SandRidge Permian Trust :PER-US: Earnings Analysis: Q1, 2017 By the Numbers : May 30, 2017

SandRidge Permian Trust reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of SandRidge Permian Trust – Diversified Royalty Corp., Viper Energy Partners LP and Apache Corporation (BEVFF-US, VNOM-US and APA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 7.24 million, Net Earnings of USD 6.33 million.
  • Gross margins narrowed from 99.82% to 99.78% compared to the same period last year, operating (EBITDA) margins now 87.40% from 83.36%.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 83.36% to 87.40%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 7.24 7.68 7.14 6 9.05
Revenue Growth (%YOY) -20.02 -32.82 -43.38 -55.08 -61.94
Earnings (mil) 6.33 7.03 6.32 4.76 7.54
Earnings Growth (%YOY) -16.15 -28.66 -55.2 -82.82 -74.29
Net Margin (%) 87.4 91.51 88.42 79.32 83.36
EPS 0.12 0.13 0.12 0.09 0.14
Return on Equity (%) 18.31 19.72 17.2 12.61 19.39
Return on Assets (%) 18.31 19.72 17.2 12.61 19.39

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Market Share Versus Profits

Revenues History
Earnings History

PER-US‘s change in revenue this period compared to the same period last year of -20.02% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that PER-US is holding onto its market share. Also, for comparison purposes, revenues changed by -5.79% and earnings by -10.03% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 99.82% to 99.78%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 83.36% to 87.40%. For comparison purposes, gross margins were 99.78% and EBITDA margins were 91.51% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

PER-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 33.95 days, compared to last year’s level of 30.19 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from 83.36% to 87.40% and pretax margins widened from 83.36% to 87.40%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

SandRidge Permian Trust is a statutory trust, which engages in acquiring and holding royalty interests in specified oil and natural gas properties. The company was founded on May 12, 2011 and is headquartered in Austin, TX.

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