NEW YORK, May 29, 2013 /PRNewswire/ -- Galbraith
Global Investment Management, LP ("Galbraith"), issued a warning
today to investors of Whiting USA
Trust I ("the Trust" or "WHX") (NYSE:WHX) that Galbraith believes
WHX's current unit price remains divorced from what it believes is
the inherent value of the Trust. As a holder of a short
position in WHX, Galbraith believes that the market continues to
fail to recognize the fact that WHX expects to make only eight more
quarterly distributions, and to terminate in August 2015 with no residual value.
Galbraith expects that the total amount of these distributions will
be significantly less than the current stock price.
WHX was formed to acquire and hold a term net profits interest
("NPI") in various oil and natural gas properties for the benefit
of its unit holders. The NPI entitles WHX to receive 90% of the net
proceeds from the sale of a total of 9.11 million barrels of oil or
oil equivalent ("MMBOE"). To date, WHX has distributed proceeds
from 7.04 MMBOE, leaving 2.07 MMBOE available for the Trust to
distribute. WHX has no assets besides the NPI in the remaining 2.07
MMBOE. Once the remaining 2.07 MMBOE have been produced and sold,
WHX will terminate and have no residual value.i
WHX is currently expected to produce and sell the remaining 2.07
MMBOE by June 30, 2015, and deliver
returns to unit holders over 8 distribution periods. WHX has
advised they expect production yields to decline by approximately
10% annually for the remaining two years of the Trust. In
addition, WHX has historically used derivatives contracts to hedge
the price of oil and gas. The profits from these contracts
accounted for an average of 17% of the profits in
2012.ii However, these derivative contracts
expired in 2012 and the dividend paid on March 1, 2013 was the last one that included
these profits (the Trust will have no future derivatives
positions).iii As a result of the declining
production and the expiration of the hedges, Galbraith correctly
predicted that the May dividend would be significantly smaller than
the February dividend, and believes that future distributions will
be less than the May distribution.
For the above reasons, Galbraith has a short position in WHX and
values the Trust's total future distributions at no more than
$3.40 per unit. Galbraith believes
that at a current market valuation of over $5 per unit, WHX is overvalued and, therefore,
investors holding a long position will lose a substantial portion
of their investment.
Forward Looking Statements
This press release contains "forward-looking statements."
Generally, the words "anticipate," "believe," "estimate,"
"expect," "intend," "may," "predict," "project," "plan," and
similar expressions identify forward-looking statements.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements to differ materially from any future
results, performance, or achievements expressed or implied by such
forward-looking statement. Consequently, no reliance should
be placed on any forward-looking statements contained herein and
the reader should consider any such forward-looking statements only
as Galbraith's current beliefs as of the date of this press
release. Even if these beliefs change because of future
events or circumstances, Galbraith declines any obligation to
publicly update or revise any such forward-looking statements.
i See 10-K filing on March 15,
2013 pp. 10-11, 28 and 8-K filing on May 7, 2013 for details of trust and remaining
distributions
ii See distribution summary at Whiting Petroleum
Corporation's website:
http://www.whiting.com/whiting-usa-trust-i/dist-summary/
iii See 10-K filing on March 15,
2013 pp. 11, 29
SOURCE Galbraith Global Investment Management, LP