With Tom Ward departure, SandRidge focuses on Mississippian assets

After nearly a year of scrutiny focused on SandRidge Energy Inc. (NYSE: SD) founder and now-former CEO Tom Ward, the Oklahoma City-based oil and natural gas company is transitioning its leadership team.

Ward, who founded the company in 2006 and had, until yesterday, served as chairman and CEO, has departed the company based on the Board of Directors’ decision that “despite Ward's many contributions to SandRidge, new leadership is in the best interests of the company and its shareholders at this time,” as stated in a press release Wednesday.

The end of the Tom Ward era comes as a surprise to few, noted Wunderlich Securities Inc. equity analyst Jason Wangler in a note Thursday morning.

As part of a storyline that reads similar to that of former Chesapeake Energy CEO Aubrey McClendon, Tom Ward, who previously served as Chesapeake Energy long-time president and COO, was under scrutiny for ways in which he ran both SandRidge and some of his private businesses.

In November of 2012, SandRidge’s sixth largest shareholder, TPG-Axon Capital, requested the company make management changes, including calling for the resignation of Ward.

Acting on allegations of improper related-party transactions in oil and gas properties in the Mississippian play, SandRidge Energy’s Audit Committee conducted, and recently completed, its previously-announced independent investigation. The four-month independent investigation was conducted by Mayer Brown LLP and included the review of hundreds of thousands of documents and the interview of more than 40 persons.

After reviewing the facts, the non-employee members of the board unanimously determined that the transactions did not merit a “termination for cause,” thus, Ward is entitled to his contractual severance package—a bill payable to Ward of nearly $90 million, which includes “a lump sum payment of $53.5 million in cash, 6.33 million shares of restricted stock that now vests and other benefits over the next 36 months. While SandRidge's board is certainly trying to move on, it certainly is paying a price for that transportation," Wangler noted.

Moving forward
James Bennett, who has served as CFO of SandRidge Energy since January 2011 and was promoted to president in March 2013, will retain his title as president and will replace Ward as CEO of the company. Lead independent director Jeffrey Serota will serve as interim non-executive chairman, effective June 19, 2013. 

Prior to joining SandRidge, Bennett was managing director for White Deer Energy, a private equity fund focused on the oil and gas industry. From 2006 to December 2009, Bennett was employed by GSO Capital Partners, where he served in various capacities in its energy group, including as a managing director. Bennett graduated with a bachelor’s degree from Texas Tech University.

With new managment in place, SandRidge looks to quiet the chatter and move forward, bringing the attention back to its assets in the Mississippian.

As one of the first to move on the emerging Mississippian, the company holds roughly 1,850,000 net acres and is the leading operator in the oil-rich play that straddles Oklahoma and western Kansas. The shallower-than-most play may generate the highest rate of return for horizontal drilling in the US and SandRidge is looking to capitalize. According to a recent company presentation, roughly 80% (nearly $1.1 billion, pre-carry) of SandRidge’s 2013 E&P CAPEX is slated for investment in the play.

Overall, the company is moving in the right direction, but uncertainty remains. “SandRidge still trades essentially in line with peers on cash flows currently and, while some noise can finally be silenced, the asset package is what matters and we still believe the Horizontal Mississippian assets look solid in some areas - but additional drilling and capital will be needed to better understand and value the play," Wangler concluded.

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