Dallas, Texas 03/31/2014 (FINANCIALSTRENDS) – Whiting USA Trust (NYSE:WHX) saw its market cap plummet by close to 35 percent during trading March, on the back of analysts explaining the import of the firm’s submission to SEC in its on 28th annual operational update filled on 13th March to the trust’s unit holders.
The trust which is operated by its parent Whiting Petroleum Corporation is into the oil and gas extraction and selling business. Whiting USA Trust (NYSE:WHX) offers its unit holders “net profits interest” which is calculated for a limited term (NPI) and the expectations are set accordingly with the share holders. Till the recent update the trust was expected to run till 30th June of 2015 and continue to payout quarterly net profit interests till then.
In the Form 10 K, annual report, Whiting USA Trust (NYSE:WHX) trustee, The Bank of New York Mellon Trust Company disclosed to the SEC that the unit holders might suffer sudden and steep fall in the valuation of their units. It also disclosed that the end term of the trust would be further reduced to 31st March 2015. In its own words, the trustee explained that, “To the extent that the Trust units are trading at a price substantially in excess of the aggregate distributions that may be reasonably expected to be made prior to the termination of the Trust, the market price decline in Trust units is likely to include one or more abrupt substantial decreases.” The warning note goes on to explain that, “the expected date of termination of the Trust has advanced to March 31, 2015”.
These warnings sent the investors in the trust, reducing their exposure by selling at discounted pricing in order to exit ahead of any steep fall in the valuation of their stock as explained in the Form 10 K.