Welcome!

Apache Authors: Pat Romanski, Liz McMillan, Elizabeth White, Christopher Harrold, Janakiram MSV

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
Major trends and emerging technologies – from virtual reality and IoT, to Big Data and algorithms – are helping organizations innovate in the digital era. However, to create real business value, IT must think beyond the ‘what’ of digital transformation to the ‘how’ to harness emerging trends, innovation and disruption. Architecture is the key that underpins and ties all these efforts together. In the digital age, it’s important to invest in architecture, extend the enterprise footprint to the cl...
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, discussed the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessio...
IoT is rapidly becoming mainstream as more and more investments are made into the platforms and technology. As this movement continues to expand and gain momentum it creates a massive wall of noise that can be difficult to sift through. Unfortunately, this inevitably makes IoT less approachable for people to get started with and can hamper efforts to integrate this key technology into your own portfolio. There are so many connected products already in place today with many hundreds more on the h...
No hype cycles or predictions of zillions of things here. IoT is big. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, Associate Partner at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He discussed the evaluation of communication standards and IoT messaging protocols, data analytics considerations, edge-to-cloud tec...
Announcing Poland #DigitalTransformation Pavilion
Digital Transformation is much more than a buzzword. The radical shift to digital mechanisms for almost every process is evident across all industries and verticals. This is often especially true in financial services, where the legacy environment is many times unable to keep up with the rapidly shifting demands of the consumer. The constant pressure to provide complete, omnichannel delivery of customer-facing solutions to meet both regulatory and customer demands is putting enormous pressure on...
DXWorldEXPO LLC announced today that All in Mobile, a mobile app development company from Poland, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. All In Mobile is a mobile app development company from Poland. Since 2014, they maintain passion for developing mobile applications for enterprises and startups worldwide.
CloudEXPO | DXWorldEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
The best way to leverage your CloudEXPO | DXWorldEXPO presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering CloudEXPO | DXWorldEXPO will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at CloudEXPO. Product announcements during our show provide your company with the most reach through our targeted audienc...
@DevOpsSummit at Cloud Expo, taking place November 12-13 in New York City, NY, is co-located with 22nd international CloudEXPO | first international DXWorldEXPO and will feature technical sessions from a rock star conference faculty and the leading industry players in the world.
Everything run by electricity will eventually be connected to the Internet. Get ahead of the Internet of Things revolution. In his session at @ThingsExpo, Akvelon expert and IoT industry leader Sergey Grebnov provided an educational dive into the world of managing your home, workplace and all the devices they contain with the power of machine-based AI and intelligent Bot services for a completely streamlined experience.
DXWorldEXPO | CloudEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
22nd International Cloud Expo, taking place June 5-7, 2018, at the Javits Center in New York City, NY, and co-located with the 1st DXWorld Expo 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 ...
In his keynote at 19th Cloud Expo, Sheng Liang, co-founder and CEO of Rancher Labs, discussed the technological advances and new business opportunities created by the rapid adoption of containers. With the success of Amazon Web Services (AWS) and various open source technologies used to build private clouds, cloud computing has become an essential component of IT strategy. However, users continue to face challenges in implementing clouds, as older technologies evolve and newer ones like Docker c...
"MobiDev is a software development company and we do complex, custom software development for everybody from entrepreneurs to large enterprises," explained Alan Winters, U.S. Head of Business Development at MobiDev, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.
JETRO showcased Japan Digital Transformation Pavilion at SYS-CON's 21st International Cloud Expo® at the Santa Clara Convention Center in Santa Clara, CA. The Japan External Trade Organization (JETRO) is a non-profit organization that provides business support services to companies expanding to Japan. With the support of JETRO's dedicated staff, clients can incorporate their business; receive visa, immigration, and HR support; find dedicated office space; identify local government subsidies; get...
Dion Hinchcliffe is an internationally recognized digital expert, bestselling book author, frequent keynote speaker, analyst, futurist, and transformation expert based in Washington, DC. He is currently Chief Strategy Officer at the industry-leading digital strategy and online community solutions firm, 7Summits.
Bill Schmarzo, author of "Big Data: Understanding How Data Powers Big Business" and "Big Data MBA: Driving Business Strategies with Data Science," is responsible for setting the strategy and defining the Big Data service offerings and capabilities for EMC Global Services Big Data Practice. As the CTO for the Big Data Practice, he is responsible for working with organizations to help them identify where and how to start their big data journeys. He's written several white papers, is an avid blogge...
In past @ThingsExpo presentations, Joseph di Paolantonio has explored how various Internet of Things (IoT) and data management and analytics (DMA) solution spaces will come together as sensor analytics ecosystems. This year, in his session at @ThingsExpo, Joseph di Paolantonio from DataArchon, added the numerous Transportation areas, from autonomous vehicles to “Uber for containers.” While IoT data in any one area of Transportation will have a huge impact in that area, combining sensor analytic...