SandRidge Mississippian Trust I (NYSE:SDT)

CAPS Rating: 2 out of 5


Player Avatar DaddioResources (99.40) Submitted: 4/8/2011 2:41:57 PM : Outperform Start Price: $25.25 SDT Score: +5.36

NEW IPO - VALUED WITH DCF MODEL AT AROUND $30 WITH DIVIDENDS. On Thursday April 7, the company priced its 15 million unit IPO at $21 vs. expectations for 12.5 million units at $19-21. -----SandRidge Mississippian Trust plans on offering 14.375 million units (assuming overs) at a range of $19-$21. Raymond James and Morgan Stanley are leading the deal, Wells Fargo, RBC, Oppenheimer, Baird, Madison Williams, Morgan Keegan and Wunderlich are co-managing. Post-IPO SDT will have 28 million units outstanding for a market cap of $560 million on a pricing of $20. IPO proceeds will go to parent SandRidge Energy (SD).SandRidge Energy will own 49% of SDT post-IPO. SD will control SDT via a separate unit class. SD is an independent oil and natural gas operation focused on West-Texas, Oklahoma and Kansas. Market cap of $5.1 billion. Proved reserves of 545.9 MMBoe.Initial distribution is expected to be made 8/30/11. Note that this distribution will include both the first and second quarter of 2011 even though SDT was not a public company in the first quarter of 2011. This initial distribution is expected to be $1.01 per unit.From the prospectus: 'SandRidge Mississippian Trust I is a Delaware statutory trust formed in December 2010.'SDT will own:royalty interests in 37 horizontal wells producing in the Mississippian formation in Oklahoma, and royalty interests in 123 horizontal development wells to be drilled in the same formation. Wells are required to be drilled by 12/31/14. Parent SD holds 64,200 acres in the formation. Until SD drills the 123 wells for the royalty trust they will not be able to drill in the formation for themselves.SDT will receive 90% of all SD's proceeds from the currently producing wells and 50% of SD's proceeds in the yet to be drilled wells. The lower % in the yet to be drilled wells reflects parent SD's costs to drill these wells.

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