Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of oil and gas company SandRidge Energy
So what: After the market's close yesterday, SandRidge issued a press release saying that the company plans to conduct an initial public offering for a newly formed royalty trust, the SandRidge Permian Trust. The trust will get royalty interests in SandRidge wells in the Permian Basin's Central Basin Platform in Andrews County, Texas. The offering is expected to bring in roughly $600 million for SandRidge and the company will end up with a 40% interest in the trust.
Now what: Historically, SandRidge has spent far more on capital spending and acquisitions than the business produces in cash flow. SandRidge is already debt-heavy and it's generally hard to get investors excited about diluting their stake through big share issuances, so shareholders are no doubt excited that the company is finding ways to monetize its current assets to provide the capital for future spending.
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