The fight for the future of SandRidge Energy Inc. has turned to the company's 2,500 employees.
CEO Tom Ward sent a letter to SandRidge employees Tuesday after hedge fund TPG-Axon Capital placed a letter to workers in Tuesday's editions of The Oklahoman. The shareholder letter occupied a full-page advertisement in the main section of the paper.
TPG-Axon wants employees to know what will happen if it wins a proxy fight with the Oklahoma City-based oil and natural gas company.
Ward responded with his own assessment of the situation.
“While as you know, we clearly disagree with many of the things TPG-Axon has said in their fight to take control of the company, we do agree that SandRidge has a great future and will continue to be an important supporter of the local community,” Ward wrote.
Ward also said the outlook for SandRidge has never been better thanks to its position as the leading acreage holder in the Mississippian, an emerging oil and natural gas play in northern Oklahoma and southern Kansas.
Edmond investment adviser Greg Womack said Wednesday the TPG-Axon letter seemed to be an attempt to sway public opinion about its push for a leadership change at SandRidge by reaching out to company employees and the community.
He said it was a “crafty approach” by the New York-based hedge fund to smooth some of the edges of its assault on SandRidge's current management.
“They are trying to soften the blow, to some degree,” said Womack, president of Womack Investment Advisers Inc.
Expenses at issue
TPG-Axon has urged SandRidge to cut back its overhead as much as 75 percent by reducing employee compensation, selling the company's planes and some of its buildings and ending “extraneous expenses.” That 75 percent figure was not part of Tuesday's letter.
TPG-Axon, in Tuesday's letter, said more than one-third of SandRidge's overhead spending was compensation for a small number of executives and board members.
Womack said he expects TPG-Axon to reduce the number of employees at SandRidge if it gains control of the company.
“I can't imagine that there wouldn't be layoffs as well if they come in,” he said.
Womack also said a leadership change could result in the company being moved out of Oklahoma City, despite TPG-Axon's insistence that it expects SandRidge's headquarters to remain here.
Proxy fight origins
TPG-Axon initiated a consent solicitation late last year, asking SandRidge shareholders to vote in favor of a leadership change at the company.