Sabine Royalty Trust Reports Operating Results (10-K)
Sabine Royalty Trust has a market cap of $941.5 million; its shares were traded at around $64.58 with and P/S ratio of 22.7. The dividend yield of Sabine Royalty Trust stocks is 5%. 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.Hedge Fund Gurus that owns SBR: Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: Net royalty income during 2010 increased approximately $14,595,000, or 35.2 percent, compared to 2009 net royalty income, which had decreased approximately $49,394,000, or 54.3 percent, from 2008 net royalty income.
Gas volumes increased from 5,798,016 thousand cubic feet (Mcf) in 2009 to 6,894,361 Mcf in 2010 after decreasing from 6,372,568 Mcf in 2008. The average price per Mcf of gas received by the Trust increased from $4.03 in 2009 to $4.55 in 2010 after decreasing from $8.45 per Mcf in 2008. The Trustee believes that tighter storage levels and higher oil prices in the first part of 2008 caused gas prices to increase to record levels over $12 per Mcf. Gas prices began to decline in the fall of 2008 due to concerns of over supply and falling demand because of the deepening recession, leading 2008 gas prices to end far below where they began, a trend that continued for most of 2009. Once the economy showed signs of stabilizing in late 2009, gas prices responded favorably. This positive trend continued for 2010, but concerns of over supply have continued and the economic recovery has been slow and, as a result, the price of natural gas continues to be much lower than the record prices set in 2008.
Oil volumes sold increased to 442,936 barrels in 2010 from 432,524 barrels in 2009, after having decreased from 465,310 barrels in 2008. The average sales price of oil increased to $70.82 per Bbl in 2010, from $51.38 per Bbl in 2009, which was a decrease from $97.32 per Bbl in 2008. The price of oil began on a high note in 2008, peaking with summer production. Due to decreasing demand from the tightening of credit markets, the deepening recession, and general economic uncertainty, the price of oil began to drop in late summer and continued to fall until December 2008. Oil prices continued to slump though mid-2009, due to the continued recession, but began to rebound in the fall, ending the year on a positive note. The positive trend continued throughout 2010, where a recovering economy, although softer than expected, increased demand for oil, which translated to increasing prices.
Interest income decreased to $4,000 in 2010 from $22,000 in 2009, which decreased from $294,000 in 2008. Changes in interest income are the result of changes in interest rates and funds available for investment.
General and administrative expenses decreased to $2,114,000 in 2010 from $2,267,000 in 2009 due mainly to a $43,200 decrease in escrow agent/Trustee fees, a $47,900 decrease in transfer agent fees and a $25,400 decrease in legal services. This decrease was augmented by a decrease due to the timing of invoices for auditing services of approximately $44,500. Offsetting these decreases somewhat was an increase of approximately $11,900 in professional services. General and administrative expenses increased to $2,267,000 in 2009 from $2,171,000 in 2008 due to a $61,000 increase in Unit holder information services, a $16,700 increase in revenue posting services, an $11,800 increase in professional services related to Sarbanes-Oxley compliance as well as a $19,000 increase in the timing of audit-related expenses. These increases were offset somewhat by a decrease in legal services for the Trust of approximately $14,000.
In August 2008, the Trust received a refund from the State of New Mexico in the amount of $163,260. In June 2009, the Trust received a refund of $588,207 from the State of Oklahoma. These refunds represented taxes that were withheld from the proceeds of production from the Royalty Properties and remitted to the States of Oklahoma and New Mexico by purchasers. Income taxes are not payable by the Trust, but are the responsibility of the individual Unit holders. Therefore the States of Oklahoma and New Mexico refunded the withheld taxes, and the refunds were included as royalty income in the Trusts September 2008 and June 2009 distributions, respectively.
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