Securities Lawyers Blog
The investment attorneys with Gana Weinstein LLP are investigating and representing investors who were inappropriately recommended oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. One royalty trust that has suffered substantial declines is Hugoton Royalty Trust (Stock Symbol: HGT). Over the past year the trust has suffered a 77% loss in value.
Hugoton Royalty Trust was created in 1998 when XTO Energy Inc. conveyed 80% net profits interests in gas-producing properties located in Kansas, Oklahoma and Wyoming to the trust. The trust was created to distribute monthly net profits related to the 80% net profits interests.
Oil and gas royalty trusts, like master limited partnerships (MLPs), invest in the energy and commodities sector. However, unlike MLPs, royalty trusts generate income from the actual production of natural resources such as coal, oil, and natural gas and therefore the cash flows from royalty trusts are subject to swings in commodity prices and production levels causing them to be very inconsistent. Royalty trusts have no physical operations, no management, and no employees. Instead, royalty trusts are merely financing vehicles run by banks that trade like stocks. Another company actually mine the resources and pay the royalties to the trust.