By Michael Erman and Anna Driver
Jan 17 An investor in SandRidge Energy Inc
that has been seeking to replace the company's board and
chief executive is now calling on the board to suspend CEO Tom
Ward and probe claims by another big shareholder that Ward and a
company run by his son acquired mineral rights and flipped then
to SandRidge at a profit.
Mount Kellett Capital, which holds about 4.5 percent in
SandRidge, said in a letter to the board of the oil and gas
company on Thursday, which it released publicly, that it was
reviewing the allegations made by TPG-Axon, a hedge fund that
owns 6.7 percent of SandRidge.
Mount Kellet said SandRidge's board should hire an
independent law firm and a forensic law firm to investigate the
allegations, and that Ward should be suspended until a probe is
"We received the letter. As we've previously stated before,
SandRidge has disclosed related party transactions in the
company's public filings as appropriate," SandRidge spokesman
Greg Dewey said.
In addition to pressing to replace Ward and the SandRidge
board, TPG-Axon Capital and Mount Kellett have pushed for a sale
of the company, citing poor stock price performance under Ward.
TPG-Axon is also soliciting support from other shareholders
to have the company's board of directors replaced.
SandRidge's shares rose about 3.5 percent on Thursday.
LINKS TO COMPANY RUN BY CEO'S SON
WCT Resources, an Oklahoma company owned by trusts
benefiting Ward's three adult children and run by his son,
Trent, is a business partner with SandRidge, according to
filings with the Securities and Exchange Commission.
The company has paid WCT nearly $5 million since 2008 to
lease property controlled by WCT in northern Oklahoma and for
royalties on wells operated by SandRidge on the land, according
to an analysis of SEC filings.
SandRidge is the largest operator and was one of the
earliest companies to acquire acreage in the Mississippian - a
rock formation that spans northern Oklahoma and southern Kansas.
WCT has also acquired land in the region, a fact supported by
oil and gas records from Pawnee County, Oklahoma, reviewed by
Those records show WCT purchasing oil and gas leases in the
county and transferring them to SandRidge later that year. It
was not immediately clear how much WCT made from the
The documents also show that WCT listed its address as 123
Robert S. Kerr Ave., in Oklahoma City -- the same address as
WCT Resources and Trent Ward did not immediately respond to
requests for a comment.
Mount Kellett also criticized WCT for competing with
"That WCT could profit from acreage sales to other oil and
gas companies at a time when SandRidge was looking to sell or
joint venture acreage to delever itself, put WCT in direct
competition with the Company and potentially siphoned value from
SandRidge shareholders and into the pockets of the Ward family,"
Mount Kellett COO Jonathan Fiorella said in the letter.
SandRidge has been searching for a strategy to improve
returns as its stock underperforms peers. The Dow Jones U.S.
Exploration and Production index is up about 8 percent
over the last year, while SandRidge shares have fallen 13
"I think what is going to come out of all this is that maybe
Wall Street will become more interested in companies where there
is no question at all about the management," said Mike Breard,
an oil analyst at Hodges Capital Management in Dallas.
Hodges Capital owned 1.4 million SandRidge shares at the end
of September, according to its most recent filing.
SandRidge, which has shifted its focus from natural gas to
oil in reaction to falling natural gas prices, made a steep cut
late last year to its estimates on how much oil it believes it
can recover from key wells in the Mississippian.
Ward bought into SandRidge's predecessor and took over the
company in 2006 after leaving Chesapeake Energy - a
company he co-founded with Aubrey McClendon.
Chesapeake had to contend with its own governance and
performance problems last year, and McClendon has been stripped
of his title of chairman of that company as a result.