Finally received my annual report today. A few notes of interest...
1) The trustee is discussing the Calico Jack lease with McMoran. McMoran believes that the lease expired, and the trust is no longer owed an ORRI for any production from the property. The trustee (and trust unit holders on this board) disagrees and will continue to pursue this matter.
2) BBW lease expires on 9/30/2011, so we should see some action here shortly.
3) Up till the date of the report the trust had received loans from Newfield of $632,277 and has accrued interest on those loans of $205,988. The loans carry an 8% interest rate.
4) The trust has a cash burn rate of around $40-$75k per year.
5) At least 92% of trust royalties should be distributed out to unit holders quarterly, 8% of royalties will be used for trust expenses and to pay off previous loans. It looks to me that more than 92% could be handed out given the low cash burn rate.
What do others think?
Got the same feedback on the MMR board.
I understand the rationale, but it's a shame there isn't a cheaper way to hold the lease.
As you say, though, they might gather some helpful information from the deeper drilling, so it may have some value in addition to that stated above.
I've been the following the MMR story for a long time--I'm just posting now because I haven't seen this issue (i.e., the rationale for drilling BBW deeper) discussed yet.
I'm not as technically savvy as some of the other posters here, but I believe that MMR would deepen the well at BBW for two reasons. The first and most important reason is because it would allow them to keep their lease on all the blocks they own regarding BBW. The second reason would be that whatever they drill at BBW could prove to be informative to their drilling efforts at BBE. It looks like both BBW and BBE have similiar geological structures, and added data points at BBW could prove valuable for BBE and other McMoran plays in the future.
By the way, if any of the vets notice any errors here feel free to correct me. I have picked up some of the lingo by following these boards, but am not very technically savvy. I do a lot more posting on the iron miner message boards.
Does the annual report list the number of leases that have not expired?
As I recall, of the original leases, the trust currently has an ORRI in nine leases. If we assume that BBE, BBW and Lafitte are on three of the nine leases, what is holding the remaining six leases? I assume none of them are held by production, since the ORRI of the trust is only below depths that haven't seen production anywhere in the gulf.
You are correct in that there are 9 leases, but 5 lease blocks compose BBW (South Timbalier 141, 142, 167, 168 and Ship Shoal 188), 1 lease block represents BBE (South Timbalier 144), and 2 represent Lafitte Eugene Island 222 & 223), and one lease block is for a property called Morgan (Ship Shoal 235).
Calico Jack, the property in dispute, is lease block South Timbalier 188.
Hope this helps,
The last CC that EXXI gave, JS said that they were through the salt and into a 200' shale section - setting a string of casing. That string of casing should be set by now(assuming they got a good cement job) and I would think they are drilling ahead. They will probably look to drill about 4000' through the mid miocene before pulling out to log - but that would depend on what they are seeing in the mud logs.
Trying to guess when they will have/give news on these UD wells is like trying to guess what shoes Amelda Marcos (sp?) would wear. But, if I would have to guess, I would say somewhere around 6 - 10 weeks before we could hear info on the lafitte section down to around 25,000'. Probably not until the MMR July qtrly meeting unless they put out an operational report on their other UD wells before that.
Oops, above is the link I mentioned in the previous post. The Lafitte update is on slide 27.
I apologize, I just took a look at the recent EXXI presentation (5/25/11 link below)and slide 27 illustrates that the geology looks a bit different than that at BBE. Given that this presentation was almost two weeks ago it looks like the drill should be in the Mid Miocene by now. How long does it typically take to evaluate sands at these depths? I'm just trying to figure out a time frame for a potential Lafitte announcement.
question for y'all--does anyone contemplate continued negative posturing by MMR with respect to ORRI? If so, two things come to mind: 1)is trustee truly independent? 2)if TI had to fight this, where do funds come from?
Currently, the only ORRI dispute is with Calico Jack. I don't think MMR will relinquish BBE & BBW leases with what they have found on them. Once they start producting from BBE, it will be held by production.
On Calico Jack, they probably not do much until it is drilled and something of value is found.
Key for this trust is what turns up at Lafitte and if they can resolve the problems in the BBE deep section and possibly log Sparta/Wilcox sands. Shallow pay at BBE is priced in, IMO.
". . . the trust had received loans from Newfield of $632,277 and . . . 8% of royalties will be used for trust expenses and to pay off previous loans."
If the note principal balance is only $632K, plus accrued interest, I'd prefer to see it paid in full before I receive any royalties.
That should hold up my first check for about a week.
Hey Sponge Bob,
I was pleasantly surprised to see that the trust expenses since inception were so low. I think the total loans plus interest equals about $840K, but this is chump change compared to what we could make from production at BBE in a years time. Very encouraging.
Also, my interpretation of the trust is that if TISDZ hypothetically received $10 Million dollars in royalties in 2012, that "up to" 8% of this would go towards administrative expenses and debt payment. That first 8% would effectively wipe out all the outstanding debt and interest. Meaning that only up to $800k would pay off admin and debt, leaving the remaining $9.2 Million to be distributed to unit holders. In 2013, if TISDZ made another hypothetical $10 million in royalties then probably a lot less than 8% would be used for admin & debt expenses--maybe only 4-5%.
Of course the trustee could always choose to hold back some money to smooth out distributions, but this would probably only be a few hundred thousand.
In my opinion everything looks great!