SANDRIDGE PERMIAN TRUST (NYSE: PER) today announced a quarterly
distribution for the three-month period ended June 30, 2020 (which
primarily relates to production attributable to the Trust’s
interests from March 1, 2020 to May 31, 2020) of approximately
$652,000, or $0.012 per unit. The Trust makes distributions on a
quarterly basis on or about the 60th day following the completion
of each quarter. The distribution is expected to occur on or before
August 31, 2020 to holders of record as of the close of business on
August 17, 2020.
During the three-month production period ended May 31, 2020,
combined sales volumes were lower than the previous period and oil
prices decreased. As no additional development wells will be
drilled, the Trust’s production is expected to decline each quarter
during the remainder of its life.
As previously disclosed, commencing with the distribution to
unitholders paid in the first quarter of 2019, the Trustee has
withheld, and in the future intends to withhold, the greater of
$190,000 or 3.5% of the funds otherwise available for distribution
each quarter to gradually increase existing cash reserves by a
total of approximately $2,275,000. The withholding for this
distribution is $190,000. This cash is reserved to pay or provide
for the payment of future known, anticipated or contingent expenses
or liabilities of the Trust.
As previously disclosed, on December 27, 2019, the Trust
received written notification from The New York Stock Exchange
(“NYSE”) that the Trust no longer satisfied the continued listing
compliance standards set forth under Rule 802.01C of the NYSE
Listed Company Manual because the average closing price of the
Trust units fell below $1.00 over a 30 consecutive trading-day
period that ended December 24, 2019. If the Trust is unable to
regain compliance with the applicable standards within a cure
period that concludes on September 5, 2020, the NYSE will commence
suspension and delisting procedures. As the average 30-day closing
price of the Trust units has remained below $1.00 since receipt of
the notification, the Trustee expects that the NYSE will delist the
Trust units following market close on September 5, 2020 and that
shortly thereafter trading of the Trust units likely would be
transferred to the over‑the-counter market.
The Trust owns royalty interests (the “Overriding Royalty
Interests”) in specified oil and natural gas wells located on
properties situated in the Central Basin Platform of the Permian
Basin in Andrews County, Texas (the “Underlying Properties”), and
is entitled to receive proceeds from the sale of production
attributable to the Overriding Royalty Interests. As described in
the Trust’s filings with the Securities and Exchange Commission
(the “SEC”), the amount of the quarterly distributions is expected
to fluctuate from quarter to quarter, depending on the proceeds
received by the Trust as a result of actual production volumes,
oil, natural gas and natural gas liquids prices, and the amount and
timing of the Trust’s administrative expenses, among other factors.
All Trust unitholders share distributions on a pro rata basis.
As previously reported in the Trust’s Form 8-K filed on April
23, 2020, Avalon Energy, LLC (“Avalon”) informed the Trustee that
Avalon would be unable to pay on a timely basis the approximately
$4.65 million it owes the Trust, which reflects the quarterly
distribution amount for the three-month period ended March 31, 2020
(which primarily relates to production attributable to the Trust’s
interests from December 1, 2019 to February 29, 2020) of
approximately $3.73 million, or $0.071 per unit, together with
approximately $0.73 million of Trust expenses and $0.19 million to
be withheld by the Trustee for the Trust’s previously disclosed
cash reserve for future known, anticipated or contingent expenses
or liabilities of the Trust. Consequently, the Trustee was not able
to make the quarterly distribution to unitholders in the second
quarter of 2020. In accordance with the terms of the conveyances
granting the Trust its Overriding Royalty Interests (the
“Conveyances”), the unpaid amount owed the Trust will accrue
interest at the rate of interest per annum publicly announced from
time to time by The Bank of New York Mellon Trust Company, N.A. at
its “prime rate” in effect at its principal office in New York City
until paid to the Trust. Avalon has informed the Trustee that
Avalon intends to make the payment of the May 2020 distribution to
the Trust, with interest in accordance with the Conveyances, when
funds are available to do so. The Trustee intends to monitor the
situation closely and, if appropriate, may take legal action
against Avalon to enforce the Trust’s rights under the
Conveyances.
As previously reported in the Trust’s Annual Report on Form 10-K
for the year ended December 31, 2019 and the Trust’s Quarterly
Report on Form 10-Q for the period ended March 31, 2020, the World
Health Organization characterized the outbreak of a novel strain of
the coronavirus (“COVID-19”) as a pandemic, which has resulted in
the implementation of a series of public health and emergency
measures to combat the spread of COVID-19. These measures have
adversely affected general commercial activity, the economies and
financial markets of many countries and localities, and global
demand for oil and natural gas. The duration and impact of COVID-19
is unknown at this time and it is not possible to reliably estimate
the impact that these developments will have on future periods. The
impact of the COVID-19 pandemic on crude oil consumption and the
resulting build-up in inventories combined with the announcement by
Saudi Arabia and Russia to abandon output restraints has created
uncertainty in the oil industry. These actions led to an immediate
and steep decrease in oil prices, which reached a closing NYMEX
price low of negative $37.63 per Bbl of crude oil in April 2020.
The West Texas Intermediate spot price of crude oil has dropped
from $61.17 per barrel on January 2, 2020 to $40.06 per barrel on
July 13, 2020. As a result, Avalon has seen a further deterioration
in cash flows from the Underlying Properties.
Volumes, average prices and distributable income available to
unitholders for the period were (dollars in thousands, except
average prices and per unit):
Sales Volumes
Oil (MBbl)
78
Natural Gas Liquids “NGL” (MBbl)
9
Natural Gas (MMcf)
36
Combined (MBoe)
93
Average Price
Oil (per Bbl)
$
20.21
NGL (per Bbl)
$
9.66
Natural Gas (per Mcf)
$
0.14
Natural Gas (per Mcf) including impact of
post-production expenses
$
(0.17)
Revenues
$
1,663
Expenses
821
Distributable income
$
842
Additional cash reserve
190
Distributable income available to
unitholders
$
652
Distributable income per unit
(52,500,000 units issued and outstanding)
$
0.012
Pursuant to Internal Revenue Code Section 1446, withholding tax
on income effectively connected to a United States trade or
business allocated to non-U.S. persons (“ECI”) should be made at
the highest marginal rate. Under Section 1441, withholding tax on
fixed, determinable, annual, periodic income from United States
sources allocated to non-U.S. persons should be made at 30% of
gross income unless the rate is reduced by treaty. This is intended
to be a qualified notice by SandRidge Permian Trust to nominees and
brokers as provided for under Treasury Regulation Section
1.1446-4(b), and while specific relief is not specified for Section
1441 income, this disclosure is intended to suffice. Nominees and
brokers should withhold at the highest marginal rate on the
distribution made to non-U.S. persons. The Tax Cuts and Jobs Act
(the “TCJA”) enacted in December 2017 treats a non-U.S. holder’s
gain on the sale of Trust units as ECI to the extent such holder
would have had ECI if the Trust had sold all of its assets at fair
market value on the date of the exchange. The TCJA also requires
the transferee of units to withhold 10% of the amount realized on
the sale of exchange of units (generally, the purchase price)
unless the transferor certifies that it is not a nonresident alien
individual or foreign corporation. Pending the finalization of
proposed regulations under IRC Section 1446, the IRS has suspended
this new withholding obligation with respect to publicly traded
partnerships such as the Trust, which is classified as a
partnership for federal and state income tax purposes.
This press release contains statements that are “forward-looking
statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements contained in this
press release, other than statements of historical facts, are
“forward-looking statements” for purposes of this provisions. These
forward-looking statements include the amount and date of any
anticipated distribution to unitholders, the Trustee’s planned
withholding of funds to increase cash reserves for future known,
anticipated or contingent expenses or liabilities of the Trust,
expectations regarding the ability of Avalon to make the payment of
the amount it owes to the Trust for quarterly distribution for the
three-month period ended June 30, 2020 (which primarily relates to
production attributable to the Trust’s interests from March 1, 2020
to May 31, 2020), the impact of COVID-19 on the global economy, the
timing of payment of the expected amount relating to the May 2020
distribution together with interest thereon, possible actions by
the Trustee to enforce the Trust’s rights under the Conveyances,
and the amount and date of any future distributions to unitholders
of the Trust. The anticipated distribution is based, in part, on
the amount of cash received or expected to be received by the Trust
from Avalon with respect to the relevant period. Any differences in
actual cash receipts by the Trust could affect this distributable
amount. The amount of such cash received or expected to be received
by the Trust (and its ability to pay distributions) has been and
will be significantly and negatively impacted by prevailing low
commodity prices, which could remain low for an extended period of
time or decline further. In addition to the recent collapse of oil
prices and the worldwide collapse of demand for oil, recent
announcements by Saudi Arabia and Russia to abandon output
restraints, and the economic effects of the COVID-19 pandemic,
other important factors that could cause actual results to differ
materially and adversely impact distributions to unitholders
include lease operating expenses related to the operation of the
Underlying Properties, expenses of the Trust, and reserves made by
the Trust for anticipated future expenses. Statements made in this
press release are qualified by the cautionary statements made in
this press release. Neither Avalon nor the Trustee intends, and
neither assumes any obligation, to update any of the statements
included in this press release. An investment in common units
issued by the Trust is subject to the risks described in the
Trust’s Annual Report on Form 10-K for the year ended December 31,
2019, its Quarterly Report on Form 10-Q for the period ended March
31, 2020, and all of its other filings with the SEC. The Trust’s
annual, quarterly and other filed reports are or will be available
over the Internet at the SEC’s website at http://www.sec.gov.
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version on businesswire.com: https://www.businesswire.com/news/home/20200723005735/en/
SandRidge Permian Trust The Bank of New York Mellon
Trust Company, N.A., as Trustee Sarah Newell 1(512)
236-6555
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