Thursday, April 29, 2004
Take a look at NGT (Eastern American Natural Gas Trust). They pay about like SJT. They will be liquidated in 2013. They have a $20 zero-coupon treas bond associated with each unit so the risk of capital loss is minimal.
Cordially,
TwoHoot
....
I beg to differ. First, I admit I'm no expert but I looked at NGT. The Trust expires in 9 years. At that time you will get your $20 plus the salvage value of the gas interests. It has been suggested by other posters that will be around $1-2. So I assume I will get back what I paid if I buy it at current market prices. So all I really get is an income stream for 9 years. Right now it is paying around $1.60 per year(approx 7.5%) but if you assume NG prices remain constant that amount has to decrease over the nine years. The wells are being played out(you can look at the SEC reports and see the historical reduction in output) and IMO it is reasonable to asuume something like a 10% per year reduction will continue over the remaining term. That means you will get over the 9 years something like $10/11 in distributions.That's not much more than the interest you would earn from buying a 9 year treasury and you have the added risk that the price of NG gas could go down or the wells played out at a faster rate than I projected(I realize that the price coud go up and the wells could decrease at slower rate-I think the latter is relatively unlikely based on prior history and the fact that these are old wells--the trust is already over 10 years old). Just my thoughts. I appreciate it when others post interesting ideas so I though I'd pass along the results of my DD.
SI