or available liquidity to repay the outstanding credit facility balance on the maturity date, which gives rise to substantial doubt about the Company’s ability to continue as a going concern. The Company’s plans discussed above, however, are probable of being achieved and would alleviate substantial doubt about its ability to continue as a going concern.
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

Recently Adopted Accounting Pronouncements. ASU 2016-13 - In March 2016, the FASB issued ASU 2016-13, “Financial Instruments —Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments,” which changes 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 replaced the previously required incurred loss approach with an expected loss model for instruments measured at amortized cost. The company adopted this ASU on January 1, 2020 using a modified retrospective approach; however, the impact was not material upon adoption.

Recent Accounting Pronouncements Not Yet Adopted. ASU 2020-04 - In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), to facilitate the effects of reference rate reform on financial reporting. This ASU provides optional practical expedients and exceptions for applying US GAAP provisions to contracts, hedging relationships, and other transactions that reference LIBOR, or other reference rates expected to be discontinued because of reference rate reform, if certain criteria are met. The provisions of this ASU do not apply to contract modifications made and hedging transactions entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in ASU 2020-04 are effective, for all entities, as of March 12, 2020 through December 31, 2022. The Company is currently reviewing the potential impact of the upcoming LIBOR reference rate change on its current contracts and hedging relationships and will determine the applicable provisions of ASU 2020-04.

ASU 2019-12 - 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.


2. 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 assets and other assets, accounts payable and accrued expenses, other current liabilities and other long-term obligations included in the unaudited condensed consolidated balance sheets approximated fair value at June 30, 2020, and December 31, 2019. 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. Further, the fair value of our assets held for sale is calculated using Level 2 inputs, which is discussed in Note 6. No other adjustments to fair value were required for other property, plant and equipment for the three and six-month periods ended June 30, 2020 and 2019.

Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2Quoted 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.
Level 3Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from 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 of 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
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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
basis. The Company had assets classified in Level 2 of the hierarchy as of June 30, 2020 and December 31, 2019, 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.

Fair Value - Recurring Measurement Basis

The following tables summarize the Company’s assets measured at fair value on a recurring basis by the fair value hierarchy (in thousands):

June 30, 2020

Fair Value Measurements
Netting(1)
Assets/Liabilities at Fair Value
Level 1
Level 2
Level 3
Assets
Commodity derivative contracts
$  $2,004  $  $  $2,004  
$  $2,004  $  $  $2,004  

December 31, 2019
Fair Value Measurements
Netting(1)
Assets/Liabilities at Fair Value
Level 1
Level 2
Level 3
Assets
Commodity derivative contracts
$  $114  $  $  $114  
$  $114  $  $  $114  
____________________
(1) Represents the effect of netting assets and liabilities for counterparties with which the right of offset exists.

Transfers. The Company did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements during the three and six-month periods ended June 30, 2020 and 2019.


3. Derivatives

Commodity Derivatives 

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.

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SANDRIDGE ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following table summarizes derivative activity for the three and six-month periods ended June 30, 2020, and 2019 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(Gain) loss on commodity derivative contracts$(2,241) $  $(12,467) $209  
Cash received on settlements$6,490  $  $10,577  $5,078  

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 in the unaudited condensed 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 June 30, 2020, the counterparties to the Company's open commodity derivative contracts consisted of two financial institutions, both 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 table summarizes (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 June 30, 2020 and December 31, 2019 (in thousands):


June 30, 2020
Gross Amounts
Gross Amounts Offset
Amounts Net of Offset
Financial Collateral
Net Amount
Assets
Derivative contracts - current
$2,004  $  $2,004  $