Over the past five years, payments from SandRidge to Ward have totaled roughly $150 million. In fact, adjusted for market capitalization, Ward has been the highest paid CEO among all publicly traded American energy companies, as well as one of the highest paid American CEOs period. Given SandRidge's less than $3 billion market capitalization, this appears all the more shocking.
YEP... SD has major management problems... that's why it's trading where it is. Luckily this trust is insulated and it's probably trading down here due to "headline risk" and getting tossed out with the SD bathwater. I'm been buying for about a month and will continue till X-Mas when the tax selling should abate and this thing will probably be a couple bucks higher by mid Jan.
US Royal trust are a legal entity that once IPOed are totally independent of the owner/ producer. The payment from SD to PER, SDT, and SDR are set by the bylaws of each US Royal trust. The salary of the CEO Ward comes from the SD income.
There are 2 types of units: common and subordinated for SDR. Of the total number of units 25% are subordinate and owned by SD. So SD is entitled to 25% of the distribution. It appears that SD has protected itself and is to be paid first. Then there are 2 situations that change the payment method and even convert the subordinate units to common units on a one for one bases.
The number of wells and the length of each well penetrating the Mississippian formation is specified and set the percent interest of SD. There is an incentive for SD to complete the number of wells.
I found the bylaws complete but complicated. Other US Royal trusts have straight forward bylaws.
Yea, he's chronicling SD's trouble... that probably IS why SDR and SDT and PER are trading where they are... they are throwing the 3 babies out with the bath water... thats' why I"m buying the #$%$ out of these. Free money IMHO.
Moreover, since the company went public, a substantial portion of SandRidge's earnings and cash flow has gone toward paying its executives. Given the stock's precipitous decline, its severe relative underperformance, and a 60% drop in book value per share over this period, shareholder outrage is understandable.
SD own outright 25% of the SDR units as “subordinate”. My understanding is that the subordinate units are paid first, if there is not enough cash flow the subordinate units get paid on pro rata bases. There is a case where by should there is not enough cash flow to pay the common units the subordinate units are converted of common units and have the same type of payments.
My understanding is that subordinates units guaranty a cash flow. After having digested SDR, SDT and PER I do not plan on buying any of them. There are better and juicier deals. WHZ, ADLW and NTI plus several more.