SandRidge Mississippian Trust II Announces There Will Be No Quarterly Distribution in August 2020
SANDRIDGE MISSISSIPPIAN TRUST II (OTC: SDRMU) today announced that there will be no distribution paid for the three-month period ended June 30, 2020 (which primarily relates to production attributable to the Trust’s interests from March 1, 2020 to May 31, 2020) as costs, charges and expenses attributable to the properties in which the Trust holds royalty interests (the “Underlying Properties”), plus funds added to the Trust’s cash reserve, equaled the revenue received from the sale of oil, natural gas and other hydrocarbons produced from such properties, as reported by SandRidge Energy, Inc. (“SandRidge”).
During the three-month production period ended May 31, 2020, average oil, natural gas and natural gas liquids (“NGL”) prices decreased significantly compared to the three-month period ended February 29, 2020. Combined sales volumes slightly decreased compared to the previous period. As no additional development wells will be drilled, the Trust’s production is expected to decline each quarter during the remainder of its life.
The Trustee is withholding the approximately $20,000 of distributable income for the period for inclusion in the Trust’s existing cash reserve for the payment of future known, anticipated or contingent expenses or liabilities. Any cash reserves remaining after the payment of all expenses and liabilities and any further additions to cash reserves as the Trustee in its discretion deems appropriate for the purpose of making reasonable provision for all claims and obligations of the Trust, including any contingent, conditional or unmatured claims and obligations, will be distributed to unitholders prior to the completion of the winding up process described below.
As described in the Trust’s annual and quarterly reports filed with the Securities and Exchange Commission (the “SEC”), the trust agreement governing the Trust requires the Trust to dissolve and commence winding up of its business and affairs if cash available for distribution for any four consecutive quarters, on a cumulative basis, is less than $5.0 million. As cash available for distribution for the four consecutive quarters ended December 31, 2019, on a cumulative basis, was approximately $4.392 million, the Trust commenced its winding up procedures beginning at the close of business on February 14, 2020. Accordingly, the Trustee will be required to sell all of the Trust’s assets, either by private sale or public auction, and distribute the net proceeds of the sale to the Trust unitholders after payment, or reasonable provision for payment, of all Trust liabilities, which is expected to include the establishment of cash reserves in such amounts as the Trustee in its discretion deems appropriate for the purpose of making reasonable provision for all claims and obligations of the Trust, including any contingent, conditional or unmatured claims and obligations, in accordance with the Delaware Statutory Trust Act. The sale process will involve costs that will reduce the amounts of any distributions to unitholders during the winding up period. As required by the trust agreement, the Trustee has engaged a third-party advisor to assist with the marketing and sale of the Trust’s assets. As provided in the trust agreement, SandRidge has a right of first refusal with respect to any sale of assets to a third party. The Trustee expects to complete the sale of the Trust’s assets and distribute the net proceeds of the sale to the Trust unitholders by the end of 2020, and the Trust units are expected to be canceled shortly thereafter. Subject to the final terms of the sale of the royalty interests, including the effective date and the timing of the closing of the anticipated sale, the Trust currently expects that there will be no further regular quarterly distributions to Trust unitholders reflecting quarterly revenues generated from the Underlying Properties. The Trust will remain in existence until the filing of a certificate of cancellation with the Secretary of State of the State of Delaware following the completion of the winding up process.