A second shareholder in SandRidge Energy has called for the company's board of directors to make changes to improve the company's financial performance and for the company's CEO to step down.
Private investment firms Mount Kellett Capital Management in a Nov. 15 letter said Chairman and CEO Tom Ward should be replaced with a "seasoned executive who can restore the company's credibility." Mount Kellett also said the company's board should be strengthened by the addition of "new, truly independent directors selected in consultation with the company's largest stockholders."
Mount Kellett also urged SandRidge not to sell its Permian Basin assets at "fire-sale prices", which Mount Kellett said would permanently impair stockholder value.
"The future direction of the company should be properly and fully evaluated by a reconstituted board and management team," said Mount Kellett, adding that all options should be explored, including a sale of the company or divestiture of ill-fitting assets such as Dynamic Offshore.
SandRidge's fundamental problems stem from the failure of management and the board to adhere to "some of the most basic tenets of managing a publicly traded company," Mount Kellett said.
Mount Kellett owns 22.2 million share of SandRidge shares, or approximately 4.5 percent of the company's outstanding stock.
Mount Kellett originally invested in the company's common stock in 2009 "because we believed the company was undervalued and possessed very valuable oil and gas assets that would generate tremendous future value if developed properly in a strategically consistent, systematic manner."
The investment firm believes SandRidge's assets are worth approximately $20/share, noting that it believes the company's net asset value is approximately $16.5 billion. Mount Kellen noted that SandRidge's Mississippian assets could represent an $8 billion asset and the company's Permian assets have a PV-10 value of approximately $4 billion. Additionally, Mount Kellen estimates the company's underdeveloped Gulf of Mexico assets are worth $3.6 billion.
"Unfortunately, all we see now are critical failures of management and board oversight. SandRidge has not merely failed to even remotely maximize the potential of its assets, but it has destroyed stockholder value," Mount Kellett said, noting that the company's stock price has plunged almost 40 percent.
Mount Kellett said that stockholders would have no choice but "to take the necessary actions to protect their investment" if the company's board does not make changes.
Last week, investment firm TPG-Axon also called for CEO Tom Ward to resign and for changes to be made to the company's board of directors and management.
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