"DOM's wells are in their twilight years and Walter Energy has begun the process of abandoning them," writes The Forensic Accountant in an SA Pro article released from embargo this morning.
The company's own reserve report suggests the trust may have a lifetime of just 4-5 years, and this report combined with the article author's own analysis points to more than a 75% downside in the stock.
When the grasping for yield goes bad: BP Prudhoe Bay Royalty Trust (BPT -5.9%) adds to recent losses, now off 27% in 2 weeks. The entire royalty trust sector has been shaken of late thanks to payout cuts at several (HGT, SJT, DOM), and the idea prices for these popular income plays have gotten far ahead of what they could ever pay out.
Royalty trusts are great (and popular) - up until a dividend cut can seriously ding their unit prices. Oil and gas wells and mines get more depleted, and thus yields are doomed to decline. Great investments at times, the trusts are far from bargains today, with many investors apparently willing to buy on current yield alone.
Dominion Resources Black Warrior Trust is a grantor trust, which acquires & holds certain overriding royalty interests burdening proved natural gas properties located in the Pottsville coal formation of the Black Warrior Basin, Tuscaloosa County, Alabama.