Oklahoma City, OK, United States
Oklahoma City, OK, United States

SandRidge Energy is an oil and natural gas exploration company headquartered in Oklahoma City, Oklahoma.SandRidge was founded in 1984 as Riata Energy, Inc. In 2006, the company changed its name to SandRidge Energy. SandRidge’s drilling activities are focused on its oil properties in the Mid-Continent and Permian Basin. The Company also maintains production in West Texas. The company owns and operates drilling rigs under the brand name Lariat Services, Inc.The company made its initial public offering on November 5, 2007, offering over 28 million common stocks at roughly $26.00 US a share. SandRidge is traded on the New York Stock Exchange under the symbol SD. However, the stock price began to drop when natural gas prices decreased in 2008. Today, SandRidge Energy has 490 million common stocks at approximately $6.00 US a share.Tom L. Ward joined the company in June 2006 when he purchased a significant interest in the company, becoming the CEO and chairman. Ward previously co-founded Chesapeake Energy and was the chief operating officer of that company from 1989 until 1996.On June 19, 2013, Tom L. Ward, who founded the company in 2006 and has served as chief executive officer and chairman of the company since it was founded, left the company, leaving James Bennett as CEO who retains his title as president. Former lead independent director Jeffrey Serota serves as interim non-executive chairman effective the same date.Bennett has served as chief financial officer of SandRidge since January 2011 and was promoted to president in March 2013. Prior to joining SandRidge he was managing director for White Deer Energy, a private equity fund focused on the oil and gas industry. From 2006 to December 2009, Bennett was employed by GSO Capital Partners, where he served in various capacities in its energy group, including as a managing director. His prior experience also includes serving as chief financial officer of Aquilex Services Corp., a First Reserve portfolio company, and as an investment banker in the energy group of Donaldson, Lufkin & Jenrette . He started his career at NationsBank. Bennett graduated with a Bachelor of Business Administration degree with a major in finance from Texas Tech University. He has served on the board of directors of the general partner of Cheniere Energy Partners L.P. and PostRock Energy Corporation. Wikipedia.


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Production for the quarter was 4.0 MMBoe (28% oil, 22% NGLs and 50% natural gas). The Company's Mid-Continent assets produced approximately 92% of total production (23% oil), while the North Park Basin (NPB) of Colorado provided 4% (100% oil) and the Permian Basin 3% (82% oil). The Company had one active rig drilling in the NW STACK area of Oklahoma for most of the first quarter, and added a second rig there in mid-March. Near term drilling will focus on the NW STACK and North Park Basin Niobrara, which produce oil in excess of 50% and 90% of total production, respectively. With more wells being drilled and brought to sales throughout the year in these two plays, crude oil, as a proportion of total production, is expected to increase from 28% in the first quarter to over 30% in the fourth quarter of 2017. Total lifting costs during the quarter were $7.08 per boe, including lease operating expenses of $6.28 per boe. The Company continues to gain operating efficiencies with a recent focus on chemical treatment optimization and electrical power contract pricing. Decreases in overall expenses were partly offset by above average costs in Colorado due to severe winter weather. James Bennett, SandRidge President and CEO said, "Motivated by our recent successes in the NW STACK, we now have two rigs developing the Meramec in Major, Woodward and Garfield Counties, where we have 70,000 net acres. Low cost drilling, operational efficiencies and innovations established in our Mississippian program will benefit us as they are applied across our portfolio. Our Colorado North Park Basin drilling will resume at midyear with one rig. Plans there include more Niobrara extended laterals and drilling on our newly established 24,000 acre Federal Unit. The development of our oil-weighted NW STACK and North Park Basin Niobrara projects is creating material resource value and will drive oil production growth later in 2017. Supported by the flexibility of our unlevered balance sheet and $550 million of liquidity, we believe SandRidge has a compelling multiyear story." Highlights during the first quarter include: $51 Million of Net Income and $56 Million of Adjusted EBITDA $41 Million of Capex During the Quarter (Excluding Previously Disclosed ~13,100 Net Acre NW STACK Acquisition) Mississippian Full Section Development Multilateral (Three Lateral Equivalent), the Hawk Haven 2710 1-22H, Produced Combined 30-Day IP of 1,248 Boepd (47% Oil) at Drilling and Completion Costs of $5.5 Million or $1.8 Million per Lateral The Company is reiterating prior capital spending guidance, expecting to invest between $210 and $220 million in 2017. This level of activity supports projected oil production growth in the second half of 2017. Depending on well results and commodity pricing, capital spending plans may be revised later in the year. Two drilling rigs are currently active in the NW STACK play in Major, Woodward and Garfield Counties, Oklahoma. The Company plans to drill 22 gross laterals (17 net) in the Meramec and six laterals (gross and net) in the North Park Niobrara during 2017, predominantly drilling extended reach laterals. SandRidge is well established as the low-cost driller of Mississippian wells and expects to transfer capabilities and best practices, including ongoing application of extended reach lateral drilling, to become a low-cost leader in the adjacent NW STACK play as well. Drilling activity has continued on Meramec targets following the success of the previously announced Medill 1-27H well in Major County, Oklahoma (30-Day IP of 925 Boepd, 77% oil and currently producing ~460 Boepd, with cumulative production of 99 MBoe after 140 days, 99% above type curve). Additional wells were spud and drilling continued at the end of the quarter in Major County, including the Campbell 2015 1-26H23H, the Company's first Meramec extended reach well drilled in Major County, offset to the Medill. Drilling was also underway in Garfield County with the Landrum 2305 1-30H31H, a Meramec extended reach well near existing SandRidge Meramec and Osage production. Both of these wells should have 30-Day initial production rates reported in the second quarter. The Adams 2122 1-16H9H extended reach well targeting the Meramec in Woodward County was undergoing completion operations at the end of the first quarter, with a 30-Day initial production rate to be reported in the second quarter earnings release. During the first quarter, the Company acquired ~13,100 net acres and 700 Boepd of production in the NW STACK of Oklahoma for $48 million of cash. The first new well on the acquired acreage will be spud during the second quarter of 2017. North Park Basin drilling activity will resume midyear with three extended reach wells planned (equivalent to six laterals). In addition to continued "D" bench development, the Company will drill an extended lateral well targeting the "C" bench following excellent results from the Hebron 4-18H, the first "C" bench single lateral well drilled in 2016. The Hebron 4-18H, the Company's most productive single lateral in 2016, yielded a 30-Day IP of 539 Boepd, 92% of which was oil, and 70 MBo in its first six months of production, 32% above type curve.  2017 drilling will also include a Niobrara well in the newly established 24,000 net acre Rabbit Ears Federal Unit and the Company's first well targeting the thick B bench of the Niobrara. Following encouraging results from the Company's 2016 drilling program, specific technical goals have been developed for the 2017 program to enhance reservoir characterization with the integration of newly acquired 3D seismic data, coring of multiple Niobrara benches and expanded logging suites. The Company is currently assessing in-field gas processing (such as the use of mechanical refrigeration units), gas-to-liquids and gas reinjection, with the potential to generate additional revenue streams and reduce combusted gas volumes. During the first quarter, Permian Central Basin Platform properties produced 136 MBoe (1.5 MBoepd, 82% oil, 11% NGLs, 7% natural gas). Entering into the new credit facility in February 2017 triggered the release of $50 million of cash held in escrow to the Company and the conversion of all of the $264 million outstanding mandatorily convertible notes into approximately 14.1 million shares of the Company's common stock. Unchanged from the previous reporting period, in 2017 the Company has approximately 3.3 million barrels of oil hedged at an average WTI price of $52.24 as well as 32.9 billion cubic feet of natural gas hedged at an average price of $3.20 per MMBtu. 2017 oil hedges represent 80% of the midpoint of current oil volume guidance. 2017 gas hedges represent 77% of the midpoint of current gas volume guidance. For 2018, the Company has approximately 1.8 million barrels of oil hedged at an average WTI price of $55.34. Subsequent to the first quarter, 9.1 billion cubic feet of natural gas swaps were added, bringing the total to approximately 12.8 billion cubic feet of natural gas hedged at an average price of $3.16 per MMBtu in 2018. The Company will host a conference call to discuss these results on Thursday, May 11, 2017 at 8:00 am CDT. The telephone number to access the conference call from within the U.S. is (877) 201-0168 and from outside the U.S. is (647) 788-4901. The passcode for the call is 4580429. An audio replay of the call will be available from May 11, 2017 until 11:59 pm CDT on June 11, 2017. The number to access the conference call replay from within the U.S. is (800) 585-8367 and from outside the U.S. is (416) 621-4642. The passcode for the replay is 4580429. A live audio webcast of the conference call will also be available via SandRidge's website, www.sandridgeenergy.com, under Investor Relations/Events. The webcast will be archived for replay on the Company's website for 30 days. Presented below is the Company's capital expenditure and operational guidance for 2017. This information is unchanged from the initial release on February 22, 2017. Upon emergence from Chapter 11 reorganization, the Company elected to adopt fresh start accounting effective October 1, 2016. As a result of the application of fresh start accounting and the effects of the implementation of the plan of reorganization, the financial statements on or after October 1, 2016 will not be comparable with the financial statements prior to that date. References to the "Successor" refer to SandRidge subsequent to adoption of fresh start accounting. References to the "Predecessor" refer to SandRidge prior to adoption of fresh start accounting. Information regarding the Company's production, pricing, costs and earnings is presented below: The table below summarizes the Company's capital expenditures for the three-month periods ended March 31, 2017 and 2016: The table below presents actual results of the Company's capital expenditures for the three-month period ended March 31, 2017 at the same level of detail as its full year capital expenditure guidance. Subsequent to March 31, 2017, the Company entered into additional gas swap contracts for the calendar year 2018. The table below sets forth the Company's consolidated oil and natural gas price swaps for 2017 and 2018 as of May 10, 2017: The Company's capital structure as of March 31, 2017 and December 31, 2016 is presented below: Adjusted operating cash flow, adjusted EBITDA, pro forma adjusted EBITDA, adjusted net loss, and net debt are non-GAAP financial measures. The Company defines adjusted operating cash flow as net cash provided by (used in) operating activities before changes in operating assets and liabilities. It defines EBITDA as net income (loss) before income tax expense, interest expense and depreciation, depletion and amortization and accretion of asset retirement obligations. Adjusted EBITDA, as presented herein, is EBITDA excluding asset impairment, gain on derivative contracts, cash (paid) received upon settlement of derivative contracts, loss on settlement of contract, severance, oil field services – exit costs, gain on extinguishment of debt, restructuring costs and other various items (including non-cash portion of stock-based compensation). Pro forma adjusted EBITDA, as presented herein, is adjusted EBITDA excluding adjusted EBITDA attributable to properties or subsidiaries sold during the period. Adjusted operating cash flow and adjusted EBITDA are supplemental financial measures used by the Company's management and by securities analysts, investors, lenders, rating agencies and others who follow the industry as an indicator of the Company's ability to internally fund exploration and development activities and to service or incur additional debt. The Company also uses these measures because adjusted operating cash flow and adjusted EBITDA relate to the timing of cash receipts and disbursements that the Company may not control and may not relate to the period in which the operating activities occurred. Further, adjusted operating cash flow and adjusted EBITDA allow the Company to compare its operating performance and return on capital with those of other companies without regard to financing methods and capital structure. These measures should not be considered in isolation or as a substitute for net cash provided by operating activities prepared in accordance with generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Therefore, the Company's adjusted EBITDA may not be comparable to similarly titled measures used by other companies. Management also uses the supplemental financial measure of adjusted net income (loss), which excludes asset impairment, (loss) gain on derivative contracts, cash (paid) received on settlement of derivative contracts, loss on settlement of contract, severance, oil field services – exit costs, gain on extinguishment of debt, restructuring costs, employee incentive and retention and other non-cash items from loss applicable to common stockholders. Management uses this financial measure as an indicator of the Company's operational trends and performance relative to other oil and natural gas companies and believes it is more comparable to earnings estimates provided by securities analysts. Adjusted net income (loss) is not a measure of financial performance under GAAP and should not be considered a substitute for loss applicable to common stockholders. The Company also uses the term net debt to determine the extent to which the Company's outstanding debt obligations would be satisfied by its cash and cash equivalents on hand. Management believes this metric is useful to investors in determining the Company's current leverage position following recent significant events subsequent to the period. The tables below reconcile the most directly comparable GAAP financial measures to operating cash flow, EBITDA and adjusted EBITDA and adjusted net loss. For further information, please contact: Duane M. Grubert EVP – Investor Relations and Strategy SandRidge Energy, Inc. 123 Robert S. Kerr Avenue Oklahoma City, OK 73102-6406 (405) 429-5515 Cautionary Note to Investors - This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, the information appearing under the heading "Operational Guidance." These statements express a belief, expectation or intention and are generally accompanied by words that convey projected future events or outcomes. The forward-looking statements include projections and estimates of the Company's corporate strategies, future operations, drilling plans, oil, and natural gas and natural gas liquids production, price realizations and differentials, hedging program, operating, general and administrative and other costs, capital expenditures, tax rates, efficiency and cost reduction initiative outcomes, infrastructure assessment and investment, and development plans and appraisal programs. We have based these forward-looking statements on our current expectations and assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including the volatility of oil and natural gas prices, our success in discovering, estimating, developing and replacing oil and natural gas reserves, actual decline curves and the actual effect of adding compression to natural gas wells, the availability and terms of capital, the ability of counterparties to transactions with us to meet their obligations, our timely execution of hedge transactions, credit conditions of global capital markets, changes in economic conditions, the amount and timing of future development costs, the availability and demand for alternative energy sources, regulatory changes, including those related to carbon dioxide and greenhouse gas emissions, and other factors, many of which are beyond our control. We refer you to the discussion of risk factors in Part I, Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2016 and in comparable "Risk Factor" sections of our Quarterly Reports on Form 10-Q filed after such form 10-K. All of the forward-looking statements made in this press release are qualified by these cautionary statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on our Company or our business or operations. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements. SandRidge Energy, Inc. (NYSE: SD) is an oil and natural gas exploration and production company headquartered in Oklahoma City, Oklahoma with its principal focus on developing high-return, growth-oriented projects in the U.S. Mid-Continent and Niobrara Shale. To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/sandridge-energy-inc-reports-financial-and-operational-results-for-first-quarter-of-2017-300455439.html


News Article | May 8, 2017
Site: www.businesswire.com

NEW YORK--(BUSINESS WIRE)--Elliott Management Corporation (“Elliott”), which manages funds that collectively beneficially own a 13.2% economic interest in Arconic Inc. (NYSE:ARNC) (“Arconic” or the “Company”), today released a new letter to shareholders. The full text of the letter follows: “ [T]here is [a] problem plaguing some American companies: poor corporate governance. And this one should be eas[y] to fix. All it requires is that board members faithfully represent shareholder interests. Exhibit A is the governance failures unearthed by activist hedge fund Elliott Management in its battle with the management of Arconic, part of the aerospace and automotive parts manufacturer formerly known as Alcoa. These failures exemplify the way that outdated corporate governance structures can harm the competitiveness of American companies. Shareholders, employees, and countless other Americans suffer as a result.” – Todd Henderson and Dorothy Shapiro, The University of Chicago1 Dear Fellow Shareholders of Arconic Inc. (“Arconic” or the “Company”): Arconic’s Board of Directors has now issued a series of open letters to the Company’s shareholders. These letters dust off the old standbys – cue up “short-term” and “undue influence,” throw around “hedge fund” like an epithet. Not only are these tired notes, but worse, they are simply inapposite. In this situation, it is Elliott, not the Board, which has demonstrated fidelity to the long-term interests of Arconic. There is of course a robust and worthwhile debate to be had about the proper role of shareholder activists. But even the most stubborn defenders of the corporate citadel will admit that “ underperforming companies may be able to benefit from better board oversight, fresh perspectives in the boardroom, new management expertise and/or a change in strategic direction. Responsible and selective activism can be a useful tool to hold such companies accountable and propel changes to enhance firm value, and institutional investors can benefit from the budget and appetite of activists who drive such reforms.”2 Our efforts at Arconic are an example of such “responsible and selective activism.” Ours is a “ constructive form of advocacy characterized by a genuine desire to create medium- to long-term value”3 and Arconic is clearly an “underperforming company” which would “benefit from better board oversight” and “new management expertise.” On January 31st, we nominated four new highly qualified independent directors to serve on Arconic’s Board. We did not take this step lightly. However, we believed that after nine years of dismal financial and operating performance, repeated instances of poor judgment on the part of management and the Board, and a continuing unwillingness to improve Arconic’s outmoded corporate governance regime, change was required at both the management and Board level. The events of the past two months – the belated revelation of Arconic’s voting agreement with the seller of Firth Rixson, the voluntary triggering of an old-fashioned “poison put,” the obstinate defense of Klaus Kleinfeld up until his departure became inevitable as a result of bizarre and potentially criminal conduct, the rigid continued adherence to Dr. Kleinfeld’s failed policies even after his departure, and now the delay of the Company’s Annual Meeting – have only served to confirm our belief that change is urgently needed at Arconic. We are mindful that American corporations are not direct democracies. We know shareholders elect the Board, and the Board members as fiduciaries for the shareholders, not the shareholders themselves, manage the corporation.4 But, in certain instances, when the Board has manifestly and repeatedly failed in its responsibilities, the Board surrenders the presumption of deference. Arconic is such a situation. Here at Arconic, the Board has failed in its key responsibilities, is not aligned with the long-term interests of Arconic’s shareholders, and has consistently, over a long period of time, acted to frustrate the adoption of basic principles of good governance. Regardless of any past failures, the Board insists that it remains the right steward. It seeks to pass off the replacement of a handful of people for the embrace of a new direction. Sadly, the Board’s words and actions indicate that it remains interested principally in its own continued entrenchment and does not believe real change is necessary. Almost as troubling is the Board’s continued insistence that its approach to corporate governance is not in dire need of adjustment. This Board has excused or been responsible for governance failures ranging from vote-buying, to poison puts, to the determined defense for years of one of the most retrograde governance regimes in corporate America. In its latest presentation, dated May 4th, this same Board describes itself as having a “consistent record of strong corporate governance.” As we take pains to demonstrate in the sections that follow, nothing could be further from the truth. In this letter, we reiterate our call to shareholders large and small to join us in our effort to ensure that Arconic is led by a Board that recognizes the need for real change and possesses the good judgment and right mix of skills and experience to produce sustainable value over the long haul. Arconic’s Board Refuses to Acknowledge that Real Change is Necessary Following the departure of Klaus Kleinfeld and Ratan Tata, the Board has added two new nominees to its slate. But change is not simply about bringing in new people. Change requires a belief that real improvements are warranted in the way a company operates and approaches important issues ranging from strategy to governance. In its latest letter, the Board has belatedly tried to reposition itself as a “change” vote in this election. But even a cursory survey of the Board’s rhetoric over the last three months offers a clear indication that it believes that no real change at Arconic is necessary. In fact, even following the resignation of Dr. Kleinfeld on April 17, the Board repeatedly endorsed his failed strategy and defended his operational performance – going so far as to vow to continue that strategy and to limit its CEO search to candidates who will execute it: “ The Board reaffirms the strategy developed under Mr. Kleinfeld’s leadership and shared with our investors, customers and employees.” – Arconic Press Release, April 17, 2017 “ There are no plans to change our strategy or direction as a company.” – David Hess letter to employees, April 17, 2017 “ The Board believes that Arconic has the right strategy and is executing well on that strategy.” – Pat Russo letter to employees, April 17, 2017 “ I would say probably the answer is yes to that.” – David Hess, Interim CEO, when asked whether it is a precondition for the next CEO to sign on to the company’s pre-existing three-year plan, Arconic 1Q17 Conference Call, April 25, 2017 “ Board is unanimously supportive of Arconic’s current strategy.” – Arconic Presentation, May 4, 2017 The implications of these above statements regarding the upcoming CEO search and the new CEO’s freedom to operate and develop strategy are profound. Arconic's Board states above that they have pre-determined that the existing corporate strategy, as propounded by Dr. Kleinfeld, remains the right one. They state that they expect the new CEO to continue to follow that strategy. As a well-respected JP Morgan analyst recently noted, “ The new CEO is expected to endorse prior financial targets, which could make it more difficult for an outsider to take the job.” This is a remarkable window into the Board's thinking regarding its most important task in the months ahead: the selection of the Company’s next CEO. These statements make clear that the current Board will be screening for someone who will continue to adhere to Dr. Kleinfeld's old strategy and that new perspectives and fresh thinking remain unwelcome at Arconic. Not only will this posture fail to attract top-tier candidates and restrict the candidate pool to those willing to execute the former CEO’s plan, it also ties any new CEO’s hands should he or she want to lay out fresh thinking once in the position. Arconic’s Board wants shareholders to believe they’re open to the best thinking and receptive to change. This is not true. Real change requires evaluating strategy anew together with the new CEO of the Company and then holding him or her accountable for the execution of that strategy. The Board has Willfully Abdicated its Fundamental Responsibilities Failure to Establish the Appropriate “Tone at the Top” Among the Board’s most important obligations is to “ establish the appropriate ‘tone at the top’ to actively cultivate a corporate culture that gives high priority to ethical standards, principles of fair dealing, professionalism, integrity, full compliance with legal requirements, ethically sound strategic goals and long-term sustainable value creation.”5 Arconic’s Board has failed at this task. Since the start of this proxy contest, it has been revealed that the Company has entered into agreements that promote the self-serving ends of management and the Board at the expense of the Corporation – twice. Because Arconic continues to conceal the full details of these arrangements, the manner and degree of Board participation in their creation remains unclear. But one thing is beyond doubt: The Board failed to do anything to stop these agreements and thereby permitted management’s active efforts to entrench. First, in August of 2016, following a $3 billion acquisition that destroyed well over $1 billion of shareholder value, Arconic traded potentially valuable legal claims against the Seller of Firth Rixson (the “Seller”) in exchange for a voting agreement to promote the entrenchment of management and the current Board for a period of two years and $20 million. In this situation, management and the Board put its own interests (entrenchment) ahead of the Company’s interests (maximizing the value of its legal claims and, thereby, corporate assets).6 Not only did this action harm the Corporation, but the Board compounded the harm to shareholders by failing to make proper disclosure and actively gerrymandering the shareholder franchise. The agreement between Arconic and the Seller was signed on August 18th. Conveniently, this was the day after the Company published its Definitive Proxy for the Company’s Reverse Stock Split. The timing of the agreement’s signing seems more than mere coincidence. From the date the agreement was signed, August 18th, through the filing of a 10-Q, 10-K, and Preliminary Proxy Statement, the Company never disclosed the agreement. This effort to conceal may have been motivated by dead-hand provisions in the Agreement which ensured that once the March 1st record date had passed, should the Seller choose to transact its shares, the Seller would still be required to vote in favor of management, thereby mandating “empty voting.” Unfortunately, there remains much we do not know about this agreement, because Arconic refuses to publish it, disclose any information about the claims that were traded or provide shareholders with the relevant books and records.7 More recently, during the pendency of this proxy contest, the Board imposed upon the Company a potential $500 million funding obligation whose sole plausible purpose is to entrench management and the Board. This “Poison Put” option was embedded in a Trust Agreement created in 1993 for the benefit of certain deferred compensation plans and subsequently amended and restated in 2007. The agreement was not disclosed at the time of its creation, modification, when Elliott filed its 13-D (the supposed triggering event) or at the start of this proxy contest. Importantly, there was no obligation on the Company to trigger this provision and thereby saddle it with this substantial potential funding requirement. In addition, prior to its decision to trigger the Poison Put option, the Company also retained the right to unilaterally amend or eliminate the provision at any time it wanted. But rather than spare shareholders from this liability and allow an election untainted by the specter of this funding commitment, the Board instead chose to declare that the election of Elliott’s nominees could trigger a change of control. Similar Poison Put devices have been condemned by virtually every knowledgeable corporate governance expert. As now Chief Justice Leo Strine wrote: “ …[B]ecause – ‘it constitutes a fundamental offense to the dignity of [the] corporate office for a director to use corporate power to seek to coerce shareholders in the exercise of the vote’ – there is immediate, irreparable harm when the directors of a corporation leverage a Proxy Put to enhance the incumbent’s board chances of procuring stockholder votes in a closely contested election.”8 Each of these two episodes – the trade of corporate assets for a voting lock-up as well as the invocation of the Poison Put – should have led to Board action to dismiss those responsible. Unfortunately, the Board not only failed to act, but may have been complicit in one or both entrenchment arrangements. Further, it has made clear to shareholders that it finds these devices permissible. A Board that has repeatedly demonstrated a willingness to put its own ends ahead of the interests of the corporation and maintains that such actions are appropriate is a Board that simply cannot be entrusted to steward the corporation. The trade of corporate assets for a voting lock-up and the triggering of the Poison Put do not merely amount to ethical breaches (in surrendering or putting corporate property at risk for purposes of personal entrenchment), but, by their very nature, also constitute clear attempts to tamper with the shareholder franchise. Actions to limit or distort shareholder voting are a clear indication that the Board simply cannot countenance an outcome in which the shareholders express disagreement with the Board’s chosen course. While the Board may have arrived at its position regarding the need for change honestly and on the merits, its efforts to prevent shareholders from expressing disagreement amounts to ultra vires behavior reflective of a Board that has lost sight of its place – as elected fiduciaries – in the corporate governance firmament. The shareholder vote or franchise, as it is known, occupies a unique and special place in the corporate law. As then Delaware Chancellor Allen memorably put it “ the shareholder franchise is the ideological underpinning upon which the legitimacy of directorial power rests.”9 Shareholders own the Corporation. The directors do not. The shareholders are the principals. The directors are the agents. It is only through the investiture resulting from the shareholder vote that the directors possess rightful authority over the Corporation. As Allen wrote, the vote “ is critical to the theory that legitimates the exercise of power by some (directors and officers) over vast aggregations of property that they do not own.”10 Arconic’s Board seems either to have to forgotten these foundational principles, or has simply chosen to ignore them. So far, to our knowledge, all of the shareholders who have expressed their public preferences – including all three of the Company’s largest shareholders investing in actively-managed funds – support the shareholder nominees and have announced their desire for change. The Board, by sharp contrast, believes real change is unwarranted. So be it. There is a difference of opinion and such disagreement is permissible. What is impermissible is when the Board acts – as the Arconic Board has – to prevent that disagreement from being settled in the manner the corporate law prescribes: at an untainted ballot box. The Board’s repeated championing of Dr. Kleinfeld and its endorsement of his character is a damning indictment of the Board’s judgment. Dr. Kleinfeld had a lengthy history of ethical issues before becoming Alcoa’s CEO. He was forced to resign from Siemens following that company’s bribery scandal because the Siemens Board determined that Dr. Kleinfeld had failed to adequately supervise the Siemens Corporation. This scandal led to the payment by Siemens of $1.6 billion in total fines – including the largest Foreign Corrupt Practices Act (FCPA) fine in U.S. history11 – and it resulted in Dr. Kleinfeld paying the Siemens Supervisory Board €2 million personally for his actions (or inaction).12 At Alcoa Inc. (Alcoa), Dr. Kleinfeld served on the Board before becoming CEO and was a member of the Audit Committee when Alcoa made hundreds of millions of dollars of improper payments that were used to bribe Bahraini government officials. These payments – a violation of the FCPA – resulted in the imposition of nearly $400 million in fines on Alcoa.13 Given this history, at the very least, the Board should have been on heightened alert and should have adopted a zero tolerance policy for any ethical lapses. Instead, it did the opposite. This Board was apparently willing to excuse anything to protect Dr. Kleinfeld. In doing so, it fundamentally abrogated its responsibilities. The Board became Dr. Kleinfeld’s advocate rather than the Corporation’s steward and thereby created an “anything goes” culture amidst which Dr. Kleinfeld seemingly felt that it was permissible to threaten a Company shareholder. Even the manner in which the Board explained Dr. Kleinfeld’s belated departure illustrates the Board’s casual approach to ethical issues. Dr. Kleinfeld sent a senior officer at Elliott a letter which clearly read as a threat to intimidate or extort. The Board calls this “poor judgment.” A prosecutor might call it criminal. But all should agree that anyone who engages in such behavior does not deserve lavish praise or laudatory comments from the Board’s new interim Chairman, whatever the merits of that executive’s past work. If the Board is willing to praise and potentially reward with severance compensation a leader that has violated the most basic standards of proper behavior, it is clearly unconcerned with establishing an appropriate ethical tone. In its release announcing Dr. Kleinfeld’s resignation, Arconic’s Board praised Dr. Kleinfeld for his “unwavering leadership and many accomplishments.” It further noted that it remains “deeply appreciative.” Even if Dr. Kleinfeld were the best-performing CEO in the S&P 500, such commentary following an attempt at extortion would be highly inappropriate. However, following Dr. Kleinfeld’s departure, the Arconic Board did not stop there. The Board saw fit to follow one inappropriate act with another and in fact rewarded Patricia Russo for her oversight of Dr. Kleinfeld in her role as Lead Director by appointing her as Interim Chair and providing her an immediate eight-fold increase in compensation.14 The departure of Dr. Kleinfeld also revealed the Board had failed in another critical task: that of establishing a succession plan. The installation of a hastily recruited Board member handpicked by the now-former CEO reveals the Board had no credible succession strategy.15 Given Dr. Kleinfeld’s poor performance, extensive outside commitments, and overt shareholder demands for change, the need for a robust succession plan should have been obvious. At any other company of comparable size, the absence of a succession plan would be shocking. But at Arconic, it is not surprising. Over the past nine years, the Board has allowed Arconic’s top ranks to be staffed by loyalists drawn from among Dr. Kleinfeld’s former colleagues at Siemens. Not only does such insularity breed poor decision-making, it also tends to result in the Company lacking viable potential internal successors if a need for changes arises. Here, the Board permitted the installation of two Siemens alums at the top of the Company’s two largest business units who lacked any experience (before arriving at Arconic) in the end-markets they serve. At companies of similar size, operating in the markets Arconic serves, such absence of previous industry and operational experience in senior management is simply without precedent or peer. It is obvious now – with the installation of Board member David Hess as interim CEO – the Board actually believed these former Siemens executives lacked the capacity to lead the whole firm if the need arose. One must wonder what the Board would have done if they hadn’t felt the need – apparently, solely as a result of this proxy contest – to find Mr. Hess in March.16 The Board is Not Aligned with Shareholders In past letters, the Board has made much of the fact that it owes shareholders fiduciary duties, while Elliott does not. It suggests that such obligations produce a superior alignment with Arconic’s shareholders. This is a fundamental misunderstanding of the corporate governance regime. Fiduciary duties are an inferior substitute for genuine alignment. Such duties exist precisely because, by definition, the Board is not aligned with shareholders. Moreover, Pennsylvania is an “other constituencies” state in which the Board may consider the interests of other constituencies apart from shareholders in making its decisions. By contrast, Elliott, as a fellow shareholder, is already perfectly aligned with Arconic’s other shareholders. Consider the old business riddle: Question: In a bacon-and-egg breakfast, what's the difference between the Chicken and the Pig? Answer: The Chicken is involved, but the Pig is committed! At Arconic, the Board is involved. But Elliott is committed. Elliott has $1.6 billion invested in Arconic. Our economic interest is in Arconic’s common equity. We have no preferred rights and do not seek any. Shareholders, large and small, should take comfort in knowing that Elliott is in precisely the same position they are. Unlike Elliott, the Board simply hasn’t “ put its money where its mouth is.” Among the legacy directors, only one of them (and on one occasion) has ever purchased Company shares on the open market. In fact, as far as we can tell Patricia Russo (the current Chairman), has never purchased a single share during her tenure. These Board members are involved, not committed. This absence of genuine alignment and the external personal interests of some Board members may help explain the Board’s tolerance for management’s failings. Specifically, the Company’s new interim Chair and former Lead “Independent” Director, Ms. Russo, maintained an interlocking relationship with Dr. Kleinfeld that significantly lessened the likelihood of effective and impartial oversight. Ms. Russo is on the Board of Hewlett-Packard Enterprise (HPE) where she is the Chairman. Until his recent departure as part of the continuing fallout over the letter he sent to Elliott, Dr. Kleinfeld also served on the HPE Board. At Arconic, Ms. Russo was responsible for supervising Dr. Kleinfeld as CEO and Chairman and Ms. Russo sits on the Board committee that set his compensation. Simultaneously, at HPE, Dr. Kleinfeld served on the committee responsible for supervising Ms. Russo and for setting her compensation. Even if there was no outright quid-pro-quo, this type of mutually dependent relationship was bound to affect Ms. Russo’s willingness and ability to form an independent judgment about Dr. Kleinfeld on the merits. It is worth noting that Ms. Russo led the Board’s review of Dr. Kleinfeld’s performance and in a recent Wall Street Journal piece, she mused aloud: “ I lose sleep wondering, what am I missing here?” In our communications with the Board, we extensively documented dismal total shareholder returns, poor financial and operating performance, a broken company culture, and the ethical lapses described above. These issues were obvious for all to see. Whether Ms. Russo’s blindness to these matters reflected the need to protect her own position at HPE and Arconic, a simple lack of good judgment, or some combination thereof, it certainly calls into question her capacity to lead this Company going forward. The Board has Frustrated the Adoption of Basic Principles of Good Governance The Board’s comments about fiduciary duties are also perplexing because Arconic is a Pennsylvania corporation. Pennsylvania is an expanded constituency state. Arconic’s Board – despite its previously discussed claims of obligations to shareholders – actually owes no controlling duties to the Company’s owners. Given this, shareholders have good reason to wonder whether the Board, protected by Pennsylvania’s nebulous fiduciary duty standards, is animated by concerns beyond the best interests of the shareholders – including ego, prestige, reputation, overlapping Board service, social ties or personal friendship. The absence of controlling duties to shareholders isn’t the only problem with Pennsylvania incorporation. As a consequence of Arconic’s Pennsylvania incorporation and its remarkable and continuing refusal to opt-out of that state’s anti-takeover regime, Arconic can rely on such retrograde measures as control share cash-out obligations and potential dead-hand poison pills in the service of management and Board entrenchment. In addition, Arconic’s Board is staggered. Removal of directors requires the consent of 80% of the outstanding shares. In practice, action by Written Consent requires the satisfaction of a similar 80% threshold. De-staggering also requires consent of 80% of the outstanding shares. As the Board well knows, meeting these extraordinarily high thresholds is effectively impossible. At no Alcoa annual meeting since the end of broker voting in 2012, has the quorum present for voting on such matters exceeded 61% of the outstanding shares – not enough to approve declassification even if every single share were voted in favor of it. Taken together, these provisions create substantial impediments to effective oversight of the overseers and, as a result, are likely to hinder rather than enhance the effectiveness of Arconic’s Board in serving shareholders. For these reasons, Pennsylvania incorporation is increasingly anomalous among publicly traded corporations. At this point, fewer than 20% of publicly traded corporations are incorporated in expanded constituency states like Pennsylvania (a figure which continues to decline) and an even smaller percentage of newly public companies (IPOs) are incorporated in these states. In fact, in 2016, of the 102 companies that went public on the NYSE or NASDAQ, not a single one was incorporated in Pennsylvania.17 In stark contrast, the managers of Alcoa Corp. have embraced shareholder-friendly corporate governance practices. Alcoa Corp. is incorporated in Delaware. Its Board is annually elected. Directors can be removed by a majority of the outstanding shares. It has split the roles of Chairman and Chief Executive and its bylaws can be amended by a simple majority. From the very beginning of Elliott’s involvement in Arconic (then Alcoa Inc.), we have encouraged the Company to reincorporate in Delaware as soon as possible. Reincorporating in Delaware would not only remove the needless overhang of Pennsylvania’s burdensome corporate law provisions but would also allow the Company to immediately de-stagger the Board. However, like a skilled parliamentarian, Arconic’s Board has relied upon its supermajority provisions to preserve a retrograde corporate governance regime, frustrating shareholder efforts to de-stagger while disingenuously attempting to claim credit for supporting de-staggering. In 2011, Arconic’s voting shareholders voted overwhelmingly, despite the Board’s negative recommendation, for a non-binding recommendation to de-stagger.18 But not enough outstanding shares voted. Chastened but not converted, the Board took a more clever approach in 2012. It put the proposal to de-stagger on the ballot, but it elected not to campaign for turnout. Predictably, again despite the overwhelming support of voting shareholders, the measure did not garner sufficient outstanding shares.19 These votes were pure theatre. If the Board truly wanted to de-stagger, a simple and obvious path has long been open to it – move the corporate domicile to Delaware. Alas, at every opportunity the Company has steadfastly resisted such a step. The Company could have reincorporated at the 2016 Annual Meeting. It did not. The Company could have reincorporated at the October 2016 Special Meeting in which shareholders approved the Company’s reverse stock-split. Notwithstanding our repeated suggestions to do so, once again it did not. But now, all of a sudden, in the midst of a proxy contest, the Board professes to have had its “Road to Damascus” moment and gotten the good governance religion. The Company has announced that it intends to submit “ for shareholder approval [a resolution] to declassify the Board structure.” Sadly, this is a half-measure and yet another disingenuous delaying tactic. What Arconic’s Board apparently won’t do is actually seek shareholder approval to reincorporate the Company in Delaware. Such a step remains a contingency plan. The Board writes: “ If such proposal [to de-stagger] fails to receive the requisite supermajority vote, the Board intends to take actions necessary so that all directors are subject to annual elections by no later than the 2018 annual meeting of shareholders; this could be achieved by seeking shareholder approval to reincorporate the Company in Delaware.” (Emphasis added). In short, the real message from Arconic’s Board is: Our shareholders may have pressured us into “trying” to de-stagger the Board, but we have no committed intention of giving up Pennsylvania’s egregious protections. Tellingly, in a recent release, the Board describes improvements to the Company’s governance regime as “concessions” it may offer Elliott.20 These “concessions” include separating the Chairman and CEO roles for at least two years and reincorporating in Delaware by year-end with a de-staggered board and no supermajority voting requirements. Elliott believes these improvements benefit all shareholders. The Board believes these are “concessions.” This is revealing. A board culture wherein governance improvements are thought of as "concessions" and parceled out grudgingly and only under duress is a profoundly broken board culture. It suggests the Board views accountability to shareholders as a bargaining chip rather than a requirement. Moreover, while it dangles governance “concessions” in one hand, the Board has also hurriedly added two new nominees to fill its card, but only after its gambit to recruit two of the shareholder nominees put forward by Elliott flopped. Such conduct makes a mockery of the Company’s claim in its latest presentation that “Arconic’s Board has been purpose-built.” Board nominees aren’t pawns. They’re supposed to be stewards. Nominees should be carefully selected to enhance the experience and expertise of the Board and the nominees themselves should spend time studying the Company and understanding the business before accepting the role. Elliott went through an extensive search process to find the shareholder nominees and unlike the Company’s most recently proposed nominees, drafted hurriedly onto its slate in desperation only 21 days before the election, the shareholder nominees put forward by Elliott have been studying the Company exhaustively for many months. We identified them for the value they could add to Arconic, not their utility in proxy contest gamesmanship. All this proves that whenever the Board expresses newfound belief in good governance, it is sharing what is at best an Augustinian vow: “ Shareholders, grant us good governance, but not yet.”21 Elliott is a long-term investor in Arconic. We made our initial purchases nearly two years ago following an extensive and exhaustive due diligence process costing many millions of dollars, and the very size of the position makes a quick exit impractical. Further, in all our communications with the Company, we have emphasized the importance of operational and governance improvements that would enhance long-term performance. Nevertheless, Arconic’s Board has consistently and deliberately misrepresented Elliott’s goals as short-term in nature and an attempt to exert undue influence. Nothing could further from the truth. Some argue that activist-driven decisions to return more capital to shareholders (in the form of buybacks or dividends) have come at the expense of productive reinvestment.22 While such concerns may be warranted in some situations, they are simply not at issue in this contest. Elliott has not demanded a buyback, nor have we encouraged Arconic to increase its dividend. In fact, one of the reasons we invested in Arconic is because the firm operates in an industry (aerospace) and sub-sector (fasteners, castings, forgings) in which we anticipate ample profitable avenues for reinvestment. Another way of putting it is that our concern at Arconic isn’t the absolute level of investment in the business, but the returns which have been earned on those investments. Since 2013, Arconic has deployed more than $6.2 billion of its owners’ capital on growth capital expenditures, research and development, and acquisitions.23 To date, those investments have managed to increase Net Operating Profits After Tax (NOPAT) by only $154 million.24 The problem here isn’t spending $6.2 billion; it’s getting 2.5% in return. That is value destruction on a grand scale. Elliott’s goals at Arconic include (1) increasing the cash flow generated from Arconic’s operations through more disciplined execution and by instilling a culture of accountability; and (2) finding high-return opportunities to deploy that cash in ways that strengthen Arconic’s franchise. Only if management is unable to find such opportunities should capital be returned. Here, buybacks and dividends are a fail-safe, not a first choice. Moreover, the way Arconic’s Board expresses its concerns about “short-termism” seems intentionally designed to confuse rather than to clarify. In one of its first letters to shareholders, the Board wrote that “ the path we have pursued did not, and was not designed to, maximize our short-term stock price or earnings – although that surely would have made our lives easier.”25 But Elliott has not faulted the Board for failing to “ maximize [Arconic’s] short-term stock price or earnings.” Our problem is that it has failed to maximize Arconic’s long-term stock price and earnings. As a result, notwithstanding the Board’s mudslinging, it has been plain from the very beginning that Elliott’s focus is very much long-term oriented. As corporate governance experts Todd Henderson and Dorothy Shapiro recently wrote, “ Elliott … has proposed a long-term strategy, unlike some activist shareholders only interested in stock buybacks or other short-term fixes.”26 Dr. Kleinfeld wasn’t a recent arrival. He was CEO for nearly nine years and a C-level officer for almost a decade. Ms. Russo has been serving the Corporation since 2008. By now even the Board must acknowledge that sufficient time has passed for shareholders to take the change in market value of their ownership stake into account when assessing the record of the Board and management. Further, the long tenure of key Board members and management speaks to a fundamental logical flaw in the Board’s argument. While shareholders may be skeptical of long-term investments when first made, a Board and management team that demonstrates the ability to consistently generate returns above the cost of its capital will be rewarded with a higher stock price the more the Company invests. If Arconic were indeed making profitable investment decisions, by now, nine years later, the stock price would reflect the Board’s prowess. Finally, whatever the goals of the shareholder activist, it is almost always the case that faced with a proxy fight, it is management and the Board (not the shareholder activist) that have the greater incentive to sacrifice long-term performance for short-term gains or in pursuit of self-serving ends. This problem is particularly acute at companies like Arconic in which the Board and management have extraordinarily little invested in the firm’s shares. In such situations, considerations of ego and the economic incentive toward continued employment and remuneration may weigh heavily. In short, we understand the concerns some have about an increasingly myopic focus on quarterly earnings or the current trading price. In fact, we share those worries. But that fear should not give the words “short term” a talismanic power capable of immunizing the Board and management from shareholder accountability. Shareholders have entrusted boards and management with their capital. After a reasonable interval, in this case nine years, it is only appropriate to ask – how have they done? The Board’s argument that Elliott seeks “undue influence” is equally irrelevant to the contest at hand and is profoundly flawed on its face. Elliott hasn’t nominated any employee or affiliate. Further, the directors nominated by Elliott will receive no ongoing compensation from Elliott for their service and will have no ongoing ties of employment or otherwise with Elliott.27 Instead, up for election are three former aerospace operating executives with a combined 80-plus years of industry experience and a former industrial and materials executive who has run multiple CEO searches. These are extraordinarily well-qualified candidates with distinguished resumes and critical skills this Board manifestly lacks. All are independent. All Elliott has done is identify them. We cannot seat them and cannot cast more than our fair share of the vote. It isn’t any “undue influence” from Elliott that will result in their elevation to the Board, but the legitimate expression of the will of a majority of Arconic’s voting shareholders. While Arconic has sought to portray the three directors seated in February of 2016 by mutual agreement of the Company and Elliott as “Elliott directors,” this characterization of these individuals makes zero sense. All Elliott did with respect to such directors was to work with the Company cooperatively to identify them. Contrary to the Company’s repeated and knowingly false allegation, Elliott did not nominate any of the February 2016 directors, and they have amply demonstrated their independence from Elliott throughout this contest. The Board praised these directors effusively in its latest presentation. It only refers to them as the “Elliott directors” when it finds it convenient to do so in order to advance its disingenuous argument that Elliott’s true goal is control of the Board. Ironically, this argument is fatally undermined in a “Catch-22” by the unanimous nature of the Board’s communications, including on the subject of Elliott’s alleged “undue influence.” Further, Elliott has taken pains to make clear that while we believe Larry Lawson – an experienced aerospace executive who achieved considerable success running a public company – should be a leading candidate to be Arconic’s CEO, we have never demanded his selection or insisted that Elliott be given any sort of veto right over the Company’s choice of Chief Executive. From the start, we have made very clear that we believe the choice of Arconic’s next CEO is the exclusive province of the Board. Our only goal is to ensure the Board is comprised of individuals who have consistently demonstrated good judgment in the past and bring to the table relevant expertise and experiences such that the Board is positioned to make a prudent selection in this regard. The Case for Change is Compelling Arconic’s underperformance on a total shareholder return (TSR) basis has been consistent and enduring.28 Its returns to shareholders have lagged in the short, medium and long term. This persistent underperformance is the consequence, not of any deliberate plan, but frequent operational failures, poor capital allocation, an incoherent strategy, and a broken company culture. Continuing on the current course is untenable. If Arconic’s operations are not improved, it will not generate the necessary funds to adequately reinvest in and grow its business. If Arconic reinvests poorly, its position in the marketplace will erode and its employees and shareholders will suffer the consequences. The Board has made clear that it believes Arconic is on the correct course. It explicitly “ reaffirm[ed] the strategy developed under Dr. Kleinfeld’s leadership” and insisted Dr. Kleinfeld’s departure was not the product of the Board’s recognition of Arconic’s poor financial performance, the result of any searching review of Arconic’s operations, or an admission that the Company’s multiple attempts to entrench the Board and management were misguided ethical breaches.29 In short, the Board didn’t dismiss Dr. Kleinfeld because it belatedly came to recognize that change is needed at Arconic. It agreed to his resignation only because, faced with potentially criminal conduct, it had no other choice. The Board’s failure to recognize the need for change at Arconic is the strongest argument yet that such change is needed. Further, the Board’s entrenching actions – trading corporate assets for a voting lockup, triggering a $500 million poison put and now delaying the Company’s annual meeting – are all independent bases on which the case for change rests. The Board is entitled to its opinion on the merits, but it is not entitled to frustrate shareholder attempts to register their disagreement. No one likes a proxy contest. It is extremely expensive, time consuming, and exhausting. It is a last resort, not a preferred course. Were we – and other shareholders – convinced that the Board recognized the need for change, that its members had the good judgment, moral compass, and needed expertise required to be this Company’s stewards, and that the Board was genuinely committed to addressing the alignment and governance issues that have plagued this Company, then there would be no need for this proxy contest. But, unfortunately, that is not the case. Whatever the short-term challenges that this contest poses, failing to hold the Board to account and failing to address the manifest problems at Arconic would be deleterious to the long-term health of the Company. We at Elliott are long-term investors committed to ensuring that Arconic has the leadership – both at the Board and management level – to produce sustainable world-class performance for its employees and its owners. We welcome the engagement of our fellow shareholders in this task, and we ask for your help by voting the BLUE card today. Elliott Associates, L.P. and Elliott International, L.P. (collectively, “Elliott”), together with the other participants in Elliott’s proxy solicitation, have filed a definitive proxy statement and accompanying BLUE proxy card with the Securities and Exchange Commission (“SEC”) to be used to solicit proxies in connection with the 2017 annual meeting of shareholders (the “Annual Meeting”) of Arconic Inc. (the “Company”). Shareholders are advised to read the proxy statement and any other documents related to the solicitation of shareholders of the Company in connection with the Annual Meeting because they contain important information, including information relating to the participants in Elliott’s proxy solicitation. These materials and other materials filed by Elliott with the SEC in connection with the solicitation of proxies are available at no charge on the SEC’s website at http://www.sec.gov. The definitive proxy statement and other relevant documents filed by Elliott with the SEC are also available, without charge, by directing a request to Elliott’s proxy solicitor, Okapi Partners LLC, at its toll-free number 1-877-869-0171 or via email at info@okapipartners.com. Elliott Management Corporation manages two multi-strategy hedge funds which combined have more than $32 billion of assets under management. Its flagship fund, Elliott Associates, L.P., was founded in 1977, making it one of the oldest hedge funds under continuous management. The Elliott funds’ investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. 1 “ Another Fix For American Manufacturing: Better Corporate Governance,” Todd Henderson and Dorothy Shapiro, The Huffington Post, available at http://www.huffingtonpost.com/entry/another-fix-for-american-manufacturing-better-corporate_us_58f4d7f8e4b048372700da07 2 Some Thoughts for Boards of Directors in 2017, Martin Lipton, Wachtell, Lipton, Rosen & Katz, December 8, 2016, published at: https://corpgov.law.harvard.edu/2016/12/08/some-thoughts-for-boards-of-directors-in-2017/ 3 Some Thoughts for Boards of Directors in 2015, Martin Lipton, Wachtell, Lipton, Rosen & Katz, December 2, 2014, published at: https://corpgov.law.harvard.edu/2014/12/02/some-thoughts-for-boards-of-directors-in-2015/ 4 Note: This basic formulation is more complicated in states such as Pennsylvania (where Arconic remains domiciled) in which the Board is permitted to consider the interests of other constituencies besides shareholders. We discuss below the difficulties such domicile poses to effective Board accountability. 5 Corporate Governance: The New Paradigm, Martin Lipton, Wachtell, Lipton, Rosen & Katz, January 11, 2017, published at: https://corpgov.law.harvard.edu/2017/01/11/corporate-governance-the-new-paradigm/ 6 Shattering all bounds both of credulity and common sense, the Company continues to insist that the Seller provided the two-year voting lock-up for no consideration. This astounding proposition flies in the face of decades of academic research and suggests disturbingly that the Arconic Board cannot even be trusted to be honest with the Company’s shareholders regarding matters of pure fact. 8 Kalick v. Sandridge Energy, Inc., C.A. No. 8182-CS (Del. Ch. Mar. 8, 2013) quoting Sutton Hldg. Corp. v. DeSoto Inc., 1991 WL 80223, at * 1 (Del. Ch. May 14, 1991) 11 “ Siemens Agrees to Record-Setting $800 million in FCPA Penalties,” Roger M. Witten, William R. McLucas, Andrew B. Weissman, Kimberly A. Parker, Jay Holtmeier, Wilmer Hale Publications & News; available at: https://www.wilmerhale.com/pages/publicationsandnewsdetail.aspx?NewsPubId=95919 12 “Siemens to Sue 11 ex-Board members,” Daniel Schafer, Financial Times, July 29, 2008; available at: https://www.ft.com/content/80b5014c-5d72-11dd-8129-000077b07658; “ Siemens to Collect Damages From Former Chiefs in Bribery Scandal,” Chris V. Nicholson, The New York Times, December 2, 2009; available at: http://www.nytimes.com/2009/12/03/business/global/03siemens.html 13 SEC Release No. 71261, available at: https://www.sec.gov/litigation/admin/2014/34-71261.pdf; DOJ Release, available at: https://www.justice.gov/opa/pr/alcoa-world-alumina-agrees-plead-guilty-foreign-bribery-and-pay-223-million-fines-and; “ Alcoa settles FCPA charge, pays $384 million to DOJ, SEC,” Julie DiMauro, The FCPA Blog, January 9, 2014; available at: http://www.fcpablog.com/blog/2014/1/9/alcoa-settles-fcpa-charge-pays-384-million-to-doj-sec.html#sthash.6Ey8yH4c.dpuf 14 Supplementary Information About the 2017 Annual Meeting of Shareholders, Arconic Inc., May 4, 2017 15 “ At Arconic, Race Heats Up for Next Chief Executive,” Bob Tita and David Benoit, The Wall Street Journal, April 19, 2017, available at https://www.wsj.com/articles/at-arconic-race-heats-up-for-next-chief-executive-1492594201. According to the Journal, Mr. Hess “was recruited by Mr. Kleinfeld” who “ had wanted Mr. Hess to join the board for years” and who “ will likely stay the course set out by the departed chief.” 16 Mr. Hess occupies the seat vacated by Martin Sorrell who failed to attend more than 1/3 of the Board’s meetings. This would likely have earned him automatic “withhold” recommendations from proxy advisory firms 17 Of the 102 companies, 86 were incorporated in Delaware. Data provided by FactSet. 18 In 2011, 80.7% of the shares cast on the proposal to declassify were voted FOR declassifying the Board of Directors despite a management recommendation AGAINST. However, the 80.7% of the shares that voted FOR represented only 42.5% of the outstanding shares. 19 In 2012, 96.9% of the shares cast on the proposal to declassify were voted FOR declassifying the Board of Directors. However, the 96.9% of the shares that voted FOR represented only 47.4% of the outstanding shares. 21 Saint Augustine is said to have asked God: “ Grant me chastity and continence, but not yet.” 22 See e.g. Corporate Governance: The New Paradigm, Martin Lipton, Wachtell, Lipton, Rosen & Katz, January 11, 2017, published at: https://corpgov.law.harvard.edu/2017/01/11/corporate-governance-the-new-paradigm/ 23 Since 2013, Arconic has spent $6,226 ($mm) on growth capital expenditures, acquisitions, and research and development. Growth capital expenditures are calculated as Capital Expenditures for Continuing Operations less 50% of Depreciation and Amortization (management has previously estimated sustaining capital is 50% of D&A – see Arconic Investor Day, December 14, 2016) 24 Using a 33% tax rate for both years, in 2013, Arconic generated Net Operating Profit After Tax (NOPAT) of $628 million. In 2016, Arconic generated $782 million of NOPAT for an increase of $154 million. 25 See Letter to shareholders from Arconic’s Board, March 2, 2017 26 “ Another Fix For American Manufacturing: Better Corporate Governance,” Todd Henderson and Dorothy Shapiro, The University of Chicago, available at http://www.huffingtonpost.com/entry/another-fix-for-american-manufacturing-better-corporate_us_58f4d7f8e4b048372700da07 27 Still more, Elliott has required that the nominees use the after-tax proceeds of all fees for filling out director nomination forms and participating in due diligence ($50,000 when nominated, $50,000 if elected) to purchase Arconic common stock if elected. 28 See slides 25-51 of Elliott’s “A New Arconic” investor presentation available at http://newarconic.com/content/uploads/2017/04/Elliott-Releases-Investor-Presentation.pdf 29 In its statement the Board wrote: “ Importantly, this decision (accepting Dr. Kleinfeld’s resignation), was not made in response to the proxy fight or to Elliott Management’s criticisms of the Company’s strategy, leadership or performance…The Board continues to believe that under Dr. Kleinfeld’s leadership, the Company successfully executed a transformative vision and improved business performance…and the Board reaffirms the strategy developed under Dr. Kleinfeld’s leadership.”


OKLAHOMA CITY, Nov. 8, 2016 /PRNewswire/ -- SandRidge Energy, Inc. (the "Company") (NYSE:SD) today announced financial and operational results for the quarter ended September 30, 2016. Production in the third quarter was 4.6 MMBoe (49.6 MBoepd, 28% oil, 24% NGLs, 48% natural gas)....


Doser D.I.,University of Texas at El Paso | Rodriguez H.,University of Texas at El Paso | Rodriguez H.,Sandridge Energy
Tectonophysics | Year: 2011

We compare relocations of recent (1973-2005) and historic (1919-1972) earthquakes to geologic and geophysical (gravity, aeromagnetic, and uplift) information to determine the relationship of seismicity to crustal deformation in southeastern Alaska. Our results suggest that along strike changes in the structure of the Pacific plate may control the location of the ends of rupture zones for large earthquakes along the offshore Queen Charlotte fault system in the southern portion of the study area. There is a marked increase in background seismicity in the northern portion of the study area where the Fairweather fault begins to bend toward the northwest and crustal uplift due to glacial unloading exceeds 20. mm/year. Focal mechanisms indicate that thrust and reverse mechanisms predominate in the region of maximum uplift, as might be expected by the decrease in ice sheet thickness. The diffuse nature of seismicity between the Fairweather and Denali faults in the northern study area suggests a complex interaction between plate/microplate interactions and glacial unloading, making it difficult to determine the optimal fault orientation for failure in moderate magnitude (5.5 to 6.5) earthquakes within this region. © 2010 Elsevier B.V.


Add Prem Watsa to the list of billionaire investors who correctly anticipated a post-Election Day turn in markets and is increasing bullish bets on U.S. markets. Watsa, CEO of Canadian insurance conglomerate Fairfax Financial Holdings, sold nearly $5 billion in U.S. Treasury bonds ahead of the election, fearing a renewed focus on infrastructure spending after the vote would drive post-election animal spirits and cause a sharp fall in bond prices. When Trump won the presidency in the early morning hours on Wednesday, global markets sold off but then rebounded sharply, entering a three-day bull run that has caused U.S. stocks to hit new record highs and government bonds to sell off to their lowest levels in a year. Since Tuesday, the yield on the 30-year U.S. Treasury bond has risen 34-basis points, according to FactSet data, to 2.96%. By selling his defensive Treasury holdings ahead the Trump rally, Wasta saved himself a lot of money. Now, after reading the post-election environment, Watsa is not returning to safe-haven assets like Treasuries. Instead, he is continuing to make bullish trades by taking off his stock market hedges. The move is similar to an election night trade made by billionaire Carl Icahn, who left a Trump victory party late on Tuesday night to bet $1 billion in S&P 500 Index futures. Prior to the election, Trump had spent much of 2016 increasing his bearish bets against the market. On Nov. 4, Watsa told investors he'd sold 90% of Fairfax Financial's Treasury bonds, building up a cash stockpile of $10 billion from $5.5 billion at the end of the third quarter. "[We've] sold 90%-plus of our Treasury bonds and we have made the point that the uncertainties in the U.S. election is the reason," he said on a conference call. "We don't know who is going to win the election, but you could have significant infrastructure spending, you could have the drop in corporate tax rates. And while we think that might work in the short term, in the long term we still have questions about that. But we do live in a mark-to-market world and we wanted to take that risk out and so we've done that," Watsa added, before noting, "our stocks are hedged. We've got no corporate bonds to speak of. We've got some deflation swaps. We like the position we're at." Since Election Day, markets have rocketed higher, particularly among assets that are exposed to increased public sector spending like infrastructure and defense. Though Watsa sold his Treasuries, he wasn't positioned to take advantage of this rally due to equity hedges and deflation swaps that may have cut into gains. "You never know when these markets will reverse, but we caution caveat emptor of buyer beware," he said ahead of the election. But now, Wasta is bolstering his equity market exposure, hoping to gain from a further rally in markets. On Friday afternoon, Watsa said Fairfax has significantly reduced its equity market hedges due to an expectation of dramatic improvements to the U.S. economy and stock markets in a Trump administration. "We believe the U.S. election may result in fundamental changes that may bolster economic growth and business development. As a result, there is the potential for a longer term rally in U.S equity markets that reduces the need for the capital preservation protection of equity hedging," Watsa said on Friday. Now Fairfax's equity hedges represent roughly 50% of its equity and equity-related holdings, down more than half from the end of the third quarter. Filings with the Securities and Exchange Commission show Fairfax's largest equity bets include Sandridge Energy, BlackBerry, IBM, Kennedy-Wilson Holdings and Resolute Forest Products. Watsa isn't the only billionaire who came out of the election excited about the U.S. economy. "I woke up extremely bullish on Trump," Pershing Square's Bill Ackman said at a Thursday conference hosted by the New York Times. “The United States is the greatest business on earth and it has been under-managed for a very long time,” Ackman added. "We are going to get a lot done." Unlike Watsa, Ackman wasn't sitting on billions of dollars in cash. His fund has been almost 100% exposed to stock markets for years, an un-hedged position Ackman characterized as a bullish bet on the United States. Donald Trump Makes The Fannie And Freddie Stock Boom Great Again Here's How Much Money Wall Street Brass Made In The Trump Rally


News Article | January 21, 2016
Site: www.ogj.com

Sandridge Energy Inc., Oklahoma City, agreed to reduce the volume of wastewaste going into disposal wells in the Medford and Cherokee-Byron areas. After negotiating with the Oklahoma Corporation Commission (OCC), Sandridge agreed to convert some disposal wells to research.


Trademark
Sandridge Energy | Date: 2015-09-15

Crude oil; Natural gas.


Trademark
Sandridge Energy | Date: 2013-01-01

crude oil and natural gas.


News Article | August 12, 2015
Site: www.bloomberg.com

China just darkened the future for riskier corporate credit around the world. The world’s second-biggest economy shocked markets this week by depreciating its currency by the most in two decades, with the goal of aligning the yuan more closely to the market rate. In response, the average price of dollar-denominated junk bonds plunged to its lowest level since 2011. Debt of some energy companies, including Energy XXI Gulf Coast Inc. and Sandridge Energy Inc., fell more than 5 percent on Tuesday alone, Bank of America Merrill Lynch index data show. And China’s move deepened losses on obligations issued by U.S. metals and mining companies, which are already suffering their highest default rate since 2003. Why is a cut in the yuan’s value such a huge deal for U.S. corporate credit? Because it indicates that China’s growth is slowing down, perhaps more than analysts expected, which directly affects industrial companies that rely on continual demand from the $10.4 trillion economy. The problem is particularly acute for commodity producers that have already been struggling to meet their bills in the face of lower natural-resources values. China’s decision to effectively make its goods cheaper for the rest of the world to buy also makes it difficult for wages and consumer prices to increase globally. That undermines what central bankers around the world have been trying to accomplish over the past six years as they unleashed unprecedented policies of buying bonds and lowering benchmark rates. “The outlook for developed markets suddenly got a lot worse,” wrote Krishna Memani, chief investment officer at OppenheimerFunds, in an Aug. 11 report. This is particularly concerning for businesses that are most reliant on developers to construct and fuel buildings, roads, schools and factories. Debt issued by U.S. metals and mining companies had a 10 percent default rate at the latest reading, according to a Fitch Ratings. That $53 billion pool of obligations has already endured a 15.3 percent loss this year, Bank of America Merrill Lynch index data show. Prices in the $1.3 trillion U.S. junk-bond market have fallen to an average 95.8 cents on the dollar from this year’s high of 101.3 cents in February, the data show. The losses may deepen if China fails to keep a grip on how quickly its currency tumbles and the Federal Reserve decides to go ahead and raise U.S. benchmark rates this year, as they’ve been planning to do. That would probably lead to the dollar strengthening, bond yields rising and debt prices falling. On the flip side, the depreciating Chinese currency could end up having a positive impact. It could stimulate growth in that economy and prompt the U.S. to delay its plans to tighten monetary policy, which would prolong the easy-money policies that have allowed speculative companies to sell record amounts of debt. Since the move was announced, the yuan has led the biggest two-day slide in Asian currencies since 2008. While the People’s Bank of China is following through on a pledge to align its currency more closely with the market rate, people familiar with the matter said authorities intervened to support the yuan and told banks to limit some companies’ dollar purchases. “China’s move could be negative in the near-term,” said Jonathan Mackay, a senior market strategist at Morgan Stanley’s wealth-management unit, “if the market doesn’t believe they have it under control.” So far, the market isn’t convinced about that.

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