Today I started the building of a new position in the VOC Energy Trust ($VOC) by trading 5% of my cash position for units costing $12.68.
The exact details of the trust are nuanced and I will get into them later. The high level overview is that VOC has profit rights to a percentage of several oil & gas related assets until a pre-arranged expiration date or a total level of production is attained and sold, whatever comes first. I’ve reviewed the arrangement and believe that at current pricing, with the amount of time and volume remaining to the trust, it’s a no brainer investment.
At $12.68 and the most recent distributions to unitholders, the trust was yielding 12.3% annually.
If you look up the chart, you’ll see some extreme volatility. That makes perfect sense, as VOC is a leveraged play on the price and volume of oil. But over the remaining life of the trust, I think today’s prices are a solid bet.
More detailed analysis will follow. Cash stands at 23%.
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Does this mean the unit price eventually goes to $0?
More or less, think like a bond with closing maturity. Although its value fluctuates much more.
I see oil and gas trusts being advertised on websites as if they were penny stocks.
Hence, I assume that many are poor investments. Not to say they are all bad, though. You may have found a decent trust, but I hope you began your research with at least some skepticism of the valuation of their assets.
U.S. Energy Trusts are more like an annuity than a bond. Since they aren’t allowed to acquire new assets like Canadian Trusts, they eventually go to $0.00
It looks like VOC has about 10 years left of assets, if they are lucky and the well doesn’t dry up early.
So, you’d need to be getting 10% a year in dividends just to get your money back. Ouch.
I see now why they run advertisements to get people to buy into their trust.
VOC has at least 15 years of assets left, tau.
Sorry- I meant they have 10 years left of production at their current rate of production
Why not buy $NLY.Pays a similar dividend
and doesn’t expire-well unless they
go broke.
NLY is a play on mortgages and interest rates. VOC is a play on oil.