NEW YORK (AP) -- Shares of SandRidge Mississippian Trust II tumbled Friday after the owner of oil and natural gas wells announced a lower-than-expected distribution for the fourth-quarter because of a drop in sales volumes.
THE SPARK: SandRidge Mississippian declared a distribution of 53.3 cents per unit. The distribution will take place on or before March 1 and will go to shareholders of record as of Feb. 14.
The trust said that for the three months ended Nov. 30, its sales volumes fell 7 percent compared to the same period a year ago.
The trust attributed the drop to lower oil production, which was offset by a slight increase in natural gas production. Realized prices for oil and natural gas, including the impact of derivatives, were slightly higher compared with the year-ago period.
THE BIG PICTURE: Austin, Texas-based SandRidge Mississippian Trust II was formed by SandRidge Energy Inc. to own oil and natural gas wells in the Mississippian formation.
The trust went public in April after pricing at $21 per unit. Since then the units have lost about 10 percent of their value and haven't traded above the $21 mark since May.
THE ANALYSIS: Raymond James analyst Kevin Smith, who expected a distribution of 71 cents per unit, downgraded SandRidge Mississippian to "Underperform" from "Outperform." He noted that the company doubled the pace of its fourth-quarter drilling program, but its production still lagged his estimates by about 30 percent.
"Even with SandRidge Mississippian's drilling schedule significantly outpacing our forecast, the trust continues to deliver weak results," Smith wrote in a note to investors. "We can only conclude that these wells are either not achieving the initial production results that we were expecting or are declining at a much faster clip than previously anticipated."
THE UNITS: Down $2.56, or 13.5 percent, to $16.35 in afternoon trading, after dropping as low as $15.73 earlier in the session. Since going public the units have traded between $15.02 and $23.91.