(NYSE: SDT) Pre Earnings Report
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SandRidge Mississippian Trust I (NYSE: SDT), a statutory trust, holds royalty interests in specified oil and natural gas properties located in the Mississippian formation in Alfalfa, Garfield, Grant, and Woods counties in Oklahoma. As of December 31, 2017, the company’s properties comprised royalty interests in the initial wells; and 121 additional wells that were drilled and perforated by the company.
The company is expected to release its Q1 earnings report next week.
April 26, 2018. The company announced a quarterly distribution for the three-month period ended March 31, 2018 (which primarily relates to production attributable to the Trust’s interests from December 1, 2017 to February 28, 2018) of approximately $1.4 million, or $0.0488 per unit. The Trust makes distributions on a quarterly basis on or about the 60th day following the completion of each quarter. The distribution is expected to occur on or before May 25, 2018 to holders of record as of the close of business on May 11, 2018. https://finance.yahoo.com/news/sandridge-mississippian-trust-announces-quarterly-201500436.html
As per the management, although oil, natural gas and NGL prices rose during 2017, a buildup in inventories, lower global demand, or other factors could cause prices for U.S. oil, natural gas and NGL to weaken. Continued low oil, natural gas and NGL prices will reduce proceeds to which the Trust is entitled and may ultimately reduce the amount of oil, natural gas and NGL that is economic to produce from the Underlying Properties causing the Trust to make substantial downward adjustments to its estimated proved reserves. As a result, SandRidge or any third-party operator of any of the Underlying Properties could determine during periods of low oil, natural gas or NGL prices to shut in or curtail production from wells on the Underlying Properties. In addition, the operator of the Underlying Properties could determine during periods of low oil, natural gas or NGL prices to plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under conditions of higher prices. Specifically, SandRidge or any third-party operator may abandon, at its cost, any well or property if it reasonably believes that the well or property can no longer produce oil, natural gas and NGL in commercially economic quantities. This could result in termination of the portion of the Royalty Interest relating to the abandoned well or property, and SandRidge would have no obligation to drill a replacement well.
SandRidge Mississippian Trust I is a statutory trust, holds royalty interests in specified oil and natural gas properties located in the Mississippian formation in Alfalfa, Garfield, Grant, and Woods counties in Oklahoma. As of December 31, 2017, the company’s properties comprised royalty interests in the initial wells; and 121 additional wells that were drilled and perforated by the company. SandRidge Mississippian Trust I was founded in 2010 and is based in Austin, Texas.
Comparison of Results of the Trust for the Years Ended December 31, 2017 and 2016
Royalty Income. Royalty income is a function of production volumes sold attributable to the Royalty Interests and associated prices received. Royalty income received during the year ended December 31, 2017 totaled $9.0 million compared to $8.5 million received during the year ended December 31, 2016. The approximate $0.5 million increase in royalty income consisted of approximately $2.4 million attributable to the increase in prices received, partially offset by approximately $1.9 million attributable to a decrease in total volumes produced. The average number of producing wells decreased by 18 during the year ended December 31, 2017 compared to the year ended December 31, 2016 as wells that could not economically produce due to continued depressed pricing were shut-in.
Derivative Settlements. The Trust’s derivatives agreement with SandRidge was intended to reduce the Trust’s exposure to commodity price volatility attributable to a portion of production from the Royalty Interests through December 31, 2015 by the use of oil fixed price swaps and natural gas collars. Net cash settlements under the derivatives agreement during the year ended December 31, 2016 were approximately $9.6 million ($9.1 million received related to oil fixed price swaps and $0.5 million received related to natural gas collars), which effectively increased the average price received for oil by $94.21 per Bbl, to $131.94 per Bbl, due to the ratio of the oil volumes hedged to oil volumes produced and the substantial declines in the market prices of oil compared to contract prices. Settlements under the derivatives agreement also increased the average price received for natural gas by $0.28 per Mcf, to $2.09 per Mcf ($1.58 per Mcf including the impact of post-production expenses). The derivatives agreement has terminated, and the Trust will not receive any additional settlements.
Post-Production Expenses. The Trust bears post-production expenses attributable to production from the Royalty Interests. Post-production expenses generally consist of costs incurred to gather, store, compress, transport, process, treat, dehydrate and market the natural gas produced. Post-production expenses for the year ended December 31, 2017 totaled approximately $0.9 million compared to approximately $1.0 million for the year ended December 31, 2016. Post-production costs decreased as a result of decreased total production.
Production Taxes. Production taxes are calculated as a percentage of oil, natural gas and NGL revenues, excluding the effects of derivative settlements and net of any applicable tax credits. Production taxes for the year ended December 31, 2017 totaled $0.5 million, or $1.19 per Boe, and were approximately 5.8% of royalty income. Production taxes for the year ended December 31, 2016 totaled $0.4 million, or $0.66 per Boe, and were approximately 4.1% of royalty income. Production tax rates increased due to Trust wells reaching the expiration point of a previously reduced tax rate. The average effective production tax rate for the Trust will continue to increase, up to a maximum rate of 7%, as more Trust wells reach this expiration point.
Distributable income for the year ended December 31, 2017 was $6.1 million, which included a net addition of approximately $0.3 million to the cash reserve for the payment of future Trust expenses reflecting approximately $1.5 million withheld in aggregate from 2017 cash distributions to unitholders partially offset by approximately $1.2 million used to pay Trust expenses during the period. Distributable income for the year ended December 31, 2016 was $15.3 million, which did not include any net reduction to the cash reserve for the payment of future Trust expenses reflecting approximately $1.5 million used to pay Trust expenses during the period offset by approximately $1.5 million withheld from 2016 cash distributions to unitholders.
Stock influences and risk factors
Continued increases in oil, natural gas or NGL prices could improve proceeds to the Trust and cash distributions to unitholders;
If they do not meet the NYSE’s continued listing requirements, the NYSE may delist the Trust units, which could affect the market price, trading volume, liquidity and resale price of the Trust Units;
The Trust is passive in nature and has no voting rights in SandRidge, managerial, contractual or other ability to influence SandRidge, or control over the field operations of, or sale of oil, natural gas and NGL from the Underlying Properties;
The amount of cash available for distribution by the Trust is reduced by Trust expenses, post-production costs and applicable taxes associated with the Royalty Interests.
On Wednesday, May 9, 2018, SDT shares were at $1.07 on traded volume of 358K. The current RSI (14) is 80.38
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