SandRidge reacquires well interests in Mississippian Lime trust
Three stocks created nearly a decade ago by SandRidge Energy to raise about $1.6 billion in capital are now being traded over-the-counter, although one of those may soon be eliminated permanently.
This week, the Bank of New York Mellon Trust Co., the trustee for the SandRidge Permian Trust, announced trading of its shares on the New York Stock Exchange were suspended as the exchange delists the stock, moving it to over-the-counter trading.
The trust was informed the stock, which had been traded under the ticker PER, was in danger of being delisted nearly a year ago because its monthly average value had fallen to less than $1 a share.
The trust was given until Sept. 5 to return its average price to $1 or more over a 30-day consecutive trading period, but that didn’t happen.
The delisting of PER follows steps the exchange took at the end of last year to delist stocks for two other trusts SandRidge had created to raise capital to support ongoing drilling activities in Oklahoma and Kansas.
Both SandRidge Mississippian Trust I, with a ticker symbol of SDTTU, and SandRidge Mississippian Trust II, with a ticker symbol of SDRMU, are traded over the counter. The Permian trust stock's over-the-counter trading symbol will be PERS. The Bank of New York Mellon Trust Co. had been the trustee for all three.
But Mississippian Trust II may be about to disappear.
On Wednesday, SandRidge Energy filed a notice with the U.S. Securities and Exchange Commission that it had closed on a $5.25 million deal to acquire 100% of its overriding royalty interest assets, bringing ownership of those rights entirely back in house.
The filing states SandRidge’s actual cost to acquire those assets was $3.28 million, given it still owned nearly 38% of the trust’s assets before the deal was completed.
Jake Dollarhide, CEO of Tulsa-based Longbow Asset Management, said Wednesday the total value of the deal exceeded the stock’s market cap value.
Dollarhide also said it won’t surprise him to see SandRidge permanently pull the over-the-counter stock representing that trust from the market. He said the company could save considerable costs by doing so, noting that energy companies must pay listing fees and auditing costs for financial entities that already had served their intended purpose.
Now, various energy companies are getting rid of those vehicles, he observed.
“Most companies are taking those partnerships back inside. If you have one company with three or four publicly-traded entities, that’s tripling or quadrupling your accounting, finance, legal, regulatory and listing costs. That gets really expensive for basically what is one company. If the entity (Mississippian Trust II) is retired, SandRidge will be able to cut its expenses,” Dollarhide said.
In April 2011, SandRidge raised nearly $340 million from an initial public offering of Trust I, which owned royalty interests in the company's holdings in the Mississippian formation in northern Oklahoma and southern Kansas.
In January 2012, it created Trust II and raised nearly $630 million more by offering investors royalty interests for wells on about 53,000 net acres in the Mississippian formation in northern Oklahoma and Kansas.
The Permian trust was created in 2011 and raised about $600 million using the same interests-selling format involving SandRidge wells drilled in that basin.