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SandRidge Mississippian Trust I Paying Above Targets

February 20, 2012

SandRidge Mississippian Trust I (SDT) is a royalty trust with interests in oil and gas properties in the Mississippian formation in Oklahoma.  This type of trust is very simple to understand.  As a unit holder, you are entitled to a portion of the revenue stream from the sale of oil and natural gas extracted from wells drilled on this property by SandRidge Energy (SD).  The only function of the trust is to collect royalty payments and distribute them to unit holders.  An investment in units of the trust is subject to certain risks.  Among them:

  • The EPA could suspend or forbid hydraulic fracturing.
  • Prices for oil and gas are volatile.
  • SandRidge might not complete its drilling obligations.

As for the first item, I don’t know how to counter this risk except to not own any stock participating in this market.  As for oil and gas price volatility, a little more than half of the expected revenues upon which the target distributions are based through December 31, 2015 are hedged in order to minimize the impact of this volatility.  Now let’s look at the third potential risk.

See the full article on Seeking Alpha.

From → Dividends, Stocks

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