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Whiting USA Trust I Whiting USA Message Board

  • peristentone peristentone Dec 28, 2012 5:34 AM Flag

    WHX Likely Distributions Going Forward

    What would others estimate the WHX distributions to be for the next 10 quarters, at some specific commodity prices? Liza I had estimated back in October that the next two distributions might be at .7 but would then likely fall to .6 starting in May/June 2013. 51 cents in November would be a big surprise to that estimate.

    I didn't read the November releases. Was their an explanation for the 51 cents and was there anything anomolous in that distribution?

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    • Their expenses have been increasing each quarter. They also are going to lose about 10 cents of the dividend going forward from hedges they had on that were in the money (the hedges expired at the end of 2012, so they were a factor in the feb div, but won't be in any divs going forward - they were responsible for .10 of the feb div). The next div will probably be less than .50. The price of this stock is basically 100% too high. When the next div is announced and it's significantly lower, people may finally realize that if they own this stock they're gong to lose half their money.

      Sentiment: Strong Sell

      • 1 Reply to jackfoley71
      • emencee Mar 11, 2013 1:17 PM Flag

        Actually the rough calculations couldnt be simpler. The company disclosures state about 1.8M BoE left before the trust expires. Their costs run about 50% of revenues. They have been realizing a blended price of $54. The blended price is really price of oil * barrels + price of NG * Mcf divided by BoE produced. If we assume that the mix of oil/gas will stay the same (~62% oil/gas), its easy to calculate the value because as many ppl have said before, with this trust all you have bought is barrels of oil/gas in the ground.

        So if we value the remaining BoE left at current prices (~$54 blended price), the value of the trust is around $3.5. Or in other words, the BoE will have to rise to $85 or 57% before the trust pays back the market price ($6.3)

        And this is optimistic. The costs could rise depressing margins. The oil/gas blend could worsen. Interest rates could rise (0% discount rate applied in my calc).

        However, because of the low float the price is easily moved and short covering/option activity pushes the price around very easily.

        By the same methodology, WHX's cousin: WHZ can be seen as slighly undervalued. One of the big differences is that the expiration date for WHZ is the LATTER of min production (11.7M total BoE product) or Dec. 31, 2021.

        Sentiment: Hold

    • Last quarter, there was roughtly .3 MBOE produced. At that rate of ouptut, there are only 8 distributions left. Let's clarify that point first. Secondly, the NG hedges are now expired. This will not impact the upcoming distribution, but will impact every one after that. This is what I expect from WHX until it goes to 0. This assumes production stays at the current levels and gas prices appreciate by 10% in the next 2 years.

      2/13 - $.53
      5/13 - $.45
      8/13 - $.46
      11/13 - $.47
      2/14 - $.47
      5/14 - $.47
      8/14 - $.48
      11/14 - $.50

      Total distributions left in stock - $3.83/share

    • The hedges actually cost us money both in oil revenues and the cost of the collars themselves. I have been loading up from 4.75 to 4.50. We are on the bottom. Normal spikes and the return of China's normalcy needs will show us 7.35 in the next 12 distributions. If Iran, N. Korea, or Syria does something stupid, we could get something well North of that. Also, the fools will come in at some point and see a 40% yield spiking WHX. I think it's a great opportunity in here with very little exposure.

      Sentiment: Strong Buy

      • 1 Reply to lwsritz
      • Not correct.
        The oil hedges were a wide collar and the price was pretty much always within the bounds. Thus the oil hedges didn't do anything.
        The NG hedges on the other hand were beneficial for most of the life of the trust (distributions would have been lower without the hedges).
        So removal of the hedges means lower distributions unless NG goes up very soon.

    • Total distributions will probably be less than the current share price and definitely not sufficient to provide a good investment return between now and the termination of the trust.

      You will probably see an increase next quarter as I believe the hedges on Nat Gas jump from $6 to $7 for the quarter ending Dec '12. Hedges added 8 to 9 cents a share last distribution. 51 cents could become 42-43 cents after the hedges are gone. At current production levels, the trust will not last as long as many seem to believe.

      • 2 Replies to fishonn
      • The calculation is very simple. You divide what is sold, minus expenses, by the number of units. So as the production is depleted by the normal predicted amount, there is less money to be divided. You keep track of the production from the “K” reports. You can track of the depletion most likely caused by a loss of pressure. The oil, NG or NGL prices do not increase fast enough to cover the depletion. Normal expected end of life to a US Royal Trust. WHX will not end off, it is that the sales will not cover the distribution, so the Trust will terminate as per the bylaws.

      • What is the math to get to a 42 cent distribution? That is based on what specific commodity prices?

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