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Sunday, April 22, 2012

Full Interview With Tom Ward - Sandridge Energy

Here is the full transcript of the interview with Tom Ward that I was able to participate in (me being Devon Shire).

This is the third in our series of CEO Interviews in the energy industry (please see our previous interviews here and here). Today’s interview is with Thomas L. Ward, the CEO of SandRidge Energy (SD). Related companies are the royalty trusts SandRidge Permian Trust (PER), the SandRidge Mississippian Trust I (SDT) and SandRidge Mississippian Trust II (SDR). Joining Seeking Alpha Editor Leland Montgomery are Contributor Mike Filloon and Contributor Devon Shire. Mike’s accompanying article appears here, and Devon Shire’s article appears here.



After leaving Chesapeake Energy (CHK), which he co-founded with CEO Aubrey McClendon, Tom Ward set out in 2006 to build a new exploration and production company based on his 23 years of experience acquiring promising acreage. Please also see SandRidge Energy’s latest Quarterly Earnings Call Transcripts and detailed company presentations.
The following is our interview.
Seeking Alpha (SA) – Given the extent of asset buying and selling SandRidge has done over the last few years, could you give us an overview on what you’ve done and why you’ve done it to set the stage for our discussion today?
SandRidge CEO Thomas Ward (TW) – SandRidge is a fairly young company that was formed in 2006 with the purchase of a gas field in West Texas. When I left Chesapeake in February 2006, we bought the PiƱon Field in West Texas based around the thought that natural gas prices would stay at what I thought then were reasonable prices, above $7 basically.
Up until then, my career had been a Chief Operating Officer of Chesapeake for 23 years, and I had always focused on buying assets, and then trying to understand why that asset wasn’t developed by our predecessors, who are much smarter than most of us. And so this natural gas asset in West Texas was very unique in that it is the only field in the United States that produced about as much CO2 as it did methane. And that kept the production of that field down over the course of time until you had gas prices at high levels in relation to what they have been historically.
So the original premise about building SandRidge was around the natural gas story in 2006. And by 2008, our management team believed that the story had changed and that we were headed for a period of low prices for natural gas; and we decided we had to make a change. So in late 2008, we hedged all of our natural gas production for two years, while we made a conversion to oil. In March of 2009, I went to our Board and recommended buying assets in the Permian Basin. And that was at a time when oil was $39.96 and gas was $4.13 an Mcf, and we’d hedged our gas at just over $8 an Mcf in late 2008.
So then we moved forward with an acquisition program in the Permian at a time when others weren’t buying oil. They were still looking for natural gas, assuming that there would be a bounce back in natural gas prices, and were still chasing the tight-gas formations in the U.S. And we’d chosen not to drill in tight gas reservoirs and stayed looking at carbonates for the most part; and so then looked for the best places to find oil that other people weren’t trying to buy, and that was in the Permian Basin.
Link to the entire interview:

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