Jan 13, 2002; Why is research analyst Kurt Wulff smiling?

By Todd Mason

One of his stock picks, San Juan Basin Royalty Trust, announced last month that
it would skip its monthly cash distribution because of lower natural gas prices
and higher capital spending. The trust warned investors to put an asterisk after
the January payout as well.

San Juan Basin shares fell 15 percent on Dec. 21 to a 52-week low of $8.53. The
stock rebounded to close Friday at $9.37.

Which brings us to Wulff, who may be the last analyst in America to follow
royalty trusts. He knew that the news wasn't nearly as grim as it sounded. The
analyst rated San Juan Basin as an "unusual opportunity" on his Web site
(www.mcdep.com) on Dec. 21.

He recommends San Juan as a buy today, although he cautions that gas prices may
stumble again.

"Don't buy in all at once," said Wulff, owner of McDep Associates, an
independent research firm. "Hold back some cash in case there's a surprising
weakness in gas prices." Wulff was a top gun at Donaldson, Lufkin & Jenrette in
energy's heyday in the 1970s and a major player in the takeover battles of the
1980s.

Royalty trusts also date to the proxy wars. Raider T. Boone Pickens championed
trusts as a superior method of channeling royalty income and drilling tax
advantages to investors. San Juan Basin collects a 75 percent royalty interest
in its namesake field in New Mexico while leaving the operations to others.

Robert M. Bass is a fan. An investment group led by the Fort Worth billionaire
owns 28.1 percent of San Juan shares, according to the group's latest Securities
and Exchange Commission filing.

The Bass group began selling San Juan shares after they hit a high of $18 in
May.

"They bought a lot of stock under $10," Wulff said. "They peeled off a lot of it
at $18, $16, $15, $13 and $11. I'd be surprised if they're selling under $11."

Wulff estimates that San Juan shares should fetch $13.50 based on its income
potential. The analyst updates his calculation weekly on his Web site, using
futures prices to gauge San Juan's potential.

The missing distribution in December was an aberration, Wulff says. San Juan's
drilling budget jumped from $21.5 million in 2000 to $35 million last year.
Although the development costs hurt distributions, Wulff expects the new wells
to generate more royalties and higher distributions in the future.

Weak gas prices also played a role, and San Juan reported a lower average price
per thousand cubic feet than most gas producers did.

"I know it looks low," said Lee Ann Anderson, the Bank One vice president who
serves as San Juan's trustee. "We wondered about how to better explain it."

San Juan Basin subtracts expenses from revenues before calculating its average
gas price. Anderson cited unusually high expenses as a principle factor in a
weak average price in October, which was the month covered by the December
distribution.

January's cash distribution will fall short as well, Anderson said. The trust
wound up $2.3 million in the red in October. The trust must pay off the deficit
before resuming distributions.

It's no biggie, Wulff says. Now you know, too.

(Fort Worth Star-Telegram - Knight Ridder/Tribune Business News
via COMTEX via www.freerealtime.com)