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Schaefer’s “This Company Has Everything You Want As An Investor…”

Checking an Oil Royalty teaser for the Friday File, plus one buy in the Real Money Portfolio and updates on Franco-Nevada, Sandstorm, Douglas Dynamics, PCSB Financial, Ligand, Qualcomm, and Conduent. Phew!

Before I get into some updates on my Real Money Portfolio, I’ve got a quick look at a teaser that several of you have asked about: Keith Schaefer’s pitch for his Oil and Gas Investments Bulletin about a “perfect business model” and “everything you want as an investor.”

Here’s how Keith gets our mouths watering:

“Big Dividend.
“Zero Debt.
“Guaranteed Growth.
“This Company Has Everything You Want As An Investor….

“A Six Percent And Growing Royalty On Surging Permian Production.”

So it’s a dividend play, and Keith says they’ve been raising the dividend and that it is entirely based on production from the Permian, the West Texas oil field that is adored for its low cost production and huge remaining reserves (mostly because of the “stacked” oil and gas shale layers that have been found there). What else do we learn about it?

“I’ve uncovered a company that literally gets paid a royalty based on how much production is coming out of the Permian. This isn’t a leveraged producer that may or may not actually generate positive cash flow while growing production.

“This is a different kind of business model. In fact this is the perfect business model….

“This company has no debt, only a few employees and virtually no expenses. The only thing that this company needs to do is cash the royalty checks that keep arriving in the mail each and every month.”

OK, those of you who’ve been around for a while will probably remember that I have a certain weakness for royalties — nothing beats passive income, especially the kind you get to collect forever without worrying about your share of production costs.

And there are a dozen or so oil and gas trusts that trade in the US, so presumably he’s talking about one of those… any other clues?

“That royalty is not on all of the Permian.

“It is on a select portion of the core of the Permian. An area that is growing much faster than the Permian as a whole….

“… it increased its dividends all through 2016—even as oil prices plummeted to $27/barrel….

“This company has no business dealings outside of the low-cost Permian basin.”

So… do any of the clues get more specific for us? Well, not really… though there is this:

“… the dividend has gone up four quarters in a row.”

Which means, that ...

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