Market firm says changes are needed at SandRidge Energy

Market consulting firm Seeking Alpha says it’s time for changes at Oklahoma City’s SandRidge Energy where Carl Icahn took control last year allowing stock to drop. The firm said it shows Icahn is not always right.

In a release this week, the firm charged that Icahn’s influence to force SandRidge out of a merger with Colorado-based Bonanza Creek was “probably a mistake.” And it said the rejection of the Midstates Petroleum offer “does not look good either.”


“Management needs to deliver some major profitability improvements,” stated Seeking Alpha.

Below is the rest of the article from the firm:

The balance sheet is in good shape with minimal debt.

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SandRidge Energy (SD) is proof that Carl Icahn is not always correct. Back in 2018, Icahn wanted new directors, a change in management and an end to the merger with Bonanza Creek (BCEI). Some senior management headed out the door, he reached an agreement with regard to directors and the merger was called off. SandRidge Energy board also rejected a proposal from Midstates Petroleum Corp. (MPO) to merge.

The sad part about the ending of the Bonanza Creek merger was the ability of SandRidge to accelerate the conversion to a higher percentage of liquids production as Chesapeake Energy (CHKaccomplished through the WildHorse Resource Development (WRD) merger. Admittedly, anytime a company emerges from bankruptcy as both SandRidge Energy and Bonanza Creek had, there is the “bankruptcy discount” that encompasses questions about the quality of assets (among other things).

Stock Price Action

The actions of Icahn have left SandRidge Energy shareholders open to the full brunt of the primarily gas producers’ stock price pullback. The unsolicited merger proposal was for a greater price than the current (and dropping) price. The common stock of this company has participated with aplomb, unfortunately for shareholders.

This is not exactly the result shareholders hoped for when they cheered Icahn on to a hopeful victory. This is also not the first time that Icahn has not been successful with an oil & gas holding. He had similarly mixed results when he got involved with Chesapeake Energy early in the overhaul of that company.


Also, this may be a very telling outcome for those shareholders inclined to back him up with the current fight at Occidental Petroleum (OXY). The lesson is Icahn needs a much better track record than this with the small fry before he picks on the big boys. His overall track record may be excellent. But his oil & gas investments are clearly not the lynchpin of that track record, based upon some of his latest results. That should be important for observers to keep in mind going forward.


Now, it’s time for Icahn and the SandRidge Energy shareholders to get this company back into shape. The stock price is probably not reflective of the company’s prospects. Finances have really not deteriorated since the emergence from bankruptcy. Instead, the price decline has a lot more to do with the market future prospects perception of primarily gas-producing companies for the next few years or so. Like any other commodity producer, this perception can quickly change. But the company needs to take advantage of any opportunities that arise.

At the end of the first quarter, the company reported a working capital deficit that was closing in on $100 million. That working capital deficit included borrowings of $20 million on the bank line. There was another more than $300 million available to the company.