A few weeks after a weak Q214 earnings report, SandRidge Energy (NYSE:SD) announced that COO David Lawler had left the company. In a normal situation, investors might see the departure of an executive after a disappointing earnings report as a move to remove an underperforming employee. In this scenario, the COO is leaving the company for a huge promotion to lead the Onshore US operations of BP plc (NYSE:BP). In this situation, the news continues the negative pattern of constant transitions in assets and leadership.
The stock has headed lower following the release that Q214 revenue was considerably below analyst expectations. For the quarter, analysts forecast that SandRidge would produce revenue of $391 million, yet the company only hit $374 million. The shortfall in revenue is blamed on power and weather disruptions in the Mid-Continent region and other issues reducing production by 350 Mboe for the quarter. Though possibly not entirely related to the constant shifting of assets and executive departures, it is consistent that transformational deals tend to cause operational disruptions.
The news of another executive departure after a weak quarterly report continues to back the investment thesis in the article "SandRidge Sells Value Destroying Assets". Considering the decision of the company to promote Lawler to COO and keep him following the executive shuffles last year including the replacement of the founding CEO, this loss appears large. Not to mention, BP concluded that Lawler was worthy of a promotion even after the company he worked at for over three years is still struggling. As with the original thesis, the constant shifts in assets and executives has left the stock uninvestable until proven otherwise. SandRidge Energy continues to forecast production growth in the 20% range for the year. With the stock selling off towards $5 from a recent high near $7.50, the stock does offer some value if it eventually hits targets. For now though, it remains in the penalty box until SandRidge proves that it has the management talent and resources to grow production profitably.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.