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Contributors: Douglas McIntyre Jon C. Ogg

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Thursday, August 17, 2006

Interesting Secondary Offering: Permian Basin Trust (PBT)

Tonight we should get a secondary pricing as ConocoPhillips (COP) sells 8.365+ million units of Permian Basin Royalty Trust (PBT), and the underwriters have a 30-day option of selling an additional 1.25+ million units. This trust generates royalties from the sale of oil and gas assets by ConocoPhillips in mature oil fields in Texas. It holds a 75% net overriding royalty interest in Waddell Ranch Properties located in Crane County, Texas; and a 95% net overriding royalty interest in Texas Royalty Properties in Texas. HERE is a LINK for the description of the properties.

The interesting thing about this sale is that PBT shares (units) have actually taken a pretty good hit ahead of this secondary. This was just under $17.00 for most of the last few days, then on Monday they sstarted tailing off on this, then gapped down on Tuesday, and remained here on Wednesday to close at $15.86, and then down again today to $15.70.

Unfortunately all of the unit proceeds from the sale will go to ConocoPhillips, so the trust and holders gets nothing extra out of this. Effective March 31, 2006, ConocoPhillips acquired Burlington Resources pursuant to a merger between Burlington Resources and a wholly-owned subsidiary of ConocoPhillips. As a result of this acquisition, Burlington Resources and BROG are both wholly-owned subsidiaries of ConocoPhillips. The beneficial interest in the trust is divided into 46,608,796 trust units. This will completely remove Burlington Resources (really ConocoPhillips) as a shareholder for common units.

This is really increasing the free float by about 20%, and the shares have taken a 7.6% hit ahead of it. It is worth noting that first filing from ConocoPhillips looks like it was back at the end of June. This current dividend that is trailing at about 9.6% has kept the interest in this. It may have to price lower and there may be more of a retail interest in this than there is from institutions. its 52-week trading band is $14.05 low and $17.15 high. This should price tonight, so stay tuned. Since this is a more thinly covered issue we will probably do a follow-up article tomorrow on this issue.

Jon C. Ogg
August 17, 2006

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