Another Step Forward in SandRidge's Turnaround
Apr 8th 2013 2:09PM
Updated May 13th 2013 11:35AM
Embattled oil and natural gas exploration and production company, SandRidge Energy , has announced a change at the top and provided investors with an update on its strategic initiatives. While it's not the change that some investors had been hoping for, it is one to watch. Let's take a look at what these changes mean for the company.
First and foremost the company announced the promotion of David Lawler to the position of chief operating officer. That position had been vacated when Matthew Grubb stepped down last month. The timing of his departure coincided with the addition of four new board members as part of a settlement with TPG-Axon Group, which had been waging a very public proxy battle with the company.
Given that Grubb had worked for SandRige for the past seven years, concern arose that top talent would begin to leave the firm. With Lawler being promoted -- he was previously an executive vice president of operations -- it doesn't appear that SandRidge is cleaning house nor are all its top executives jumping ship. The company's advanced technical expertise is in the Mississippian, so holding on to its top executives is important for maintaining its competitive advantage in the play.
The company further announced that it was hiring a law firm to review the land deals between CEO Tom Ward's family and SandRidge. These deals have been highly criticized by TPG-Axon while SandRidge has denied any wrongdoing. The company expects the firm to wrap up the review by June 15.
That will give the company's board enough time to make a final decision on the fate of Ward. It's set a June 30 deadline to either fire him or allow him to continue to run the company. Many investors would like to see him go because as CEO he's pulled in more than $116 million in compensation since 2007. For perspective, that's $7 million more than the two CEOs of Chevron made during that time, and Chevron is 90 times larger than SandRidge.
Further, Chevron has been a steady performer, while SandRidge's shares have dropped by nearly 90% over the past five years. Shareholders have rightly questioned whether that pay package is deserved. Because of this, the new board has hired an independent compensation consultant to review management pay at SandRidge.
The other part of the news that's of interest to investors is that the company will be trimming its advertising and sponsorship expenses as well as selling company-owned aircraft. The use of company aircraft has been under increased scrutiny by shareholders over the past couple of years. Former Chesapeake Energy CEO Aubrey McClendon was one at the forefront of that discussion, and part of his last pay package included a provision that required him to reimburse the company for his personal use of company aircraft in excess of $250,000.
The fact that SandRidge is selling company-owned aircraft is a positive step in reducing costs as well as cashing in on a non-core asset. However, it doesn't appear that the company will stop there. It's very likely that investors will see a number of future asset sales as the company pares down in order to live within its capital constraints. This could include its Gulf of Mexico operations, its Mississippian electrical and saltwater disposal infrastructure or the shares it still owns of its three royalty trusts.
The next few months will be critical for the future of SandRidge Energy. Once investors have some clarity on Tom Ward's future, as well as what assets the company plans to hold, it should provide a catalyst for the company's shares. SandRidge remains one of the more intriguing stories in the energy industry, and one worth a closer look.
I've spent a lot of time digging into the company over the past few months. If you'd like to learn more of what I've discovered about the future of this emerging oil and gas junior then check out The Motley Fool's premium research report detailing SandRidge's game plan and what to expect from the company going forward. To get started, simply click here now!
The article Another Step Forward in SandRidge's Turnaround originally appeared on Fool.com.Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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