SandRidge Energy Chairman and Chief Executive Officer Tom Ward will depart the oil company he founded and be replaced by Chief Financial Officer James Bennett, days before an activist shareholder was poised to get majority control of the board.
Ward was terminated after the board decided “new leadership is in the best interests of the company and its shareholders,” the company said in a statement Wednesday. Director Jeffrey Serota will be interim chairman and all the management changes are effective today. Ward, 53, founded the Oklahoma City-based company in 2006 after leaving Chesapeake Energy Corp.
The announcement comes as the company said a four-month independent review by Mayer Brown LLP of related-party transactions between SandRidge and businesses affiliated with the CEO or his family found nothing the board determined merited Ward’s termination “with cause.” The independent review was part of a March settlement with TPG-Axon Capital Management LP, which has called for Ward to be fired and would’ve gained majority control of the board if he didn’t exit by June 30.
The move is the latest in a series of shareholder campaigns that have shaken up the U.S. oil and natural gas industry in the past year. Chesapeake Energy’s Aubrey McClendon, who co-founded that company with Ward, stepped down in April after shareholders criticized personal loans he got using company wells as collateral.
Occidental Petroleum Corp. Chairman Ray Irani was forced out in May after almost three decades at the company when shareholders questioned his role in the decision to replace CEO Stephen I. Chazen. Hess Corp. and Transocean Ltd. have also agreed to board changes after shareholders questioned management.
SandRidge in May reported its third-biggest quarterly net loss as it sold assets in Texas. The company has sought to cut spending and focus on the Mississippi Lime, an oil and natural gas shale formation in Kansas and Oklahoma.
“The company is in a position of digging itself out of its own hole,” Jason Wangler, an analyst at Wunderlich Securities Inc. in Houston, said in an interview before the announcement. “Tom put them there, so they probably want to dig with someone else’s shovel.”
Bennett has been CFO since January 2011 and was promoted to president in March. Prior to joining SandRidge, Bennett worked for White Deer Energy, a private-equity fund.
“The board unanimously concluded that an external search was unnecessary and not in the best interests of the company,” Serota said. “After evaluating James’ performance as president and his two-and-a-half years as our CFO, we believe that with his extensive industry and financial expertise, as well as his leadership qualities, he is the ideal choice to lead SandRidge.”
TPG-Axon, SandRidge’s third-largest shareholder, called for Ward to be replaced because of questions surrounding the transactions and the company’s “disastrous” performance. SandRidge added four TPG-Axon appointees to the board as part of a March settlement to head off a proxy contest. The settlement allowed TPG-Axon to add another board member, giving it majority control, if Ward wasn’t fired by June 30.
TPG-Axon, run by former Goldman Sachs Group Inc. banker Dinakar Singh, has said SandRidge suffered “strategic blunders, extraordinary spending and poor governance” that caused the stock to drop. SandRidge has fallen 80 percent since it began selling for $26 a share in 2007.
SandRidge paid $9.5 million over four years to companies controlled by Ward and his family as it leased land for oil and natural gas drilling in Oklahoma, TPG-Axon said.
Because the termination was without cause, Ward will receive a $53.3 million lump sum, vesting of 6.3 million shares of previously-issued restricted stock and his base salary for the next 36 months, the company said.
Ward is the largest individual shareholder in SandRidge, with a 4.76 percent stake as of April 1, according to data compiled by Bloomberg. In a May 8 interview, Ward said he’d continue working at SandRidge “every day until I’m told not to.”