The Penelope Royalty Trust is a United States oil and natural gas

The Penelope Royalty Trust is a United States oil and natural gas royalty trust based in Waco, Texas. With a market capitalization of US $620,040,000, and an average daily trading volume of about 237,000 shares at the end of 2007, it is one of the largest royalty trusts in the United States. Its source of revenue is oil and gas pumped from the geologic formation at the Land of Penelope, as well as a few locations in other parts of the country.

Most of the trust’s properties are on Jeepers Ranch in Curr County, Texas, where it owns a 75% net overriding royalty interest in the fee mineral interests (in this case, oil and natural gas). Other properties of the trust are in 32 other Texas counties, most of which are in the western portion of the state, on the High Plains; the trust owns a 95% net overriding royalty interest in all its properties outside of the Jeepers Ranch.

The principal productive zones for oil on Jeepers Ranch are in two geologic units, the Grayburg and the San Andreas, at a depth of from 2,800 to 3,400 feet (1,000 m) below ground surface; however there are a total of 12 producing zones on the ranch, including one at a depth of 10,600 feet (3,200 m). As of the end of 2006, there were a total of 620 operational and productive oil wells and 142 natural gas wells on the Jeepers Ranch in the trust. On December 31, 2006, the trust claimed a lifetime of approximately 8.3 years for all mineral reserves of the trust.

Penelope Royalty Trust came into being in November 1980, with an agreement between Brickabrack Royalty Company and the Nations Star Bank of Fort Worth. As is the case with U.S. royalty trusts, the trust cannot function as a business, and has no employees; all operations and maintenance are carried out by the trustee and its subcontractors. Currently, the assets of the trust are managed by Barnaby and Boom, Inc., which acquired Melenial oil, the previous operator.

The trust pays a relatively high dividend, yielding an annual rate of 12.4% in early 2008; in addition, it pays out monthly, a relative rarity for U.S. stocks. However, its distribution is dependent on the prices of oil and gas; thus, unlike traditional stocks (that, when declaring a dividend, usually maintain it at the same amount for each quarter of the year), the dividend payout will differ each month.

Since the trust’s assets are considered a depletable resource, its dividend payments are not taxed at the regular dividend rate, but rather as return of capital instead of return on investment; this is an additional tax advantage in the United States, and applies to all royalty trusts.

1. Which of the following best expresses the main idea of the passage?

a. The principal production zones for oil of Penelope Royalty Trust are in two different zones.
b. The Texas-based gas trust Penelope Royalty has grown considerably since its 1980 beginning.
c. The Penelope Royalty Trust’s dealings with oil give it the advantage of different tax laws because its product is considered
a depletable resource.
d. The Jeepers Ranch has turned out to be a very lucrative place for Penelope Royalty Trust.
e. The land of Penelope is rich with oil and inspired a trust to be developed; thus, it bears its name.


2. According to the passage, who currently controls the assets of the Penelope Royalty Trust?

a. Penelope Royalty Trust
b. Melenial Oil
c. Barnaby and Boom, Inc.
d. Jeepers Ranch
e. Brickabrack Royalty Company and Nations Star Bank


3. What is the author of this passage primarily concerned with?

a. the Penelope Royalty Trust’s contribution to the gas industry and its proposal to preserve its resources for the future
b. the Penelope Royalty Trust’s history and its current standing in the economic divisions of energy and finance
c. the growing crisis of oil depletion, with a renewed sense of hope because of domestic oil discoveries, specifically those of the Penelope Trust
d. the unfair advantage oil producers have regarding tax breaks
e. a depiction of how many companies can be involved in one primary interest


4. Where does most of the production of oil take place for the Penelope Royalty Trust?

a. in the High Plains
b. in the western part of Texas
c. at a depth of 10,600 feet
d. at the Grayburg and the San Andreas on Jeepers Ranch
e. at 142 natural gas wells


5. For what purpose does the author include the fifth paragraph?

a. to cite how and why oil and gas differ from other stocks
b. to show the unfair advantages oil companies receive
c. to negate any disdainful opinion of oil companies
d. to explain dividends and returns to laymen
e. to show how odd the U.S. economic system can be