SandRidge Energy Inc. founder Tom Ward, the former chairman and CEO, was replaced Wednesday by the board of directors, which said its decision was "in the best interests of the company and its shareholders at this time."
President and former CFO James Bennett immediately was tapped to take over, and lead independent director Jeffrey Serota is to serve as interim nonexecutive chairman of the Oklahoma City operator.
Ward, who had co-founded Chesapeake Energy Corp. with Aubrey McClendon, left to form SandRidge in 2006. He has served as chairman and CEO since then. McClendon was forced out at Chesapeake on April 1.
"The board's decision to replace Ward reflects its judgment that, despite Ward's many contributions to SandRidge, new leadership is in the best interests of the company and its shareholders at this time," the board said.
"On behalf of the board, I want to express our appreciation of Tom's leadership and vision, which led to the founding and growth of SandRidge," Serota said.
The announcement came after the board's audit committee completed a previously announced independent investigation, which was prompted by allegations of improper related-party transactions in oil and gas properties in the Mississippian Lime.
"The four-month independent investigation was conducted by Mayer Brown LLP, an internationally recognized law firm, and included the review of hundreds of thousands of documents and the interview of more than 40 persons," the board noted. "After reviewing the facts developed during the audit committee's investigation, the nonemployee members of the board unanimously determined that such did not merit a termination for cause.
"The termination of Ward's employment, which reflects the board's decision that new leadership is desirable at this time, will accordingly be 'without cause' under the terms of his employment agreement."
Ward has been under fire for more than a year and has faced lawsuits and accusations from shareholder groups concerning how he has run the company -- similar accusations that dogged McClendon. Among other things, a lawsuit earlier this year accused Ward and the board of breaching their fiduciary duties by allowing Ward "to usurp the company's corporate opportunities by front-running the company and acquiring mineral rights to almost 500,000 acres through multiple leaseholds immediately next or adjacent to the company's leaseholds" (see Shale Daily, April 1).
With the internal investigation finding no evidence of wrongdoing, Ward is to receive a severance package provided under his employment agreement, consisting of vesting 6.33 million shares of previously granted restricted stock; a lump sum cash payment of $53.5 million, comprised of three times the average of the last three annual bonuses; accrued vacation; value of the restricted stock that he would have received over the next three years if employment had continued; and current base salary to be paid for a period of three years.
Bennett's promotion came after the board had evaluated his performance "as president and his two-and-a-half years as our CFO," and "we believe that with his extensive industry and financial expertise, as well as his leadership qualities, he is the ideal choice to lead SandRidge," said Serota. "The board unanimously concluded that an external search was unnecessary and not in the best interests of the company as the board has full confidence that James will provide excellent leadership to a talented management team and workforce, focus the company on transparency, meeting or exceeding expected results, capital discipline and creating sustainable returns."
Bennett began as CFO in January 2011 and became president in March. He previously was managing director for private equity fund White Deer Energy, which focused on the oil and gas industry. From 2006 to December 2009, he was employed by GSO Capital Partners, as well as serving as CFO of Aquilex Services Corp., a First Reserve portfolio company. In addition Bennett was an investment banker in the former energy group of Donaldson, Lufkin & Jenrette, which is now part of Credit Suisse. He started his career at NationsBank.
The new CEO graduated from Texas Tech University in Lubbock with a bachelor of business administration degree. He has served on the boards of directors of the general partner of Cheniere Energy Partners LP and PostRock Energy Corp.
"As we begin a new chapter in the company's history, we are focused on keeping our talented team motivated, enhancing our communications, and delivering on expectations by efficiently executing on our assets," said Bennett. "We are confident this will result in value creation for all stakeholders, including our stockholders, employees and the communities in which we operate."