SANDRIDGE MISSISSIPPIAN TRUST II (NYSE: SDR) today announced a quarterly
distribution for the three-month period ended December 31, 2015 (which
primarily relates to production attributable to the Trust’s interests
from September 1, 2015 through November 30, 2015) of $6.8 million, or
$0.183 per Common 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 February 26, 2016 to
holders of record as of the close of business on February 12, 2016.
During the three-month production period ended November 30, 2015, total
sales volumes were lower than initial Trust estimates and oil, natural
gas and natural gas liquids (“NGL”) experienced continued depressed
pricing. The decrease in revenue caused by lower commodity prices during
the period was partially offset by net cash settlements received under
the derivatives agreement of approximately $3.1 million. This increased
the average price received per barrel of oil, including the effects of
the derivatives and post-production expenses, from $41.43 to $101.82,
due to the ratio of the oil volumes hedged to the oil volumes produced
and substantial declines in the market prices of oil compared to
contract prices, and increased the quarterly income available for
distribution to $0.183 per Common Unit. Although distributions related
to production through December 31, 2015 are supported by hedging
arrangements, no such arrangements are in place for production
attributable to periods after December 31, 2015 and consequently
distributions for production periods beginning January 1, 2016 or later
should be expected to be dramatically lower than distributions for
recent periods. As no additional development wells will be drilled, the
Trust’s production is expected to decline each quarter during the
remainder of its life.
The Trust owns royalty interests in oil and natural gas properties in
the Mississippian formation in Alfalfa, Grant, Kay, Noble and Woods
counties in northern Oklahoma and Barber, Comanche, Harper and Sumner
counties in southern Kansas and is entitled to receive proceeds from the
sale of production attributable to the royalty interests. As described
in the Trust’s filings with the Securities and Exchange Commission (the
“SEC”), the amount of the quarterly distributions is expected to
fluctuate from quarter to quarter, depending on the proceeds received by
the Trust as a result of actual production volumes, oil, NGL and natural
gas prices and the amount and timing of the Trust’s administrative
expenses, among other factors. Although there is no assurance of any
minimum distribution in any quarterly period, during the subordination
period (as described in the Trust’s filings), holders of Common Units
are entitled to receive an amount up to the “Subordination Threshold”
(which varies from quarter to quarter) prior to any distribution being
made for that quarter in respect of the Subordinated Units, all of which
are held by SandRidge Energy, Inc. (“SandRidge”). If the amount
available for distribution in any quarterly period is sufficient to
distribute an amount equal to the Subordination Threshold to the holders
of all units (including the Subordinated Units), any additional balance
is distributed to holders of all units pro rata, up to the amount of the
Incentive Threshold for the quarter. Trust units are entitled to receive
50% of any cash available for distribution in excess of the Incentive
Threshold for the quarter. The Trust’s quarterly income available for
distribution to the Common Units is below the Subordination Threshold of
$0.640 per Common Unit for the quarter, and no quarterly distribution
will be paid to the Subordinated Units.
Volumes, price and distributable income available to unitholders for the
period were (dollars in thousands, except per unit):
|
|
|
|
Sales Volumes
|
|
|
|
Oil (MBbl)
|
|
|
|
51
|
NGLs (MBbl)
|
|
|
|
64
|
Gas (MMcf)
|
|
|
|
981
|
Combined (MBoe)
|
|
|
|
279
|
Average Price
|
|
|
|
Oil (per Bbl)
|
|
|
$
|
41.43
|
NGLs (per Bbl)
|
|
|
$
|
13.08
|
Gas (per Mcf)
|
|
|
$
|
2.01
|
Average Price - including impact of derivative settlements and
post-production expenses
|
|
|
|
Oil (per Bbl)
|
|
|
$
|
101.82
|
NGLs (per Bbl)
|
|
|
$
|
13.08
|
Gas (per Mcf)
|
|
|
$
|
1.41
|
Revenues
|
|
|
|
Royalty income
|
|
|
$
|
4,938
|
Derivative settlements
|
|
|
|
3,098
|
Expenses
|
|
|
|
1,214
|
Distributable income available to unitholders
|
|
|
$
|
6,822
|
Distributable income per Common Unit (37,293,750 units issued and
outstanding)
|
|
|
$
|
0.183
|
Distributable income per Subordinated Unit (12,431,250 units
issued and outstanding)
|
|
|
$
|
0.000
|
|
|
|
|
|
On April 1, 2016, the day following the end of the fourth full calendar
quarter subsequent to SandRidge’s fulfillment of its drilling obligation
with respect to the development wells, which occurred in the first
quarter of 2015, the Subordinated Units will automatically convert into
Common Units on a one-for-one basis. Beginning with the Trust’s August
2016 distribution, distributions made on Common Units will no longer
have the benefit of the Subordination Threshold, nor will the Common
Units be subject to the Incentive Threshold, and all Trust unitholders
will share on a pro rata basis in the Trust’s distributions.
Pursuant to IRC Section 1446, withholding tax on income effectively
connected to a United States trade or business allocated to foreign
partners should be made at the highest marginal rate. Under Section
1441, withholding tax on fixed, determinable, annual, periodic income
from United States sources allocated to foreign partners should be made
at 30% of gross income unless the rate is reduced by treaty. This is
intended to be a qualified notice by SandRidge Mississippian Trust II to
nominees and brokers as provided for under Treasury Regulation Section
1.1446-4(b), and while specific relief is not specified for Section 1441
income, this disclosure is intended to suffice. Nominees and brokers
should withhold at the highest marginal rate, currently 39.6% for
individuals, on the distribution made to foreign partners.
This press release contains statements that are “forward-looking
statements” within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. All statements contained in this press release,
other than statements of historical facts, are “forward-looking
statements” for purposes of these provisions. These forward-looking
statements include the amount and date of any anticipated distribution
to unit holders. The anticipated distribution is based, in part, on the
amount of cash received or expected to be received by the Trust from
SandRidge with respect to the relevant period. Any differences in actual
cash receipts by the Trust could affect this distributable amount. Other
important factors that could cause actual results to differ materially
include expenses of the Trust and reserves for anticipated future
expenses. Statements made in this press release are qualified by the
cautionary statements made in this press release. Neither SandRidge nor
the Trustee intends, and neither assumes any obligation, to update any
of the statements included in this press release. An investment in
Common Units issued by SandRidge Mississippian Trust II is subject to
the risks described in the Trust’s Annual Report on Form 10-K for the
year ended December 31, 2014, and all of its other filings with the SEC.
The Trust’s quarterly and other filed reports are or will be available
over the Internet at the SEC’s web site at http://www.sec.gov.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160128005150/en/
Copyright Business Wire 2016