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Geophyte1
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I'm an individual investor. I have believed in buy and hold in the past but have strayed fairly far off of that path. I am blessed with a wonderful and very supportive family. I earned an EE degree from The University of Texas at Austin but have also developed a love for petroleum geology... More
  • WHZ - Whiting Petroleum Trust II - High 2012 Return? 4 comments
    May 31, 2012 2:52 PM | about stocks: WHZ

    WHZ, Whiting USA Trust II, just made the first "quarterly" payment which exceeded their prospectus estimate even though the realized price of oil was lower than estimated. This first payment, according to Whiting documents, was only 2+ months of oil and 1+ months of NG. There is also a note on the announcement explaining that the realized price for NG was larger than expected due to the "liquids rich" content of a portion of the NG produced.

    My estimate says that if they average $70.00 oil for the 3rd and 4th quarters and $90.00 per barrel for the 2nd quarter, at today's, 5/31/2012, price for WHZ, the return for the year would be about 16%.

    My calculations used some facts, according to published reports, and many estimates and assumptions. That is, there are no guarantees.

    The projected distributions below are estimated 2012 full year payouts at the given oil prices for the 3rd and 4th quarters. $90.00 is used for the 2nd quarter oil price and the actual 1st quarter payment is included in the total.

    3rd and 4th Qtr........................................... Total Estimated

    Oil Price per Barrel...................................... 2012 Distribution

    $100.00.......................................................$4.05

    $95.00.........................................................$3.88

    $93.00........................................................ $3.82

    $90.00........................................................ $3.72

    $85.00........................................................ $3.56

    $80.00........................................................ $3.39

    $75.00........................................................ $3.23

    $70.00........................................................ $3.07

    These estimates are based on:

    · Their prospectus estimates of future payments

    · Their first "quarterly" payment

    · Estimated prices per barrel for oil for every quarter of 2012

    · Estimated NG prices for each quarter calculated using ratios of historical prices from the Energy Information Administration and the estimated and realized prices of NG for the 1st payment

    · Assuming the NG/NGL mix will remain about the same as the actual 1st quarter for the remainder of 2012

    · Assuming they will meet their projected development costs objectives

    · Adjusted NG price adder for NGLs using ratios of base NG price and realized NG prices, which apparently include the NGLs, from their prospectus

    · Their projected production numbers for each quarter altered using ratios of the first quarter estimated and realized production

    · A base NG price for the 2nd quarter of $2.27 per mcf and a 3rd and 4th quarter NG base price of $2.62 per mcf

    · Assuming that the 2+ months of oil production and 1+ months of gas production was 55 days of gas production and 84 days of oil production for the 1st quarter. Just a guess.

    According to the WHZ prospectus they have approximately 50% of the oil hedged until 12/31/2014. My calculations/assumptions are without regard to what their hedging might do but I am assuming it can only improve the result.

    WHZ is an oil and gas trust so anyone contemplating an investment in WHZ should understand that oil and gas trusts set up as this one is with a defined production total attributable to the trust are a depleting asset even though the underlying oil and gas production may not be depleting.

    Disclosure: I am long WHZ.

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Comments (4)
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  • 65983
    , contributor
    Comments (17) | Send Message
     
    why is this stock tanking? A continual descent ever since I purchased it at IPO.
    4 Jun 2012, 04:05 PM Reply Like
  • Geophyte1
    , contributor
    Comments (5) | Send Message
     
    Author’s reply » This is not going to answer your question but I'll share the thoughts that run around my head when I try to "reason", and I use that word loosely when trying to figure out why some stock prices do what they do, why it has acted as it has directly after its IPO - and I would caution that some of these thoughts may have a hint of paranoia in them:
    1. I have to admit that I haven't gone back and studied this and I don't know the rules on this sort of thing but it may be that WHZ looked so good on paper for the next few years that the underwriters, or the first level of investor they sold to choose not to sell the stock and therefore the stock is mostly owned in large quantities by a relatively few people. The thing that makes me think this is a possibility is the seeming trading frequency. It appears to be very slow/thin to me compared to WHX which is the older trust and obviously would be in far more hands which would lead to a larger trading frequency. I haven't gone back and looked at WHX to see if the trading frequency was anything like WHZ is at this point. If my thinking is correct on this then this stock is trading more like a thinly traded stock which can have larger swings in price and which seem to be more easily manipulated to someone's desire.
    2. Somewhat related to #1 - It seems WHZ is acting much like WHX after the Ex-Date in falling off in an exaggerated amount. It is impossible to know if it will act the same the next month or two but if it does I think this adds some credence to #1 because it might mean that some of those "lower" purchasers, like you and me, who did manage to buy the stock are treating the stock as if it was WHX instead of WHZ.
    3. WHX has held up better than WHZ since the Ex-date - WHX has been up many days that WHZ has been down - I think this adds to the thought of the thinly traded stock but it also might support another thought that I saw on some message board - that people may be more comfortable with WHX than WHZ in general due to familiarity but also in particular after WHZ took the hit that nobody thought it would after the Ex-Date.
    4. Oil and gas prices - knee jerk reactions - probably 'nough said but I won't let that stop me - I don't know the psychological makeup of people that invest in these O&G trusts but there could be some skittish folks among the group and, again, if my thinly traded theory holds any credence, when the O&G prices started to fall some probably decided they didn't want to ride that train and started trading which would lead to downward pressure on the stock price. The rapid drop probably lead to more thoughts of selling possibly including one or more of these assumed large holders and if they started selling when no one wanted to buy that can tank a stock price in a hurry.
    5 Jun 2012, 11:07 AM Reply Like
  • stocknerd
    , contributor
    Comments (1435) | Send Message
     
    Sometimes a sure thing is a sure thing.
    22 Jun 2012, 09:26 PM Reply Like
  • Geophyte1
    , contributor
    Comments (5) | Send Message
     
    Author’s reply » Definitely looking more positive.
    17 Jul 2012, 07:54 PM Reply Like
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