While I agree with your potential analysis concerning oil hedges and such, I was refering to the part of his statement where Sandridge could cause the trusts to halt their dividend. It could only do that if the oil fields suspend all operations. When Sandridge bankrupts, whomever picks up their assets will have the option of continuing production. The oil field asset will still exist as long as there is oil reserve.
So true, at one point this was trading like almost 5 dollars below NAV. Should have just dissolved this trainwreck right then and there and gave the money back to shareholders, at least if it is true that their number 1 goal is "preservation of shareholder equity." What a lie!
The trust has no debt. The trust is simply set up to hold assets of the writing company in order to provide tax breaks. The trust pays a dividend based on its level of production of the underlying asset it holds; this allows the tax rate to be extremely minimal for pumping oil for Sandridge. Sandridge energy itself may go bankrupt but the trust will not. Now that is not to say that whomever comes into possession of Sandridge's assets won't put the wells out to pasture and stop pumping oil. If that happens then you won't receive any dividend obviously because there is no production but the assets themselves still exist.
First of all the dividend can not be "halted" as such. As long as the royalty trust maintains operations it will continue to pay a dividend as stipulated in its articles of incorporation. The issue is if Sandridge has no cash to continue operations then the wells will not be pumping. However, whomever takes over their assets can continue those operations in which case the trust would continue paying a dividend. Of course, it has no obligation to do so nor at what level of production which is where uncertainty lies.
A royalty trust does not take on debt. It's operations are strictly the production of whatever asset it holds. In this case oil and natural gas is the asset and as long as the well is producing there will be distributions paid. Sandridge or whoever takes over its assets when it goes bankrupt can continue pumping oil from the properties as long as it has cash to do so. You will receive a dividend based on that level of production as stipulated in the articles of incorporation of the royalty trust. They are; however, not under any obligation to continue those operations though which is where the uncertainty with Sandridge's trusts enters the game. The assets will still exist though and the trust will not "go bankrupt" as such along with the underlying asset owner.
If you want my opinion, a small investment would not be bad, hoping that whomever winds up with possession of Sandridge's assets continues production as it seems that there is still good value in doing so. The issue will be if oil prices drop to too low a level that production is no longer a viable business opportunity. Therefore cautious buy would be my sentiment.
Stop panicking. If you already have enough shares that adding 5000 is just another buy-in then like the rest of us who bought into the sinking ship are down quite a bit on this debacle. Management is inept to say the least; we already knew this before we invested yet we still bit on the high dividend. Now it's time to live with the decision. Take some amount of your shares and play with them selling at intraday high and re-buying them at a lower point and do this a few times to pass your day along because the stock price is safe for now (i.e. it ain't moving anywhere soon up or down). You will recoup your loss in time so make some money with your shares you hold along the way. I've already done it 7 times since March about 20 cents each time dropping my buy-in price by over $1.00 and still collecting the dividend.
The douchebags in charge of Nuveen Commodity funds actually are getting paid multiple 6 figure salaries to burn through cash faster than a dumb blond heiress. Truly mind-boggling how poorly this fund has been run; so much potential for gain yet they fail at every market turn.
Sentiment: Strong Sell
When there is nothing negative to parade around, the yahoo finance message board trolls move onto browner pastures.
If you like the sector, buy WD .
Didn't study too much about your company before throwing that money out there, eh?