This is some notes on Mosh from someone who has done a lot of research on it and is a participant in the mosh lawsuit as am I. I am not guaranteeing the accuracy of this information so do your own research and due dilligence. This also in no way constitutes a recommendation to purchase units in Mosh. I am providing this for informational purposes only.
The speculation that monthly royalty payments may resume as soon as next month, may probably be a bit too optimistic. Also, payments if, any are quarterly not monthly (need to read the SEC 10Qs and 10K).
In the beginning the Trust had 10 GOM (Gulf of Mexico) leases purchased at auction from the Department of the Interior by Mesa Petroleum and placed into MOSH when the Trust was formed and distributed to Mesa's shareholders 25 years ago. Over the years, as the hydrocarbons (oil and gas) was pumped, the wells depleted, the leases were abandoned and plugged, with the depleted lease holds returned to the DoI - thus the Trust is unable to go back and work those leaseholds again - they are gone. The Trust is now down to, I believe - 2 GOM lease tracks - West Delta 61 (off of New Orleans) and Brazos A39 (off of Houston). Read the 10K or a 10Q as this is all explained.
The way the Trust was formed, there is no way to add properties, so when the current properties are depleted, and returned to the DOI, then the Trust terminates (or when certain income levels are not met over a specific time period). A US Royalty Trust operates differently from a Canadian Royalty Trust. (just an aside)
The Trust only holds a 50% interest in BA39, with PXD holding the other 50% (PXD purchased this from the original bidder some years ago - reference Boone Pickens' book). BA39 currently has 1 well currently - the #5 referred to as the "Midway", which is the primary basis of the lawsuit. The WD61 wells (4 of them) were shut in from Katrina, as their sea bed collection systems were damaged. Rumors have it, that these wells are finally coming back on line. However, last September (please go back and read the last 12 to 15 monthly 8Ks from the Trustee) a $1.4M abandonment and plugging charge was presented by PXD to the Trust. I would think that PXD will probably take what ever current income from WD61 production against the A&P charge until the balance is paid off. So there will be some wait until the A&P charge is paid before any royalties to unit holders (remembering the Trust's legal expenses). Prior to Katrina, the WD61 property was producing an income of about (again, if I remember correctly) $200K per month (again go back to about 2003's 10K and 10Qs and check the income, as it is broken out and identified).
The trust also has an over riding royalty (ORR) (a royalty on the profits with out paying any production costs) on an adjacent lease that Norsk Hydro (Hydro GOM LLC) drilled earlier this year (called the "Nimitz"). Little is known about the well, as no news has been released by Hydro. If it is commercially viable and Hydro goes into production, it appears that the Trust will probably obtain some income, when that will occur or how much it might be, is unknown.
I would encourage everyone to actually read the lawsuit and the rest of the information that is available and understand what it is about. Initially the Trust had a Working Interest (WI) in the lease hold at something like 36% (I think). A 36% WI gives you 36% of the wells profits and 36% of its production costs. When the well was drilled, PXD (as Managing General Partner for the Trust) traded the Trust's WI for I think a 5% ORR, since the Trust did not have funds to cover its cost of the well, and PXD would not front the costs for the Trust. PXD took on a partner, Woodside and how the Trust's WI was turned in to an ORR is in dispute. The lawsuit contends that it was not a true third party - arm's length transaction by PXD - again read the lawsuit for the details and come to your own conclusions.
The $1.2B figure is from the lawsuit. There has been no decision as of yet, so the amount - if any is wild speculation. The recent settlement with JPMorgan is over "standing" i.e., if the MOSH unit holders can sue PXD and Woodside. With the potential appointment of a new Trustee, who will then decided what to do, will bring clarity to the situation. If the new Trustee decides to continue with the lawsuit, (then the standing issues is resolved and goes away) thus its up to either a jury trial or out of court settlement to determine what happens to the lawsuit. If a trial and the Trust wins - what the damages actually are, and how much additional damages will be, if any, will be determined by a Jury. If the Trust wins, and if PXD wishes to appeal, then they will need to post a 2x bond in cash, and the case drags out. (Read about the Texaco, Getty Oil and Penzoil case that was in the Texas courts and how it turned out.)
If both sides agree to settle, then its what the lawyers work out, with the Judge's approval. Again, go back and read, as settlements take time and if they occur will probably not be instantaneous.
Suggestion #1 - do a Google search on "Woodside" and "Midway".
Suggestion #2 - go to Woodsides' website and use their search box to do a search on "Midway" and then do another search on "Brazos" or "Brazos A39". Do some reading.
There are probably 12 law firms involved across the case. The defendants, PXD and Woodside have some the biggest law firm names representing them - whose job is to ensure that the Trust gets not a single penny. The plaintiffs also have great lawyers whose job is to extract every last penny they can out of PXD and Woodside. So far as I read the situation - they have been doing a VERY good job.
The Trust has been paying JPMorgan for management by the Trustee and the costs incurred (i.e., JPM's legal bills). As of now the Trust is broke (see the last 10Q). As part of the settlement, the JPM loaned $3M to the Trust against the Trust's properties, for operating capital, some of which went to pay JPM's legal bills. In reading the 10K and 10Q, the Trustee has indicated that the Trust is in termination. The only thing stopping termination is the lawsuit. Again read the SEC 10Qs and 10K, just NOT the new releases which leave many of the details out.
The Trust has no employees, officers, no president, CEO, Board of Directors, just a Trustee (1 person).
I would suggest to everyone to continue to read the court documents along with the SEC filings and continue to dig in doing your due diligence.
I am not a lawyer, not making a recommendation, or anything else, just passing along some information as I understand it (which I hope is correct - but no guarantees - as I am getting on in years and .....) Yes, I hold a position in MOSH and am not selling. I have also done a TON of reading and searching for information. And of course - this all has been just my opinion. Good Luck. |
