San Juan Basin Defies Expectations (SJT, COSWF)

Reported reserves for buy-recommended San Juan Basin Royalty Trust (NYSE: SJT) and U.S. peers have increased by 1% a year for the past three years. That contradicts the frequently repeated warning that royalty trusts are liquidating entities. Stable reserves imply stable production as has been the case in recent years. Proven reserves that imply a life index as low as 7.9 years may be nice for calculating a high depletion allowance for tax purposes, but are less reliable as indicators of investment value for the U.S. royalty trusts in our coverage.

Meanwhile renewed investor interest in SJT and its peers appears justified by lagging stock price for stocks concentrated on natural gas and domiciled in the U.S. Notwithstanding their better recent performance, we remain confident about the prospects for stocks concentrated on oil and domiciled outside the U.S. including buy-recommended Canadian Oil Sands Trust (COSWF).

Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at [e-mail].