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To: yard_man who wrote (91932)	4/9/2001 7:23:53 PM
From: Broken_Clock	Respond to of 436258

From what little I know: Say BR develops a find; They want to recoup some development cost; They put together a trust and sell shares based on the estimated yields which is a function of the known reserves.

To: yard_man who wrote (91932)	4/9/2001 9:00:28 PM
From: Ken98	Read Replies (2) \| Respond to of 436258

A royalty trust is essentially a way to monetize future profits from an oil/gas development(s). A royalty interest is a net proceeds interest (net of production expenses) in oil/gas production from a well, group of wells or a field such as the San Juan Basin (gas mainly), Hugoton Basin (gas mainly), Prudhoe Bay (oil). There are several publicly traded royalty trusts - these are royalty interests which are carved up into "units" (not shares) that are publicly traded. The owners of the oil/gas interest sold the "future" profits to obtain $$ for working capital, repay debt, whatever. The advantage to investing in these "units" is that it is a highly leveraged way to play increases in the price of oil or gas - every $$ increase over and above the production cost goes straight to the royalty interest holders. If, however, the cost of production exceeds the cost received for the oil/gas the royalty interest holders get zilch. The disadvantage to investing in these "units" is that you need to do a good bit of due diligence into (1) the terms of the trust documents, and (2) the capacity of the oil/gas field involved. (The trust documents are enough even to make a grown lawyer cry). Watch out for the methods of terminating the trust early and pre-determined expenses (BPT is bad one about this) and expenses for future capital items (LRT). These are self-liquidating investments generally unless ongoing development is taking place in the field covered by the royalty interest. So even though the yields look yummy, remember they might not last forever. All that being said, a couple I follow have been yummy indeed: finance.yahoo.com The yield on LRT is misstated, it is actually 24% Hope this helps, Ken