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SandRidge Mississippian Trust I (SDTTU)·Q2 2021 Earnings Summary

Executive Summary

  • Q2 2021 was defined by liquidation mechanics, not operating results: the Trustee withheld the entire $4.50M net proceeds from the April 22 asset sale to fund reserves for potential securities litigation liabilities; no distribution was made for Q2 and regular quarterly distributions are discontinued .
  • The trust’s dissolution process continued: assets were sold to SandRidge for $4.85M (effective April 1), and units are expected to be canceled after the winding-up and reserve distribution following litigation resolution .
  • Sequentially, Q1 2021 showed better operating metrics versus Q4 2020 (higher commodity prices, revenues up to $0.875M, per-unit distribution $0.0110 vs $0.0029), but the effective date of the sale (4/1/21) ended ongoing production receipts thereafter .
  • Catalyst: timing and outcome of securities litigation resolution, which will determine when remaining cash reserves can be distributed and the trust canceled .

What Went Well and What Went Wrong

What Went Well

  • Asset sale executed at $4.85M with a clean effective date (April 1, 2021), providing clarity on winding up and eliminating operational volatility from commodity prices .
  • Sequential operating improvement in Q1 2021: revenues $0.875M, per-unit distribution $0.0110, supported by higher oil/NGL/gas prices vs the prior period .
  • Targeted cash reserve for routine expenses reached by Q1 2021; no additional reserve withheld from the Q1 distribution before the sale became effective .

What Went Wrong

  • Entire net sale proceeds ($4.50M) withheld in Q2 to fund litigation-related reserves; distributable income and per-unit distribution were effectively zero .
  • No further regular quarterly cash distributions will be made post-sale; the trust will not receive additional production proceeds from April 1 onward .
  • Dissolution triggered earlier by low cumulative distributions (<$1.0M over four quarters ended 9/30/20), culminating in forced asset sale and eventual unit cancellation .

Financial Results

Operating Distribution Metrics (oldest → newest)

MetricQ4 2020Q1 2021Q2 2021
Revenue ($USD Thousands)$732 $875 — (assets sold, proceeds reserved)
Expenses ($USD Thousands)$556 $567 —
Distributable income ($USD Thousands)$176 $308 —
Additional cash reserve ($USD Thousands)$96 $0 (no additional withheld) $4,500 (litigation reserve from sale proceeds)
Distributable income available to unitholders ($USD Thousands)$80 $308 —
Distributable income per unit ($USD)$0.0029 $0.0110 —

Asset Sale and Reserve (Q2 2021)

MetricAmount
Gross proceeds from asset sale ($USD Thousands)$4,850
Sale expenses ($USD Thousands)$350
Net proceeds ($USD Thousands)$4,500
Amount withheld for reserve ($USD Thousands)$4,500
Distributable income to unitholders—

KPIs (production and pricing; Q4 2020 → Q1 2021; Q2 not applicable post-sale)

KPIQ4 2020Q1 2021Q2 2021
Oil (MBbl)5 4 N/A (effective 4/1/21 sale)
NGL (MBbl)17 16 N/A
Natural Gas (MMcf)186 183 N/A
Combined (MBoe)54 51 N/A
Avg Oil price ($/Bbl)$38.06 $49.69 N/A
Avg NGL price ($/Bbl)$10.62 $16.91 N/A
Avg Gas price ($/Mcf)$1.83 $2.09 N/A
Gas price incl. post-prod ($/Mcf)$1.15 $1.39 N/A

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Distribution of net sale proceedsQ3 2021Trustee required to distribute net sale proceeds in August/Q3 2021, subject to reserves Proceeds withheld to fund litigation-related reserves; distribution only after litigation resolution and payment of remaining expenses Delayed
Regular quarterly distributionsForward from Q2 2021Expected to continue until sale completion; Q1 distribution announced Trust will not make any further regular quarterly cash distributions post-effective date (4/1/21) Discontinued
Trust statusPost-winding upExpected sale completion and distribution by Q3 2021; units canceled thereafter Trust remains in existence until reserves distributed; units canceled after winding up completion Timing contingent on litigation resolution

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2020, Q1 2021)Current Period (Q2 2021)Trend
Commodity prices/macroPrices increased vs prior period; low prices in 2020 impacted distributions Forward-looking statements note commodity volatility from COVID-19 and OPEC/Russia actions Improving sequential prices in Q1; macro volatility still cited
Dissolution and winding upDissolution trigger (11/13/20) due to < $1.0M cumulative distributions; marketing of assets; expected sale and distribution by Q3 2021 Sale completed 4/22/21; reserves withheld; trust remains until cancellation post winding up Progressed from planning to execution; completion dependent on litigation reserve resolution
Distribution policyQ4 small distribution; ongoing reserves; Q1 distribution $0.0110/unit with no additional reserve withheld No Q2 distribution; no further regular distributions post-sale Distributions ceased post-effective date
Legal/regulatorySecurities litigation cited as contingent liability requiring reserves Explicit withholding of net proceeds to cover potential litigation liabilities Legal reserve escalated to full net proceeds in Q2

Management Commentary

  • “Because of the statutory requirement to provide for the Trust’s potential liabilities with respect to the securities litigation … the Trust will not be distributing … the net proceeds from the sale … Instead, the Trustee is withholding such net proceeds as part of its cash reserve.”
  • “Because the Agreement entitles the Purchaser to the revenues from the oil and natural gas production attributable to the Royalty Interests since April 1, 2021, the Trust will not receive any further proceeds from such production and therefore will not make any further regular quarterly cash distributions to the Trust unitholders.”
  • “Under the trust agreement, the Trustee is required to distribute to the Trust unitholders … the net proceeds of the sale … less any amounts withheld as cash reserves … However … the Trustee does not expect that there will be cash available for distribution until such litigation has been resolved.”
  • Q1 operating context: “Average oil, natural gas and natural gas liquids (“NGL”) prices increased … Combined sales volumes slightly decreased compared to the previous period.”

Q&A Highlights

  • No earnings call transcript was identified; company communications for the period were via 8-K filings and press releases related to distributions, asset sale, and reserves .

Estimates Context

  • Wall Street consensus estimates via S&P Global for Q2 2021 were unavailable; as a result, comparisons vs estimates are omitted.

Key Takeaways for Investors

  • The liquidation framework dominates: the full $4.50M net proceeds were reserved in Q2 to cover potential litigation exposures; distributions hinge on legal resolution timing .
  • Post-effective date (4/1/21), the trust ceased receiving production proceeds; there will be no further regular quarterly distributions, shifting focus purely to reserve disposition .
  • Operating trends before the sale improved (Q1 pricing uplift, higher per-unit distribution), but are no longer relevant drivers post-sale .
  • Expect unit cancellation after reserves are distributed and winding up is completed; timeline uncertain pending litigation resolution .
  • Near-term trading implications: news flow now tied to legal developments and Trustee updates on reserve sufficiency; no commodity-linked earnings catalysts remain .
  • Monitor any additional sale-related costs (e.g., third-party bid reimbursement ~$50K) that reduce distributable reserves at the margin .
  • There is no guidance on operating metrics going forward; portfolio decisions should treat units as liquidation instruments with binary legal outcome risk .