SandRidge Mississippian Trust I (expected to trade under the symbol: SDT) is a royalty trust scheduling a $250 million IPO with a market cap of $560 million at the price range mid-point of $20, for Friday April 8, 2011.
Conclusion-- The SDT trust has a 20 year life span and expires in 2030.
- Better returns with more of an upside are offered in CVR Partners, LP (NYSE:UAN), also on the IPO calendar for Friday April 8.
- Targeted distribution varies from 11% in 2012, peaks at 16% in 2014 and declines to 8% in 2020 and beyond.
- The parent SandRidge retains 55% of SDT (the royalty trust). The parent also owns the incentive distribution rights, not the public royalty trust, SDT.
Business -- Trust units do not represent interests in or obligations of SandRidge. SDT was formed to own:
- Royalty interests to be conveyed to the trust by SandRidge in 37 horizontal wells producing from the Mississippian formation in Alfalfa, Garfield, Grant, Major and Woods counties in Oklahoma, and;
- Royalty interests in 123 horizontal development wells to be drilled in the Mississippian formation (within an “Area of Mutual Interest” [AMI]
- SandRidge presently holds 63,500 gross acres (42,600 net acres) in the AMI.
- SandRidge, the ‘parent’, is an oil & natural gas exploration/production company with activities in the Permian Basin, Mid-Continent, West Texas Overthrust, Cotton Valley Trend in East Texas, Gulf Coast and Gulf of Mexico.
- SD has a market cap of $5.2 billion. The stock increased 120% in the last six months
Targeted Distribution Rates:
- Yearly targeted distribution payout percentage at $20, price range mid-point
- Annualized 2011 (13%); 2012 (11%); 2013 (15%); 2014 (16%), 2015 (15%); 2016 (12%); 2017 (11%); 2018 (10%); 2019 (9%); 2020 (8%)
Page B-1 in the March 28, 2011 SEC filing
Royalty interests are not burdened by operating or capital costs. The trust will not be responsible for any operating or capital costs associated with the Underlying Properties, including the costs to drill the PUD Wells. The trust will bear post-production costs, certain taxes and trust administrative expenses.
Use of Proceeds:
$230mm, repay debt to parent
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.