(In March 13th story, corrects number of board members replaced
at Hess to six from three in 18th paragraph)
* Company has been under fire by investor TPG-Axon
* Four TPG-Axon-nominated directors join SandRidge board
* Board to review land deals by CEO Tom Ward
* Board to decide Ward's fate by June 30
By Michael Erman and Anna Driver
March 13 SandRidge Energy Inc and
activist hedge fund TPG-Axon Capital struck a deal on Wednesday
that could lead to the removal of the oil and gas company's
chief executive, Tom Ward, SandRidge said.
The company has been under fire since last year from
TPG-Axon and another hedge fund for governance lapses and
strategic missteps. TPG-Axon, which owns 7.3 percent of
SandRidge, launched a campaign to oust Ward and the company's
entire board of directors.
SandRidge said that four directors nominated by TPG-Axon
will be added immediately to SandRidge's board, which will
engage an independent firm to review land deals by Ward and his
Apart from claims of strategic missteps, TPG-Axon has
alleged that Ward and the company's board allowed WCT Resources,
an Oklahoma company run by Ward's son, Trent, to acquire the
rights to drill for oil and gas near SandRidge operations.
SandRidge said that its board will decide whether to
terminate Ward by June 30. SandRidge has said that its board
found no wrongdoing in the land deals and that WCT was "an
independent oil and gas company."
But a Reuters review of chief executive Ward's employment
contracts found that SandRidge's board had given
Ward and his family wide latitude to profit from personal
oil-and-gas deals in ways that could pose potential conflicts of
Ward has not responded to repeated requests for comment
about his or his family's land deals.
Even if Ward is not terminated by June 30, directors
nominated by TPG-Axon - which has been agitating for Ward's
removal since November - will be given majority control of the
board. A source familiar with TPG-Axon said the hedge fund's
position on Ward has not changed.
Ward is eligible to receive a "golden parachute" payment of
more than $90 million if he is terminated without cause,
according to SEC filings. If he is fired for cause, he will not
receive any payments from the company.
SandRidge also said that Chief Operating Officer Matthew
Grubb plans to resign.
'VICTORY FOR ACTIVISTS'
"I think this is entirely justified and it's a clear victory
for the activists," said Mark Hanson, oil company analyst at
Morningstar. "Given the stock price, the continued outspending
and the related party transactions, there is not a lot to like
about this name and it was driven by one man and his management
Grubb's exit and Ward's possible departure reflect a wave of
governance overhaul at U.S. oil and gas companies amid increased
shareholder activism in the past year.
Corporate governance experts said the spate of leadership
overhauls at U.S. energy companies was unprecedented, and was
spurred by frustration with a cozy industry where many of the
top executives also founded the companies they ran.
"Some of these companies have had performance issues. Some
of them have had conflict issues. Some of them have had
performance issues combined with some dominating families," said
Charles Elson, director of the Weinberg Center for Corporate
Governance at the University of Delaware.
A series of Reuters investigations last year, coupled with
financial strain, led to the departure of six board members at
Chesapeake Energy Corp, the Oklahoma City oil and gas
company co-founded by Tom Ward and Aubrey McClendon in 1989.
McClendon, Chesapeake's chief executive, will leave the company
on April 1. He resigned as chairman of the company's board last
Like Ward, McClendon entwined his personal finances with
those of the company he ran far more than shareholders knew.
Ward resigned from Chesapeake in 2006 to start his own
natural gas company, SandRidge, several miles away in Oklahoma
This month, energy company Hess Corp agreed to
replace six board members and sell a range of assets amid calls
for change from investor Elliott Associates.
A vote on TPG-Axon's proposal to remove SandRidge's entire
board was set to wrap up on Friday. The fund agreed to shut down
that vote and end its plans to make proposals and nominate
directors at this year's annual meeting.
In a report to investors last month, influential proxy
advisory firm ISS endorsed the replacement of a majority of
SandRidge's board, in part because "the apparent failures of
stewardship on this board are legion."
SandRidge shares closed up 2 cents at $5.85 on the New York
Stock Exchange. The shares are down nearly 80 percent since
their November 2007 debut. The Dow Jones U.S. oil and gas
producers index - of which SandRidge is a component -
is up around 9 percent over that same period.
(Reporting by Michael Erman in New York and Anna Driver in
Houston; editing by Gary Hill and Matthew Lewis)