By Richard Zeits:
In an article published over a year ago (SA Top Idea: “SandRidge Mississippian Trust I: Risk Of Downward Repricing,” July 5, 2013), I warned that reported operating data for SandRidge Mississippian Trust I (NYSE:SDT) likely reflected very poor well performance. The conclusion was the result of my attempt to reconcile the Trust’s reported production volumes with the type curve used by SandRidge Energy (NYSE:SD), the Trust’s sponsor and property operator, for the Mississippian play. I warned about the risk to the Trust’s reserve estimates (downward revisions indeed occurred at 2013 year end) and substantial downside to the units’ price. At the time of publication, SDT was trading at $ 14.08 per common unit and 16.8% then-current distribution yield.
Following the completion of the drilling obligation by SandRidge during the second quarter of last year, the Trust’s production trajectory has reflected natural well declines. As quarterly production volumes surprised to