New language in Tom Ward’s employment contract gives the SandRidge CEO “wide latitude” to profit personally from oil and natural gas deals, which could pose conflicts of interest, a new Reuters investigation shows.
SandRidge changed Ward’s employment agreement in 2011, lifting “most restrictions” on the CEO’s ability to sell mineral rights or drill wells, the news service’s Michael Erman, Brown Grown and Anna Driver report:
Before the changes, Ward was permitted to receive royalties from SandRidge, or jointly own wells with it, on land he had owned before joining the company in 2006. The 2011 agreement allows him to do deals with SandRidge competitors in the oil and gas business, and to do business with SandRidge on any land that he owns or acquires.
SandRidge is trying to stave off a shareholder revolt, and investors are calling for Ward to step down as CEO. Many of the investors’ corporate governance concerns are similar to those that befell Chesapeake Energy, which Ward co-founded with Aubrey McClendon. Same “playbook,” same scrutiny, Reuters reported in January.
The new contract language allows Ward to participate in “outside operated” oil and gas drilling in areas not being pursued by SandRidge, and participation as a working interest owner in properties operated by the company on land owned by “Ward-related entities,” Reuters reports:
According to land records reviewed by Reuters, a Ward-linked entity named 192 Investments LLC acquired mineral rights on thousands of acres in late 2011 in the Mississippi Lime shale formation in Kansas. The Ward-related company bought those mineral rights just months before SandRidge leased property in adjacent plots, the Kansas land records show.
These deals could pose a potential conflict of interest, Reuters reports:
Buying personal mineral rights in land adjacent to acreage later bought by SandRidge could allow Ward to profit if SandRidge’s purchases help drive up values, for instance. SandRidge doesn’t disclose when its chief executive acquires new mineral rights in areas where it drills.
Ward’s contract is quite different from those of CEO’s at SandRidge’s corporate peers, Reuters reports:
Seven of the contracts didn’t permit the CEOs to earn royalties from their employer or rivals, and many included strict non-compete requirements. The agreement for one CEO, Chesapeake’s McClendon, does permit him to own “interests in oil and gas” on land which he acquires or already controlled.
SandRidge declined to comment, the news service reports. Last month, the company said it found no wrongdoing after an internal review of land deals involving entities tied to Ward and his family.