For those releying solely upon the SA article yest
For what it's worth I found Zeus 2012's retort mos thelpful. From the comments; 3Q12 production was 2,993 Mmcf which exceeded the target production of 2,594 Mmcf by 15.4%.
By my estimate, 4Q12 production was around 2,583 Mmcf based upon an average spot price of around $3.39, production cost of around $0.75 and incorporating the fact that 1,362 Mmcf was floored at $5.
The distribution per trust unit has actually been fairly consistent: 1Q12 - $0.522, 2Q12 - $0.473, 3Q12 - $0.516 and 4Q12 - $0.512. They've been below the subordinate threshold so you are correct to point out that once the subordinated shares becomes pari pasu with the common, distribution would drop.
For 1Q13, assuming a target production of 2,590 Mmcf and an average price of $3.4 (which is conservative as the average spot for the quarter till March 11th is around $3.36 based on IEA data and spot gas has rallied quite a bit over the past week and half), the expected distribution per share is around $0.514 per share taking into account of the 1,395 Mmcf floored at $5 and production cost of $0.752.
By the way, the PV-10 has ALWAYS been greater than the market cap of this security. The PV-10 at the time of the offering was $205.875 million calculated using a price of $3.984. The offering came at $20 per share, and using a fully diluted number of shares (including the subordinated shares), the market cap of the trust was $352.2 million, or a 71% premium to its then calculated PV-10.
I don't know how they operate in the Marcellus shale formations, but they can fracture the shale multiple times, as often as every month, to stimulate production and drill horizontally from the borehole in every direction. After 20 years, using current technology, and if they do there job right, there will be very little dry gas left in the formation. Liza has a lot of knowledge, but it sounds like it was obtained from financial documents and not from hand on experience with a drill string.
You are right, I am not, have never been, and never pretended to be a petroleum engineer, just an investor in the sector who reads a lot.
As for the technology, there is no doubt on what you say. The question though, is whether that is part of the trust deliverables. I'm sure it's covered in the S-1, what development (if any) is done following completion of the drilling program, however I don't feel like going back and reading the S-1 again at this stage. Also keep in mind that at trust termination, ECA gets 50% back with the other 50% being sold (ECA has first refusal) and proceeds distributed. So there is a bit of an incentive for the parent not to do development because whatever is left at the end they can produce without having to pay the royalty to unitholder.