Mathematically, ROYT will always receive 7.5% overriding royalty from the "Remaining Properties" no matter what happens to the Remaining Properties. In theory, if PCEC's development and capital costs are all paid off (not going to occur for at least 5 years anyway), then ROYT holders may receive 20% royalties from the "Remaining Properties." For now, the "Remaining Properties" only contribute to a tiny fraction of royalty income to ROYT, because it is the Developed Properties that is contributing to the most of the income for ROYT. By the way, that tiny 7.5% royalties are still there regardless of steam injection ban.
Furthermore, because PCEC is required to pay the 7.5% overriding royalty in any case, ROYT holders will receive 13% annualized royalties for 15+ years to come. To top it off, there is a good chance that steam injection ban is not upheld in the court system. This is a buying opportunity, IMO.
I love these scares, great buying op coming in the days ahead.
New Law puts a damper in expansion plans but doesn't stop steaming existing wells.
Good thing all ROYT wells ain't in Santa Barbara County. lol
Many are. PCEC get 3,300+ boe from SB county and were planning on additional wells being drilled. Steam is the method used by PSEC. I am not sure about biotech's take on the situation as if they can't drill no one get's paid. In any case this will no doubt end up in the courts. It is possible that county will accept steaming for existing wells-grandfathered in-but, not for any new ones. Unfortunately without the steam or water process the drilling becomes unprofitable.
This should not come as a surprise to posters on this board as Joewheller and I posted about this problem a week ago. I guess nobody believed us as we received a lot of thumbs down votes.
I guess it's the lost value of expansion properties that worry people. These environmentalist are killing the economy.... most probably don't know how to drive. I guess they don't know that all their product shipping requires oil, not to mention heat & air.
Welcome back Liza!
As usual, you are right. But the sponsor does have a management team, PCEC CEO is Randall Breitenbach and President is Halbert Washburn - these guys are the BBEP duo and some of the smartest managers in the upstream space. I think they are both even native Californians, so maybe they know how to navigate their way through the tree hugger's gauntlet.