* TPG-Axon says company could be worth $12 to $14 per share
* Urges shakeup of board
* Sandridge reports third-quarter net loss
(Adds analyst comment, third-quarter net loss, other details)
By Michael Erman and Anna Driver
NEW YORK/HOUSTON, Nov 8 One of SandRidge Energy
Inc's top shareholders called for the oil and gas company
to consider selling itself and for Chief Executive Tom Ward to
step down, saying management's strategy has been "incoherent,
unpredictable and volatile."
Hedge fund TPG-Axon, which said it owns more than 4.5
percent of SandRidge and has about $4 billion in assets under
management, on Thursday sent the company a letter that also
urges a shakeup of the U.S. oil and gas company's board.
The hedge fund repeatedly compared SandRidge to Chesapeake
Energy Corp, which has been besieged by a governance
crisis and liquidity crunch. Ward co-founded Chesapeake with
Aubrey McClendon in 1989. Ward joined SandRidge in 2006 and took
the company public the following year.
TPG-Axon said in the letter it believes SandRidge could be
worth $12 to $14 per share, compared with its $6 closing price
SandRidge shares closed 1.7 percent higher at $6.10 on
Thursday. The company's current market value is around $3.2
"SandRidge stock performance has been nothing short of
disastrous, on both an absolute and relative basis, since the
company's IPO in 2007," TPG-Axon founder Dinakar Singh wrote in
a letter to the SandRidge board.
The shares have lost more than three-quarters of their value
compared with their IPO price of $26. That compares with a 4
percent drop in the Dow Jones index of U.S. oil companies.
Singh pointed to what he called appalling corporate
governance and reckless spending that "has resulted in repeated
financial emergencies, and caused massive dilution, soaring cost
of capital, and unnecessary risks for shareholders."
SandRidge acknowledged in a statement that it needs to
improve performance for shareholders and said it is open to
constructive engagement with its investors.
The Oklahoma City, Oklahoma-based company focuses on
exploration and production primarily in the Permian Basin and
the Mid-Continent region of the United States. It is the leading
operator in the Mississippian Oil Play of northern Oklahoma and
western Kansas, and also has operations in the Gulf of Mexico.
"You look at shareholder returns, you look at consistent
outspending of capital, you look at the pivots on strategy and
their approach ... First they're onshore, then they're offshore,
then they're gas, then they're oil," said Mark Hanson, analyst
"It's a little bit of a roller-coaster and it's almost too
much to stomach if you're a shareholder."
After the close of trading on Thursday, SandRidge reported a
third-quarter net loss of $184 million and said it is exploring
the sale of some Permian Basin assets.
TPG-Axon said in the letter that it met with Ward earlier
this year, expressing concerns about governance.
"Mr. Ward assured us, in a meeting earlier this year, that
SandRidge did not have the poor corporate governance practices
employed at Chesapeake Energy," Singh wrote. "As we subsequently
examined the claims he made to us in that meeting, we have come
to believe these statements were disingenuous, at best."
Some of TPG-Axon's criticisms of Ward were centered on a
program that allowed the executive to buy stakes in the
company's oil and gas wells.
According to a SandRidge filing, the company paid $67.3
million in October 2008 to buy the stakes in wells that Ward had
acquired since joining the company. At that time, the United
States was in the middle of a financial crisis and SandRidge's
shares had plummeted more than 80 percent from their all-time
peak above $68 per share reached that summer.
A similar well program at Chesapeake has also drawn ire from
its investors. In April, Reuters reported McClendon,
Chesapeake's CEO, arranged to borrow more than $1 billion using
as collateral well interests granted to him as a corporate perk.
McClendon's well program is under scrutiny by the U.S.
Securities and Exchange Commission and the company has said it
will no longer grant McClendon well interests beginning in 2014.
Reuters also reported McClendon, who has since been stripped
of his title as chairman of Chesapeake, and Ward ran a hedge
fund on the side that traded in the same commodities produced at
Chesapeake and SandRidge for at least four years between 2004
Ward told Reuters in May that he continued to trade his own
personal cash in commodity markets and that he saw "no conflict
Singh, the former co-head of Goldman Sachs Group Inc's
proprietary trading desk, Principle Strategies, founded
TPG-Axon Capital Management in late 2004 after a 14-year career
at the investment bank.
While not typical of its strategy, TPG-Axon has used
activism previously to try to boost returns. In one instance in
2006 the hedge fund began a campaign for changes at Triad
Hospitals, which in 2007 agreed to a $4.7 billion buyout by two
private equity buyers.
At the end of the second quarter, TPG-Axon's largest equity
holdings by market value were Sirius XM Radio Inc,
Express Scripts Holding Co and W.R Grace & Co,
according to a regulatory filing. The firm held roughly 15
million shares in SandRidge Energy at the end of the second
(Additional reporting by Katya Wachtel and Jeanine Prezioso in
New York and; Brian Grow in Atlanta; Editing by Maureen Bavdek,
Gerald E. McCormick and Matthew Lewis)