TPG-Axon Responds to SandRidge Energy’s Statement Regarding Related Party
Notes Board’s Failure to Deny Allegations
Calls On Board to Suspend Tom Ward and Engage Credible Experts to Review
NEW YORK -- January 28, 2013
TPG-Axon, beneficial owner of 6.7% of the outstanding shares of SandRidge
Energy, Inc. (NYSE: SD) (the “Company”), today issued the following statement
and rebuttal to SandRidge’s press release regarding related party transactions
issued Friday, January 25, 2013.
“The Board’s disappointing response on Friday shows disregard for both facts
and stockholders. Nowhere in its press release did the Company refute the
accuracy of the facts we presented. Therefore, there can be no doubt that
SandRidge’s Board of Directors has failed stockholders by allowing its CEO's
immediate family, using entities he created or funded, to compete with the
Company in one of the most crucial aspects of its primary business – acquiring
the mineral rights to land in the Mississippian. Furthermore, since many of
the directors have either long-standing business relationships with Mr. Ward
or have had direct business relations with the Company, we disagree with the
very characterization of this Board as independent. For the Board to dismiss
our concerns as ‘entirely unremarkable’ is in fact remarkable,” said TPG-Axon.
TPG-Axon notes the following in response to the primary points made in the
statement from the SandRidge’s Board of Directors:
WCT Resources' Independence:
The Board of Directors is asking its stockholders to believe that the
"management of WCT Resources…including Mr. Ward's son…are independent of the
Company." The following facts continue to be true:
*The CEO of WCT Resources is the son of the SandRidge’s CEO;
*WCT Resources appears to have few employees and resources relative to
*WCT Resources and SandRidge shared an addressuntil lastyear;
*WCT Resources is owned by trusts established by Tom and Sch’ree Ward and
whose trustee is a SandRidge employee;
*The COO of WCT Resources recently worked at SandRidge.
These facts, along with the significant and curious overlap of activity should
cause a reasonable person, at the minimum, to be skeptical of claims of
Adjacent or Advance Acquisitions:
The detailed examples that TPG-Axon provided of advance or adjacent
acquisitions by WCT Resources are illustrative and are just examples of the
significant overlap in both location and timing between the activity of WCT
Resources and SandRidge in the Mississippian. From the data TPG-Axon has
reviewed so far, this pattern of activity is not rare;it is frequent, -
particularly in more recent expansions in the Mississippian.
The Board claims that “virtually all companies active in the play are likely
to have some interests that could be characterized as adjacent to the
Company’s holdings”. Yet, it is simply not true that all companies have
frequent correlation of activity, in both time and place. Even the Company, in
the Consent Revocation Statement it recently filed, proudly trumpets that
SandRidge created value by “quietly and inexpensively” acquiring rights ahead
of other companies. Therefore, for WCT Resources to appear frequently
alongside or in advance of SandRidge is notable, and not “entirely
“We challenge the Board to show that the pattern of overlap between WCT
Resources and SandRidge is modest compared to that of others. It is simply
astonishing that family-controlled entities are active in the same business
that SandRidge is active in. It is even more astonishing that these entities
have frequently, as opposed to rarely, appeared ahead of, or alongside,
SandRidge in areas of interest,” said TPG-Axon.
The direct transactions between WCT Resources and SandRidge are a small
fraction of the overall pattern of overlap between WCT Resources and
SandRidge, simply because much of the property or rights acquiredby WCT
Resources appear to have been kept, or sold to third parties. If WCT Resources
buys land or rights in advance of the Company, there is potential for harm to
SandRidge stockholders, whether that land is kept or sold, and regardless of
whom it is sold to.
The vast majority of transactions in which WCT Resources acts in advance, or
alongside, of SandRidge have never been disclosed by the Company. For only the
small percentage of actual direct transactions in which land or rights were
flipped to SandRidge, the Company has had very limited disclosure – this is
the “one quarter of one percent” the Company refers to. Yet, even for these
transactions, we do not believe the disclosure has been sufficient. As an
example, to provide limited disclosure regarding transactions with WCT
Resources, and yet not disclose that those very assets had been held by TLW
Land & Cattle just months before being sold to SandRidge, is a significant
omission. TPG-Axon has the following questions for the Board:
*Why did the Company not disclose the history of ownership of those assets?
*Why were assets transferred to the “independently managed” WCT Resources
and then resold to SandRidge shortly thereafter?
*Is the Board now taking the position that TLW Land & Cattle is also an
“independently managed” company?
*If not, then why did Mr. Ward, in his role at TLW Land & Cattle, choose to
sell rights to WCT Resources only to then choose, in his role as CEO of
SandRidge, to buy them for the Company?
*If these transactions were appropriate, why did the Company not disclose
the history of ownership and the reasons for the complex transfer?
*Even leaving aside the claim that WCT Resources is independently managed,
is it not relevant to disclose that the very assets being bought by the
Company were indirectly owned by the CEO, by virtue of his ownership of
TLW, just months prior to such acquisitions?
Overall, the conflicts of interest, and potential for harm to the Company and
unfair gain for others, are significant in all of these transactions.
When SandRidge signs a joint venture agreement, as it has with companies like
Repsol and Atinum, there is benefit for SandRidge stockholders. The Company
and its stockholders bear the initial expense and overhead of identifying
opportunities.However, the partners then pay a premium to the Company for a
share of the land, and share in the expense of developing the land.
On the other hand, if in fact, family-controlled entities have gained
information and advantage through the relationship with Mr. Ward and
SandRidge, then by contrast, the situation with WCT Resources and other Ward
family entities is remarkably advantageous for them. In such circumstances,
SandRidge would bear the expense of huge overhead, which presumably would help
in identifying attractive opportunities while WCT Resources would appear to
reach that same result with little overhead spending or resources. SandRidge
would also, in such circumstances, bear the cost of drilling to prove whether
the land was valuable or not. If it was valuable, WCT Resources would benefit
from having adjacent land, even without having borne that cost.
“Just like the earlier Executive Well Participation Plan program, which Mr.
Ward benefitted handsomely from, there would be an unfair sharing of risk and
reward. However, at least with the Executive Well Participation Plan, the
Company disclosed its existence, albeit to a limited degree. In this case, by
adopting the view that WCT Resources is an ‘independently managed company,’
SandRidge has avoided any disclosure of the significant potential for conflict
of interest and unfair gain for the Ward family,” said TPG-Axon.
The Board's response also ignores a number of the other inconvenient facts and
questions pointed out in TPG-Axon’s presentation. Most notably, in its
response, the Board does not address any of the other persons or entities
related to Mr. Ward that appear frequently alongside SandRidge in the
acquisition of land and mineral rights, including 192 Investments and Sch’ree
Ward. Are stockholders to believe that those occurrences are also simply
The Board also claims that it does not technically have the ability to stop
WCT Resources from engaging in any particular business. While that may be
literally true (despite the fact that such activity was being conducted by a
company which shared an address with SandRidge, and whose economic benefit
flowed to a trust controlled by a SandRidge employee for the benefit of the
CEO’s children), it was not beyond the Board's power to require that Mr. Ward
step down as CEO if related entities did not cease their competitive
activities, because it is inappropriate for SandRidge's CEO to be in such a
“We believe the time has long passed to simply ‘consider’ the appointment of
independent counsel – that should have been done already. The Board should
suspend Mr. Ward while they engage credible experts to analyze the
transactions and review the behavior. We challenge the Board to either do
something, or make clear they will not. Stockholders cannot afford more
inactivity or delay by their Board,” concluded TPG-Axon.
About TPG-Axon Capital
TPG-Axon Capital is a leading global investment firm. Through offices in New
York, London, Hong Kong and Tokyo, TPG-Axon invests across global markets and
TPG-AXON MANAGEMENT LP, TPG-AXON PARTNERS GP, L.P., TPG-AXON GP, LLC, TPG-AXON
PARTNERS, LP, TPG-AXON INTERNATIONAL, L.P., TPG-AXON INTERNATIONAL GP, LLC,
DINAKAR SINGH LLC AND DINAKAR SINGH (COLLECTIVELY, “TPG-AXON”) HAS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) A DEFINITIVE CONSENT
STATEMENT AND ACCOMPANYING CONSENT CARD TO BE USED TO SOLICIT WRITTEN CONSENTS
FROM THE STOCKHOLDERS OF SANDRIDGE ENERGY, INC. IN CONNECTION WITH TPG-AXON'S
INTENT TO TAKE CORPORATE ACTION BY WRITTEN CONSENT. ALL STOCKHOLDERS OF
SANDRIDGE ENERGY, INC. ARE ADVISED TO READ THE DEFINITIVE CONSENT STATEMENT
AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF WRITTEN CONSENTS BY
TPG-AXON, STEPHEN C. BEASLEY, EDWARD W. MONEYPENNY, FREDRIC G. REYNOLDS, PETER
H. ROTHSCHILD, ALAN J. WEBER AND DAN A. WESTBROOK (COLLECTIVELY, THE
"PARTICIPANTS") FROM THE STOCKHOLDERS OF SANDRIDGE ENERGY, INC. BECAUSE THEY
CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL INFORMATION RELATED TO THE
PARTICIPANTS. THE DEFINITIVE CONSENT STATEMENT AND FORM OF WRITTEN CONSENT
HAVE BEEN FURNISHED TO SOME OR ALL OF THE STOCKHOLDERS OF SANDRIDGE ENERGY,
INC. AND ARE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO CHARGE ON
THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, TPG-AXON WILL PROVIDE
COPIES OF THE DEFINITIVE CONSENT STATEMENT AND ACCOMPANYING CONSENT CARD
WITHOUT CHARGE UPON REQUEST.
INFORMATION ABOUT THE PARTICIPANTS AND A DESCRIPTION OF THEIR DIRECT OR
INDIRECT INTERESTS BY SECURITY HOLDINGS IS CONTAINED IN THE DEFINITIVE CONSENT
STATEMENT ON SCHEDULE 14A FILED BY TPG-AXON WITH THE SEC ON JANUARY 18, 2013.
THIS DOCUMENT CAN BE OBTAINED FREE OF CHARGE FROM THE SOURCES INDICATED ABOVE.
MacKenzie Partners, Inc.
Dan Burch or Larry Dennedy, 212-929-5500
Anton Nicholas, 203-682-8245
Phil Denning, 203-682-8246
Jason Chudoba, 646-277-1249
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