The board at SandRidge Energy Inc. on Friday issued a statement in support of CEO Tom Ward, who has been accused of “front-running” by one of the company’s largest shareholders.
Hedge fund TPG-Axon Capital, which has asked shareholders to replace Ward and the board, contends entities affiliated with Ward have been “flipping” leases to SandRidge. TPG-Axon detailed its concerns Wednesday in a presentation posted on its website, shareholdersforSandRidge.com.
“The board has reviewed issues related to these allegations several times over the Company’s history and has found no wrongdoing to have taken place,” the board said Friday.
WCT Resources LLC, the company at the center of TPG-Axon’s allegations, is independent of SandRidge, with no non-public access to information about its land and mineral acquisition programs, even though one of its managers is Ward’s son, according to the board. Ward is not involved in the company, which was created by trusts established to benefit his adult children.
“Thus, contrary to TPG-Axon’s assertions, neither the company nor Mr. Ward has the power to “allow” WCT Resources to engage in any business regardless of whether it competes with the company,” the board said. ”As an ongoing business not controlled by the company or Mr. Ward, WCT Resources is free to engage in whatever commerce it deems suitable wherever it chooses.”
The SandRidge board also dismissed TPG-Axon’s concerns about WCT leasing acreage adjacent to the company’s holdings in the Mississippian oil play.
“Given the company’s vast acreage holdings in the Mississippian play, which include interests in over 7,500 sections covering nearly five million acres in 30 counties throughout an area that encompasses approximately 17 million acres, this is an entirely unremarkable fact,” according to the board. ”Virtually all companies active in the play are likely to have some interests that could be characterized as adjacent to the company’s holdings.”
The board said leases secured by TLW Land and Cattle LP were acquired with the purchase of ranch land or other surface acreage, mostly before SandRidge became active in the Mississippian in northern Oklahoma and southern Kansas.
“Mr. Ward disclosed these longtime business interests to the board early in the company’s history and has discussed them with the board several times over the past several years, and the board has found no evidence of impropriety or ‘front running,’” the board said.
TPG-Axon and another large institutional shareholder, Mount Kellett Capital Management, had asked the board to investigate the allegations against Ward. Mount Kellett suggested hiring an independent law firm and forensic accounting firm. It also wants Ward to be suspended until the inquiry is completed.
“While the board’s perspective on these and other issues may diverge from TPG-Axon’s, the company’s directors continue to value the input of its stockholders,” according to the board’s statement. ”As part of its continuing oversight duties, the independent members of the board will consider the requests of TPG-Axon and Mount Kellett for the appointment of independent counsel and other investigative measures concerning the activities surrounding their allegations. “