4 replies to this topic

[PorkLoin]

The Natural gas price decline has been rough on the trusts. SHN, THY - ouch, though they've come back a little.

PEY - not an impressive chart, for the last year, but it's down in "good value" range. The trust has a very low cost of production, like $2.25 CDN per barrel of energy equivalent. Hard to beat that. Focused on long-term growth by drilling, rather than paying big bucks for producing assets. Keeps a lot of money for growth; doesn't pay the dividends most others do, but this is my pick for long-term growth, though it's heavy on NG.

AET, NAE, top quality and it shows. CF = low risk, electric power is more stable in pricing than oil & gas. It's original parent company Calpine, painted with the Enron brush (not altogether unfairly), isn't a threat anymore.

Lots of merger activity in the past year. CNE is a merger product, and is looking good. Light oil production is a big plus. HTE also is from a merger, and has been weaker, but pays a big dividend. It's paying out over 90% of distributable case in dividends, though. Oh-oh. Heavy oil production is a negative.

DAY is going to merge, and I'm content to sit and collect the big yield. Same for EEE, though it's merging with Pengrowth, which I view unfavorably overall. Nice move up in EEE, courtesy of Pengrowth paying a high price. EEE shares get an additional special 30 cent dividend. I'm gonna hang in and collect it, then see what the new trust looks like.

NVG quit trading Aug. 14 since it merged with Clear Energy to form Sound Energy Trust. Sound is SND/UN.TO and closed today at $8.42 so no real change yet. I like the new trust, and it's paying 14.3% in dividends.

BPT is a US trust, and has been unbeatable in the long run. Big news about the shutdown of the corroded pipeline pipes, but look at the Chaikin Money Flow - really positive and the MACD looks bottomy.

There's risk to all of these (except maybe CF). If crude oil takes a big hit, so will the trusts. NG has been weak, and we'll see. COT for both have the Commercials short like a big dog right now. Worldwide economic slowdown might occur. There are some potential negatives. If the energy bull market is over, then these are yesterday's winners.

Yet the yields are big, and when we get price spikes down, that's the time to buy. It's been a year for patience, versus the prior four. More later.

Best,

Doug

Edited by PorkLoin, 21 August 2006 - 11:09 PM.

[PorkLoin]

Portfolio of $10,000 divided roughly equally among the 11 trusts.

It's nice that the dividends are paid monthly. Reinvesting them ups the yield. 10% yearly yield, if reinvested monthly, increases to 10.5%. 12% becomes 12.7% and 15% goes to 16.1%.

Some US trusts for consideration:

BPT yields 13.4%. Cirrus brought it this one up.
PDS yields 9%. MSS gets the credit here.
MSB 8.1%
SJT 6.8%

[PorkLoin]

Harvest Energy to Acquire Refinery for C$1.6 Billion

Aug. 23 (Bloomberg) -- Harvest Energy Trust, a Canadian oil and natural-gas producer, agreed to buy a Newfoundland refinery from Vitol Refining Group BV for C$1.6 billion ($1.44 billion) to create a steadier stream of cash flow for its unit holders.

The refinery can process 115,000 barrels of crude oil a day, Calgary-based Harvest said today in a statement. The purchase also includes 69 filling stations and other fuel businesses, such as a home heating service with 20,000 customers, the trust said.

Canadian income trusts are snapping up assets so they can keep generating cash needed to make payments to their unit holders. Harvest has completed two other acquisitions, valued at about C$2 billion combined, since February. The Newfoundland purchase will make Harvest the first Canadian trust that both produces and refines oil.

``They've picked up a standalone business that offers some diversification and improved sustainability,'' said Jill Angevine, an analyst at FirstEnergy Capital Corp. in Calgary who owns an undisclosed number of Harvest units, which she rates at ``market perform.''

Canadian income trusts are popular because they make regular payouts that investors can hold in tax-deferred accounts. Those in the oil and gas business, like Harvest, have to keep adding assets to at least maintain payouts as their existing wells are depleted.

Longer Asset Life

Harvest said the Newfoundland plant, located in Come by Chance, will continue to produce fuel for more than 30 years, providing a longer-term source of cash. The acquisition is expected to boost per-unit cash flow by about 10 percent next year, the trust said.

Harvest expects to distribute about 60 percent of its cash to investors after the transaction closes, down from 80 percent currently, Chief Financial Officer Bob Fotheringham said in a telephone interview. The trust plans to issue units to reduce debt, he said.

Units of Harvest fell 56 cents, or 1.7 percent, to C$33.40 at 11:24 a.m. in Toronto Stock Exchange trading. The units have dropped 10 percent this year.

The Newfoundland refinery has fuel exports of more than C$2 billion a year, plant manager Gunther Baumgartner said in Harvest's statement. The plant and related businesses generated cash flow of C$214 million in this year's first six months, Harvest said.

Exports to U.S.

Geneva-based Vitol, a closely held energy trader, decided last year sell the refinery, which it purchased in 1994, the Canadian Broadcasting Corp. reported in December. Vitol will continue to supply oil to the plant, which exports as much as 90 percent of its output from the eastern Canadian province to the U.S., Harvest said.

Interest in refinery assets has jumped as profit margins on gasoline and other oil-based fuels widen. Lyondell Chemical Co. said on Aug. 16 it would pay about $2.1 billion to buy out its partner's 41 percent stake in a Houston refinery.

Harvest said it's paying C$13,900 per barrel of refining capacity. Houston-based Lyondell is paying about $20,000 per barrel, a record for U.S. refining assets, according to Roger Read, an analyst at Natexis Bleichroeder Inc.

The transaction is expected to close in mid-October, Harvest said. Canadian Imperial Bank of Commerce advised the trust, and Deutsche Bank AG advised Vitol.

Harvest said it expanded its credit facilities to C$2.2 billion to provide initial financing for the deal.

The trust was formed in July 2002 and sold units to the public later that year.



I don't know about this refinery business, but if mgmt. is correct then a 10% raise in cash flow would be good. The chart has been sideways - the market perceives some risk here. Harvests "targeted payout ratio" is 55-80%, and at 79% it's right at the upper edge. Over 13% dividends are nice.

Doug

[PorkLoin]

I'd rather have the Commercials be net long, but hey, they're producers and they hedge.



Whew... This chart gives me pause. The Small Specs are permabulls and the Commercials are short, bigtime. If there's any consolation, it's that they are "45% bullish."



The Large Specs have got right with the program and our little uptrend in $NATGAS, but not all that much has been gained. Nice move up in July, but then well back down. Now we've got a few days going up, helped to a significant degree by the expiration of the August futures contract. So, I feel this thing has yet to prove itself. September futures made a nice double bottom on Aug. 17 and Aug. 21, 80 cents higher than the low in July. If it keeps on going, great, fine, and it'll really help most of the trusts.

I'd like to see a move up into November or later, but price has a lot of work to do.

Doug

[PorkLoin]

One other thing to consider for the Canadian trusts as well as Canadian companies, period, is the exchange rate with the US. Above is the Canadian Dollar in terms of the US Dollar. $C has been gaining on the $US as the bull in resources goes and as Canada's balance sheet gains on that of the US.

This isn't uniformly a windfall, necessarily, since many of the trusts make most of their money selling to the US, and if oil, for example, is priced in US Dollars then it equals less and less CDN Dollars as that currency rises.

However, for share prices and dividends in the CDN currency, we US holders have indeed benefitted overall. If the resource bull has gone away, this effect ought to fade away or even reverse, but IMO that remains to be seen.

Doug