BPT, CRT, DOM, NGT, LRT, MARPS, MTR, TRU
HGT - Hugoton Royalty trust (gas)
DMLP - Dorchester Minerals
PBT - Permian basin trust
SBR - Sabine royalty trust
SJT - San Juan Basin royalty trust
WTE - Williams Coal Seam Gas Trust (gas)
on the NYSE: ERF, AAV, BTE, HTE, PGH, PWE, PVX
index: XTR
15% Canadian flat tax is withheld by your broker - which is recoverable at tax time, so yes you get it back when you file the correct tax form (IRS form 1116 - foreign tax credit). Up to $400 of foreign taxes withheld by countries that have tax-treaties with the U.S. are simple to report on a 1040. Larger amounts need 1116 filled out, it’s detailed, but not difficult with tax software.
15% US dividend tax.
Trusts held in IRA’s are treated differently.
Generally you ignore “earning” for the trusts and look at free cash flow and dividend coverage from free cash flow. As trusts who will be taxed in 2011 they do not want to show a profit.
FYI, the trust are required to show their financial reports just as if the 2011 tax increase was currently in place; but they add back to cash flow the tax liability.
“Known Reserves” is key to understanding the energy trusts. It can be express in volume of know oil/gas in ground or by that number divided by expected production to give you “Years of Reserves”. Most often the years of reserves range from 8 to 13. But, they do bid on new leases and add to their “known reserves”. The point being, not just a dividend play, there is real potential for increase in stock price as the know reserve goes up in value along with energy prices.
Pipeline MLPs are such boring investments because not much can go wrong. They are the most conservative of the natural resource MLPs and provide stable cash flow and slow growth.
Sure, in the short-term, the winter could be too warm or the summer too cool, reducing transported volumes below expectations. But pipelines don’t go out of fashion. They are not in danger of being made obsolete by new products. And, since pipelines usually don’t duplicate each others’ routes, they don’t have competition.
Increasing energy-price exposure
MLP pipelines come in two types: petroleum pipelines carrying crude oil or refined petroleum products, and natural-gas pipelines.
Petroleum-pipeline operators base their fees on the volume of product transported. They’re not affected much by the price of oil.
By contrast, natural-gas pipeline operators frequently also run gas-gathering systems, which connect wells to public pipelines as well as processing plants. Typically, gathering and processing contracts expose pipeline operators to changes in the price of natural gas and its byproducts. So natural-gas pipeline operators profit margins can vary with the price of the commodity. Some operators employ hedging strategies to reduce their susceptibility to price swings. But not all do because that limits their upside potential.
While several pipeline MLPs focus on natural gas exclusively, some petroleum-pipeline operators have recently acquired natural-gas assets and others are planning to do so. It appears that eventually, most pipeline MLPs will have at least some natural-gas pipelines, and thus, at least moderate susceptibility to price swings.
Pipelines are fee-for-service businesses. There are long-term contracts and long-lived assets. Commodity risk is minimal. Kinder Morgan, for example, gets $1.35 to move a barrel of gasoline to Phoenix from Los Angeles regardless of whether oil prices are $25 or $50.
Midstream transport of natural gas is a key part of the energy commodity chain. The transport stack consists of 3 key components: gathering, transmission, and distribution. Each component faces a common set of problems when it comes to significant safety incidents. However, the causes vary by percentage for each.
The gathering system of pipelines is the key to transporting natural gas from the wellhead to plants where it can be processed for transmission (aka “sweetened”). Typically, this gas is extremely corrosive and can be dangerous, often requiring special pipelines to transport it. As a result, most safety incidents in this system of pipelines are caused by corrosion (49%). Further, approximately 20% of total gathering incidents are caused by internal corrosion.
Transmission, or the shipping of gas via interstate pipelines, also suffers from a similar set of problems. Unlike pipes used for gathering, corrosion accounts for about 22% of incidents (with only about 5% due to internal corrosion). However, excavation damage accounts for approximately 23% of all safety incidents (vs. 15% in gathering) . Further, material failure such as malfunction of control equipment, faulty pipe seam welds, ruptured seals, and broken couplings are the root cause of about 18% of incidents. Finally, 11% of problems are caused by natural forces such as movement of the earth, flooding, high winds, and even lightning. The balance is due to human error and other damages.
NYSE:TPP - Teppco
Interstate natural gas pipeline companies
NASDAQ:TCLP