14, 2002; Natural Gas Resource Value Declines Less Than Daily Commodity Price
price is the most volatile natural gas commodity price while the six-year quote,
now publicly available from the New York Mercantile Exchange prices, post Enron,
is least volatile. When interest
rates remain steady and operational measures are unchanged, the 72-month
average, or six-year "strip", is a close indicator of change in
present value of future cash flow from natural gas production.
Though six-year quotes have been available for only a few weeks we have
been calculating present value on a weekly basis for two years.
The full record is on www.mcdep.com.
While present value peaked about the same time as daily price, it has not
declined to the level of two years ago, as has daily price (see Chart).
the flatter trend for Cross Timbers Royalty Trust probably reflects the
fact that most of CRT's value is in a net revenue interest while the other two
trusts have net profits interests in natural gas production.
The net revenue interest is particularly advantageous at a time when the
operator of the properties is spending on new development.