SandRidge Energy Inc. (SD:US), the oil company that lost more than one-fourth of its market value this year, adopted a shareholder rights plan after two of its major owners called for a sale of the company.
Another shareholder, Prem Watsa of Fairfax Financial Holdings Ltd. (FFH), increased his stake in the company and praised its chief executive, Tom Ward.
“We believe Tom Ward is one of the best operators in the business and that the company he has built, SandRidge Energy, is poised to do well in the long term,” Watsa said in an interview.
Under the plan, stockholders will receive the right to buy additional shares, exercisable if an outside party acquires more than 10 percent of the company or an institutional investor acquires 15 percent of the company, according to a statement today.
The company also changed its bylaws to make it more difficult to overhaul SandRidge’s board by requiring a majority vote of its shares to fill vacancies or change the board’s rules, according to the statement.
“Today’s actions are designed to protect the interests of all of our stockholders,” according to the statement. “The board and management look forward to continuing to engage in constructive dialogue with stockholders regarding our plans for the business.”
TPG-Axon Management LP Chief Executive Dinakar Singh and Jonathan Fiorello of Mount Kellett Capital Management LP have written to SandRidge’s board, calling for SandRidge to put itself up for sale, fire Ward and allow major shareholders to appoint new directors.
SandRidge’s stock price should be as much as $20 a share; it’s been driven down by poor management and a lack of board oversight, the investors said in their letters. Mount Kellett’s Fiorello said the company should delay a plan to sell its acreage in the Permian Basin until a new board is appointed.
Ward, who founded SandRidge in 2006, was paid $25.3 million in salary, bonus, stock awards and other compensation in 2011.
Ward has defended SandRidge’s strategy, including the Permian Basin (PBT:US) 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 at an industry conference Nov. 14.
Analysts have said the Mississippian is worth less because it produces more natural gas than the company’s Permian fields.
Singh’s TPG-Axon owns 6.2 percent of SandRidge and Mount Kellett owns 4.5 percent. Watsa increased his stake to 10.4 percent, according to a Nov. 16 filing.
SandRidge announced the rights plan after the close of regular trading. SandRidge rose 5.2 percent to close at $5.62 in New York. The stock has fallen 31 percent this year.
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