Read an LEARN the FACTS!
Here is what FASB #5 means.
"This Statement establishes standards of financial accounting and reporting for loss contingencies. It requires accrual by a charge to income (and disclosure) for an estimated loss from a loss contingency if two conditions are met: (a) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements, and (b) the amount of loss can be reasonably estimated."
Therefore with cap-ex to an O&G trust... (1) is not an impairment of assets and (2) no liability is incurred by cap-ex costs and (3) If cap-ex costs were $1 Billion dollars, TELOZ would not incur any LOSS as a result! Cap-ex REDUCES future income and may offset income completely, but would not produce a loss for a TRUST.
Thus, this scenario with TELOZ doesn't meet ANY of the SEC reporting requirements in which you CLAIM to be an EXPERT. Goes to show you "a little knowledge can be a dangerous thing!"
If you follow the message string, way back in this string I did scrap my estimate for the dividend since we came to the conclusion that the Trust would most likely have to fund the escrow account in advance of the actual expenditures which is what most of this discussion has been about.
If you want an idea as to how the capex costs will impact the distribution, look at 4q 2003, and the first three quarters of 2004.
I would expect something similar here. Your guess for a distribution this quarter is as good as mine. I would err on the side that there won't be one. Regardless of wether there is or not though, I believe the price will react pretty violently with weight to the downside. Of course that is just my opinion.
I am going to wait to buy for a couple of quarters and if oil is still above $100 per barrel then load up. If the price goes sub $10 perhaps in the 5-8 range then I will buy at any time.
"It doesn't factor in oil price. "
Without considering the price of oil it is meaningless speculation.
" ....and deprive us from distribution."
Yah, I'm sure that a concern of Chevron - regardless if you've invested in Teloz for distribution boy did you pick the wrong investment.
Reserve estimates are about how how much oil/gas you can expect to extract given current production techniques.
It doesn't factor in oil price.
Based on oil price you may decide to continue or abort operation.
High price oil price may make you invest to increase output/extraction level or drill to go after smaller oil/gas packets.
In case of TELOZ they invest to improve EI 339 field and deprive us from distribution.
"I would expect they based their reserve estimates on monitoring of oil/gas flow from wells (pressure & volume)."
I think the overriding fact in establishing reserve ESTIMATES is the price of oil. (period) At $120/Barrel there are "X" estimated reserves. At $60/barrel there are significantly less reserves available. At $30/barrel there is no oil available ant the trust is kaput!
I got impression that the only distributions in question are for Q2. Because the timing of sec filing q2 distributions may be paid out before TELOZ will have to cover $14.7 Mil expense /whatever is proper name for this expense :))/. While q2 may be in question after that several (2-3-4??) distributions will go to Chevron :(.
TELOZ has ~48 mo reserve left and it was the case for at least 8 yrs. One important assumption in reserve estimates - what % of oil/gas is extractable and what part to remain in hard-to-access packets. As slower you pump the more you extract. Due to Katrina TELOZ wasn't pumping too much, so fields had chance to recover and redistribute underground pressure (may be I don't use right English terminology).
I would expect they based their reserve estimates on monitoring of oil/gas flow from wells (pressure & volume). From that they adjust initial estimates. With relatively few wells (measure points) compare with land based fields it give huge room for positive/negative errors.
Its very hard to determine. As you may know, they have had about three years of revenue left for about the last 5 years. I assume they keep finding more oil on the trust properties, so there is no way to tell just how long. I would never look or assume anything past guidance though.
No not at all. I do think NHY is. I like it when you take him on. I also post my trades. But I don't know as much as you or NHY. I just don't like the way NHY comes across on the chat board. I watch a lot of boards and he is a guy that shows up after what ever big thing happend and claims to have capitalized on it better than you.