Sounds like you have it right. I admit to not being involved in 1980 and I guess I misunderstood what was implied by the name Southland "royalty". Either way, the proceeds of the IPO setting up the trust, ended up in the treasury of BROG.
Thanks for the input.
This is offered only a point of clarification. The confusion is over "Southland," which was in fact the name of the operating company (actually Southland Royalty Co.), not the trust. My reading of the trust documents indicates that the trust was always the "San Juan Basin Royalty Trust." See snippets from the 2000 10K-405 (annual report).
The San Juan Basin Royalty Trust (the "Trust") is an express trust created under the laws of the state of Texas by the "San Juan Basin Royalty Trust Indenture" (the "Trust Indenture") entered into on November 3, 1980, between Southland Royalty Company ("Southland Royalty") and The Fort Worth National Bank, a banking association organized under the laws of the United States, as Trustee. The Trustee is now Bank One, Texas, N.A.
On October 23, 1980, the stockholders of Southland Royalty approved and authorized that company's conveyance of a net overriding royalty interest (equivalent to a net profits interest) to the Trust for the benefit of the stockholders of Southland Royalty
In 1985, Southland Royalty became a wholly-owned subsidiary of Burlington Northern Inc. ("BNI"). In 1988, BNI transferred its natural resource operations to Burlington Resources Inc. ("BRI") as a result of which Southland Royalty became a wholly-owned indirect subsidiary of BRI. As a result of these transactions, El Paso Natural Gas Company ("El Paso"), Meridian Oil, Inc. ("MOI") and Meridian Oil Trading Inc. ("MOTI") also became indirect subsidiaries of BRI. Effective January 1, 1996, Southland Royalty, a wholly-owned subsidiary of MOI, was merged with and into MOI, by which action the separate corporate existence of Southland Royalty ceased and MOI survived and succeeded to the ownership of all of the assets, has the rights, powers and privileges and assumed all of the liabilities and obligations of Southland Royalty. Subsequent to the merger, MOI changed its name to Burlington Resources Oil & Gas Company ("BROG").
You may be right, but I do believe and have always believed that Southland Trust was a royalty trust established by Meridian Oil, now part of BROG. There is a brief history of all of this in the 10K if anyone wants to try to follow all the convolutions. One thing for sure, Southland became part of BROG and therefor could not continue as the trustee of the fields in question. The trusstee must by law be independant of the operator. Who ever recieved the proceeds from the IPO (Southland) is now part of BROG. That is why I simplified my statement to say that BROG recieved them. Maybe someone on the board has been with this trust since the 80's and can give us better info. Southland as a trust, could not have recieved the IPO. I read something on Permian Basin operations within the last 6 or so months. I will try to remember what it was and get back to it.
Thanks for the input.
By the way, the payout this month is a little less than I thought, but not too bad. Comes out to around 13% I think.
Interesting post, Nomowk. However, I believe you are incorrect when you state that Burlington received the funds from the IPO of San Juan Basin Royalty.Actually, Southland Royalty received those funds. At that time, Southland I believe was the operator. Burlington was the O&G subsidiary of Burlington Northern (RR), and had nothing to do with SJT.
Over time, there have been several changes of operator. An interesting sidelight is that I believe Burlington is also the operator of the leases underlying the Permian Basin Trust, which was also spun out from Southland at about the same time as SJT. Burlington thought highly enough of those reserves to make a tender offer for a large number of units several years ago.
Good points made on the 'wasting asset' question. It has been educational for everybody to stop and think about what we're really invested in.
I think it's really important for new or potential investors to be aware if they buy these units they're not buying an exploration company, but securitized shares of a finite resource. The 'wasting asset' debate may be academic to us, but to the uninitiated, it's very important they don't leap into this as if it's a growth stock.
That said, I discovered this gem back when it was 5.5 bucks, got a little but it seemed too good to be true. Dutifully diversified into lots of value and growth stocks, many of which promptly died. I've crawled back to even, but wish I had put every dime in SJT.
Sorry wbelmer, but my days are just as limited as yours, maybe less. Decipher my handle and you will figure it out. My argument if you wish to call it that, was theoretical only. I imagine SJT will pay distributions long after we are both beyond caring. I take it in the lite that was intended, good humor. I try not to get too upset on these discussions. I stay away from the boards that are nothing but juvinile ravings.
Good fortune and of coarse, good health, so as to collect as many distributions as possible.
I got it. You are absolutly correct. My use of the term was with a slightly different definition. Economic reserve is indeed quite different than true volumn of commodity in the ground. Price does control how much can be economically recovered. You may be "just a production guy" but that puts you in a better position of authority than I, as I do not nor did I ever work in the industry. Good fortune to you and I will try harder to define terms.
Well, I got in this same arguement with the DOE, once. After my submission of significant 3rd party opinions, they finally understood how reserves are added.
Reserves, by the SEC definition, are "economic" reserves.
We are just having a conflict of definition, because I believe you are talking about the oil/gas in place.
The recovery factor is dependent on commodity costs. If gas was worth nothing, the SEC would say there were no gas reserves.
I'm just a production guy, so I could have some misunderstanding here too, but the above is the way I understand it.
At some point in the life of any field the production levels will begin to fall, regardless of applications of all the technical aids to improve them. This is a fact of life with the exception as you noted when pressure is applied via water. Coal gas is also finite and as you point out, the actual amount and extraction methods were not totally appreciated in the past.
You make a very good presentation of technical facts and I appreciate your additional input. I think all of this is retorical but quite interesting. I also have read too many posts from those who do not understand the nature of royalty trusts and how they work in theory.
Any field will have some ups and downs in production, but they are minor perturbations to a curve that will rise quickly with a longer falling tail to zero. This is the nature of the beast.
Good luck to you, and keep up the thoughtful input.
You are pointing out the technical points I tried to lump together when I said the life is the equation of total reserve in the ground/pump rate/ price and a couple of other lesser factors. You can not "add" reserves. You can add to the "life" of those reserves by a varity of technical applications to the extraction. You are right about Southland but BR is the operator and received the funds from the IPO. When an operator sets up the trust, they are in fact, selling future profits for discounted money.
May we find all this only interesting discourse and the trust live for the next 20-30 years. Good luck to you.