SandRidge Energy Inc. (SD:US), an oil and natural gas producer, said it found no wrongdoing in its review of business transactions with companies controlled by Chairman and Chief Executive Officer Tom Ward and his family.
“The board has found no evidence of impropriety or ‘front running,’” in which the companies buy leasehold interests and then sell them to SandRidge, according to a statement from the Oklahoma City-based company today. The board will consider requests “for the appointment of independent counsel and other investigative measures concerning the activities surrounding their allegations.”
TPG-Axon Capital Management LP and Mount Kellett Capital Management LP, owners of a combined 11 percent stake, have urged SandRidge to replace Ward, cut overhead and refocus on drilling for oil. TPG began soliciting votes Jan. 16 to replace the seven-member board.
TPG, based in New York, said in a Jan. 23 website presentation that SandRidge should disclose more about its dealings with Ward’s family, including whether they used company information for personal gain.
SandRidge has paid $3.9 million to TLW Land & Cattle LP, a Ward business, and $5.6 million to WCT Resources LLC, run by Ward’s son Trent, for royalties and leases, according to the presentation. TPG reviewed records and found 15 instances where WCT and SandRidge bought adjacent oil and natural gas leases in Kansas’ Mississippian Lime field at about the same time.
The purchases from WCT are less than one-fourth of 1 percent of SandRidge’s acreage and the board reviewed them in advance, according to today’s statement. Given the size of SandRidge’s leasehold across 30 counties in Oklahoma and Kansas, it’s “entirely unremarkable” that WCT has land nearby, according to the board statement.
Apart from Ward, SandRidge’s directors are all independent, according to the company’s 2012 proxy statement. SandRidge has business ties to two of them, according to filings. SandRidge rents office space from Roy Oliver for $510,000 a year. Everett Dobson owns a 3.9 percent stake in the Oklahoma City Thunder, a basketball team in which Ward owns 19.2 percent. SandRidge has sponsorship deals with the team.
SandRidge investors would see a better return on their investment if the company were sold or run by new managers, TPG and Mount Kellett have said. The shares have fallen 16 percent in the past 12 months.
SandRidge has said replacing the board may trigger change- in-control provisions linked to its debt. The company said last week that TPG “has repeatedly made inflammatory and false statements” with the goal of taking control of the company and restructuring or selling it.
Anton Nicholas and Scott Tagliarino, spokesmen for TPG-Axon and Mount Kellet, respectively, wouldn’t immediately comment when reached by phone and e-mail.
The shares roses 0.3 percent to $7.07 at the close in New York.
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