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Sabine Royalty Trust Message Board

  • bigdogsefx bigdogsefx Apr 2, 2001 2:47 AM Flag

    Do any have experience with ERF?

    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.

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    • 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.

    • PE is 9.1 but even better is the ROE of 458 and ROA of 424. They also have a buy/bullish rating since 01/2000. THe PE is low end of 10 year history.

    • When are the wells going to run dry? I owned one of these things and it had a date when the wells were to end. I'm not sure if I understand SBR yet...

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