SandRidge Energy Inc. (SD:US), the oil producer facing calls for its board’s ouster, fell the most in more than three months after lowering the amount of oil output expected from its main field.
The shares dropped 3.6 percent to $5.49 at 11:57 a.m. in New York. Earlier, the shares dropped as much as 11 percent, the most intrady since Nov. 9.
Production from wells in the Mississippi Lime field, where SandRidge has 1.8 million acres, was 29 percent oil in 2012, compared to a November estimate of 35 percent, the Oklahoma City-based company said in a slide presentation on its website today. Remaining output will be natural gas and petroleum liquids, which are less profitable than oil.
The reduction in the field’s recoverable oil reserves was greater than analysts were expecting, Amir Arif, an analyst with Stifel Nicolaus Inc. in Washington, wrote in a note to clients today. “We would not be surprised if the stock breaks below $5 per share,” he said.
SandRidge expects to lower its drilling cost in the field, Chief Executive Officer Tom Ward said on a conference call with analysts. SandRidge has set up saltwater disposal and electrical systems that allow it to operate more efficiently, he said. Production is expected to grow 72 percent from the Mississippian in 2013, the company said.
“We’re drilling better wells as we drill more,” Ward said. “It is a niche play where infrastructure and costs are very very important.”
TPG-Axon Capital Management LP, the company’s third-largest shareholder, has asked shareholders to remove the board of directors and fire Ward because of the company’s “disastrous” performance. A new board might sell SandRidge to a larger operator, or bring in a new CEO to generate a profit out of SandRidge’s oil and gas fields, TPG-Axon said in filings.
Ward declined to comment on TPG’s allegations during the call.
SandRidge reported a fourth-quarter loss yesterday of $302 million, or 63 cents a share, compared with 97 cents a share in the same quarter of 2011. Rising production costs countered an increase in revenue from oil and gas production, the company said in a statement.
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