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Hugoton Royalty Trust Message Board

  • peristentone peristentone Sep 26, 2010 5:17 PM Flag

    Natural Gas Down HGT Up?

    Natural Gas dropped recently below the low point of April 2010. HGT somehow managed to stay 28%+ higher than its lows from April. Can someone explain how is HGT holding onto its gains when the underlying commodity is not?

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    • MLP
      Master Limited Partnerships are limited by US Code to only apply to enterprises that engage in certain businesses, mostly pertaining to the use of natural resources, such as petroleum and natural gas extraction and transportation. Some real estate enterprises may also qualify as MLPs.
      Because MLPs are a partnership, they avoid the corporate income tax, on both a state and federal basis. Additionally, the limited partner (investor) may also record a pro-rated share of the MLP's depreciation on his or her own tax forms to reduce liability. This is the primary benefit of MLPs and gives MLPs relatively cheap funding costs.
      However, this makes MLPs unattractive to tax-deferred funds, who must lose this tax saving advantage. To encourage tax-deferred investors, many MLPs set up corporation holding companies of LP claims which can issue common equity.

      Trust
      In common law legal systems, a trust is a relationship whereby property (including real, tangible and intangible) is managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a settlor, who entrusts some or all of their property to people of their choice. The trustees hold legal title to the trust property, but they are obliged to hold the property for the benefit of one or more individuals or organizations, usually specified by the settlor, who hold equitable title. The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property.
      The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust document and the governing law.
      Comments
      There are differences between MLP and Trusts. Both are partnership of sorts labeled with different appellations. Both are instruments used to limit the tax liabilities. Trust apply to any financial arrangement. MLP are intended to be used for natural resources. From my point of view MLP are not expenses free I am liable for the UTBI , trust is expenses free. Trading within a 401K or an IRA offers no capital gain tax. I am taxed as per my income bracket once I withdraw moneys from my IRA. From a trading angle MLP and Trust are the same.

    • The last (October) distribution from both SJT and HGT was the highest since May. Which seems strange since it represents income for July and I don't remember there being any mini NG price spike in July timeframe.
      I don't really understand why the October distribution for SJT and HGT was that high. But I do expect the following couple of distributions to be lower. Maybe the price will drop then.

      I'm surprised too. I had expected around now would be a good opportunity to be adding more Amroys units at low prices but hasn't really worked out that way so far. I still expect lower prices before end of year though.

      • 1 Reply to lizahuang54321
      • I have come to realize that the driver of MLP is the attached commodity. All MLP are plays on commodities: HGT is NG, BPT is oil MSB is iron ore, etc. MLP can only be conceived with a commodity partner. So like it or not, commodity dividend is directly proportional to the commodity price. What is driving the commodities prices, not really the NG, I am starting to believe in the coming inflation and the dollar going south. The US price of NG is 1/3 that of the world price. We, in the US are not using natural gas as Europe does. In France from way back, before WWII, gas was widely used but not from natural gas, it was from coal. In Europe coal is plentiful and gas was piped everywhere in urban area. This is not the case in the US, although in the farm country propane is widely used, I make reference with Idaho.
        In researching attractive stocks, of the best movers are all commodities. Actually the 30 days 15% upside movers are mining MLP. Today Cotton is in a 15 years high. This is an inflation play, plus a dollar that is going south make lots of sense.

    • I am guessing that the yield chasers are still bidding ANYTHING with a decent return higher.

      I am also going to guess that they will be somewhat disappointed over the next few months as HGT's return drops back in line with NG pricing.

      MLP's, bond funds, REIT's, etc have all been receiving good bids.

    • What are my obscured posts, MLP is a good vehicle to invest, and I want as much information as possible on what I am investing in. The commodity market is exploding, which to me is the forerunner of inflation if not hyper inflation. Commodity is the place to be, oil is the premiere, NG is not far behind.
      HGT is a perfect candidate. HGT was the XTO Royalty Trust. XOM has purchased XTO therefore XOM is the organization that feed royalty to HGT.
      Prior the purchased of XTO, XOM pure NG investment was 5% according to my research. Now XOM has tripled its properties to 15% of XOM market cap. XOM purchased of XTO has been negative by the Wall Street traders, I happen to disagree. XOM has merged the XTO assets into a new division of XMO called XTO. Has the new XOM division, XTO, incorporated the other XOM NG assets such as the 30% of RASGAS. XMO inherited the RASGAS play with the purchased of Mobile. I strongly believe the interest of XOM in NG started with the purchase of Mobile. RASGAS is producing LNG from 7 LNG trains, the 6th and 7th been the absolute largest in the world. I worked on these 2 trains.
      My interest is to understand the behavior of the XOM stock and the HGT unit pay out. The tax angle is what drives the MLP as well as Royalty Trust distribution. To my knowledge XOM did not have a MLP or Trust, but I need to research more.
      Liza, you have been instrumental is presenting aspect of Royalty Trust and MLP, I did not know. BPT is one, BPT has all to getter another dynamic then HGT. Making money requires understanding what you buy, the more you know, the less risks you take.

    • Yes, KMP is an MLP.
      But what is your point?
      You keep posting these obscure comments on several royalty trust boards but I don't think anyone has any idea what your point is.

 
HGT
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