Ect

[bjl584]

I've been watching this trust as a possible addition to my ROTH. It's currently paying an annual dividend of 6.6% (.50 per share). Tax free inside my ROTH would be a nice addition to my portfolio.

It's a trust fund dealing in the natural gas drilling that's going on in the Marcellus Shale fields.

Any thoughts?

ECT ECA Marcellus Trust I stock quote price shares XNYS – Morningstar

[jpg7n16]

wow. I tried to look through their annual report and it was just pages and pages and pages of notes! craziness

one thing I did find was that they only own the royalties - they don't actually do any drilling. So their huge profit margins are because they essentially have no real expenses. They just manage the trust and collect royalties for letting other companies drill there.

I don't know how that looks for the long term future, but for right now, it's a pretty sweet deal. Just sit back and collect royalties.


But the income was $21m for the year. Which I actually discovered was only 9 months (since inception). So the 25 P/E on Morningstar is probably a bit higher than it really is. Yes it's true that market cap/year's earnings is 25 - but that's missing a quarter of income, so the multiple should be lower.

If we assume they'll average 7 mil/qtr - then actual 12 month earnings would have been $28M - which is a P/E of 19.4.

Likewise ROE was at 6% - which maybe should have been around 8% with the remaining quarter of income

Just something to consider.



I don't know enough about drilling royalties to know it that's a good investment for the area. Or how long the drilling can last. If drilling can only last 20 years, or if the royalties expire in 25 years, that's obv bad for your investment, and you'd just have to hope that it pays out more than your investment over those years.

But I don't know how that works. Maybe the royalties are good forever. I just don't know enough to say.


Do you know how that stuff works? If they're good forever, and can drill forever, then it's probably a good investment to get in on.

[bjl584]

Yes, you are correct. They don't actually do the drilling. They just collect the royalties from the drilling operations. I live right in the middle of the Marcellus fields, that's how I got interested in this fund. The find intself is supposedly hundreds of years worth of Natural gas. The trust collects royalties from approx. 9300 acres, but as far as how long they own the royalties and how much the estimated reserves there are on their lands, I am unsure. I'm still doing my homework. If it is around 20 yrs which you stated, which is what I was thinking it probably is, I'm thinking it would still be a good addition to my Roth at say a 3 to 5 year time horizon. As long as they can remain profitable, I can assume with high probability that I will continue to receive a high dividend tax free for the next several years.

[jpg7n16]

I think the terms of the royalty are the make or break for me. If it's 20 years, I'd kinda view it like a 20 year bond paying out at 6.5% - but with no face value at the end.

But if the rights last a lot longer than that, I may become an investor with you


I have no doubt that they can remain profitable while the royalties last. They virtually only have expenses of the trust. My problem is that I don't want to pay $30/share for a company that will pay me back $2/share for 20 years and then be worthless. That'd be a profit of $10 over 20 years - so 1.45% compounded return overall. (ignoring reinvesting the dividends) Not really worth my time.

[bjl584]

http://www.energycorporationofamerica.com/downloads/marcellus_trust.reprint.10-10.pdf

Here's a PDF on their financial strategy. It's only about 3 pages and is an easy read.

[Mr Nice Guy]

Tried to get some fundamentals on ScotTrade, but I guess they are too new. Do you know when they will filling a 10-K?

[jpg7n16]

They already filed their Annual report (10-K) on 3/1/11:

ECA Marcellus Trust I(ECT) Annual Report (10K) Quarterly Report (10Q)

But just a warning... it's a handful!

[Mr Nice Guy]

They already filed their Annual report (10-K) on 3/1/11:

ECA Marcellus Trust I(ECT) Annual Report (10K) Quarterly Report (10Q)

But just a warning... it's a handful!

Scottrade.......You get what you pay for!!

[jpg7n16]

http://www.energycorporationofameric...rint.10-10.pdf

Here's a PDF on their financial strategy. It's only about 3 pages and is an easy read.

Looks like it's only the 20 years. I may be missing out on a good opportunity - but I think I'll pass. I'm not confident enough about how that would play out income wise, and I think I have better returns out there.

If you go for the 3-5 years, good luck to you! I hope it shoots up to $50 right after you buy