Galbraith Warns Investors Of Bleak Outlook For Whiting USA Trust I (WHX)

NEW YORK, April 30, 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 is 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 has failed up to now to recognize the fact that WHX expects to make only nine more quarterly distributions, and to terminate in August 2015 with no residual value.

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 6.78 MMBOE, leaving 2.33 MMBOE available for the Trust to distribute. WHX has no assets besides the NPI in the remaining 2.33 MMBOE. Once the remaining 2.33 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 2.33 MMBOE by June 30, 2015, and deliver returns to unit holders over 9 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 value of the dividend over the last four quarters.ⁱⁱ  However, these derivative contracts expired in 2012 and the dividend paid on 3/1/13 was the last one that will include these profits (and the Trust will have no future derivatives positions).ⁱⁱⁱ  As a result of the declining production and the expiration of the hedges, Galbraith expects that future distributions will be significantly smaller than last quarter's distribution.

For the above reasons, Galbraith has a short position in WHX and values the Trust's total future distributions at no more than $4 per unit. Galbraith believes that at a current market valuation of approximately $7 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 3/15/13 pp. 10-11, 28 and 8-K filing on 2/7/13 for details of trust and remaining distributions
ⁱⁱ See distribution summary at Whiting website: http://www.whiting.com/whiting-usa-trust-i/dist-summary/
ⁱⁱⁱ See 10-K filing on 3/15/13 pp. 11, 29

SOURCE Galbraith Global Investment Management, LP

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