U.S. Oil & Gas Royalty Trusts' Performance Has Leverage to Natural Gas, But Demand Will Take Time to Build: Senior Analyst Ethan Bellamy Discusses His Outlook on the Space with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - July 7, 2014 - The Wall Street Transcript has just published its Oil & Gas Review 2014 Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Oil & Gas Review 2014

Companies include: SandRidge Energy, Inc. (SD), Chesapeake Energy Corporation (CHK), Breitburn Energy Partners LP (BBEP) and many more.

In the following excerpt from the Oil & Gas Review 2014 Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Is there any kind of investor who you'd say these would be most appropriate or suitable for?

Mr. Bellamy: An investor who is risk-tolerant, who is nimble and who has an understanding of the energy sector. I would definitely discourage someone who is looking for fixed income or has a significant risk aversion from owning most of these trusts.

Now, when you throw a blanket statement over a group like that, certainly there will be some outliers. I mentioned earlier a couple of trusts that we like, but even those are going to have above-average commodity-price sensitivity, so I would say younger, more aggressive investors with higher risk tolerance are better suited for trust positions.

TWST: Do you think we'll see any new offerings of royalty trusts this year?

Mr. Bellamy: I only know of one, and I can't discuss it. I get most of the phone calls by virtue of having covered a lot of these in the past; we only cover three now, but we have covered quite a few of the ones that have come out.

Again, performance of late has been an impediment. However, there is a lot of leverage in trust securities performance to natural gas. Futures suggest that natural gas prices will rise, although I still would dissuade investors from betting big on a price rebound above, say, $5 for natural gas. We are awash in natural gas, and demand will take a long time to build.

That said, the further away we get from 2012, trusts have been on average performing better in 2013. To the extent that natural gas prices come back, that could - down the road in the back half of this year or maybe in 2014, with the potential for trust valuations to be higher like they were in the first half of 2012 - encourage some asset owners in oil and gas to consider...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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