.... Once upon a time, energy stocks were glamorous. In the early '80s many big companies spun off their energy operations to raise cash — a move akin to the urge to do Web spinoffs during the Internet bubble. When the operations were oil- or gas-producing wells, deals were occasionally structured as royalty trusts. Think of them as holding companies created to do nothing but pass along income.

About a dozen royalty trusts have NYSE listings, but no one pays much attention. There's no investment banking revenue to attract brokerage firms. There are no executives with stock options and a story to tell. There aren't even any employees — just a few bankers hired by the trustee to mail out monthly checks. And, of course, oil and gas are classic 'wasting' assets. Eventually, the wells run dry, and your trust shares will be worthless. Despite all this, royalty trusts aren't disappearing as fast as you'd think. The audited reserve life of the trusts in my table averages only 10 years, but that's a conservative number. Oil production keeps improving, and higher prices would make it profitable to pump reserves that are marginal today.

Kurt Wulff, a former Wall Street analyst who studies royalty trusts, figures that new technology will more than double estimated reserve life. Wulff doesn't follow Sabine (its diverse holdings are a plus, but difficult to track). But based on current prices of energy futures, he thinks Cross Timbers, Hugoton and San Juan are trading today at an average 25% discount from present value. For more of Wulff's ideas, see www.mcdep.com.