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Sabine Royalty Trust Reports Operating Results (10-Q)

August 02, 2010 | About:
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10qk

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Sabine Royalty Trust (SBR) filed Quarterly Report for the period ended 2010-06-30.

Sabine Royalty Trust has a market cap of $767.44 million; its shares were traded at around $52.64 with a P/E ratio of 15.3 and P/S ratio of 18.5. The dividend yield of Sabine Royalty Trust stocks is 8.25%. Sabine Royalty Trust had an annual average earning growth of 7.6% over the past 10 years. GuruFocus rated Sabine Royalty Trust the business predictability rank of 2.5-star.

Highlight of Business Operations:

Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources The Trust makes monthly distributions to the holders of Units of the excess of the preceding months revenues received over expenses incurred. Upon receipt, royalty income is invested in short-term investments until its subsequent distribution. In accordance with the Trust Agreement, the Trusts only long-term assets consist of royalty interests in producing and proved undeveloped oil and gas properties. Although the Trust is permitted to borrow funds if necessary to continue its operations, borrowings are not anticipated in the foreseeable future. Results of Operations Distributable income consists of royalty income plus interest income plus any decrease in cash reserves established by the Trustee less general and administrative expenses of the Trust less any increase in cash reserves established by the Trustee. Distributable income for the three months ended June 30, 2010 was $13,421,097, or $0.92 per unit. Royalty income for the three months ended June 30, 2010 amounted to $14,030,965 while interest income was $1,034. General and administrative expenses totaled $610,902 for the three months ended June 30, 2010.

Distributions during the period were $.47982, $.32220, and $.23659 per Unit payable to Unit holders of record on April 15, May 17, and June 15, 2010, respectively.

Royalty income for the quarter ended June 30, 2010 increased approximately $3,393,000 or 32% compared with the second quarter of 2009. This increase was caused by an increase in the production of natural gas as well as increases in both the price of oil and natural gas. These increases were offset somewhat by a decrease in the production of oil. Compared to the preceding quarter ended March 31, 2010, royalty income decreased approximately $345,000, or 2%, due to decreases in the production of both oil and natural gas. These decreases were tempered somewhat by increases in both the price of oil and natural gas. Royalty income for the six months ended June 30, 2010 increased $6,891,000 or 32% compared with the same time period in 2009. This increase was due mainly to an increase in natural gas production as well as increases in the prices of both oil and natural gas. The increases were offset somewhat by a decrease in the production of oil.

Gas revenues received for the three months ended June 30, 2010, related primarily to production for January 2010 through March 2010. The average price of gas as reported by the Henry Hub for the same time period was $4.52 per Mcf. The average price of gas for the Henry Hub was $4.20 per Mcf for January 2010 through June 2010. Oil revenues for the three months ended June 30, 2010 related primarily to production for February 2010 through April 2010. The average price of oil as reported by Nymex for that time period was $80.78 per barrel. The average price of oil was $78.55 per barrel for January 2010 through June 2010. As of July 9, 2010, the average price of gas for the Henry Hub was $3.96 per Mcf and the average price of oil reported by Nymex was $75.44 per barrel. It is difficult to accurately estimate future prices of oil and gas, and any assumptions concerning future prices may prove to be incorrect.

Interest income for the quarter ended June 30, 2010 decreased approximately $400 compared with the second quarter of 2009. Compared to the preceding quarter ended March 31, 2010, interest income increased approximately $700. Interest income for the six months ended June 30, 2010 decreased approximately $19,300. Changes in interest income are the result of changes in interest rates and funds available for investment.

General and administrative expenses for the quarter ended June 30, 2010 decreased by approximately $79,700 compared to the same quarter of 2009 primarily due to decreases in the fees associated with the change in transfer agent, legal fees, and escrow agent/trustee fees of approximately $5,200, $26,600, and $25,600, respectively. There were also decreases relating to the timing of expenses for annual accounting support fees, auditing services, and unitholder information services of approximately $8,300, $10,000, and $25,000, respectively. These decreases were offset somewhat by an increase in the timing of printing expenditures of approximately $20,000. Compared to the previous quarter ended March 31, 2010, general and administrative expenses increased approximately $43,200 due mainly to increases relating to the timing of annual payments for engineering services, printing expenses related to annual reporting, and tax reporting services of approximately $86,900, $48,100, and $10,700, respectively. These increases were offset somewhat by decreases in the escrow agent/trustee fees, legal services, and expenses related to changing the transfer agent of approximately $14,500, $17,900, and $7,500, respectively, along with decreases relating to the timing of expenses for professional services, auditing services, and the New York Stock Exchange listing fee of approximately $7,500, $18,500, and $38,000, respectively. General and administrative expenses for the six months ended June 30, 2010 decreased approximately $131,600 due mainly to decreases in the escrow agent/trustee fees, transfer agent fees, and legal fees of approximately $28,600, $16,100, and $27,200, respectively, along with decreases relating to the timing of expenditures for professional services, auditing services, and unitholder information services of approximately $9,900, $44,500, and $12,200, respectively.

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