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SandRidge Mississippian Trust I (SDTTU)·Q3 2020 Earnings Summary

Executive Summary

  • No distribution for the three-month period ended September 30, 2020; revenues of $0.619M were fully offset by $0.564M in expenses and a $0.055M addition to cash reserves, resulting in $0.00 distributable income available to unitholders .
  • The Trust crossed its dissolution threshold with cumulative cash available for distribution over four consecutive quarters totaling approximately $0.815M (<$1.0M), triggering dissolution as of close of business November 13, 2020; Trustee will sell all assets and expects to complete the sale and distribute net proceeds by Q3 2021 .
  • Sequentially, commodity prices rebounded versus Q2 (oil/NGL/gas), lifting revenues to $0.619M from $0.483M, but combined volumes fell and reserves were increased, keeping distributions at zero .
  • Catalyst: formal dissolution trigger and sale timeline, with SandRidge holding a right of first refusal on asset sales; quarterly distributions may continue only if cash remains after expenses and reserve additions during the wind-down .

What Went Well and What Went Wrong

What Went Well

  • Average oil, natural gas, and NGL prices increased versus the prior production period; oil averaged $38.32/Bbl and NGL $10.19/Bbl in Q3’s production period, supporting higher quarterly revenues versus Q2 .
  • Revenues improved quarter-over-quarter to $0.619M from $0.483M as pricing recovered off Q2 lows (COVID/Saudi supply shock referenced by the Trustee) .
  • Trustee noted the Trust “anticipates that it will continue to receive income from the royalty interests and will continue to make quarterly distributions to unitholders to the extent there is available cash after payment of Trust expenses and additions to cash reserves” .

What Went Wrong

  • Combined sales volumes declined sequentially, with total MBoe falling to 56 from 64 in Q2; oil volumes dropped to 5 MBbl (from 7 MBbl) and gas to 199 MMcf (from 221 MMcf) .
  • No distribution was declared for November 2020 because costs plus reserve additions equaled revenues; distributable income available to unitholders was $0.00 .
  • Dissolution was formally triggered as cumulative cash available for distribution across the last four quarters totaled ~$0.815M, below the $1.0M threshold; the Trustee will incur sale process costs that will reduce amounts distributable during the wind-down .

Financial Results

P&L and Distribution Comparison

MetricQ3 2019Q1 2020Q2 2020Q3 2020
Revenues ($USD Millions)$1.070 $1.019 $0.483 $0.619
Expenses ($USD Millions)$0.654 $0.624 $0.570 $0.564
Distributable Income ($USD Millions)$0.416 $0.395 ($0.087) $0.055
Additional Cash Reserve ($USD Millions)$0.035 $0.035 $0.000 $0.055
Distributable Income Available to Unitholders ($USD Millions)$0.381 $0.360 $0.000 $0.000
Distribution per Unit ($USD)$0.0136 $0.013 $0.000 $0.000

Notes:

  • EPS and margins are not applicable for the Trust; reported metrics are revenues, expenses, and distributable income/distributions per unit filed via 8-K press releases .

KPI: Volumes and Realized Prices

KPIQ3 2019Q1 2020Q2 2020Q3 2020
Oil Sales Volumes (MBbl)8 8 7 5
NGL Sales Volumes (MBbl)18 20 21 18
Natural Gas Sales Volumes (MMcf)278 240 221 199
Combined Sales Volumes (MBoe)73 68 64 56
Avg Oil Price ($/Bbl)$54.21 $55.07 $21.38 $38.32
Avg NGL Price ($/Bbl)$13.71 $12.30 $4.94 $10.19
Avg Natural Gas Price ($/Mcf)$1.38 $1.37 $1.08 $1.19
NG Price incl. post-production ($/Mcf)$0.64 $0.64 $0.32 $0.47

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Cumulative Cash Available for Distribution vs $1.0M ThresholdFour consecutive quarters ending Sep 30, 2020“May fall below $1.0 million… would require the Trust to commence termination shortly after the quarterly cash distribution in November 2020.” “Will total approximately $815,000… Trust will be required to dissolve beginning as of the close of business on November 13, 2020.” Tightened and triggered
Dissolution Trigger DateQ4 2020“If early termination event occurs… shortly after November 2020 distribution.” Formal trigger date: Nov 13, 2020; Trustee to sell all assets and distribute net proceeds; SandRidge has ROFR Formalized date/process
Sale Process Timeline2020–2021Not specified Engage third-party advisor within 30 days; expect to complete sale and distribute net proceeds by Q3 2021; units canceled thereafter New timeline disclosed
Distribution Policy During Wind-downOngoingRegular quarterly distributions subject to cash and reserves Continue quarterly distributions only to extent cash remains after expenses and reserve additions Conditional distributions emphasized
Quarterly Cash Reserve WithholdingOngoingWithhold ≥$35k or 3.5% per quarter to increase reserves toward ~$425k (e.g., $35k withheld in Q4 ’19 and Q1 ’20) $55k addition to cash reserve in Q3 2020 Increased reserve addition
November 2020 DistributionQ3 2020Potential termination after November distribution if threshold breached No distribution paid for period ended Sep 30, 2020 Lowered (to zero)

Earnings Call Themes & Trends

Note: No earnings call transcript documents were identified for Q3 2020; key themes below reflect the Trust’s filed press releases.

TopicPrevious Mentions (Q2 2020 and Q1 2020)Current Period (Q3 2020)Trend
Commodity PricesQ1: Oil up slightly; NG/NGL down vs prior period . Q2: Prices decreased significantly vs Q1; distribution suspended .Prices increased vs Q2; partial recovery supports higher revenues Improving sequentially
Production VolumesQ1: Flat vs prior period . Q2: Combined volumes slightly decreased .Combined volumes slightly decreased vs prior period Gradual decline expected
DistributionsQ1: $0.4M distribution ($0.013/unit) . Q2: No distribution .No distribution; income fully offset by expenses and reserve Weak; at zero
Cash ReservesOngoing policy to withhold ≥$35k per quarter .Added $55k to reserves in Q3 Higher withholding
Dissolution/TerminationQ2: May fall below $1.0M threshold; possible early termination .Formally triggered; dissolution date set; sale by Q3 2021 Escalated to execution
Listing/TradingPre-2020: Delisting from NYSE and move to OTC anticipated .Units expected to be canceled after sale completion Wind-down to cancellation

Management Commentary

  • “There will be no distribution paid for the three-month period ended September 30, 2020… as costs, charges and expenses… plus funds added to the Trust’s cash reserve, equaled the revenue…” .
  • “As cash available for distribution for the four consecutive quarters ended September 30, 2020… will total approximately $815,000, the Trust will be required to dissolve… beginning… November 13, 2020.” .
  • “The Trustee will be required to sell all of the Trust’s assets… The Trustee expects to complete the sale… and distribute the net proceeds… by the third quarter of 2021, and the Trust units are expected to be canceled shortly thereafter.” .
  • “During the three-month production period ended August 31, 2020, average oil, natural gas and [NGL] prices increased compared to the… period ended May 31, 2020. Combined sales volumes slightly decreased…” .
  • “Pending the sale… the Trust anticipates that it will continue to receive income… and will continue to make quarterly distributions… to the extent there is available cash after payment of Trust expenses and additions to cash reserves.” .

Q&A Highlights

Not applicable; source materials are 8-K filings with press releases, and no earnings call Q&A was provided by the Trust in the Q3 2020 timeframe .

Estimates Context

  • Wall Street consensus estimates (EPS, revenue) via S&P Global were unavailable for SDTTU for Q3 2020 due to missing mapping; therefore, no estimate comparison can be made for this period.

Key Takeaways for Investors

  • Formal dissolution triggered; Trustee will liquidate assets with expected completion and net proceeds distribution by Q3 2021, after which units will be canceled—this is the defining catalyst for the name .
  • No November 2020 distribution; Q3 revenues ($0.619M) were fully offset by expenses ($0.564M) and a larger reserve addition ($0.055M), leaving $0.00 distributable income to unitholders .
  • Sequential pricing recovery (oil/NGL/gas) lifted revenues vs Q2, but declining volumes and higher reserve additions limit distribution prospects during the wind-down .
  • Sale process costs will reduce amounts available for any interim distributions; SandRidge’s right of first refusal may influence sale outcomes and timeline .
  • Near-term trading: liquidation timeline announcements and periodic reserve additions can drive volatility; fundamental cash distributions likely remain constrained or zero absent a sharp, sustained commodity/pricing uplift .
  • Medium-term thesis: positioning should center on expected net proceeds from asset sale and timing certainty; ongoing quarterly updates will matter primarily for reserve changes and realized commodity pricing/volumes until disposition .
  • Operationally, with no new development wells, expect ongoing production declines; realized price improvements help but are unlikely to reverse dissolution dynamics without exceptional market conditions .