SandRidge Permian Trust Announces Quarterly Distribution (1/29/15)
AUSTIN, Texas--(BUSINESS WIRE)--SANDRIDGE PERMIAN TRUST (NYSE: PER) today announced a quarterly distribution for the three-month period ended December 31, 2014 (which primarily relates to production attributable to the Trust’s interests from September 1, 2014 through November 30, 2014) of $27.7 million, or $0.656 per Common Unit and $0.141 per Subordinated Unit. The Trust makes distributions on a quarterly basis approximately 60 days after the end of each quarter. The distribution is expected to occur on or before February 27, 2015 to holders of record as of the close of business on February 13, 2015.
During the three-month production period ended November 30, 2014, total sales volumes were lower than initial Trust estimates and lower than the previous period. The lower production resulted in quarterly income available for distribution of $0.527 per unit, which is below the subordination threshold. As a result, the distribution per common unit is the subordination threshold of $0.656 for the period.
The Trust owns royalty interests in oil and natural gas properties in the Central Basin Platform of the Permian Basin in Andrews County, Texas 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, natural gas liquids (“NGLs”) 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 all Trust units was $0.527 per unit, which was below the Subordination Threshold for the Common Units of $0.656 per unit for the quarter. As a result, the distribution to the Subordinated Units was decreased to $0.141 per unit in order to permit a distribution per Common Unit equal to the Subordination Threshold for the quarter.
In addition to wells that were producing at the effective date of the assignment of the royalty interests to the Trust, SandRidge, pursuant to a development agreement with the Trust, was obligated to drill, or cause to be drilled, the equivalent of 888 development wells, determined by reference to SandRidge’s net revenue interest in a well, in an area of mutual interest by March 31, 2016. As of November 30, 2014, SandRidge had drilled 888 development wells and met its obligation under the development agreement. As no additional development wells will be drilled, the Trust’s production is expected to decline each quarter during the remainder of its life.
Equivalent development wells producing, or drilled and perforated for completion, during production periods upon which distributions are based are as follows:
On the day following the end of the fourth full calendar quarter subsequent to SandRidge’s satisfaction of its drilling obligation with respect to the development wells, January 1, 2016, the Subordinated Units will automatically convert into Common Units, distributions made to Common Units in respect of subsequent periods will no longer have the protection of the Subordination 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 Permian Trust 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. http://www.businesswire.com/news/home/20150129006002/en/SandRidge-Permian-Trust-Announces-Quarterly-Distribution#.VMsCJIktGUk