The heat on SandRidge Energy Inc. is rising.
Another large institutional investor is questioning the company's leadership, calling for the ouster of CEO Tom Ward and changes to SandRidge's board.
“We believe that — properly managed — the company's assets are worth approximately $20 per share,” Mount Kellett Capital Management LP wrote Thursday in a letter to SandRidge's board. “Unfortunately, all we see now are critical failures of management and board oversight.
“SandRidge has not merely failed to even remotely maximize the potential of its assets, but it has destroyed stockholder value.”
Mount Kellett is the second SandRidge investor in a week to call for change at the Oklahoma City-based oil company. TPG-Axon urged the company to replace Ward and some of its board members in a Nov. 8 letter.
“Lest the board believe that TPG-Axon's concerns are isolated ones, we are writing to add our views and be crystal clear that management and the board cannot ignore the interests of the company's stockholders any longer,” wrote Jonathan Fiorello, Mount Kellett's chief operating officer.
SandRidge spokesman Grey Dewey said the company's board and management value the opinions of shareholders as it works to improve performance.
Stock value has fallen
SandRidge's stock closed Thursday at $5.32 a share, up 13 cents, but it has dropped more than 35 percent since the first of the year.
Mount Kellet, which owns 22.2 million shares of SandRidge stock, estimates the company should be selling for at least $20 a share based on its asset base.
The investment firm wants the company to replace Ward as CEO and add independent directors to its board in consultation with its largest shareholders.
“In the interim, we urge the board not to take any hasty strategic actions, such as the precipitous sale of the Permian assets, which will permanently impair stockholder value,” according to the letter. “The company has no immediate financing needs and there is no need to sell assets at fire-sale prices.”
SandRidge said last week it was exploring the sale of some of its holdings in oil-rich west Texas so it could focus on developing the Mississippian play in northern Oklahoma and southern Kansas. The potential sale won't include acreage connected to the publicly traded SandRidge Permian Trust.
The company acquired its acreage in the Permian after natural gas prices collapsed in 2008.
SandRidge took on significant debt and nearly tripled its share count in its shift to focusing on crude oil, Morningstar analyst Mark Hanson said in a Nov. 9 report on the company.
Hanson said SandRidge's future looks bright because of its holdings in two attractive liquids plays, but he was not surprised by the complaints raised by TPG-Axon. Many were echoed Thursday by Mount Kellett.
He said SandRidge's “approach to capital spending, corporate governance, deal-making and balance-sheet maneuvers” is similar to Chesapeake Energy Corp.
Chesapeake, which Ward co-founded, faced a significant boardroom shake-up earlier this year because of investor unrest, Hanson said.