DiabloD3 (68.44)

MARPS: The case for Royalty Trusts: Marine Petroleum Trust

April 01, 2009 – Comments (4) | RELATED TICKERS: MARPS

Marine Petroleum Trust (MARPS) is a royalty trust that exists to administer the rights for oil and natural gas leases in the Gulf of Mexico so the rights holders (e.g., share owners in the trust) can profit from the oil and natural gas drilled for by Chevron (formerly Gulf Oil, Gulf gas stations and products were spun off into their own holding company separate from the license to drill Chevron now owns) and Elf Exploration.

The share price for the trust has dropped 45% due to reduced oil demand and the natural gas market collapsing combined with the recession, yet total revenue for 2008 is up 15% from 2007 and gross profit is up almost 4%.

The real shining point for MARPS is the yearly return on equity averaged over the past 5 years is 185%, and the return on equity for 2008 alone is over 353%. Combine this with the fact that the trust has no short or long term liabilities and a dividend yield of twice that of the S&P 500's average (factoring in Q4 2008 for both) makes this a real no brainier

The market has under-valued this stock so badly that I'd buy this stock for double what it is now ($17.11). In addition, even after the dividend cut it recently suffered, it still has amazing dividends, enough so to be considered for a dividend powerhouse.

Demand for oil is now increasing again (in the face of clean energy demands), and natural gas has clearly bottomed and is climbing again. This stock can only go up from here.