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San Juan Basin Royalty Trust Message Board

  • lca13 lca13 Jun 17, 2010 9:02 AM Flag

    Tomorrow's Dividend Pediction

    I have 10 cents, with a margin of error of +2 cents on the high side (continued low CAPEX spend and higher hub price delta) and - 2 cents at the low side (CAPEX getting in line with 2010 expectations and neutral hub pricing).

    Note that CAPEX to date has been running much lower than estimates... so one of these month's could have a big CAPEX surprise and squash the dividend temporarily.

    If this plays out, the effective yield drops below 5% at current SJT prices... and all those articles about SJT having the highest yield of funds, RT's, etc etc... might get replaced with articles about "the biggest recent drop in yields.... etc etc". Underlying NG dropped yesterday 4% in a couple hours. Watch this as well, especially if this morning's storage report is a surprise (in either direction).

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    • 16 cents

    • LCA13, very interesting computation... may I ask how you arrived at that divy? that was about to be paid?
      Dave the Novice..
      GLTA...

      WONDER IF THIS POSITION MAY EVER GET TO THE 30 DOLLAR RANGE...

      • 1 Reply to allen2462001
      • I track san juan hub flows, estimate SJT's percentage of participation, factor in guesstimates of capex, taxes, etc.

        I have a model I plug all this into.

        $30's is not likely in the near future. It may not be likely in the distant future. NG prices continue to decline. My target is the teens, the only question is this fall or next spring...

        The next dividend will at most be similar to last month and may be a few cents lower. The following month "will" be lower. Sept NG is not pricing well either so right now the Nov dividend looks single digits as well.

        If this plays out and a $1-$1.20 divvy looks right going forward, I do not see how price can be maintained about $25, and maybe not above $20.

    • I am new to NG as well. I bought this stock on a tip from a friend. I do however invest in transportation stocks and have seen a build up of LNG tankers over the last couple of years and new orders coming in at a high rate. Thats enough to convince me for now that NG is a sound place to be.

    • You are correct that you don't need to report the income if it's in an IRA. You had confused my by asking about Turbotax. If it's in an IRA then you don't need Turbotax.

      Are you talking about MMLP the ticker (which is itself an MLP)? Or are you talking MLPs in general?

      Either way, I am sure that the UBTI issue doesn't come into play for royalty trusts like SJT.

      And if you did have UBTI tax liability (due to some MLP holdings), then Turbotax would also not apply. With UBTI it is up to the broker to determine the liability and file with the IRS. Not the account holder.

      So in all these respects you have no concern. Your only concern is the direction of SJT unit price and distributions. I expect the trend will be down for the next 4 months or so. That's not to say it's not a decent longer term investment though.

    • I was under the impression that this type of dividend was subject to the $1000 limit imposed by MMLPs. I'll call up my broker to see if I am incorrect (and if so, I have more motivation to buy more). Thanks for the heads up that the dividends are treated differently than MMLPs.



      http://www.sjbrt.com/faqs.html

      I own my units in an IRA/tax-deferred account. Do I need to report this information on my tax return?

      No. You do not report trust income in an IRA or other tax-deferred account.

      http://www.allbusiness.com/personal-finance/individual-taxes/495307-1.html

      If an investor has a brokerage account in both a taxable account and a retirement account, he or she must decide which to use for the royalty trust. Generally, as long as the investment is intended to meet future retirement needs and retirement account contribution limits are of no concern, the royalty mast units should be placed in a retirement account to shelter the flow of current income. If, on the other hand, the investment is intended to meet short-term goals (particularly the need for immediate retirement income), trust units should be held in a taxable account.

    • Don't know what this talk about one grand is about. Maybe the other poster was thinking about ubti in retirement accounts, but that is relevant for MLPs not for trusts like SJT.

      Oh Oh. If you just download trade information from your brokerage, your taxes will be incorrect in the case of MLPs and royalty trusts. For MLPs the brokerage download is definitely wrong and you should use the K-1 instead.
      For royalty trusts like SJT, the borkerages may or may not report the royalty income correctly. More often than not, I have found they get it wrong. But even if they report the income correctly, if you just download the brokerage trades you will miss out on the depletion allowance which would reduce your taxes.

      If you are going to hold trusts and especially MLPs you need to spend some time learning about the tax handling.
      I use Turbotax and it handles them fine, but you need to spend some time the first year learning how to use it for MLPs and trusts.

    • How hard is it to do the extra paperwork if you use turbotax or the like if you exceed the 1 grand? Do they do this automatically for you? Last year I didn't exceed the 1 g limit as I was vested in MMLP until I sold at 32. I used the auto download feature in turbotax from schwab and it did all the work for me... but that wasn't over a grand total.

    • Thank you for the thoughtful response Lisa. I'm learning all the time and it's posters like you that help the most. One can only research so much online before getting some actual information off of people that have been in the game for a while.

      I agree that the current price poses significant risk in SJT, and I would love an entry point at 22... that being said, I did put a 25% investment at current levels in case they do continue to rise due to the gulf coast oil disaster that could have unpredictable affects on NG prices. We currently have a significant amount of NG that comes from the Gulf and even though we are adding Shale resources, they won't be completed for years... they are just starting to come online. That could create a short term price spike alone with any other natural disaster that could see NG in the double digets short term. The laws concerning deep water drilling will certainly be changed and the price to reclaim NG in the gulf will go up. Also if oil prices spike then we can expect drillers to focus on the more profitable resource driving up NG prices as well. I see a short term drop, but overall gain in price by year end... but that's just an IT guy who does this as a hobby speaking.

    • some more snippets from that article:


      ________________________

      Internationally, there is a greater potential for shifting
      between oil and natural gas than in the United
      States. In addition, many European and Asian natural
      gas price contracts are tied to oil prices, and as a
      result world natural gas prices tend to move with oil
      prices. A stronger price linkage in the United States
      could occur with the development of new markets,
      such as GTL production, natural gas vehicles, or LNG
      exports.

      ____________________

      U.S. net imports of natural gas decline in the Reference
      case from 13 percent of total supply in 2008 to 6
      percent in 2035. The reduction consists primarily of
      lower imports from Canada and higher exports to
      Mexico, as a result of demand growth in both countries
      that outpaces the growth in their production, as
      well as increased U.S. production.

      __________________

      Domestic production keeps
      U.S. natural gas prices low relative to world LNG
      prices, which remain tied to oil prices in many foreign
      markets. Actual import volumes are likely to vary
      notably around the trend line.
      High LNG supply case illustrates
      uncertainty in future import levels
      Figure 78. Cumulative difference from Reference
      case natural gas supply and consumption in the
      High LNG Supply case, 2008-2035 (trillion cubic feet)
      U.S. imports of LNG depend on world liquefaction
      capacity, world demand for LNG, and U.S. natural
      gas prices. When there is excess natural gas supply in
      world markets (for example, during years with
      warmer weather than normal), more LNG becomes
      available for U.S. imports. The AEO2010 High LNG
      case assumes the availability of more LNG imports to
      North America than in the Reference case—up to
      5 times more in 2035 and cumulatively 2.9 times more
      from 2009 to 2035, or a total of 70 trillion cubic feet.
      The increase in LNG imports results in lower wellhead
      prices, with annual wellhead prices lower in the
      High LNG case than in the Reference case by 7 to 18
      percent ($0.55 to $1.42 per thousand cubic feet)
      during the period from 2020 to 2035. A major impact
      of the increase in LNG imports in the High LNG case
      is on the timing of the Alaska pipeline, which is
      opened in 2023 in the Reference case but delayed
      until 2033 in the High LNG case. In the lower 48
      States, a major impact of increased LNG imports is
      reduced production of onshore natural gas and an
      even larger percentage reduction in offshore production,
      because lower prices imply that fewer U.S.
      natural gas resources are economical to produce.
      Effects on U.S. natural gas consumption in the High
      LNG case are primarily in the price-responsive electricity
      generation sector, where natural gas competes
      with coal and renewables. The electricity generation
      sector accounts for 80 percent of the cumulative
      difference in consumption between the two cases

    • This is a fascinating article to me about the projected future of NG. I included some snippets from the long article.

      http://www.eia.doe.gov/oiaf/aeo/pdf/trend_4.pdf

      Still, increased use of
      natural gas as a substitute for petroleum in some
      transportation uses and/or as a GTL feedstock could
      increase natural gas prices and narrow the ratio.
      ______________

      The downward pressure
      placed on natural gas prices by more rapid technology
      improvement is, however, offset somewhat by higher
      levels of consumption.

      _________________

      In the Slow Technology case, slower declines in exploration
      and development costs lead to higher natural
      gas prices and lower levels of consumption than
      in the Reference case (Figure 71). In both the Slow
      and Rapid Technology cases, as in the Reference case,
      completion of the Alaska pipeline (in 2020 and 2027 in
      the Slow Technology and Rapid Technology cases,
      respectively) results in a temporary decline in natural
      gas prices.
      ___________________

      Oil prices have small but measurable impacts on domestic
      natural gas production and prices, causing
      them to increase in the High Oil Price case and
      decrease in the Low Oil Price case. Higher or lower oil
      prices lead to higher or lower levels of drilling activity,
      which affect the costs of labor and key commodities,
      such as steel, that factor into production costs for
      both industries. As a result, domestic natural gas
      prices rise and fall with oil prices (Figure 72). The
      changes are offset in part by increased production of
      liquids associated with natural gas production when
      oil prices are higher, as well as the increase in recovery
      of associated gas that comes with increased oil
      production.

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