War of words heats up between SandRidge and Icahn

The conflict between SandRidge Energy Inc. and activist investor Carl Icahn continued Thursday as Icahn responded point-by-point to a SandRidge presentation critical of its largest shareholder.

SandRidge's 38-slide presentation promotes the company's directors as "committed to maximizing shareholder value" and criticizes Icahn's "poor track record in the energy industry."

Icahn has asked shareholders to reject the company's current directors and replace them with a full slate of seven directors he has nominated. The vote is set to take place at the company's annual meeting at 9 a.m. June 19 at SandRidge's Oklahoma City headquarters.

"We believe this drastic measure is warranted because, since emerging from bankruptcy, the board has exhibited a clear and consistent pattern of failure," Icahn said in his open letter to SandRidge shareholders filed with federal regulators Thursday. "Time and again the board has failed to understand and address the concerns of stockholders and has only acted when threatened with legal process or open shareholder revolt. And yet, remarkably, they still seem not to have gotten the message."

SandRidge directors, however, said Icahn is trying to take over the board so he can bypass the company's ongoing effort to solicit and evaluate third-party offers to buy or partner with the company. SandRidge directors have recommended shareholders reelect the current five-member board, plus two of Icahn's nominees, John J. "Jack" Lipinski and Randolph C. Read.

"Icahn's agenda is clear — it is seeking to gain control of SandRidge without paying an appropriate premium in order to preserve further upside only for itself," the directors said in this week's investor presentation.

SandRidge directors highlighted the company's 2017 production and cost results, which met or exceeded guidance. The directors also said SandRidge outperformed its peers from its emergence from bankruptcy until Icahn bought into the company.

The directors also said they are listening to shareholders, citing their decision to cancel the planned purchase of Bonanza Creek and the firing of CEO James Bennett and Chief Financial Officer Julian Bott.

The SandRidge directors also criticized Icahn's history with energy companies, including Oklahoma City-based Chesapeake Energy Corp., along with Cheniere Energy Inc.; Talisman Energy Inc.; Transocean Ltd.; Dynegy Inc. and CVR Energy Inc., which owns the oil refinery in Wynnewood.

While four of the six companies posted a positive total shareholder return one year before Icahn's involvement, only three had positive returns while Icahn sold the stock and three of the four stocks Icahn has since sold have recorded negative total shareholder returns in the year after Icahn sold his investment.

Icahn gained board seats at all six of the companies and led to management changes at five of the firms. Only one Icahn effort resulted in an increase in return on capital, the SandRidge directors stated.

"On aggregate, about $28 billion of shareholder value was destroyed during Icahn's energy investments," the directors stated in the presentation.

Icahn on Thursday rejected both the claims of SandRidge's strength before he bought into the stock and the assertion that his efforts would hurt the company and its shareholders.

"Shares of SandRidge have fallen 23 percent from before the announcement of the Bonanza Creek transaction while the price of crude oil has risen 23 percent," he said. "The board has expressed no clear vision or strategy while production has fallen 19 percent year-over-year."

Icahn said he has not decided whether he will bid for the company and that if he were to make an offer, shareholders would have the ultimate decision.

"In the event we were to decide to submit an offer to acquire SandRidge, any such transaction would require the approval of the majority of the shares of SandRidge stock held by stockholders who are not affiliated with us," he said.

Icahn also rejected the SandRidge directors' statement that they have been "demonstrably positive" to shareholder concerns and suggestions.

"Stockholders should not be forced to threaten directors with removal simply in order to get them to do the jobs they were elected, and are being paid handsomely, to do!!!" Icahn wrote in bold, all-capital letters.