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TIRTZ - Tidelands Royalty Trust "B"


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With the downturn in commodity prices, many royalty trusts are at the lows, but Tidelands Royalty Trust "B" represents a unique opportunity, given the current Trustee arrangement has put unnecessary pressure on distributed income and there are catalysts on the horizon including the Trust Indenture Expiration, along with putting pressure on the Trustee who is now beginning to observe that the administrative expenses have outgrown the life of the Trust. A full investment write-up is attached. Tidelands has oil and natural gas overriding royalty interests in the Gulf of Mexico.

 

Brief Summary:

 

- Southwest Bank is administering over 60% of oil and natural gas revenues to administrative expenses at Tidelands, including Audit, Trust Fees, Professional Services, Filing with the SEC and Printing Costs

- The units have 50% upside at current levels even if the Trust continues this excessive management of the Trust, as the Trust Indenture expires in 2021, forcing liquidation

- Other value scenarios include the Trust de-registering and reducing Admin expenses to sensible levels, or an immediate sale, which both drive shareholder returns between 40%-100%

- Last year the company paid 9 cents in distributions per unit holder, implying a trailing FY Current Yield of 8%.

 

SEE ATTACHED INVESTMENT WRITEUP

Tidelands_Investment_Proposition.pdf

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What is the actual mechanism for enacting any of these pre-2021 value-realization scenarios? Is there language in the indenture that allows unitholders to push for a sale or otherwise override trustee decision making before expiration? Absent that, what's the game plan? Can't credibly threaten to sue the trustee, since there's no way the economics of that pencil out on a $1.5 million market cap.

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What is the actual mechanism for enacting any of these pre-2021 value-realization scenarios? Is there language in the indenture that allows unitholders to push for a sale or otherwise override trustee decision making before expiration? Absent that, what's the game plan? Can't credibly threaten to sue the trustee, since there's no way the economics of that pencil out on a $1.5 market cap.

 

That is the question.  Clearly, the fees are excessive and benefit the Trustee, but what will stop them from milking (or slowly leeching) the cow?

 

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