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SandRidge Permian Trust Message Board

  • debbie08730 debbie08730 Nov 1, 2011 9:52 AM Flag

    Concern?Question?

    How will any of these Trust like PER and SDT do if interest rates rise? or in a period when interest rates are ON the rise? thank you

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    • Debbie this trust is based on the price of oil and ng not interest rate.

      The production that comes from wells in the trust, the price of oil and ng that the trust is able to get for the production will determind the dividend. The price of the stock will move on the divided rate more than any other factor.

      The interate which will not raise for a year or longer will drive the overall eco. But the only way the interest rate will be raised is "IF" the eco improves. If that happens chances are more oil and ng will be consumed and thus a higher price as demand grows.

      An improved eco would be a great thing for this trust not to mention the whole stock market. How much and how fast the interest rate goes up is another issue but do not hold your breath waiting for the interest rate to go up.

      A "hard" winter will drive up the price of ng and oil as more electric power and oil heating would be used to stay warm. A "soft" winter will do the opposite. Winter is about ready to make it run while the interest rate is not.

      The drill bit and production out of the permian bason will be the big issue for the trust right away. So far given the prediction by SandRidge all is going a little better than expected.

      Where can anyone get 12% interest right now? Only from Bond REIT such as AGNC NLY CIM and others who sell CMO type bonds. Those stock will be effected if and when the interest rate raises a lot more than a E&P Trust.

      • 2 Replies to rogere1946
      • All income investments would be impacted by interest rates. If interest rates rise and thus other safer investments gain in yield, investors will demand a higher yield from something like this to compensate for the higher risk of holding an oil trust. If interest rates rise (especially if they rise fast), the yield on a trust like this is likely to rise which means the price would fall.

        Having said that, I agree that any interest rate would be dependent on an improving economy which I don't see happening any time soon. The Fed says rates will be low for 2 years, I suspect it may be way longer than that.

      • Good anaylsis. IMHO, there's considerably more upside than downside for SDT and PER.

    • Like any income investment the price may fall (to give it a higher yield). On the other hand, if there is inflation that may increase the price of the oil produced by the trust. If you invest in it primarily for the distribution, I wouldn't be too concerned.

 
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