SandRidge Energy Inc. (SD:US) Chairman and Chief Executive Officer Tom Ward was fired from the energy producer he founded and replaced by Chief Financial Officer James Bennett, days before an activist shareholder was poised to gain control of the board.
Ward departed after the board decided “new leadership is in the best interests of the company and its shareholders,” SandRidge said in a statement yesterday. Director Jeffrey Serota was named interim chairman. Ward, 53, founded the Oklahoma City-based oil explorer in 2006 after leaving Chesapeake Energy Corp. (CHK:US)
The company said a four-month independent review by Mayer Brown LLP of related-party transactions between SandRidge and Ward family entities found nothing that merited his termination “with cause.” The independent review was part of a March settlement with TPG-Axon Capital Management LP, which would’ve gained a majority of board seats if he didn’t exit by June 30.
The elevation of Bennett without an external search for a new CEO may suggest SandRidge plans to put itself up for sale, said Scott Hanold, an analyst at RBC Capital Markets LLC. Bennett’s appointment represents “modest change,” Hanold said in a telephone interview from Minneapolis yesterday.
Greg Dewey, a SandRidge spokesman, declined to comment yesterday on whether the company is considering a sale.
The termination of Ward is the latest in a series of shareholder campaigns that have shaken up the U.S. oil and natural gas industry in the past year. Chesapeake Energy’s Aubrey McClendon, who co-founded that company with Ward in 1989, stepped down in April after shareholders criticized personal loans he got using company wells as collateral.
Occidental Petroleum Corp. (OXY:US) Chairman Ray Irani was forced out in May after almost three decades at the company when shareholders questioned his role in the decision to replace CEO Stephen I. Chazen. Hess Corp. (HES:US) and Transocean Ltd. (RIG:US) have also agreed to board changes after shareholders questioned management.
SandRidge fell 4.9 percent to $4.83 at the close in New York. The stock has lost 24 percent of its value this year.
SandRidge’s 7.5 percent bonds maturing in March 2021 fell to 96.95 cents on the dollar to yield 8.035 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
SandRidge in May reported its third-biggest quarterly net loss (SD:US) as it sold assets in Texas. The company has sought to cut spending and focus on the Mississippi Lime, an oil and natural gas shale formation in Kansas and Oklahoma.
Bennett, 44, has been CFO since January 2011 and was promoted to president in March. Prior to joining SandRidge, Bennett worked for White Deer Energy, a private-equity fund.
“The board unanimously concluded that an external search was unnecessary and not in the best interests of the company,” Serota said in the statement. “After evaluating James’ performance as president and his two-and-a-half years as our CFO, we believe that with his extensive industry and financial expertise, as well as his leadership qualities, he is the ideal choice to lead SandRidge.”
TPG-Axon, SandRidge’s third-largest shareholder (SD:US), called for Ward to be replaced because of questions surrounding the related-party transactions and the company’s “disastrous” performance. SandRidge added four TPG-Axon appointees to the board as part of the March settlement to head off a proxy contest. The agreement allowed TPG-Axon to add another board member, giving it majority control, if Ward wasn’t fired by June 30.
TPG-Axon, run by former Goldman Sachs Group Inc. executive Dinakar Singh, has said SandRidge suffered “strategic blunders, extraordinary spending and poor governance” that caused the stock to drop. SandRidge has fallen 81 percent since it began selling for $26 a share in 2007.
SandRidge paid $9.5 million over four years to companies controlled by Ward and his family as it leased land for oil and gas drilling in Oklahoma, TPG-Axon said.
Because the termination was without cause, Ward will receive a $53.3 million lump sum, vesting of 6.3 million shares of previously issued restricted stock and his base salary for the next 36 months, the company said.
Ward is the largest individual shareholder in SandRidge, with a 4.76 percent stake as of April 1, according to data compiled by Bloomberg. In a May 8 interview, Ward said he’d continue working at SandRidge “every day until I’m told not to.”
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