ECA Marcellus Trust I (NYSE:ECT) is a Delaware statutory trust formed by Energy Corporation of America (ECA). ECA Marcellus Trust should be purchased due to the incoming cash flow for the next 19-years. ECA Marcellus Trust I was designed to distribute significant return-of-capital dividends in its early years. This will allow the investor to recoup, in the near term, a significant percent of their investment capital. Dividends will be paid through 2030. This leaves 19-years remaining in ECA Marcellus Trust's dividend life stream. The fund's termination date is March 31, 2030. The trust has 14-operating horizontal natural gas wells at present time. Other wells are planned to be developed by Energy Corporation of America.
As of December 31, 2009, ECA maintained 5,100 wells in the Appalachian Basin and had an net leasehold position of approximately one million acres. 85% of this acreage was in production. In fiscal year 2009, ECA sold 22.5-BcF of gas for an average of 62-MMCF of gas per day.
ECT has exceeded their total distribution expectations since their short public trading. Below is a chart with the SEC S1, page B-1, with the estimated distribution amounts. The actual distributions are listed on the right side. The 2nd quarter, 2011, dividend has not been announced as of July 22nd. Quarterly distributions will be disbursed within 60-days after quarter's end.
Investors can expect the following dividends for future quarters through March 31st, 2030:
2011: Investors can expect an average of 62.9-cents per quarter. This equates to an approximate 9.3% return of capital assuming a $27-ECA stock price.
2012: Investors can expect an average of 78.1-cents per quarter. This equates to an approximate 11.5% return of capital assuming a $27-ECA stock price.
2013: Investors can expect an average of 89.7-cents per quarter. This equates to an approximate 13.3% return of capital assuming a $27-ECA stock price.
2014: Investors can expect an average of 72.5-cents per quarter. This equates to an approximate 10.7% return of capital assuming a $27-ECA stock price.
Investors can expect distributions to decline post-2014. The SEC S1 B-1 distribution targets forecast $1.50 in 2021 dropping to $1.359 per share in the March 31st, 2030 quarter. This quarter is the trust's termination date.
The ECA Marcellus Trust I began with 8,800,000 shares priced at $20-per share. The IPO was jointly managed by Raymond James and Citigroup. ECT began trading on July 1st, 2010.
The following chart, page 8 of the SEC S1, shows the relationship of ECA, the trust and the public unitholders:
Energy Corporation of America is a privately held energy company. The company is involved in the exploration, development, production, gathering and sale of natural gas and oil. ECA is focused primarily in the Appalachian Basin, Gulf Coast and Rocky Mountain regions in the United States and in New Zealand.
John Mork and his wife own 71% of the privately held ECA. They have remained very private, donated to charities, and continued to operate ECA as a very successful company. The SEC S1, page 45, has further details on Mr. Mork and ECT's management team:
"John Mork has been President and Chief Executive Officer of ECA and a Director of ECA since its formation. Mr. Mork served in various capacities at Union Oil Company until 1972 when he joined Pacific States Gas and Oil, Inc. and subsequently founded Eastern American Energy Corporation (“EAEC”). Mr. Mork was President and a Director of EAEC from 1973 until 1993 with the incorporation of ECA ... Mr. Mork holds a Bachelor of Science Degree in Petroleum Engineering from the University of Southern California and is a graduate of the Stanford Business School Program for Chief Executive Officers ..."
Disclosure: I am long ECT.