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SANDRIDGE PERMIAN TRUST - 10-Q - Trustee's Discussion and Analysis of Financial Condition and Results of Operations

August 8, 2014

Introduction

The following discussion and analysis is intended to help the reader understand the Trust's financial condition, results of operations, liquidity and capital resources. This discussion and analysis should be read in conjunction with the Trust's unaudited financial statements and the accompanying notes included in this Quarterly Report and the Trust's audited financial statements and the accompanying notes included in the 2013 Form 10-K. Overview The Trust is a statutory trust created under the Delaware Statutory Trust Act. The business and affairs of the Trust are administered by the Trustee and, as necessary, the Delaware Trustee. The Trust's purpose is to hold the Royalty Interests, to distribute to the Trust unitholders cash that the Trust receives in respect of the Royalty Interests and the derivatives agreement (described in Note 4 to the unaudited financial statements contained in Part I, Item 1 of this Quarterly Report) and to perform certain administrative functions in respect of the Royalty Interests and the Trust units. Other than the foregoing activities, the Trust does not conduct any operations or activities. The Trustee has no involvement with, control or authority over, or responsibility for, any aspect of the operations on or relating to the properties in which the Trust has an interest. The Trust derives all or substantially all of its income and cash flow from the Royalty Interests and the derivatives agreement. The Trust is treated as a partnership for federal income tax purposes. The Trust's activities result in the Trust having nexus in Texas and, therefore, make it subject to Texas franchise tax. The Trust is required to pay Texas franchise tax each year at a maximum effective rate (subject to changes in the statutory rate) of 0.7% of its gross income apportioned to Texas in the prior year. Properties. As of June 30, 2014, the Trust's properties consisted of Royalty Interests in (a) the Initial Wells, (b) 785 additional wells (equivalent to approximately 812 Trust Development Wells under the development agreement as described below) that were drilled and perforated for completion between April 1, 2011 and June 30, 2014, and (c) the equivalent of approximately 76 Trust Development Wells to be drilled within an AMI consisting of approximately 16,700 gross acres (15,300 net acres) in Andrews County, Texas. SandRidge is obligated to drill, or cause to be drilled, the Trust Development Wells on or before March 31, 2016. SandRidge is not permitted to drill and complete any well within the AMI for its own account, subject to certain exceptions, until it has satisfied the drilling obligation to the Trust. SandRidge has granted to the Trust a lien covering its interest in the AMI (except its interest in the Initial Wells) in order to secure the estimated amount of the drilling costs for the Trust's interests in the undeveloped Underlying Properties, the balance of which is reduced as SandRidge fulfills its drilling obligation under the development agreement. At June 30, 2014, the amount potentially recoverable under the lien was approximately $25.1 million. The Trust is not responsible for any costs related to the drilling of the Trust Development Wells or any other operating or capital costs related to the Underlying Properties. The following table presents the number of Initial Wells, Trust Development Wells drilled and Trust Development Wells to be drilled as of June 30, 2014 and December 31, 2013. Trust Trust Development Development Initial Wells Wells Drilled(1) Wells To Be Drilled Total June 30, 2014 517 812 76 1,405 December 31, 2013 517 683 205 1,405

-------------------------------------------------------------------------------- (1) SandRidge is credited for having drilled one full Trust Development Well if a well is drilled and perforated for completion to the Grayburg/San Andres formation and SandRidge's net revenue interest in the well is equal to 69.3%. For wells in which SandRidge has a net revenue interest greater or less than 69.3%, SandRidge will receive proportionate credit for such well. In certain circumstances, SandRidge may also receive Trust Development Well credit for horizontal wells drilled to such formation. Distributions. The Trust makes quarterly cash distributions of substantially all of its cash receipts, after deducting amounts for the Trust's administrative expenses and cash reserves withheld by the Trustee, property tax and Texas franchise tax, on or about 60 days following the completion of each quarter. The Trust's subordinated units are entitled to receive pro rata distributions from the Trust each quarter if and to the extent there is sufficient cash to provide a cash distribution on the common units that is at least equal to the Subordination Threshold. If there is not sufficient cash to fund such a distribution on all of the common units (including the common units SandRidge owns), the distribution to be made with respect to the subordinated units is reduced or eliminated for such quarter in order to make a distribution, to the extent possible, to all of the common units (including the common units held by SandRidge) up to the Subordination Threshold. However, there is no minimum distribution. If the cash available for distribution on all 12 --------------------------------------------------------------------------------

Table of Contents SANDRIDGE PERMIAN TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED (Unaudited) of the Trust units in any quarter exceeds the Incentive Threshold for the corresponding quarter, SandRidge, as holder of the Trust's subordinated units, is entitled to 50% of the amount by which the cash available for distribution exceeds the Incentive Threshold.



The following table sets forth the approximate Subordination Threshold and Incentive Threshold for each remaining calendar quarter through the first quarter of 2017, as set out in the trust agreement.

Subordination Incentive Period(1) Threshold(2) Threshold(2) 2014 Second quarter (3) $ 0.63 $ 0.95 Third quarter 0.65 0.98 Fourth quarter 0.66 0.98 2015 First quarter 0.64 0.96 Second quarter 0.61 0.92 Third quarter 0.56 0.85 Fourth quarter 0.54 0.81 2016 First quarter 0.53 0.80 Second quarter 0.52 0.78 Third quarter 0.51 0.77 Fourth quarter 0.50 0.75 2017 First quarter 0.49 0.74

-------------------------------------------------------------------------------- (1) Due to the timing of the payment of production proceeds to the Trust, each distribution covers production from a three-month period consisting of the first two months of the most recently ended quarter and the final month of the quarter preceding it. (2) The subordination period will terminate and the subordinated units will automatically convert into common units on a one-for-one basis after the fourth full calendar quarter following SandRidge's completion of its drilling obligation, at which point the units will no longer be subject to the Subordination Threshold or have the benefit of the Incentive Threshold. Amounts have been rounded to two decimal places and are presented as set forth in the trust agreement. Actual distributions are declared and paid based upon a calculation carried out to three decimal places. (3) A distribution of $0.632 per common unit and $0.432 per subordinated unit was declared on July 31, 2014 and is expected to be paid on or about August 29, 2014. See Note 6 to the financial statements contained in Item 1 of this report for further discussion. Pursuant to Internal Revenue Code ("IRC") Section 1446, withholding tax on income effectively connected to a United States trade or business allocated to foreign partners should be made at the highest marginal rate. Under IRC Section 1441, withholding tax on fixed, determinable, annual, periodic income from United States sources allocated to foreign partners should be made at 30% of gross income unless the rate is reduced by treaty. This is intended to be a qualified notice to nominees and brokers as provided for under Treasury Regulation Section 1.1446-4(b) by the Trust, and while specific relief is not specified for IRC Section 1441 income, this disclosure is intended to suffice. Nominees and brokers should withhold at the highest marginal rate, currently 39.6% for individuals, on the distribution made to foreign partners. Results of Trust Operations The primary factors affecting the Trust's revenues and costs are the quantity of oil, NGLs and natural gas production attributable to the Royalty Interests, the prices received for such production and amounts paid or received as net settlements under the derivatives agreement. Royalty income, post-production expenses, certain taxes and derivative settlements are recorded on a cash basis when net revenue distributions are received by the Trust from SandRidge and net derivative settlements are received from the Trust's derivative counterparty. Information regarding the Trust's production, pricing and costs for the three and six-month periods ended June 30, 2014 and 2013 is presented below. 13 -------------------------------------------------------------------------------- Table of Contents SANDRIDGE PERMIAN TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2014(1) 2013(2) 2014(3) 2013(4) Production Data Oil (MBbls) 319 293 662 632 NGL (MBbls) 29 32 66 68 Natural gas (MMcf) 96 94 206 189 Combined equivalent volumes (MBoe) 364 341 762 731 Average daily combined equivalent volumes (MBoe/d) 4.0 3.8



4.2 4.0

Well Data Initial and Trust Development Wells producing - average 1,030 868 1,006 863 Revenues (in thousands) Royalty income $ 30,992$ 24,384$ 66,417$ 54,989 Derivative settlements 1,228 2,701 2,586 6,449 Total revenue $ 32,220$ 27,085$ 69,003$ 61,438 Expenses (in thousands) Post-production expenses $ 25$ 30$ 55$ 52 Property taxes - - 1,940 1,767 Production taxes 1,460 1,140 3,128 2,572 Franchise taxes 440 - 440 442 Trust administrative expenses 450 236 942 788 Cash reserves withheld (used) for current Trust expenses, net of amounts (used) withheld 193 1,166 (1,352 ) (688 ) Total expenses $ 2,568$ 2,572$ 5,153$ 4,933 Distributable income available to unitholders $ 29,652$ 24,513$ 63,850$ 56,505 Average Prices Oil (per Bbl) $ 92.80$ 78.84$ 95.87$ 82.72 NGL (per Bbl) $ 35.62$ 31.10$ 34.83$ 32.52 Combined oil and NGL (per Bbl) $ 88.02$ 74.13$ 90.34$ 77.88 Natural gas (per Mcf) $ 3.42$ 2.85$ 3.09$ 2.67 Combined equivalent (per Boe) $ 85.05$ 71.52 $



87.12 $ 75.21

Average Prices - including impact of derivative settlements and post-production expenses Oil (per Bbl)(5) $ 97.34$ 88.98$ 99.32$ 92.83 NGL (per Bbl) $ 35.62$ 31.10$ 34.83$ 32.52 Combined oil and NGL (per Bbl) $ 92.17$ 83.28$ 93.48$ 87.01 Natural gas (per Mcf) $ 3.16$ 2.53$ 2.83$ 2.40 Combined equivalent (per Boe) $ 88.96$ 80.16$ 90.04$ 83.88 Expenses (per Boe) Post-production $ 0.07$ 0.09$ 0.07$ 0.07 Production taxes $ 4.01$ 3.34$ 4.10$ 3.52

-------------------------------------------------------------------------------- (1) Production volumes and related revenues and expenses for the three-month period ended June 30, 2014 (included in SandRidge's May 2014 net revenue distribution to the Trust) represent oil, NGL and natural gas production from December 1, 2013 to February 28, 2014. (2) Production volumes and related revenues and expenses for the three-month period ended June 30, 2013 (included in SandRidge's May 2013 net revenue distribution to the Trust) represent oil, NGL and natural gas production from December 1, 2012 to February 28, 2013. (3) Production volumes and related revenues and expenses for the six-month period ended June 30, 2014 (included in SandRidge's February 2014 and May 2014 net revenue distributions to the Trust) represent oil, NGL and natural gas production from September 1, 2013 to February 28, 2014. 14 -------------------------------------------------------------------------------- Table of Contents SANDRIDGE PERMIAN TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED (Unaudited) (4) Production volumes and related revenues and expenses for the six-month period ended June 30, 2013 (included in SandRidge's March 2013 and May 2013 net revenue distributions to the Trust) represent oil, NGL and natural gas production from September 1, 2012 to February 28, 2013. (5) Includes impact of derivative settlements attributable to production from December 1, 2013 to February 28, 2014 for the three-month period ended June 30, 2014 and from December 1, 2012 to February 28, 2013 for the three-month period ended June 30, 2013. Includes impact of derivative settlements attributable to production from September 1, 2013 to February 28, 2014 for the six-month period ended June 30, 2014 and from September 1, 2012 to February 28, 2013 for the six-month period ended June 30, 2013.



Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Revenues Royalty Income. Royalty income received during the three-month period ended June 30, 2014 totaled $31.0 million compared to $24.4 million received during the three-month period ended June 30, 2013. Royalty income is a function of production volumes sold attributable to the Royalty Interests and associated prices received. The increase in royalty income was primarily attributable to an increase in the average price received for oil production, excluding the impact of derivative settlements and post-production expenses, to $92.80 per Bbl during the three-month period ended June 30, 2014 from $78.84 per Bbl during the same period in 2013. The average price received for natural gas increased to $3.42 per Mcf during the three-month period ended June 30, 2014 from $2.85 per Mcf during the same period in 2013. Also contributing to the increase in royalty income was an increase in equivalent volumes produced as Trust Development Wells were completed and brought on production throughout 2013 and 2014. The net revenue distribution from SandRidge received by the Trust during the three-month period ended June 30, 2014 included royalty income attributable to production for the three-month period from December 1, 2013 to February 28, 2014 of 348 MBbls of oil and NGLs and 96 MMcf of natural gas, or 364 MBoe of combined production. The net revenue distribution from SandRidge received by the Trust during the three-month period ended June 30, 2013 included royalty income attributable to production for the three-month period from December 1, 2012 to February 28, 2013 of 325 MBbls of oil and NGLs and 94 MMcf of natural gas, or 341 MBoe of combined production. Derivative Settlements. The Trust's derivatives agreement with SandRidge reduces the Trust's exposure to commodity price volatility attributable to a portion of production from the Royalty Interests through March 31, 2015 by the use of oil fixed price swaps. Net cash settlements received related to the Trust's derivatives during the three-month period ended June 30, 2014 were approximately $1.2 million, and included (i) approximately $0.7 million received related to the conveyed contracts for production attributable to the Royalty Interests from December 1, 2013 to February 28, 2014, (ii) approximately $0.4 million received from the counterparty to the novated contracts for production attributable to the Royalty Interests from January 1, 2014 to February 28, 2014 and (iii) approximately $0.1 million received from the counterparty to the novated contracts for March 2014 production. Derivative settlements received during the three-month period ended June 30, 2014 related to March 2014 production will be included in the Trust's August 2014 quarterly distribution. Total net derivative settlements received by the Trust for production from December 1, 2013 to February 28, 2014 were $1.4 million, including $0.3 received in February 2014 from the counterparty to the novated contracts for December 2013 production, which effectively increased the average price received for oil production for the related period by $4.54 per Bbl to $97.34 per Bbl. Net cash settlements received related to the Trust's derivatives during the three-month period ended June 30, 2013 were approximately $2.7 million, and included (i) net settlements received of approximately $1.4 million related to the conveyed contracts for production from December 1, 2012 to February 28, 2013, (ii) approximately $0.8 million received from the counterparty to the novated contracts for production from January 1, 2013 to February 28, 2013 and (iii) approximately $0.5 million received from the counterparty to the novated contracts for March 2013 production. Total net derivative settlements received by the Trust for production from December 1, 2012 to February 28, 2013 were $3.0 million, including $0.8 million received in February 2013 from the counterparty to the novated contracts for December 2012 production, which effectively increased the average price received for oil production for the related period by $10.14 per Bbl to $88.98 per Bbl. 15

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Table of Contents SANDRIDGE PERMIAN TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED (Unaudited) Expenses Post-Production Expenses. The Trust bears post-production expenses attributable to production from the Royalty Interests. Post-production expenses generally consist of costs incurred to gather, store, compress, transport, process, treat, dehydrate and market the oil and natural gas produced. Post-production expenses for the three-month period ended June 30, 2014 totaled approximately $25,000 compared to approximately $30,000 for the three-month period ended June 30, 2013. Production Taxes. Production taxes are calculated as a percentage of oil and natural gas revenues, excluding the effects of derivative settlements and net of any applicable tax credits. Production taxes for the three-month period ended June 30, 2014 totaled approximately $1.5 million, or $4.01 per Boe, and were approximately 4.7% of royalty income. Production taxes for the three-month period ended June 30, 2013 totaled approximately $1.1 million, or $3.34 per Boe, and were approximately 4.7% of royalty income. Texas Franchise Tax. The Trust paid its Texas franchise tax for the year ended December 31, 2013 of approximately $0.4 million, or approximately 0.4% of 2013 royalty income, during the three-month period ended June 30, 2014. There were no amounts paid relating to Texas franchise taxes during the three-month period ended June 30, 2013. Trust Administrative Expenses. Trust administrative expenses generally consist of fees paid to the Trustee and the Delaware Trustee, administrative services fees paid to SandRidge, tax return and related form preparation fees, legal and accounting fees, and other expenses incurred as a result of being a publicly traded entity. Trust administrative expenses for the three-month period ended June 30, 2014 totaled approximately $0.5 million compared to approximately $0.2 million for the three-month period ended June 30, 2013. The increase in expense is attributable to the timing of administrative expense payments. Distributable Income Distributable income for the three-month period ended June 30, 2014 was $29.7 million, which included a net addition to the cash reserve for payment of future Trust expenses of approximately $0.2 million (approximately $1.1 million withheld from the May 2014 cash distribution to unitholders partially offset by approximately $0.9 million used to pay Trust expenses during the period). Distributable income for the three-month period ended June 30, 2013 was $24.5 million, which included a net addition to the cash reserve for payment of future Trust expenses of approximately $1.2 million (approximately $1.4 million withheld from the May 2013 cash distribution to unitholders partially offset by approximately $0.2 million used to pay Trust expenses during the period ). Distributions to Common and Subordinated Units. Holders of Trust common units received greater distributions than holders of Trust subordinated units during the three-month periods ended June 30, 2014 and 2013 as a result of the Trust's subordination provisions. Because income available for distribution on the Trust common units for the May 2014 and 2013 distributions was below the Subordination Threshold, reduced distributions were paid to the subordinated units for those periods. As a result of the subordination provisions, holders of common units received approximately $1.5 million and $1.6 million more in distributions for the three-month periods ended June 30, 2014 and 2013, respectively, than such holders would have received had the subordination provisions not existed.



Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Revenues Royalty Income. Royalty income received during the six-month period ended June 30, 2014 totaled $66.4 million compared to $55.0 million received during the six-month period ended June 30, 2013. The increase in royalty income was primarily attributable to an increase in the average price received for oil production, excluding the impact of derivative settlements and post-production expenses, to $95.87 per Bbl during the six-month period ended June 30, 2014 from $82.72 per Bbl during the same period in 2013. Also contributing to the increase in royalty income was an increase in equivalent volumes produced as Trust Development Wells were completed and brought on production throughout 2013 and 2014. The net revenue distributions from SandRidge received by the Trust during the six-month period ended June 30, 2014 included royalty income attributable to production for the six-month period from September 1, 2013 to February 28, 2014 of 728 MBbls of oil and NGLs and 206 MMcf of natural gas, or 762 MBoe of combined production. The net revenue distributions from SandRidge received by the Trust during the six-month period ended June 30, 2013 included royalty income attributable to production for the six-month period from September 1, 2012 to February 28, 2013 of 700 MBbls of oil and NGLs and 189 MMcf of natural gas, or 731 MBoe of combined production. 16 --------------------------------------------------------------------------------

Table of Contents SANDRIDGE PERMIAN TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED (Unaudited) Derivative Settlements. Net cash settlements received related to the Trust's derivatives during the six-month period ended June 30, 2014 were approximately $2.6 million, and included (i) approximately $1.0 million received related to the conveyed contracts for production attributable to the Royalty Interests from September 1, 2013 to February 28, 2014, (ii) approximately $1.5 million received from the counterparty to the novated contracts for production attributable to the Royalty Interests from October 1, 2013 to February 28, 2014 and (iii) approximately $0.1 million received from the counterparty to the novated contracts for March 2014 production. Total net derivative settlements received by the Trust for production from September 1, 2013 to February 28, 2014 were $2.3 million, including the impact of $0.2 million paid in November 2013 to the counterparty to the novated contracts for September 2013 production, which effectively increased the average price received for oil production for the related period by $3.45 per Bbl to $99.32 per Bbl. Net cash settlements received related to the Trust's derivatives during the six-month period ended June 30, 2013 were approximately $6.4 million, and included (i) approximately $2.7 million received related to the conveyed contracts for production attributable to the Royalty Interests from September 1, 2012 to February 28, 2013, (ii) approximately $3.2 million received from the counterparty to the novated contracts for production attributable to the Royalty Interests from October 1, 2012 to February 28, 2013 and (iii) approximately $0.5 million received from the counterparty to the novated contracts for March 2013 production. Total net derivative settlements received by the Trust for production from September 1, 2012 to February 28, 2013 were $6.4 million, including $0.5 million received in November 2012 from the counterparty to the novated contracts, which effectively increased the average price received for oil production for the related period by $10.11 per Bbl to $92.83 per Bbl. Expenses



Post-Production Expenses. Post-production expenses for the six-month period ended June 30, 2014 totaled approximately $55,000 compared to approximately $52,000 for the six-month period ended June 30, 2013.

Property Taxes. Property taxes paid during the six-month period ended June 30, 2014 totaled approximately $1.9 million compared to approximately $1.8 million for the six-month period ended June 30, 2013. Production Taxes. Production taxes for the six-month period ended June 30, 2014 totaled approximately $3.1 million, or $4.10 per Boe, and were approximately 4.7% of royalty income. Production taxes for the six-month period ended June 30, 2013 totaled approximately $2.6 million, or $3.52 per Boe, and were approximately 4.7% of royalty income. Texas Franchise Tax. The Trust paid its Texas franchise tax for the period ended December 31, 2013 of approximately $0.4 million, or approximately 0.4% of 2013 royalty income, during the six-month period ended June 30, 2014. The Trust paid its Texas franchise tax for the period ended December 31, 2012 of approximately $0.4 million, or approximately 0.4% of 2012 royalty income, during the six-month period ended June 30, 2013.



Trust Administrative Expenses. Trust administrative expenses for the six-month period ended June 30, 2014 totaled approximately $0.9 million compared to approximately $0.8 million for the six-month period ended June 30, 2013.

Distributable Income. Distributable income for the six-month period ended June 30, 2014 was $63.9 million, which included a net reduction to the cash reserve for payment of future Trust expenses of approximately $1.3 million (approximately $3.3 million used to pay Trust expenses during the period partially offset by approximately $2.0 million withheld from the February 2014 and May 2014 cash distributions to unitholders). Distributable income for the six-month period ended June 30, 2013 was $56.5 million, which included a net reduction to the cash reserve for payment of future Trust expenses of approximately $0.7 million (approximately $3.0 million used to pay Trust expenses during the period partially offset by approximately $2.3 million withheld from the March 2013 and May 2013 cash distributions to unitholders). Distributions to Common and Subordinated Units. Holders of Trust common units received greater distributions than holders of Trust subordinated units during the six-month periods ended June 30, 2014 and 2013 as a result of the Trust's subordination provisions. Since income available for distribution on the Trust common units for the May 2014 and 2013 distributions was below the Subordination Threshold, reduced distributions were paid to the subordinated units for those periods. As a result of the subordination provisions, holders of common units received approximately $1.5 million and $1.6 million more in distributions for the six-month periods ended June 30, 2014 and 2013, respectively, than such holders would have received had the subordination provisions not existed. 17 --------------------------------------------------------------------------------

Table of Contents SANDRIDGE PERMIAN TRUST NOTES TO FINANCIAL STATEMENTS - CONTINUED (Unaudited)



Liquidity and Capital Resources

The Trust's principal sources of liquidity and capital are cash flow generated from the Royalty Interests and the Trust's derivative contracts, and borrowings to fund administrative expenses, including any amounts borrowed under SandRidge's loan commitment described in Note 5 to the financial statements contained in Part I, Item I of this Quarterly Report. The Trust's primary uses of cash are distributions to Trust unitholders, including, if applicable, incentive distributions to SandRidge, payment of amounts owed under the Trust's derivative contracts, payment of Trust administrative expenses, including any reserves established by the Trustee for future liabilities, payment of applicable taxes and payment of expense reimbursements to SandRidge for out-of-pocket expenses incurred on behalf of the Trust. The incentive distribution provisions will terminate concurrently with the subordination provisions. Under the conveyances granting the Royalty Interests, the Trust does not have any capital requirements related to drilling wells or any other operating and capital costs related to the wells. Administrative expenses include payments to the Trustee and the Delaware Trustee as well as a quarterly fee of $75,000 to SandRidge pursuant to an administrative services agreement. Each quarter, the Trustee determines the amount of funds available for distribution. Available funds are the excess cash, if any, received by the Trust from the sale of oil and natural gas production attributable to the Royalty Interests that quarter over the Trust's expenses for the quarter, subject in all cases to the subordination and incentive provisions. If at any time the Trust's cash on hand (including available cash reserves) is not sufficient to pay the Trust's ordinary course administrative expenses as they become due, the Trust may borrow funds from the Trustee or other lenders, including SandRidge, to pay such expenses. The Trustee does not intend to lend funds to the Trust. If such funds are borrowed, no further distributions will be made to unitholders (except in respect of any previously determined quarterly distribution amount) until the borrowed funds have been repaid, except that if SandRidge loans such funds, SandRidge may permit the Trust to make distributions prior to SandRidge being repaid. There was no such loan outstanding at June 30, 2014 or December 31, 2013. Under the derivatives agreement, SandRidge pays the Trust amounts it receives from its counterparty and the Trust pays SandRidge any amounts that SandRidge is required to pay such counterparty. Additionally, the Trust receives payment directly from its counterparty to the contracts novated to the Trust by SandRidge and is required to pay any amounts owed under those contracts directly to the counterparty. Payments by the Trust to SandRidge or the counterparty to the novated contracts reduce, and could eliminate, distributions paid to unitholders.



2014 Trust Distributions to Unitholders. During the six months ended June 30, 2014, the Trust's distributions to unitholders were as follows:

Covered Production Total Period Date Declared Date Paid Distribution Paid (in millions)

Calendar Quarter 2014 First Quarter September 1, 2013 - November 30, 2013 January 30, 2014 February 28, 2014 $ 33.7 Second Quarter December 1, 2013 - February 28, 2014 April 24, 2014 May 30, 2014 $ 29.9 Future Trust Distributions to Unitholders. During the three-month production period from March 1, 2014 to May 31, 2014, total sales volumes were lower than initial Trust estimates. The Trust Development Wells added during the period underperformed which impacted the production and distributable income for the period.On July 31, 2014, the Trust declared a cash distribution of $0.632 per common unit and $0.432 per subordinated unit covering production for the period for record unitholders as of August 14, 2014. The distribution will be paid on or about August 29, 2014 and was calculated as follows (in thousands, except for unit and per unit amounts): Revenues Royalty income $ 33,115 Derivative settlements, net 110 Total revenues 33,225 Expenses Post-production expenses 26 Production taxes 1,558 Cash reserves withheld by Trustee(1)



1,083

Total expenses



2,667

Distributable income available to unitholders $



30,558

Distributable income per common unit (39,375,000 units issued and outstanding)

$



0.632

Distributable income subordinated per unit (13,125,000 units issued and outstanding) $ 0.432 18

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(1) Includes amounts withheld for payment of future Trust administrative expenses.

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