Wednesday, November 5, 2014

SandRidge Permian Trust – Struck by the Saudi Oil Shock

On October 30th SandRidge Permian Trust (PER) announced its quarterly distribution for production during the time period of June through August 2014.  During the summer the energy market showed high oil prices throughout that benefited the Permian Trust which has 86% its production in crude oil.  The spread between WTI and WTS crude oil widened during the quarter causing a slight decline in price level realized by the Trust.

The distribution announcement was greeted with a rally in the market as the units traded up from $9.50 to $9.93 per unit on the day after the press release.  However, the information released may not have been the primary factor in share price movement during the day.  On Halloween the entire market experienced what is being reported by experts as a massive global shortcovering rally because of the announced changes in Japan monetary policy and pension fund allocation.  The unit price movement in Permian Trust units in the five day period leading up to the announcement was probably more indicative of the change in short-term sentiment about the Trust units, rising from $9.00 to the most recent $9.93 closing price on October 31st.