Black Gold
Long/short equity, oil & gas

Hugoton Royalty Trust Is Overvalued By 45%

Hugoton Royalty Trust (NYSE:HGT) is a trust, originally set up by XTO Energy, which has a net profits interest in properties located in Kansas, Oklahoma, and Wyoming. With the Fed's ZIRP policy, investors have been forced into riskier assets to find yield. Royalty trusts are one place where investors have ended up. Several of these have been bid up without investors realizing what the underlying properties are actually worth. I believe HGT is overvalued by 45%.

My production model assumes the following:

    Gas production declines at 7.5% per year. The past three years the decline rate has been 6%, 9.9% and 9.6%. A little bit of variance there, but I tried to pick a middle of the road...
Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
FREESA PRO MEMBERS
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details