WCT Resources, a company owned and controlled by trusts established by SandRidge Energy CEO Tom Ward to benefit his children, controls approximately 475,000 acres adjacent to SandRidge in the Mississippi Lime play, TPG-Axon Capital reported Tuesday.
Investment firm TPG-Axon, which owns 7 percent of SandRidge's outstanding shares and is seeking to replace the company's current board of directors and change the company's bylaws, made the finding in a review conducted of 22 counties in Oklahoma and Kansas, saying in a Feb. 19 presentation that it had found an "undeniable pattern" of conflicted related-party transactions of large proportions with entities related to Ward and his family.
WCT's acreage position in the Mississippi Lime would make WCT the fifth largest exploration and production company in the Mississippian play, behind only SandRidge, Chesapeake Energy, Royal Dutch Shell plc and Devon Energy Corp., a direct competitor of SandRidge, TPG-Axon said in a statement.
"TPG-Axon is concerned not only by the scale of WCT Resources' involvement in the Mississippian, but by the suspicious timing of the company's purchases," TPG-Axon commented, noting that it had discovered that, in many instances, WCT and SandRidge actively acquired acreage within weeks and months of each other.
"Contrary to SandRidge's claims, based on the data TPG-Axon has reviewed, this pattern of activity is not rare; it is now clear that the degree of overlap and competition is truly massive," TPG-Axon noted.
TPG-Axon has previously stated it believes SandRidge stockholders may have been disadvantaged by the actions of entities related to Ward or his immediate family members. The company is asking shareholders to vote in favor of amending SandRidge's bylaws and replacing its entire board of directors.
SandRidge's current management received a vote of confidence from independent proxy advisory firm Egan-Jones Proxy Services, which recommended shareholders back the company's current board in connection with TPG-Axon's current proxy fight.
"We believe that voting to revoke consents to the TPG-Axon's consent solicitation is merited and in the best interest of the company and its shareholders," Egan-Jones said in a statement.
The firm reached its decision to back SandRidge's current board based in part on its belief that TPG-Axon has provided no specific plans and no substantive new ideas or valid reasons to change the company's strategic direction that will enhance the company's stockholder value.
Egan-Jones also does not believe TPG-Axon's proposed board of directors would work to the benefit of shareholders, the firm said in a statement.
SandRidge officials praised Egan-Jones recommendation.
"Our highly qualified and independent board has taken decisive steps over the last few years to transition SandRidge to an oil focused producer with a leading position in the Mississippian play," the company said in a statement.
While SandRidge believes its current board has the right skills, experience and expertise to oversee continued execution of its strategic plan, TPG-Axon's nominees are not familiar with the company's operations, and SandRidge officials believe they do not have the needed qualifications to serve on the SandRidge board.
TPG-Axon's nominees for SandRidge's board include Stephen C. Beasley, who previously served as president of El Paso Corporation's Eastern Pipeline Group. Beasley is the founder and CEO of Houston-based executive leadership and strategic investment firm Eaton Group.
Other nominees include Edward W. Moneypenny, who retired as senior vice president of finance and chief financial officer from 7-Eleven in 2006 and was chief financial officer of Florida Progress Corporation, now Duke Energy Corporation, and Oryx Energy Corporation.
Fredric G. Reynolds, who served as executive vice president and chief financial officer of CBS Corporation from January 2006 through August 2009 and as president and chief executive officer of Viacom Television Stations Group, is also among TPG-Axon's nominees.
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