New Era Dawns for SandRidge Energy Inc. (SD)

Page 1 of 2

SandRidge Energy Inc. (NYSE:SD)It’s been bad year to be a highly paid CEO of an underperforming energy company. This past January we found out that Chesapeake Energy Corporation (NYSE:CHK) co-founder Aubrey McClendon was “retiring” after philosophical differences with his board. Now, SandRidge Energy Inc. (NYSE:SD) CEO Tom Ward, also a co-founder of Chesapeake Energy, is being sent packing.

Unfortunately, for Ward, there won’t be any cake served at a retirement party, for he’s being let go effective immediately. It could have been worse: The company, which had hired an independent investigation firm to look into allegations of improper related-party transactions, determined that Ward’s actions didn’t merit him being terminated with cause. Despite that finding, this isn’t the most graceful exit for the company’s founder.

With cake and cookies not being an option, Ward will have to make due with his severance package. Under the terms of his employment agreement more than 6.3 million shares of previously granted restricted stock will vest, in addition to which he’ll receive a lump sum payment of $53.5 million, which consists of things like unpaid vacation and bonuses. Finally, Ward will continue to receive his base salary for the next three years. When you add it all up, Ward’s package is worth about $90 million, which is one of the highest exit packages the energy industry has seen, and much higher than what McClendon received from Chesapeake Energy Corporation (NYSE:CHK). While this might seem like a lot — for those scoring at home that equates to the cost of about 30 Mississippian wells — this is simply the cost of beginning a new chapter in the company’s history.

For investors, that’s really what this is all about. For far too long the focus on the company has been placed on things like Ward’s pay or the company’s previous missteps. Now, the focus can be on the company’s assets and business operations, which are both very solid. For example, Mississippian oil production is expected to grow 64% this year while the company is in its best financial shape in years. That’s one reason why the board moved quickly to tap CFO James Bennett to lead the company. The board determined that it was in SandRidge Energy Inc. (NYSE:SD)’s best interest not to pursue an external search when it already possessed an ideal internal candidate.

Bennett, who has been CFO since January 2011, comes from the private equity world; he was a managing director at both West Deer Energy and GSO Capital Partners. Previous to that, his experience includes investment banking roles and prior experience as a CFO for a private equity portfolio holding. What Bennett really brings to the top spot is the financial acumen to lead a company that will need to remain financially flexible in order to continue growing.

Bennett has done an admirable job in getting the company on better financial ground since taking over as the CFO. The company’s credit metrics and balance sheet are much improved, as you can see in the graphs below:

A New Era Dawns for SandRidge Energy Inc. (SD)Source: SandRidge Energy investor presentation

Notice that the leverage ratio is down from 4.6 times in early 2011 to just 2.3 times this year. Moreover, the company’s liquidity is robust right now and more than enough to fund its drilling program through 2014. Part of this is because the company has been much less aggressive in spending capital, as evidenced by its announcement earlier this year to slash its capital budget by $700 million year over year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!