Archive for the ‘GULTU’ category

Gulf Coast Ultra Deep Royalty Trust (GULTU) – A Very Special Situation

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In a recent interview (here), T. Boone Pickens was asked about Gulf Coast Ultra Deep Royalty Trust (GULTU) and he immediately changed subjects. Odd, isn’t it, that a guy who has a lot to say about everything all the sudden doesn’t want to talk?

It was his reaction that piqued my curiosity. So I dug in. And what I learned makes me believe Gulf Coast Ultra Deep Royalty Trust is a very special situation.

GULTU was created in connection with Freeport-McMoRan Copper & Gold’s acquisition of McMoRan Exploration, which was completed on June 3, 2013. Immediately prior to the merger, McMoRan created a trust and conveyed a 5% gross overriding royalty interest in the future production from 20 specified shallow water ILTC (Inboard Lower Tertiary / Cretaceous) exploration prospects located on the Shelf of the Gulf of Mexico and onshore South Louisiana.

The nature of the overriding royalty interest means that GULTU owns a share of future production yet doesn’t have to pay any of the operating expenses or development costs. So the holders in GULTU are getting a free ride on the back of McMoRan’s exploration and development efforts in the Gulf and Southern LA.

There are a few things that are notable about the Trust: