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
SYS-CON Events announced today that Daiya Industry will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Daiya Industry specializes in orthotic support systems and assistive devices with pneumatic artificial muscles in order to contribute to an extended healthy life expectancy. For more information, please visit https://www.daiyak...
SYS-CON Events announced today that Nihon Micron will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Nihon Micron Co., Ltd. strives for technological innovation to establish high-density, high-precision processing technology for providing printed circuit board and metal mount RFID tags used for communication devices. For more inf...
SYS-CON Events announced today that Massive Networks, that helps your business operate seamlessly with fast, reliable, and secure internet and network solutions, has been named "Exhibitor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. As a premier telecommunications provider, Massive Networks is headquartered out of Louisville, Colorado. With years of experience under their belt, their team of...
SYS-CON Events announced today that Suzuki Inc. will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Suzuki Inc. is a semiconductor-related business, including sales of consuming parts, parts repair, and maintenance for semiconductor manufacturing machines, etc. It is also a health care business providing experimental research for...
SYS-CON Events announced today that mruby Forum will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. mruby is the lightweight implementation of the Ruby language. We introduce mruby and the mruby IoT framework that enhances development productivity. For more information, visit http://forum.mruby.org/.
Elon Musk is among the notable industry figures who worries about the power of AI to destroy rather than help society. Mark Zuckerberg, on the other hand, embraces all that is going on. AI is most powerful when deployed across the vast networks being built for Internets of Things in the manufacturing, transportation and logistics, retail, healthcare, government and other sectors. Is AI transforming IoT for the good or the bad? Do we need to worry about its potential destructive power? Or will we...
SYS-CON Events announced today that B2Cloud will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. B2Cloud specializes in IoT devices for preventive and predictive maintenance in any kind of equipment retrieving data like Energy consumption, working time, temperature, humidity, pressure, etc.
In his session at @ThingsExpo, Greg Gorman is the Director, IoT Developer Ecosystem, Watson IoT, will provide a short tutorial on Node-RED, a Node.js-based programming tool for wiring together hardware devices, APIs and online services in new and interesting ways. It provides a browser-based editor that makes it easy to wire together flows using a wide range of nodes in the palette that can be deployed to its runtime in a single-click. There is a large library of contributed nodes that help so...
What is the best strategy for selecting the right offshore company for your business? In his session at 21st Cloud Expo, Alan Winters, U.S. Head of Business Development at MobiDev, will discuss the things to look for - positive and negative - in evaluating your options. He will also discuss how to maximize productivity with your offshore developers. Before you start your search, clearly understand your business needs and how that impacts software choices.
SYS-CON Events announced today that SIGMA Corporation will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. uLaser flow inspection device from the Japanese top share to Global Standard! Then, make the best use of data to flip to next page. For more information, visit http://www.sigma-k.co.jp/en/.
SYS-CON Events announced today that NetApp has been named “Bronze Sponsor” of SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. NetApp is the data authority for hybrid cloud. NetApp provides a full range of hybrid cloud data services that simplify management of applications and data across cloud and on-premises environments to accelerate digital transformation. Together with their partners, NetApp em...
Agile has finally jumped the technology shark, expanding outside the software world. Enterprises are now increasingly adopting Agile practices across their organizations in order to successfully navigate the disruptive waters that threaten to drown them. In our quest for establishing change as a core competency in our organizations, this business-centric notion of Agile is an essential component of Agile Digital Transformation. In the years since the publication of the Agile Manifesto, the conn...
There is huge complexity in implementing a successful digital business that requires efficient on-premise and cloud back-end infrastructure, IT and Internet of Things (IoT) data, analytics, Machine Learning, Artificial Intelligence (AI) and Digital Applications. In the data center alone, there are physical and virtual infrastructures, multiple operating systems, multiple applications and new and emerging business and technological paradigms such as cloud computing and XaaS. And then there are pe...
Real IoT production deployments running at scale are collecting sensor data from hundreds / thousands / millions of devices. The goal is to take business-critical actions on the real-time data and find insights from stored datasets. In his session at @ThingsExpo, John Walicki, Watson IoT Developer Advocate at IBM Cloud, will provide a fast-paced developer journey that follows the IoT sensor data from generation, to edge gateway, to edge analytics, to encryption, to the IBM Bluemix cloud, to Wa...
SYS-CON Events announced today that MIRAI Inc. will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. MIRAI Inc. are IT consultants from the public sector whose mission is to solve social issues by technology and innovation and to create a meaningful future for people.
While some developers care passionately about how data centers and clouds are architected, for most, it is only the end result that matters. To the majority of companies, technology exists to solve a business problem, and only delivers value when it is solving that problem. 2017 brings the mainstream adoption of containers for production workloads. In his session at 21st Cloud Expo, Ben McCormack, VP of Operations at Evernote, will discuss how data centers of the future will be managed, how th...
SYS-CON Events announced today that Keisoku Research Consultant Co. will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Keisoku Research Consultant, Co. offers research and consulting in a wide range of civil engineering-related fields from information construction to preservation of cultural properties. For more information, vi...
SYS-CON Events announced today that Fusic will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Fusic Co. provides mocks as virtual IoT devices. You can customize mocks, and get any amount of data at any time in your test. For more information, visit https://fusic.co.jp/english/.
SYS-CON Events announced today that Enroute Lab will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Enroute Lab is an industrial design, research and development company of unmanned robotic vehicle system. For more information, please visit http://elab.co.jp/.
SYS-CON Events announced today that Mobile Create USA will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Mobile Create USA Inc. is an MVNO-based business model that uses portable communication devices and cellular-based infrastructure in the development, sales, operation and mobile communications systems incorporating GPS capabi...