Anthony Donato
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###### More on MVO by Anthony Donato

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15 Comments

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## Computing MV Oil Trust's Q4 Distribution: Solid Returns [View article]

PV=-25 (current share price)

PMT=3 (distribution)

FV=0

Periods=13

Compute Rate

Rate=7.05%

Assuming -- constant $3 annual distribution, $25 share price, $0 value at the end of 13 years. (rate would be slightly higher if you compute with quarterly distributions instead of annual... but you get the idea)

## Computing MV Oil Trust's Q4 Distribution: Solid Returns [View article]

Year / cost basis / return

1 / 25 / 5%

2 / 22.92 / 5.54%

3 / 20.84 / 5.99%

4 / 18.76 / 6.66%

5 / 16.68 / 7.5%

6 / 14.60 / 8.6%

7 / 12.52 / 9.98%

8 / 10.44 / 11.97%

9 / 8.36 / 14.95%

10 / 6.28 / 19.9%

11 / 4.20 / 29.7%

12 / 2.12 / 58.9%

Those are the returns on your adjusted basis.

That is an oversimplification of the returns... depletion is not constant, production will not be constant. Most importantly... the unit price is determined by supply and demand (market), so the actual price depreciation is uncontrollable. But your comment about a 3.7% return is incorrect.

## Computing MV Oil Trust's Q4 Distribution: Solid Returns [View article]

Adjusting the numbers listed in the 10k for this years results:

The trust currently has ~7.2M barrels of proved reserves and an expected production and development costs of ~$220M, the future cash flows have the following values given the price of oil

oil price -- cash flow -- per share CF -- % return

$70 -- $284M -- $24.69 -- 0%

$80 -- $356M -- $30.95 -- 24%

$90 -- $428M -- $37.21 -- 49%

$100 -- $500M -- $43.48 -- 75%

$110 -- $572 -- $49.73 -- 100%

So as an investor, you need to decide the return you demand and your estimate price for oil over the next decade -- the rest of the math is pretty simple.

## Computing MV Oil Trust's Q4 Distribution: Solid Returns [View article]

## Computing MV Oil Trust's Q4 Distribution: Solid Returns [View article]