Created: 04/18/2011 12:47:50 AM -
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Royalty Stream No. 4: Mesa Royalty Trust (NYSE: MTR)
Mesa Royalty Trust is actually the remnant of a legendary Texas oilman's company. He founded Mesa Petroleum in 1956. In Mesa Petroleum, Thomas Boone Pickens, (known as T. Boone) created the largest independent oil and gas company in the world.
He achieved unparalleled success in 1962, when his team drilled 98 successful oil wells. The two-person company made more than $750,000 in profit that year (about $4.2 million in today's money).
Today, the resulting trust has acreage in two excellent U.S. basins, the Hugoton in Kansas and the San Juan in Colorado and New Mexico. It also has two excellent operators in those basins. BP Amoco operates the 468 wells in the Hugoton fields. ConocoPhillips operates the 466 wells in the San Juan Basin. The trust holds 99,413 net acres in the Hugoton and 31,328 net acres in the San Juan.
The interesting growth potential is actually in coal bed methane. Methane, the simplest form of natural gas, often fills coal seams. The Fruitland coal field in New Mexico is one of the largest sources of coalbed methane reserves in the United States. Mesa Trust owns 25,400 net acres with Fruitland potential.
The operator of those acres drilled 50 Fruitland coalbed methane wells subject to royalty payments. In all, the trust owns 485,000 barrels of oil and 6.9 million mcf of natural gas proven reserves.
Year Revenue Average
Gas Price Dividends
Per Share Dividend
2007 $12 million $6.11 $6.55 9.6%
2008 $14 million $8.28 $7.38 8.5%
2009 $4 million $3.48 $2.06 13.6%
2010* $4 million $4.67 $3.31 7.5%
*results through first six months 2010
The trust is 75% natural gas, 25% oil, has no debt, and pays a 6.2% annual dividend. Its market cap is small, just $87 million.