Dividend Recovery Makes TELOZ a Buy and Hold

Tel Offshore Trust (TELOZ) is an American based Oil & Gas Trust with Gulf of Mexico wells producing oil and natural gas. Two years ago, two hurricanes knocked the socks off of TELOZ, its dividend was stopped, and it took more than a year for repairs to be completed. At this point, almost all repairs are done and the dividend is back!

Here's the current updated dividend history -

• May 27 2007 - Quarterly Dividend of $0.245727 was paid out.
• June 29 2007 - Quarterly Dividend of $0.432 was paid out.
• Sept 27 2007 - Quarterly Dividend of $0.597051 was paid out.
• Dec 27 2007 - Quarterly Dividend of $0.684564 per share.

With oil prices staying high and no hurricanes, this trust will reap the benefits and should be able to pay out $0.70 to $0.90 per quarterly dividends for the next couple of quarters - as crude prices stay higher than even a few months ago.

In addition, TELOZ is American based, therefore U.S. based share holders get 100% of the dividend, rather than 85% of the dividend in the Canadian Royals, which are also yielding 12% to 16% annually - such as Penn West Energy Trusts (PWE) or Pengrowth Energy Trust (PGH). Plus, you do not have to worry about the Canadian tax structure change on CanRoys.

On January 7th, TELOZ closed down at $17.75, a very nice entry point. Realize that oil is now $90 to $100 a barrel of crude. With China and India's new middle class consuming more and more, building more and more infrastructure (roads, buildings, utiities), this requires more ENERGY, metals, plastics, and so forth. In our opinion - oil prices will stay high for a few more years.

Assume a $0.70 dividend will be paid out (last quarter was $0.684) for the next year. Taking a $2.80 (4 x $0.70) annual yield at the current pirce ($17.75) gives us a 15.8% dividend.

Now, if the dividend increases to $0.80, it amounts to $3.20 / $17.75, which gives us an 18% dividend.

The $0.80 very well could occur, as this trust has a built in time delay of a quarter reporting its revenue and earnings. $100 oil has just appeared. Earnings will be impacted up (a very good thing). Realize that this is a trust... with fixed assets... partnerships with major oil companies.... risk of hurricanes in the Gulf...

Future Share Price - A reasonable dividend percentage yield for American based trusts, once the investor community is comfortable with TELOZ for long term investing, is a target 12%. We believe TELOZ should be trading at $24.00 a share:

$2.80 / $24.00 = 11.67% - Assume $0.70 dividend a $24.00 share price

$3.20 / $28.00 = 11.45% - Assume $0.80 dividend and $28.00 share price

Momentum players got into this trust during the last 3 months and we have seen TELOZ hit $30.00 a share and retreat back to the 18.00 range yesterday. We see three groups of investors currently in TELOZ

• Longs who still hang unto the hurricane values of TELOZ
• Longs who see $28 to $32 share prices
• and Momentum players just wanting to make a short term quickie.

The longs get the nice dividend for sure!

In our opinion, we will see another run up into the mid 20s or low 30s, as we get closer to the dividend announcement again im late March 2008. One must decide if they are a short-term Momentum investor, or a long on TELOZ.

Disclosure: Author is long TELOZ.

Comments

[rimy360:]

Sir i would be interested to know how long does 390 mil. barrels last & what kind of future does this co. have.

Does the trust dissolve?

2008 Jan 09 11:03 AM

[TIRED:]

TELOZ PAYS .70 DIVIDEND IS THIS A PROVEN FACT HOW LONG HAS TELOZ BEEN PAYING A DIVIDEND I AM IN FOR A LONG NOT SHORT TERM YOU MAKE THE STOCK SOUND GOOD THANK YOU KEEP ME UP TO DATE ON THIS ONE

2008 Jan 09 05:30 PM

[golds:]

TNK is a recent IPO spinoff with a similar dividend, low debt and is priced now around 16.66 yield.

2008 Jan 10 09:55 AM

[Philip Obal:]

TELOZ is still a bargain at 17.70 a share today. Some are anticipating the next dividend to be around .80 - at the end of March - we shall see.

I suspect that the dividend will increase again. IMHO, it will be .75 to .80 range.

2008 Jan 24 11:52 AM

[Philip Obal:]

TELOZ is still a bargain with a 16% dividend - if we use .80 quarterly dividend for this upcoming quarter and the next year (assumption). TELOZ is now $19.87 a share. UNDERVALUED for the dividend that it is paying!

2008 Feb 14 07:43 PM

[CoverMe:]

In at $22... dividend is $0.94 this quarter... i'm staying long!

2008 Apr 05 05:28 PM

[Philip Obal:]

Dividend of 94 cents - HIGHER than the 80 cents that I suggested. Now, it will be three t-h-r-e-e THREE months before the next dividend.

Consider two items, (1) buy at dips, (2) consider holding TELOZ for less than 1 or 2 years, as some wells are depleting (maybe new wells will come onboard, maybe not), and oil prices will eventually come down - once the hydrogen cell becomes low cost and a standard feature in trucks & cars.

2008 Apr 06 08:32 PM