Seeking Alpha
Editor's notes: Investors are hypnotized by SDT's high yield, but sector expert Richard Zeits uncovers data suggesting the wells are performing poorly. If Q2 earnings confirm the trend, shares could pull back significantly.

Oil & Gas royalty trusts are often presented as relatively low-risk, high-distribution investment vehicles providing exposure to commodity price upside. While clearly there is some truth to such characterization, underlying operational and financial uncertainties can nonetheless be quite significant. SandRidge Mississippian Trust I (SDT) is the case in point.

Ostensibly, the Trust's operational risks are moderate. Unlike a typical exploration and production company, the Trust has little exposure to new drilling (by this time, the majority of its 160 gross wells have been brought on production) or field operating costs (paid by the sponsor, SandRidge Energy (SD)). The Trust does not have any debt, is burdened with only minimal amount of administrative overhead, and distributes all...

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