TPG-Axon, which owns about 4.5% of the company, points out that SandRidge’s stock is “the single worst performing energy stock in the US market, and in the bottom 1% of the broader market, since its IPO in 2007.” Shares are down more than 90% from their peak in April 2008.
And why has the performance been so bad? According to TPG-Axon, “Management strategy has been incoherent, unpredictable, and volatile.” There’s more: “Corporate governance has been appalling, which has drained massive value from shareholders and completely misaligned management and shareholder interests.”
The hedge fund wants a “significantly reconfigured” board of directors, followed by a management change: “The company must bring in new management that is viewed as credible, experienced, and highly competent.” TPG-Axon would welcome an invitation to join the board, of course.
There’s a lot to be said for TPG-Axon’s complaints. SandRidge does sit on a significant stock of reserves — some 500 million barrels of oil equivalent at last count, a bit more than half of which is liquids. The company has been shifting its focus from one field to another, although it finally seems to have settled on the Mississippian play in Oklahoma and Kansas. SandRidge has also had to tap massive amounts of capital to fund its drilling and only in early October did the company set a goal of funding capex out of cash flow.
TPG-Axon suggests that the shares are worth $12 to $14 apiece, at least double today’s price. Shares closed at $6.00 last night and are up 5% at $6.30 now in a 52-week range of $5.55 to $9.04.
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