Does anyone have details on their reasoning? The production drop seems to be a well timing issue and the 8-k mentions inventory will return to prior levels in upcoming distribution periods. PER is screening really cheap as a trust (large discount to PV10, high yield) and has plenty of remaining hedges and is mostly oil. The only thing I can think of is SD selling its remaining shares but that is only 7.5% of shares outstanding.
I read the report and my impression is that it's a #$%$ off analyst. His main beef is the fact that during the roadshow they strongly indicated that they would utilize only 3 rigs to drill out the wells. meanwhile, until very recently they were using 4-5 rigs, though it's now down to 3. Analyst is pissy that he can't model production based on not knowing the rig count. It's actually a valid concern, and would be nice if the company would issue full guidance to analysts as far as rigs drilling, but they don't, and he's #$%$ about it. He also mentions an "unexpected production decline" but in the note he states that the overriding concern he has is not being able to model based on rigs. He's got the knives out, from my read of the report.
I am a holder of PER.........what troubles me, and I don't know if it's a valid fear, is if SD (the parent co) would ever back out on their drilling commitments to PER. Anyone know if this has ever happened anywhere else? Like I said, not trying to spread fear, just don't know if this is really something to worry about.
If they don't drill the wells PER has a lien against SD. The lien is a value of the land in the AMI that gets reduced as SD drills more of the wells. At September 30, 2012, the amount potentially recoverable under the lien was approximately $156.9 million.
I think before that happens they will sell the fields to a cash rich operator, especially with rising energy prices. Apparently SD has funding for another 12 months + so its not a near term concern. Of course they can sell their 7.5% of shares, but that will not change the value of the assets.