Analysis: TPG-Axon won't find quick fixes for SandRidge

Fri May 3, 2013 1:10am EDT
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By Anna Driver and Michael Erman

(Reuters) - Hedge fund TPG-Axon Capital has won nearly half the seats on SandRidge Energy Corp's board but faces an uphill battle to reverse the oil and gas company's slumping stock price.

SandRidge shares have tumbled 20 percent this year to around $5 on disappointing forecasts for its wells in Oklahoma and Kansas, as well as investor uncertainty over its strategic direction.

While natural gas prices have risen from last year's 10-year lows, they remain depressed, adding pressure to SandRidge and peers like Chesapeake Energy Corp and Hess Corp to cut costs and improve well efficiency.

SandRidge faces additional uncertainties over the future of Chief Executive Officer Tom Ward, who TPG-Axon has accused of making strategic mistakes and self-dealing at the expense of shareholders. Under a deal reached in March, the board has to let go of Ward by June 30 or give TPG-Axon a controlling number of seats.

Some shareholders fear Ward's departure will lead to an exodus of other managers who have the expertise SandRidge needs to improve.

"We are concerned that the reconstituted board may be drawn to focus on short-term change to the detriment of long-term shareholder gain," said Paul Rivett, vice president of operations at Canada's Fairfax Financial, SandRidge's largest shareholder.

Fairfax, which is run by investment guru Prem Watsa and owns 12.7 percent stake in SandRidge, had supported Ward in his battle against TPG-Axon, which has a 7.3 percent stake.

TPG-Axon and Mount Kellett Capital Management, which owns 5 percent of the company, originally called for SandRidge to consider selling itself, but that is now seen unlikely in the near term because of the falling share price.   Continued...

Specialist trader Frank Massiello works at the post that trades SandRidge Energy stock on the floor of the New York Stock Exchange January 11, 2013. REUTERS/Brendan McDermid