SandRidge Permian Trust
August 21, 2013
Mr. H. Roger Schwall
Assistant Director
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-3628
| Re: | SandRidge Permian Trust |
Form 10-K for the Fiscal Year Ended December 31, 2012
Filed March 1, 2013
File No. 001-35274
Dear Mr. Schwall:
SandRidge Permian Trust (the “Trust”) hereby submits this letter in response to the written comments of the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”), dated July 30, 2013 (the “Comment Letter”), with respect to the Form 10-K for the fiscal year ended December 31, 2012 filed by the Trust with the Commission on March 1, 2013 (the
“Form 10-K”).
Set forth below is the heading and text of each comment set forth in the Comment Letter, followed by our response thereto. Capitalized terms used but not otherwise defined herein have the respective meanings ascribed to them in the Form 10-K.
Form 10-K for the Fiscal Year ended December 31, 2012
Item 1: Business, page 1
Proved Reserves, page 6
1. We note footnote (2) on page 8. Revise the table to indicate the amount of natural gas liquids for 2011 as a line item or via footnote.
Response
Although the Trust’s proved natural gas liquids reserves were only 9% of total proved reserves at the time of the conveyances to the Trust of the royalty interests to which the Trust’s reserves correspond, natural gas liquids reserves constituted 12% of total proved reserves at December 31, 2011. FASB ASC 932-235-50-4 provides that “reserve quantity information shall be disclosed separately for natural gas liquids” if significant. The definition of significant oil and gas producing activities found in FASB ASC 932-235-20 states that an entity is regarded as
having significant oil and gas producing activities if (a) revenues from, (b) results of operations for or (c) identifiable assets of oil and gas producing activities are 10% or more of the entity’s total respective revenue, results of operations or identifiable assets. The Trust acknowledges that, by applying the same 10% criteria to determine the significance of natural gas liquids reserves to the Trust’s total reserves, the Trust’s natural gas liquids reserves at December 31, 2011 should have been separately disclosed. The Trust undertakes to separately disclose, in the table indicated, such reserves in future annual reports on Form 10-K to the extent they exceed the 10% criteria described above. The Trust notes, for the Staff’s information, that natural gas liquids reserves at December 31, 2011 were disclosed separately in note 9 to the financial statements attached to the Form 10-K.
Proved Undeveloped Reserves, page 10
2. Item 1203(b) of Regulation S-K requests that registrants “[d]isclose material changes in proved undeveloped reserves that occurred during the year, including proved undeveloped reserves converted into proved developed reserves.” Please expand your disclosure on page 10 relating to the 2012 revisions of previous estimates to provide the net quantities associated with a change in economic factors separately from the changes resulting from new information obtained from development drilling and well performance.
Response
We acknowledge the Staff’s comment and note that the referenced paragraph contains a description of all material changes in the net quantities of the Trust’s proved undeveloped reserves for the fiscal year ended December 31, 2012. We are not aware of a specific requirement within Item 1203(b) to provide separately revisions associated with changes in economic factors from revisions resulting from new information obtained from development drilling and well performance. Accordingly, the Trust submits that its current disclosures are accurate and compliant with applicable guidance.
3. Further to the previous comment, please expand your disclosure to provide a clear reconciliation of the changes in the net quantities of proved undeveloped reserves from the date of the conveyance to December 31, 2011.
Response
We acknowledge the Staff’s comment. Set forth below are the changes in the net quantities of proved undeveloped reserves from the date of the conveyance to December 31, 2011. We undertake to include disclosure of changes to proved undeveloped reserves, to the extent material, in future annual reports on Form 10-K. Additionally, we note that a reconciliation of material changes is not required by Item 1203(b), but rather, “material changes” in proved undeveloped reserves.
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On August 16, 2011, royalty interests in Trust Development Wells were conveyed to the Trust. At that time, there were a total of 16.1 MMBoe of proved reserves associated with the Royalty Interests in such Trust Development Wells. By December 31, 2011, SandRidge had drilled 192 Trust Development Wells on proved undeveloped locations, resulting in the conversion of approximately 3.0 MMBoe of proved undeveloped reserves to proved developed reserves. At December 31, 2011, 167 of these wells were classified as proved developed producing properties with the remaining wells still in progress. In addition, there were five wells that were drilled yet to be classified as Trust Development Wells, resulting in the conversion of approximately 0.1 MMBoe of proved undeveloped reserves.
SandRidge is not required to drill Trust Development Wells on locations with respect to which proved undeveloped reserves have previously been identified for the Trust. In that connection, three Trust Development Wells were drilled during 2011 on locations different than those included in the reserve report prepared as of December 31, 2010. As a result, and because no more than 888 Trust Development Wells were to be drilled for the Trust, certain locations with proved undeveloped reserves were removed from the drilling plan developed for the Trust, resulting in downward revisions of 0.2 MMBoe during the period.
Production and Price History, page 10
4. Your disclosure of the production and average sales price on page 10 and elsewhere in Form 10-K excludes separate disclosure of information relating to natural gas liquids. As Items 1204(a) and 1204(b)(1) of Regulation S-K require separate disclosure by final product sold or produced, please advise or revise your disclosure to provide separate disclosure relating to natural gas liquids.
Response
The natural gas liquids production attributable to the Trust was 9.2% and 9.6% of total production for the years ended December 31, 2012 and 2011, respectively. The Trust applied the 10% “significance” criteria from FASB ASC 932-235-20 described above (see response to Comment 1) to determine the significance of natural gas liquids production to the Trust’s total production, and concluded that natural gas liquids production for the years ended December 31, 2012 and 2011 was not significant based on the percentages it constituted of total production and was therefore not separately disclosed.
Developed and Undeveloped Acreage, page 11
5. We note from the disclosure on page 11 that a portion of the Company’s net undeveloped acreage will expire in 2013. Please tell us the net amounts by product of your December 31, 2012 proved undeveloped oil and gas reserves assigned to locations on acreage scheduled to expire in 2013. Also tell us if all such proved undeveloped locations are included in a development plan adopted by management as of December 31, 2012 indicating these locations are scheduled to be drilled prior to lease expiration.
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Response
None of the Trust’s proved undeveloped reserves at December 31, 2012 were assigned to locations on acreage scheduled to expire in 2013.
Notes to Consolidated Financial Statements, page F-6
Note 9 Supplemental Information on Oil and Natural Gas Producing Activities, page F-13
Oil and Natural Gas Reserve Quantities (Unaudited), page F-15
6. Please refer to the requirements set forth in FASB ASC 932-235-50-5. Revise the narrative disclosure on page F-17 relating to the 2011 and 2012 revisions of previous estimates to provide the net quantities associated with a change in economic factors separately from the changes resulting from new information obtained from development drilling and well performance.
Response
The Trust acknowledges the Staff’s comment and notes that FASB ASC 932-235-50-5 provides that “Changes resulting from all of the following shall be shown separately with appropriate explanation of significant changes,” with six distinct categories being listed, one of which is as follows:
| a. | Revisions of previous estimates. Revisions represent changes in previous estimates of proved reserves, either upward or downward, resulting from new information (except for an increase in proved acreage) normally obtained from development drilling and production history or resulting from a change in economic factors. |
With respect to (a) above, the Trust notes that the requirement to show items separately from one another applies to the six distinct categories and not within a single category. Therefore, the Trust does not believe ASC 932-235-50-5 requires disclosure of separate items within the “Revisions of previous estimates” category. Accordingly, the Trust submits that its current disclosures are accurate and compliant with applicable guidance.
In response to your request, the Trust hereby acknowledges that:
the Trust is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the Trust may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
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If you have any questions or require any additional information, please contact the undersigned at 512-236-6599 or Michael Ulrich at 512-236-6599.
Very truly yours,
SandRidge Permian Trust
| By: | The Bank of New York Mellon Trust Company, N.A., as trustee | |||||
| By: | /s/ Sarah Newell | |||||
| Name: | Sarah Newell | |||||
| Title: | Vice President | |||||
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