LL&E Royalty Trust (fka LRTR)

[mrholty]

I hope you are wildly successful.
If you do - let me know so I can say I know a guy who owns O&G offshore. Sounds a lot better than the stripper wells my Grandfathers friends had back in the day.

[LLnEorBust]

One of the benefits of paying a fortune to Enverus in my professional life is they will run down whatever I ask them to. I have them researching and pulling historical / current production from those platforms, along with current operator data. If there's some value there, I'll find out--my guess is if they're onstream but not in pay, Conoco or its successor-in-interest is playing the same abandonment cost game. I might show up at the auction :)

[mrholty]

Sorry if I wasn't clearer. The announced auction (with about 50 days notice from date of letter) - less than 45 days from when I received letter is for the non-Jay field assets.

The auction appears to be primarily for the assets of the South Pass 89 assets and I assume the Offshore Lousiana assets (which are made of up South Marsh Island 76, Eugene Island 261, Vermillion 331 and East Cameron 336 and 195. The South Pass 89 was 25% owned by LL&E. Back in 2015-16 these rigs were all back online less 1. Assume that $400k for all of this are substaintially undervalued.

That said, I've reached out to get an accounting/history of the lawsuits becuase I am shocked by the language that that assets will not cover legal fee/recovery. No response yet.

[LLnEorBust]

Most of the fees are earned in pre-trial discovery and motion practice. Other costs are added on top of whatever the contingency would be--in this case they had a forensic accountant and a reserve engineer do very extensive reviews.

But, I don't know if this would have been a contingency case. It was financially complex, and Maverick had a number of viable affirmative defenses, including in Bankruptcy Court (where the case remained open, because Maverick also had a viable path to rejecting the claim, depending on the outcome of certain TX law questions the state court never resolved). Kim isn't really a plaintiff's attorney, but rather specializes in complex oil & gas litigation, has won some high-profile cases. Moreover: the trust made a motion in limine (request that the judge bar attorneys and witnesses from discussing certain matters while the jury is seated) which included any discussion of Shrik Mehta's other businesses (specifically his diamond business) and 'any discussion of how the litigation is being financed.' Those formed part of the same request, so likely related. That, along with the fact that Kim doesn't seem like the usual contingency-minded plaintiff's lawyer, suggests to me that Shrik has been lending the Trust money to cover its legal costs. That was an authority he granted himself via proxy vote on an amendment to the Trust Agreement.

I just refuse to believe he willingly settled the case for an amount that lost the Trust money. Kim is good at building narratives for juries (check out the "Asian Colombo" video on his website) and I think the fact-pattern was very, very supportive of his position.

Ultimately, Mehta / Parsons are contractually obligated to provide unitholders financial statements showing the income and expenses of the Trust, and to do so in a timely manner. See: https://www.sec.gov/Archives/edgar/data/721765/000135448813003343/ltr_41.htm, as amended by Mehta himself in 2013. Section 4.04.

[Enterprising Investor]

Letter arrived yesterday. Holty had provided me a copy earlier.

No financial information was disclosed. It's hard to hide settlements in financial statements, especially if they are designed not to be made public.

I've seen some settlements result in recoveries equal to one-third of the claim.

If special litigation counsel was handling the case on a contingency fee basis, there are normally two fee rates. One rate, say 25%, depending if the case is settled before going to trial, and another rate, maybe 33%, if the case goes to trial. Rates vary.

I seen all sorts of sad outcomes for plaintiffs in wins. The law firms always get paid first.

In the Temecula Valley Bank case, a settlement was reached with FDIC on the first day of trial just before it started. The firm received the full fee. The bankruptcy judge said there was nothing they could do during the fee hearing.

[LLnEorBust]

They have an obligation (per the trust agreement, revised by a Mehta-initiated proxy when he took over) to report financials to holders of valid trust certificates. Did the letter disclose any numbers? This is really fishy. I suspect the settlement figure is in the $20-40mm range based on the (rational parts of) the damage models disclosed in various exhibits, and some commentary in other exhibits around historical settlement discussions. Quantum was simply making up the future capex numbers, they virtually admitted to it in one of their pleadings ("the Trust is inventing contract language where it doesn't exist! There's no requirement that the estimation of future costs be reasonable or prudent!"). It was decades of pure, unadulterated fraud initiated by the most sophisticated oil & gas investment firm on the planet, given a free pass by Conoco, one of the largest oil companies on the planet. You don't settle after two weeks of jury trial because you're expecting a good outcome. (The Trust wasn't in a perfect position either: they likely didn't want to risk a reversal-dismissal of a big verdict on appeal, having already lost the 'capacity' argument twice before the Court of Appeals but in a non-dispositive way relating to a TRO).

Many comments ago I warned about the possibility of CITG / Mehta simply claiming the litigation costs leaves no net proceeds left. That's bullshit, for a few reasons. First of all, they had a solid case on the factual merits of the fraudulent accounting, and would not have settled on the eve of a verdict after 9 years if they were going to lose money on it. This was a complex case and it's not clear to me whether John Kim was on contingency or fees. There was something like 80 GB of discovery and a number of experts to depose... but even so, the UBS presentation on Jay that surfaced (they tried selling the field in 2021) says Maverick was spending $200,000-$300,000 on the case. And they were definitely using a more expensive firm with a lot more attorneys involved. The action picked up before the trial, of course, but all-in I can't imagine it was more than ~$5 million for the Trust's legal costs, including experts and so on.

So I'd definitely want to see some support for their contention it was all for nothing. (Mr Holty, I'll shoot you an email).

[LLnEorBust]

They have an obligation (per the trust agreement, revised by a Mehta-initiated proxy when he took over) to report financials to holders of valid trust certificates. Did the letter disclose any numbers? This is really fishy. I suspect the settlement figure is in the $20-40mm range based on the (rational parts of) the damage models disclosed in various exhibits, and some commentary in other exhibits around historical settlement discussions. Quantum was simply making up the future capex numbers, they virtually admitted to it in one of their pleadings ("the Trust is inventing contract language where it doesn't exist! There's no requirement that the estimation of future costs be reasonable or prudent!"). It was decades of pure, unadulterated fraud initiated by the most sophisticated oil & gas investment firm on the planet, given a free pass by Conoco, one of the largest oil companies on the planet. You don't settle after two weeks of jury trial because you're expecting a good outcome. (The Trust wasn't in a perfect position either: they likely didn't want to risk a reversal-dismissal of a big verdict on appeal, having already lost the 'capacity' argument twice before the Court of Appeals but in a non-dispositive way relating to a TRO).

Many comments ago I warned about the possibility of CITG / Mehta simply claiming the litigation costs leaves no net proceeds left. That's bullshit, for a few reasons. First of all, they had a solid case on the factual merits of the fraudulent accounting, and would not have settled on the eve of a verdict after 9 years if they were going to lose money on it. This was a complex case and it's not clear to me whether John Kim was on contingency or fees. There was something like 80 GB of discovery and a number of experts to depose... but even so, the UBS presentation on Jay that surfaced (they tried selling the field in 2021) says Maverick was spending $200,000-$300,000 on the case. And they were definitely using a more expensive firm with a lot more attorneys involved. The action picked up before the trial, of course, but all-in I can't imagine it was more than ~$5 million for the Trust's legal costs, including experts and so on.

So I'd definitely want to see some support for their contention it was all for nothing. (Mr Holty, I'll shoot you an email).

[Enterprising Investor]

Although the Trust received funds from the settlement, the amount does not even cover the cost to litigate.

All remnant assets will be sold at auction on 12/17/24 for at least $400,000 as there is already a cash bidder. Additional bids will be in $25,000 increments.

[mrholty]

Did you get a mailing dated Oct 29th?
I just got it in the mail this week.

Any ody have any thoughts as it appears they are going to sell the entire assets to 1 person.

If you want to me with me - mrholty at hotmail dot com

[mrholty]

Did you get a mailing dated Oct 29th?
I just got it in the mail this week.

Any ody have any thoughts as it appears they are going to sell the entire assets to 1 person.

If you want to me with me - mrholty at hotmail dot com

[mrholty]

So I spent some time trying to get a hold of someone at CITG. A general email was returned as undeliverable but I was able to get an email to someone there but no response.

[mrholty]

Thanks. I agree with your assessment if its closed. Just wondering if you had come accross something else.
Thanks again.

[Enterprising Investor]

I haven’t spoken to anyone.

If the trust receives income, it will be reportable in year received.

And if trust assets are only cash and cash equivalents, the trust needs to be liquidated. The result may two payments. A large one for 2024, and a final, smaller payment next year.

[mrholty]

Its a good idea. I'll try to start on that later this week...

[mrholty]

EI-

Is that you belief due knowledge of taxes, etc or have you spoken to anyone involved that is working on it?

Thanks.

[Enterprising Investor]

It is highly likely that a distribution will be made by 12/31/24 for the tax year 2024.

[LLnEorBust]

I was but there is nothing in that document worth mentioning. All docs were signed and the Trust was paid by Breitburn / Maverick and Conoco. The lawyer was more careful this time and didn't call Conoco bhe taxy name, but it can only be them.

In what is likely the last public record on this matter which will ever to appear, on July 29, a nodescript, barebones, just-over-two-page Assignment and Bill of Sale was recorded at Book 4526, Page 843 of the Official Records of Santa Rosa County, Florida. All parties to the settlement (including Conoco) are parties to the instrument, which conveys the Jay Field ORRIs to Breitburn. No purchase price is given. Sadly, this was my last play to get to a settlement number--Florida generally requires the consideration for a property transfer to be recorded for collection of the 'doc stamp tax,' assessed on real property transfers. That wasn't done here, so I am officially out of ideas.

I say this in all seriousness: the next step is for a bona fide owner of Trust units to call CITG and ask to speak to Parsons or Mehta, indicate you're an owner of Trust units, and offer your enthusiastic congratulations for the successful decade-long legal campaign. You've been following it closely, you're thrilled to have finally, after all these years, gotten justice from those jerks at Maverick and Conoco. Oh, yes, you know about Conoco--it's in an SDNY transcript. Anyway, great show old chap. So, how, as trustee (if Parsons) or the unitholder driving the litigation (Mehta) would you like to go about making distributions to bona fide unitholders in the Trust? When can we expect an accounting? (There is going to be pushback on disclosure given the confidentiality, and if this actually works, they're gonna throw an NDA at you, but I think as bona fide unitholders you're entitled to make sure the Trustee hasn't been unreasonable in its allocation of pre-settlement expenses).

[mrholty]

Were you able to get the transcript that became eligible on June 20th? At this point there I have tried and been unable when I call. frustrating

[LLnEorBust]

Well, that's where it gets... tricky. It's a confidential settlement and neither party has disclosure requirements (LL&E's registration was revoked by the SEC 10 years ago). There's another transcript in SDNY unsealing at the end of June, but I doubt they'll say a number on the record. I do have one other potential source--don't want to say exactly what, in case someone's reading this, but it's a bit of a quirk unique to the asset owned by the Trust, and one the attorneys for both parties are likely unaware of. If it pans out, I'll post it here.

A trust has no capacity for self-governance, so you're correct in that the Trustee would be responsible for directing a distribution of the settlement proceeds, less legal fees. Roger Parsons is General Counsel of a private investment firm (CITG Capital Partners) headed by an individual (Bela Mehta) who owned, at the time of the Trust's last filing, a plurality of units, and initiated the proxy. Mehta is firmly in the driver's seat on the lawsuit. Since I last visited the CITG website a few years ago, it's been replaced by a single page with only a short description.

[mrholty]

Thank you for sharing the links to the lawsuits. I've just gotten into and it looks like I have some light reading primarily on the Harris County website. Thank you.

General update - joint MTD / nonsuit was just filed in TX, indicating terms have been finalized. It's really happening people (it took twice as long as they told the BK judge it would).

Very interesting. Wonder when we are going to get a look at the terms. so it would appear that there are still multiple hurdles.
1. Assume the trust (or does Robert Parson as Trustee of the trust) simply distribute the proceeds less legal fees or is there something else? I agree with you on somehow pooling shares.

[LLnEorBust]

Reiterating my standing offer to buy units. Since we have no idea what the settlement is I'd offer a cut of what I get... essentially, I want to accrue a large enough stake that my threat to sue Mehta if he tries any funky business to deny unitholders their cut. If I were him I'd bill the trust for the time my PE firm spent working this thing, over and above the lawyers' take.

[LLnEorBust]

One other important bit of info that isn't apparent from the state case, but was in a recently-released transcript from the bankruptcy case: we know Conoco Phillips (maybe you've heard of them) is making a cash payment to the Trust as part of the settlement. As managing general partner of the LL&E Partnership, it (allegedly) breached its obligations to the unitholders by not acting in good faith to purse these claims, and was therefore a third party defendent in the suit. They literally never made a response on the merits of any claim against them in the entire 9 year history of the case--just some motion practice on why they can't be sued.

I hadn't really considered the Conoco angle. I'm a skeptical pessimistic ass by nature, but... there's a slight chance this thing is a lot bigger than I'd estimated.

[LLnEorBust]

You're completely correct and per a transcript filed in SDNY Bankruptcy Court (where Breitburn remains an open case, because this lawsuit is an alleged prepetition claim), the settlement with Maverick (successor) + Conoco covers both the historical damages and future value. That is, the cash settlement covers the damages and includes a consideration for future value.

General update - joint MTD / nonsuit was just filed in TX, indicating terms have been finalized. It's really happening people (it took twice as long as they told the BK judge it would).

Great question on court docs. Two sources:
1. Lawsuit in TX court: Harris County Clerk - online, free account required, Case # 201547031.
2. Status conference transcripts from Breitburn Ch. 11 - the LL&E trust lawyers, Maverick's litigation lawyers, and Maverick's bankruptcy lawyers all show up and tell the BK judge what's going on. You can pay for access via PACER or get it with a little delay from Kroll, no account required and easier to navigate. https://cases.ra.kroll.com/breitburn/Home-DocketInfo

[mrholty]

Hey EI and others-

I was talking about some of my weird esoteric investments and thought of this one and did a search for the ticker since my shares still sit with 0 value in my account mocking me. I'm happy to read that there is some movement.

I have done no additional work on this and I'd like to say I'll do some over the weekend but it won't happen as I'm too busy coaching multiple soccer teams.

If I am thinking of this correctly, wouldn't/shouldn't there be 2 assets:
1. The NPV of correct amount the trust should have received from Maverik from 2007-forward plus interest
2. The value of this asset today of what it would sell for in the open market?

Also, for EI or LLnEorBust - how are viewing these filings. I follow some of the links and I get the judgement but I'd like to review the full records...

[LLnEorBust]

No, the only thing of value at LL&E is proceeds from the settlement. The last damage model from Saul Solomon (expert witness for the trust) was in the $95 million range, including future cash flow. My gut says Maverick settled for something in the $25-40 million range.

I'll say $8 million to John Kim / experts / costs of 8 years of litigation

Then Mehta is going to take a chunk for all the money he spent pursuing it as Trustee (remember, it's not the Trustee's responsibility to enforce the contract, it was Conoco's--so he has a right to charge LL&E for his costs). Call that another $5mm.

Still plenty left over given only a tiny fraction of unitowners--probably just us on this forum--even know they own units / follow the lawsuit / know it settled. It was delisted from the pink sheets a while ago, there's no disclosure requirement. But anyone who owned units still does.

[DSperz]

Thanks for the info. I look forward to seeing how this plays out, and would appreciate seeing more updates as more information becomes available.

[Enterprising Investor]

Proposed Agreed Order Refunding Defendant Roger D. Parsons, In His Capacity as Trustee (1/16/24)

The District Court will return $250,000 payable to Parson's Counsel, John H. Kim, The Kim Law Firm.

Source: Document 112261108

[samiam5]

Are you assume there will be much left from the settlement (after the lawsuit is paid for)? Or are you assuming that there is value somewhere else that would be distributed to the unit holders?

[LLnEorBust]

So to that point, we know Mehta has funded the lawsuit, and was provided a list of unitholders of record by BNY Mellon as part of the Trustee replacement... a very long time ago. The problem is, unitholders of record are the registered owner of a security, typically a broker/dealer acting on behalf of its clients; that's unless you registered your units yourself. So it's dated information, for (mostly) intermediaries. So it will be hard for them to track down current owners, and hard (because the stock certificates would have been held by the broker/dealer) for beneficial owners (ie, you) to prove that they are indeed owners. And I'm sure, as Trustee, Mehta will be taking a decent chunk of the settlement to cover the costs of the litigation, not to mention work done by his employees: email traffic in the court docs indicates employees of Mehta's PE fund spent years trying to gather NPI records from Quantum-Breitburn-Maverick.

That said: I will buy any verifiable LL&E Royalty Trust units that you, or anyone else, is willing to sell me.

[LLnEorBust]

No, a 'unit' is simply equity in any business entity not structured as a Corporation; that is, corporations have shares of stock, and partnerships / trusts have units. Royalty trusts and publicly-traded partnerships have units that can be traded on exchanges, file financials and other information with the SEC, and so on--in other words, very different from families or individuals placing assets into a trust. Those kinds of trusts, there won't be much in the public record beyond standard charter documents filed with the secretary of state's office. This isn't your trust.

[HCK_Trust]

What is a trust unit? I have been reaching out to so many businesses, banks, Louisiana Board of Trustees, NGOs, Politicians, all of it... trying to find out about a Trust I think my family is entitled to and has been hidden from us for years. I could be wrong, but I doubt it. ... so this trust unit.. could that be me>?

[Enterprising Investor]

Case was settled (12/15/23)

12/15/2023 HOLD FOR JUDGMENT
12/15/2023 CASE SETTLED/NONSUITED AFTER JURY SWORN

201547031
Hold For Judgment
QRE OPERATING LLC vs. PARSONS, ROGER D (IN HIS CAPACITY AS TRUSTEE
8/12/2015
133
Civil Other Contract

[stevenmoll]

Is there any point in hanging on to this or best to just write off? Any thoughts?

[LLnEorBust]

Trial is well into its third week. The most recent filings include summaries of LL&E's damage models under various scenarios, the high end of the range (which includes future cash flow) is now $96 million.

It's too bad Trust units can't be found anywhere, OTC or otherwise. There's a private equity fund out of Detroit backing the play, but I don't know how much of the Trust they actually picked up.

Interestingly, Maverick's attorneys have admitted to years of errors in the Trust proceeds calculation. Depending on how other items land, the impact could be large or small--but notably, Maverick has admitted for the first time that it should have paid LL&E after 2008.

September 13, 2023
RE: NPI Calculation Corrections
Dear Joe,
This letter provides the LL&E Royalty Partnership (“LL&E Partnership”) notice that Breitburn Operating, LP (“Breitburn”) has identified certain historical errors in the monthly NPI calculation:

1. Interest calculated by Breitburn’s predecessors related to the “Special Cost Escrow
Account” or “SCEA” under the Conveyance. Funds were first placed in the Wells Fargo
depository agency account in May 2014. Because there was no depository agency account
or escrow account before that date, Breitburn agrees that interest on the SCEA calculated
balance from September 2010 through May 2014 should be based on the Prime Rate
formula described in Article VIII(h) (instead of T-Bill rates). Had the Prime Rate formula
been applied during that period, the LL&E Partnership would have received a payment of
$322,554.48 in June 2014 and a payment of $483,630.86 in July 2014. Those interest rates
will be corrected retroactively in the next monthly calculation.

2. Outdated interest rates. The Chase Bank rates and T Bill Rates used in the calculation
most recently have been listed at 3.25% and 0.05%, respectively. Those will be corrected
retroactively to reflect recent changes in the next monthly calculation. Incorporating this
change into the NPI calculation does not result in any additional payments to the
Partnership after July 2014.

3. Set amount for Treating Facility Overhead. For several years, $2,897.08 has been listed
each month under Jay Gas Plant Expenses as “Treating Facility Overhead.” While there is still a gas plant at the St. Regis facility that processes natural gas liquids, this specific amount appears to have been included in error. Those amounts will be removed retroactively in the next monthly calculation. Incorporating this change into the NPI calculation does not result in any additional payments to the Partnership after July 2014.

[Enterprising Investor]

Thank you for sharing!