SandRidge Energy Inc. (SD:US), the oil producer that lost more than one-third of its market value this year, faces rising shareholder mistrust amid calls for new leadership and a clearer company strategy.
SandRidge ought to fire Chairman and Chief Executive Officer Tom Ward, appoint new directors and consider selling the entire company, Mount Kellett Capital Management LP said in a letter to the board today. Mount Kellett, holder of 4.5 percent of SandRidge’s stock, also said a plan to sell reserves in the Permian Basin announced by the company on Nov. 8 should be delayed until a new management team and board are in place.
Ward, who founded the company in 2006, ought to be replaced “with a seasoned executive who can restore the company’s credibility,” Jonathon Fiorello, chief operating officer at New York-based Mount Kellett, said in the letter. A slate of new directors chosen by the Oklahoma City-based energy company’s largest investors should be added to the board, Fiorello wrote.
Mount Kellett, a $7 billion asset manager co-founded by two former Goldman Sachs Group Inc. (GS:US) bankers, is the second major SandRidge investor in a week to call for Ward’s ouster and a sale of the corporation.
TPG-Axon Capital Management LP CEO Dinakar Singh demanded Ward’s firing on Nov. 8, just hours before SandRidge announced plans to sell oilfields in the Permian Basin, a move panned by shareholders and analysts because it would increase the company’s reliance on lower-profit natural gas.
Singh said on Nov. 8 that SandRidge stock should be trading at $12 to $14. The shares rose 2.5 percent to $5.32 at the close in New York. SandRidge has fallen 35 percent this year.
Today, Mount Kellett’s Fiorello said the shares should be worth $20.
“Unfortunately, all we see now are critical failures of management and board oversight,” Mount Kellett said in the letter. “SandRidge has not merely failed to even remotely maximize the potential of its assets but it has destroyed stockholder value.”
In his Nov. 8 letter to SandRidge, Singh criticized the company for overspending and having an incoherent strategy. TPG- Axon reported it owns 6.2 percent of SandRidge, according to a Nov. 13 filing.
Kevin R. White, a spokesman for SandRidge, didn’t return a telephone message seeking comment.
Ward, 53, was paid $25.3 million in salary, bonus, stock awards and other compensation last year, exceeding that of Chevron Corp. (CVX:US) CEO John S. Watson, who heads a company with a market value 76 times larger than SandRidge.
Ward has defended SandRidge’s strategy, including the Permian Basin auction. Selling the reserves will allow SandRidge to concentrate on the Mississippian formation in Oklahoma and Kansas, where rates of return are higher, Ward said. Analysts have said the Mississippian is worth less because it produces more natural gas than the company’s Permian fields.
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