It's indicated 22% distribution yield, payed monthly, is quite compelling. There is no board for this issue, as of yet. So, I know how we 'love' monthly income issues, anyone have any caveats? JUst came to NYSE last November.
Hmmm, the 10k said the payments are simple dividends, but I bet you are right about depletion write offs. That is how Torch Energy (TRU) was mostly tax free. They had some certain kind of gas mining/drilling that had tax credits, and also the depletion write off. Damn, I hated doing taxes that year. Even with the examples they gave, it was hard to follow. I can not imagine most people getting it right - even my father had a mistake that I caught.
SBR dividends are totally tax free if you write off depletion etc on Sch. 13 using SBR's tax information guide. So its great for taxable accounts.
I have alot in my taxable account but since the yield is so good I'm also considering it for IRA accounts. Why not?
BuyLowSellHigh, your mentioning about another trust where the dividends were mostly tax deductible has me wondering if I made a wrong move. I recently bought some shares of SBR for my Roth IRA account. As best as I can figure from reading the annual financial report, SBR's dividends are mostly taxable. If there is a tax-deductible part, it involves having to fill out some complicated tax forms to find it. Within the Roth IRA, I don't need to worry about any tax consequences, but I don't gain any advantage if the dividends are non-taxable to begin with. Would I have been better off to have bought SBR for my taxable account rather than my Roth IRA account?
With OPEC being so unified the past few years, I don't see oil coming down to where it was a few years ago, unless OPEC falls apart.
PS: I used to own Torch Energy, which paid I think a 20% dividend, much of which was deductable (horrid tax forms). I think they are still around...yes, TRU is the symbol with a 7.89 P/E. $1.15 dividend on a $9 investment. I thought their reserves ran out in just a few years though.
Yes, information on trust expiration can also be found in the 10K. It expires when royalty income falls below specified levels.
Note, those reserve estimate include a factor for cost of recovery and economic viability. So if oil prices fall to a point where recovering the oil is no longer profitable, the reserve estimates will be revised downward.
Oil pricing is a very major factor in the future of SBR--and how long it will continue to operate profitably.
Thanks. Looks like they have about 5.5 million barrels of oil, but are selling about 600k barrels per year? So perhaps 10 years left?
I did not do the math for gas, nor did I check yet whether the trust has more gas or more oil.
If my numbers are right, and if oil prices remain this high, then SBR seems like a good investment. After about 3-4 years, an investor would have their money back, and the last 6 years would be all profit.
What happens - does the trust end when they run out of oil and gas?
Read the reserves statement in the 10K. Everybody says those numbers are expert guesses at best, but they give you an idea. I wouldn't worry about it for now. When prices are high, they will find a way to keep getting it out of the ground. Things change when prices are low.