Description
This stock is a natural gas trust that terminates in the year 2013. Not only are their wells pretty much guaranteed to produce until the trust ends, there is a U.S. Government zero coupon bond that is guaranteed to pay $20 per share at termination.
Let me give some background on the trust. On March 15, 1993, 5,900,000 shares were issued in a public offering at an initial public offering price of $20.50 per share. Each share consists of beneficial ownership of one unit of beneficial interest in the Trust (i.e. the net profits interests) and a $20 face amount beneficial ownership interest in a $1,000 face amount zero coupon United States Treasury Obligation maturing on May 15, 2013. The proceeds were distributed as follows:
Gross Amount % to each Per Share
Invested in Zero Cpn $27,787,820 22.97% $ 4.71
Invested in NPI $93,162,180 77.03% $ 15.79
Total 5,900,000 $120,950,000 100.00% $ 20.50
Gross Amount % to each Per Share
Value of Zero Cpn (3/31/00) $52,356,600 62.85% $ 8.96
Implied Value of NPI $30,943,400 37.15% $ 5.29
Total 5,900,000 $83,300,000 100.00% $ 14.25
THe zero coupon has a face value of $118,000,000.
Right now, the stock is trading at $14 of which roughly $9 of it is backed by this zero coupon. Therefore, you are paying about $5 per share for $1.20 - $1.50 per year for the next 13 years in dividends. When this trust is all said and done, for your $14 purchase you will recieve $20 for the zero coupon bond and roughly $17.50 in dividends(conservatively). The beauty of it, believe it or not, is that there is little downside risk due to backing of the zero coupon. This stock is truly one that has been completely ignored by the street. The volume is very light and there are no analysts following it.
In short, what we have here is an attractive investment with very high income and good appreciation potential with the added attraction of a future return guaranteed by the U.S. Treasury.
Catalyst
THis stock is truly a classic, buy and put it in the safe kind of investment. Natural gas prices are rising and there is about a 6 month lag time on the increases in price to be reflected in the dividend paid. If anybody knows of any other stocks out there that have this same type of financial structure please let me as I would like to own more of these types of gems.