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To: wlheatmoon who wrote (12796)	8/22/2000 3:23:11 PM
From: Ken98	Read Replies (1) \| Respond to of 436258

Most of these trusts were created in the 80's by oil companies to monetize an illiquid asset - an oil/gas field. They are really net profits interests - the holders of the trust units (traded like shares on the exchanges) have the right to receive the "net profits" from the sale of oil and gas from a particular field(s). But the operator of the field (typically the seller of net profits interest, ie. the trust)gets to deduct all expenses of producing the oil. These expenses can be not only the cost of bringing the oil/gas to the surface from an existing well, but also the cost of drilling a new well in the field. Thus, (hypothetically) if it costs $10 to produce a barrell of oil and it is selling for $15, the $5 profit goes to the unit-holders of the trust. If oil is selling for $10 or less, the unit holders get zilch. The reason that attracted me to these units is that they are highly leveraged way to profit from the rise in the price of oil/gas without a lot of the problems of the drilling sector. The other important thing to note is that no 2 trusts are created alike. To understand any of the trusts you have to wade through a ton of VERY obtuse legal documents and have a basic understanding of oil/gas law and a few production/depletion concepts. For example, a lot of people might get burned on BPT: finance.yahoo.com The 25% yield looks attractive, but if you look at the actual trust documents, there is a fixed number for deductible expenses and that fixed number is very large and automatically escalates in the later years of the trust in which we are now in. Also be sure to check (1) the reserves available to the trust; (2) the termination mechanism for the trust; (3) how expenses are calculated and deducted. They are listed in every trust's 10K by an independent OG firm. Good luck, Ken