Thursday October 04, 2012
by Brian Hicks, editor The Wealth AdvisoryIt's no secret we are 100% bullish on oil and natural gas stocks. Energy is simply too important to the global economy. The
SandRidge Permian Basin Trust (
PER) is a new recommendation in the sector.
The SandRidge Permian Basin Trust was formed by SandRidge Energy in May 2011. It owns royalty interests in oil and natural gas properties leased by SandRidge in the Central Basin Platform of the Permian Basin in Andrews County, Texas.
The trust is entitled to receive proceeds from the sale of production attributable to the royalty interests. It owns an 80% royalty interest in 509 developed wells in the basin and a 70% interest in 888 wells yet to be drilled.
The trust's parent company is ahead of schedule on many drilling projects. In turn, this is good news for the Permian Basin Trust — because more wells mean more income, and more income means a bigger payout to shareholders.
The Permian Basin Trust has paid a bigger-than-expected dividend every quarter since its IPO. That's because it's completing wells faster than expected.
Also, natural gas rig counts are down, which means less new natural gas is coming online. That is supportive of higher natural gas prices. While the Permian Basin Trust is 75% weighted toward oil, higher nat gas prices will still help.
Buy the SandRidge Permian Basin Trust to up $21 a share. Our 12-month target price is $24.
Learn more about this financial newsletter at Brian Hicks's The Wealth Advisory.Related articles:
