Absurd severance package
Considering that Tom Ward was forced out at SandRidge Energy Inc. (NYSE:SD) due to a lack of performance in creating shareholder value, it has to be shocking that he gets a staggering severance package.
Tom gets 6.3 million shares of previously granted restricted stock immediately vested or a value of nearly $32 million based on the current price of around $5. Imagine if the stock goes up $2 or $3 due to him leaving the company. He also gets a lump sum cash payment of $53.5. The payment is comprised of the value of future restricted stock, three times his last three annual bonuses, and his base salary for the next three years.
So basically he walks out the door with over $80 million in cash and stock that could gain value based on his departure. Investors should absolutely not accept these pay packages anymore.
Slow and steady wins the race
Over the last several years, the slow and steady stocks focused on turning assets into production have won the race. As an example, slow and steady Southwestern Energy has turned a focus on the weak natural gas market into a more successful stock in the last couple of years. Sure, the stock is still down 9% during that time period, but it vastly exceeds the losses of Chesapeake and SandRidge Energy Inc. (NYSE:SD).
Southwestern Energy Company (NYSE:SWN) continues to increase production in the Fayetteville Shale while ramping up production in the Marcellus Shale to grow total production in Q1 by 11% over last year. In addition, the company recently bought $93 million worth of assets from Chesapeake Energy Corporation (NYSE:CHK) in the Marcellus Shale. Analysts expect revenue to grow roughly 10% yearly over the next couple of years. More importantly, the company is very profitable compared to the continuous losses at SandRidge Energy Inc. (NYSE:SD).
On the other hand, analysts expect Chesapeake to report flat revenue growth in 2014 due to cut backs in drilling and asset sales. Analysts do see earnings rising as the company is more focused on profits.
Bottom line
While the changes in the founding CEOs may or may not create long-term value, it appears that short-term gains could occur as SandRidge Energy Inc. (NYSE:SD) benefits attracting back investors unwilling to participate in the perplexing asset shifts. The results at Chesapeake Energy Corporation (NYSE:CHK) suggest SandRidge could be an intriguing investment over the next six months.
The article Why the CEO Had to Go at SandRidge Energy originally appeared on Fool.com.
Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy Corporation (NYSE:CHK), and Short Jan 2014 $15 Puts on Chesapeake Energy. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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