BTE market cap is less than HTE CNE PWE etc.
Does this mean it has to continue to find another trust to merge with or run the risk of being taken over by a bigger co. ?
Mergers seem to be running all through the Trust as if it was a normal and expected process of doing business. Was just posted on CNE board that it "usually" did about four mergers a year and was always looking for more. What are we going to end up with...four or five very large oil cos. like CVX XOM COP etc ? If so how soon would it take? I would think as cos. got bought out at premiums that a major wealth building engine was running full tilt here in Cnanda.
In the quote below you are saying that you use RLI to see if the total reserves have increased via asset purchases or drill bit, right?
"One of the key indicators I use to evaluate Canroys is whether the life of reserves (as shown in annual reports) has stayed the same or increased.
If the answer if yes than the energy trust has replaced the production sold during the previous year or acquired assets that give them more total reserves.
If the reserve life number gets smaller I look to sell the trust units. Almost all good Canroys replace what they sell and then some."
"The point of your response puzzles me. No one uses a Reserves per Unit to measure anything. It means nothing."
That is a strong statement, just because you don't care what you are buying in addition to the income stream that doesn't mean no-one else is using Reserves per Unit as one of the factors in the evaluation of an investment.
"Next you don't even quote me correctly. My comment about Reserve life is that it is one key indicator that can quickly measure whether the company has an adequate capital investment program. One must also look at production levels as well as a host of other items but if Reserve life is declining then currently financial performance may be overstated since the capital program is not generating enough reserves to replace production."
RLI is not telling you if the cashflow per unit generation power is going down via dilutive acquisitions aimed at maintaing or increasing RLI. Cashflow per unit is dependant on a number of factors one of the major ones is Reserves per Unit - these are trusts producing oil & gas from their reserves base.
"I really have no time for someone who wants to look like an expert by saying someone else is wrong."
All I am saying is that your relience on RLI is ill-informed.
One of the dandy things about Baytex is that it has a contract with Frontier Oil who buys their heavy oil (delivered by pipeline). Baytex dilutes the heavy oil with light oil and gas liquids so that they are able to get close to the Light Sweet Crude price for their heavy oil. They do, indeed, have great management.
Paramount Energy Trust, a natural gas Canadian trust, currently is out of favor because natural gas is also, and has a yield of aboutr 16%. Their management has increased their cash flow by 50% with hedging contracts, and they have stated that they will be able to maintain their dividend for the foreseeable future.
I am deciding whether to increase my holding of BTE, or to open a position with CNE.
What do you guys think? I prefer not to put all my eggs in one basket, and diversifying netween the 2 seems to "pread" out the risk a little.
The point of your response puzzles me. No one uses a Reserves per Unit to measure anything. It means nothing.
Next you don't even quote me correctly. My comment about Reserve life is that it is one key indicator that can quickly measure whether the company has an adequate capital investment program. One must also look at production levels as well as a host of other items but if Reserve life is declining then currently financial performance may be overstated since the capital program is not generating enough reserves to replace production.
I really have no time for someone who wants to look like an expert by saying someone else is wrong.
I orginally bought Baytex in January at $17.32, but still liked it enough last week to double my holdings at $19.95. RBC Capital Markets rates it "Outperfrom, Average Risk". Baytex has good management, a low POR of 54%and proved RLI of 7.6 years (P+P RLI of 10.4 years). The low POR offsets the medium length RLI for me, as I generally like longer RLI. It is also 70% oil and 30% NG and I like oil price prospects. Baytex will make tons of money with oil at $70+. Finally, if you read the last few days' posts, you'll see Baytex is also in oil sands.
Hi Sully - I originally bought some BTE at 17.05 for my mother in law right after it was listed in US. Thanks for the rec.
Right now the only canroy I own personally is HTE, and I like its 14% yield, but want to diversify within the sector a bit. BTE still a good buy at 20+? I think so, but appreciate your thoughts.
OK, but what about "cash flow". Many components and complicated.
POR can be meaningful, meaningless, or mis-leading depending on how cash flow was calculated for the period in question.
Typically when a CANROY increases the number of units though a secondary offering, it uses the proceeds to purchase new reserves. In order to maintain the distribution it must increase production. The Reserve Life Index (RLI) is the number of years of production remaining given current reserves at current levels of production. Just doubling units without acquiring new reserves would mean doubling production to maintain distribution levels so RLI would be cut in half. If RLI does in fact remain stable (show no depletion) or grow year over year, then it means management has made smart acquisitions. Note that ideally these acquisitions are made without issueing new trust units from excess cash flow. This is one reason Baytex's low payout ratio is so attractive. Perhaps I'm missing your point?
Looking at RLI change year over year in isolation is not very useful. For example to maintain RLI a no-sustainable trust could have doubled trust units outstanding, which means their all important Reserves/Unit have most likely have gone down significantly. You want trusts that are increasing Reserves/Unit and are increasing production, not simply a growing RLI trust.