SandRidge shareholders re-elected company directors and asked some tough questions Monday at the Oklahoma City oil and natural gas producer's annual meeting.
The meeting was markedly different from previous years in that it was led by new CEO James Bennett and featured the company's expanded board, which in March added four new directors hand-picked by the activist shareholder TPG-Axon Capital.
The formal portion of Monday's meeting lasted less than six minutes as shareholders re-elected the directors Jeff Serota, Jim Brewer and William Gilliland. The actual vote count was not disclosed, but the company said each director received a plurality of the votes cast.
Bennett then outlined the company's plan for the future.
“We've taken our fixed costs down, reduced debt and are focused on meeting or exceeding expectations,” he said. “We think those things taken together will drive returns for shareholders.”
He pointed out that the company has spent the past two years building power lines, pipelines and other infrastructure to develop its six core areas in the Mississippian formation in northern Oklahoma and southern Kansas.
“We are the leader in the Mississippian play. We think it's important that we have size and scale in the play,” he said. “We're the largest operator. We have 25 rigs running. We have the biggest disposal infrastructure in the business. To us, having that size and scale is important because it gives you a competitive advantage.”
The Mississippian can be a challenge because it is in a rural area with few power lines and because the rock produces many times more water than oil. The produced water is up to 20 times more salty than the ocean, and companies must find a cost-effective way to dispose of the water.
In part because SandRidge has addressed those two challenges, the company has driven down its cost per well by about 14 percent over the past year while more than doubling its Mississippian production.
“That's an impressive number. That's a big deal,” said Phil Macy, who has been a SandRidge shareholder for four years.
Despite reduced expenses and increased production, several shareholders expressed concern about SandRidge's stock price, which has traded well below $10 for most of the past five years. SandRidge shares rose 7 cents, or 1.5 percent, Monday to close at $4.83
“I've been staying up nights worried about this stock,” shareholder Rosalee Bridge said during the meeting Monday. “Why this stock is dead in the water, I'll never know. No one is interested in it. Can't we do something to stop that?”
Bennett said the company expects its current strategy to pay off for shareholders.
“We're all shareholders,” he said of the management team. “It's our goal and job to get the stock price up. We want to generate a return for you and for us.
“I think the measures we're trying to take — hydrating the capital program, drilling the best known parts of the play, reducing our overhead structure and cost structure, keeping our well costs down, acquiring acreage at competitive prices — we think all those things are adding value for shareholders.”
Bridge was not fully satisfied with the answer.
“I understand all that, but it's not working,” she said.
“I'm not totally dumb, Obviously I'm a little dumb or I wouldn't be investing in this,” she said. “I just really thought that the company was valued more than the selling price, so I thought it was a good opportunity. I just cannot figure out why it doesn't all go together.”