Welcome!

Apache Authors: Pat Romanski, Liz McMillan, Elizabeth White, Janakiram MSV, Gil Allouche

News Feed Item

Mount Kellett Sends Letter to The Board of SandRidge Energy

NEW YORK, Nov. 15, 2012 /PRNewswire/ -- Mount Kellett Capital Management LP ("Mount Kellett") today sent a letter to SandRidge Energy, Inc.'s (NYSE: SD) ("SandRidge") Board of Directors outlining issues related to the company's management and strategic direction.  Full text of the letter follows:

November 15, 2012

SandRidge Energy Inc.
123 Robert S. Kerr Avenue
Oklahoma City, OK 73102
Attn: Board of Directors

Dear Sirs,

Mount Kellett Capital Management LP ("Mount Kellett" or "we") is a multi-strategy private investment firm focused on global value, special situations and opportunistic investing. Mount Kellett and funds and accounts under common control collectively have beneficial ownership in SandRidge Energy Inc. ("SandRidge" or the "Company") of 22.2 million shares (the "Shares"), or approximately 4.5% of the Company's outstanding common stock. 

Mount Kellett originally invested in the Company's common stock in 2009 because we believed the Company was undervalued and possessed very valuable oil and gas assets that would generate tremendous future value if developed properly in a strategically consistent, systematic manner. Even today, as outlined in more detail below, we believe that – properly managed – the Company's assets are worth approximately $20 per share.  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.  Just this year alone, the Company's stock price has plunged, down almost 40%.

Like other stockholders, we read with interest TPG-Axon's November 8th letter to you. 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.

We strongly believe that Tom Ward should be replaced as Chairman and CEO with a seasoned executive who can restore the Company's credibility. In addition, we believe the Board should be strengthened by the addition of new, truly independent directors selected in consultation with the Company's largest stockholders.  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.  The Company has no immediate financing needs and there is no need to sell assets at fire-sale prices. The future direction of the Company should be properly and fully evaluated by a reconstituted Board and management team.  All options should be explored, including a potential sale of the entire Company or a more limited divestiture of ill-fitting assets, such as Dynamic Offshore.

Our valuation of the Company of at least $20 per share is supported by the following:

Mississippian  
In the Company's Mississippian play, we believe the Company's original 750,000 acres to be worth approximately $6,800/acre on a developed basis.  Further, we believe the 1,000,000 excess acres in the extension of the Mississippian play into Kansas to be worth approximately $2,500/acre based on comparable transactions.  In total, the Company's Mississippian assets could represent an approximate $8 billion asset.

Permian  
The Company's Permian assets, pre-royalty trust interests, are worth up to $4 billion, based on Apache's purchase of BP's Permian assets in 2010, at approximately $22/boe when oil was at $75-$80 per barrel.  The Company's own reported PV-10 of its Permian assets is approximately $4 billion.  Additionally, we believe that if the Company were to continue to monetize portions of its Permian assets through a royalty trust structure, such as the SandRidge Permian Trust ("PER") or a Master Limited Partnership ("MLP") structure, the Company would continue to realize premium valuations for these assets.  

Other Assets  
We estimate the Company's other production, undeveloped proved reserves, undeveloped acreage and Gulf of Mexico assets are worth $3.6 billion. In addition, the Company has other assets that have not been properly highlighted. 

  • Mississippian Infrastructure - The Company has invested huge amounts of capital to develop the water disposal and electrical infrastructure necessary for future Mississippian development.  This front loading of infrastructure has increased the value of the Company's Mississippian assets, providing the Company with a competitive advantage on its acreage and should enable the Company to accelerate development over the coming years.  We commend the Company's operations team for successfully managing such a large and complex project.  We estimate that the Company has spent approximately $500 million in mid-stream infrastructure, gathering system and salt water disposal wells in this area. We believe these assets could ultimately have tremendous value to an MLP buyer who would be willing to pay a multiple of in-place cost, especially with the prospect of attracting third party volumes as the play continues to develop. 
  • Mississippian Drilling Carry - By our calculations, at year-end the Company will have approximately $650 million of drilling carry remaining in the Mississippian.
  • Pinon Field - The Company's Pinon field in the West Texas Overthrust, while of little value today, should have tremendous value in a higher natural gas environment or in the hands of the right buyer.

Overall, we believe SandRidge's Net Asset Value to be approximately $16.5 billion (assuming the mid-stream assets at cost), prior to net debt and royalty trust minority interest. 

So, given these values, why is the stock trading at $5.19 per share on November 14, 2012?

The answer is clear.  The Company's fundamental problems stem from the failure of management and the Board to adhere to some of the most basic tenets of managing a publicly traded company:

  • Follow a consistent strategy – Instead, the Company has  shifted its strategy with alarming frequency, sometimes seemingly on a quarter-by-quarter basis;
  • Allocate capital properly – Poor capital allocation decisions have led not only to stockholder dilution but diversion of management time and resources from the development of core assets;
  • Insure management credibility – To the contrary, the management team has consistently overpromised and underperformed; and
  • Align management compensation with stockholder success – As the stockholders have suffered, the CEO, other top executives and Board members have been richly rewarded through restricted stock grants that have significant value even if the Company's stock fails to appreciate in value.

In conclusion, SandRidge has great assets and should be a great company, but it is clear that it will not be without changes at the top.  We would prefer that the Board take the initiative and work in consultation with major stockholders to make the necessary changes.  Of course, if that does not happen, the stockholders will have no choice but to take the necessary actions to protect their investment.

We are hopeful that the Board understands the gravity of the situation and that the Board can and will do the right thing.  As always, we are available to discuss issues relevant to SandRidge at your convenience.

 

Very truly yours,




MOUNT KELLETT CAPITAL
MANAGEMENT LP






By:

(sig.)


Name:  Jonathan Fiorello


Title:  Chief Operating Officer




 

About Mount Kellett Capital Management LP  
Mount Kellett is a multi-strategy private investment firm focused on global value, special situations and opportunistic investing. The firm has approximately 115 employees with offices in New York, Dallas, Hong Kong, London, and Mumbai. The firm currently has in excess of $7 billion in assets under management.

SOURCE Mount Kellett Capital Management LP

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
Developing software for the Internet of Things (IoT) comes with its own set of challenges. Security, privacy, and unified standards are a few key issues. In addition, each IoT product is comprised of (at least) three separate application components: the software embedded in the device, the back-end service, and the mobile application for the end user’s controls. Each component is developed by a different team, using different technologies and practices, and deployed to a different stack/target –...
SYS-CON Events announced today Telecom Reseller has been named “Media Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Telecom Reseller reports on Unified Communications, UCaaS, BPaaS for enterprise and SMBs. They report extensively on both customer premises based solutions such as IP-PBX as well as cloud based and hosted platforms.
Almost two-thirds of companies either have or soon will have IoT as the backbone of their business in 2016. However, IoT is far more complex than most firms expected. How can you not get trapped in the pitfalls? In his session at @ThingsExpo, Tony Shan, a renowned visionary and thought leader, will introduce a holistic method of IoTification, which is the process of IoTifying the existing technology and business models to adopt and leverage IoT. He will drill down to the components in this fra...
Pulzze Systems was happy to participate in such a premier event and thankful to be receiving the winning investment and global network support from G-Startup Worldwide. It is an exciting time for Pulzze to showcase the effectiveness of innovative technologies and enable them to make the world smarter and better. The reputable contest is held to identify promising startups around the globe that are assured to change the world through their innovative products and disruptive technologies. There w...
There is growing need for data-driven applications and the need for digital platforms to build these apps. In his session at 19th Cloud Expo, Muddu Sudhakar, VP and GM of Security & IoT at Splunk, will cover different PaaS solutions and Big Data platforms that are available to build applications. In addition, AI and machine learning are creating new requirements that developers need in the building of next-gen apps. The next-generation digital platforms have some of the past platform needs a...
With so much going on in this space you could be forgiven for thinking you were always working with yesterday’s technologies. So much change, so quickly. What do you do if you have to build a solution from the ground up that is expected to live in the field for at least 5-10 years? This is the challenge we faced when we looked to refresh our existing 10-year-old custom hardware stack to measure the fullness of trash cans and compactors.
The emerging Internet of Everything creates tremendous new opportunities for customer engagement and business model innovation. However, enterprises must overcome a number of critical challenges to bring these new solutions to market. In his session at @ThingsExpo, Michael Martin, CTO/CIO at nfrastructure, outlined these key challenges and recommended approaches for overcoming them to achieve speed and agility in the design, development and implementation of Internet of Everything solutions wi...
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...
Cloud computing is being adopted in one form or another by 94% of enterprises today. Tens of billions of new devices are being connected to The Internet of Things. And Big Data is driving this bus. An exponential increase is expected in the amount of information being processed, managed, analyzed, and acted upon by enterprise IT. This amazing is not part of some distant future - it is happening today. One report shows a 650% increase in enterprise data by 2020. Other estimates are even higher....
Smart Cities are here to stay, but for their promise to be delivered, the data they produce must not be put in new siloes. In his session at @ThingsExpo, Mathias Herberts, Co-founder and CTO of Cityzen Data, will deep dive into best practices that will ensure a successful smart city journey.
Identity is in everything and customers are looking to their providers to ensure the security of their identities, transactions and data. With the increased reliance on cloud-based services, service providers must build security and trust into their offerings, adding value to customers and improving the user experience. Making identity, security and privacy easy for customers provides a unique advantage over the competition.
SYS-CON Events announced today that 910Telecom will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Housed in the classic Denver Gas & Electric Building, 910 15th St., 910Telecom is a carrier-neutral telecom hotel located in the heart of Denver. Adjacent to CenturyLink, AT&T, and Denver Main, 910Telecom offers connectivity to all major carriers, Internet service providers, Internet backbones and ...
SYS-CON Events announced today that Pulzze Systems will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Pulzze Systems, Inc. provides infrastructure products for the Internet of Things to enable any connected device and system to carry out matched operations without programming. For more information, visit http://www.pulzzesystems.com.
Data is an unusual currency; it is not restricted by the same transactional limitations as money or people. In fact, the more that you leverage your data across multiple business use cases, the more valuable it becomes to the organization. And the same can be said about the organization’s analytics. In his session at 19th Cloud Expo, Bill Schmarzo, CTO for the Big Data Practice at EMC, will introduce a methodology for capturing, enriching and sharing data (and analytics) across the organizati...
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - comp...
SYS-CON Events announced today that Adobe has been named “Bronze Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. Adobe is changing the world though digital experiences. Adobe helps customers develop and deliver high-impact experiences that differentiate brands, build loyalty, and drive revenue across every screen, including smartphones, computers, tablets and TVs. Adobe content solutions are used daily by millions of co...
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
19th Cloud Expo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterpri...
DevOps at Cloud Expo, taking place Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long dev...