Icahn Takes Control Of SandRidge Board, But Company’s Future Remains Unclear
SandRidge shareholders elected four of Carl Icahn’s nominees to the company’s seven-member board of directors Tuesday, giving the activist investor a slim majority on the board. The Journal Record’s Sarah Terry-Cobo writes the company will likely be sold, but it is not clear if Icahn will first break SandRidge up into pieces.
Jacob McCleland: You’re listening to the Business Intelligence Report, a weekly conversation about business news in Oklahoma. I’m Jacob McCleland and today we’re talking with Sarah Terry-Cobo. She’s the senior reporter at the Journal Record newspaper. Sarah, thank you for joining us.
Sarah Terry-Cobo: Good morning Jacob, thank you for having me.
McCleland: There were a couple of substantial business developments yesterday. One is that activist investor Carl Icahn took control of the board of directors at Oklahoma City-based SandRidge Energy. We’ve talked about this proxy fight a few times before. But now Icahn controls a majority of the boards of directors. What happens next?
Terry-Cobo: I hate to be anti-climatic, but we don’t just know yet, as far as the big picture is concerned. So there are four new board members. They will have to get up to speed with where the company is and it’s so-called strategic review plan. The new board members will, of course, get to weigh in on what they think the company should do. And part of the strategic review is looking at all of their oil and gas wells, all of the land that has been leased but not drilled, everything. And then trying to figure out, do they keep going? Do they try to sell part of it or do a joint venture with another company? And four of Icahn’s nominees will have a say in the direction of where the company goes next.
McCleland: What do we know about Icahn’s intentions for SandRidge?
Terry-Cobo: Well, so he has alluded to his intention to sell the company. And that of course is his reputation. He’s a hedge fund manager, and as our sources have told us in the past, hedge fund managers don’t buy oil companies to run them. But whether or not Icahn will break up SandRidge into pieces and then tries to sell it, we just don’t know yet. He did send yet another open letter to shareholders Tuesday morning and say his nominees will work tirelessly to improve the company’s value in a conflict-free manner.
McCleland: What does this mean for SandRidge leadership, like interim CEO Bill Griffin? Will the board of directors select a new CEO?
Terry-Cobo: There was no indication of that on Tuesday morning. So, it’s hard to say as of right now.
McCleland: Let’s talk about the another business story from yesterday. The Oklahoma Corporation Commission approved a settlement agreement with Oklahoma Gas and Electric. How will this play out for customers?
Terry-Cobo: Yes. So that was a $64 million rate reduction for customers, including an $18 million one-time refund. And that will show up for customers on their July bills. The company says they will put this line item on the bill so you can see what portion is the refund. So for an average residential OG&E customer, they will get about a $13, nearly $14 one-time refund. And then bills will be reduced by about $4 or so per month going forward.
McCleland: Why was this case before the Oklahoma Corporation Commission in the first place?
Terry-Cobo: Well it’s part of a typical rate cases that utilities bring every few years or so. They spend money on projects, their infrastructure changes, they want to recover that money from customers, which typically means raising bills. But this one was a bit unique because of the federal income tax overhaul, the Tax Cuts and Jobs Act of 2017.
So after Congress passed this bill late last year, it lowered corporate income tax rates by 14 percent. And Oklahoma’s attorney general said that was a windfall profit that should go to customers, not to shareholders. So the rate reduction in this rate case was due to the tax cut, but also due to some of these closed-door negotiations between the utility, the regulatory staff, the AG’s office and other customer groups like AARP and some industrial customers who joined in on this.
McCleland: Sarah Terry-Cobo is the Journal Record’s senior reporter. Sarah, thank you so much.
Terry-Cobo: Absolutely, it’s my pleasure, Jacob.
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