to get in? I'm spoiled. I bought SJT below $20 (now mid 40's)
This looks like a good play even if the share price stays about the same. Does the divvy look secure for the future?
Most of the current payouts for the Canadian Engergy royalty trusts are based on energy prices in the spring time period. No one except ERF and PWI have increased their payout significantly to make it more inline with the substantial increase in revenue they are and will be experiencing.
One would think tht PTF would look to increase their distribution by 40 to 50% starting in 2006 due to the high natural gas prices which do not look like they are going down in the near future.
Yes, but they are basing all of their numbers on a 2006 average price for NG of, and I quote, "$7.50 (US$/Mcf)".
I think their estimate might be a little low considering NG is now above $15. Even if NG dips back down to $12 for most of Jan-Mar, it would then have to slide to around $5 through all of Apr-Sep to get back to around a $7.50 average YTD. Seems unlikely to me.
Trusts play games with their payout numbers, so you should be comparing apples to apples, here is what RBC had to say about PWI including their REAL payout ratios:
We rate PrimeWest Underperform, Average Risk with a 12-month price target of $29.75. Based on our commodity price forecasts for 2006, which are low versus current futures strips, we anticipate a simple payout ratio of 89% and an effective payout of 156% with capital expenditures considered. These simple and effective figures compare to 69% and 110%, respectively, for our coverage universe. Our estimates also indicate 2006 net debt to cash flow of 1.5x versus 1.0x versus the coverage universe. Detailed operational, financial and valuation data are provided in Exhibit 3 below.
Our target price represents a P/NAV ratio of 117% relative to our pretax 10% blow-down NAV of $25.34 under base case commodity prices and 94% relative to our $31.75 NAV under Nymex futures prices. We view these metrics as reasonable versus its peers, which reflect target P/NAV ratios of 141% relative to base case commodity prices and 113% relative to Nymex futures prices. Our target price also represents a multiple of 7.0 times 2006 debt adjusted cash flow versus an average of 6.8 times for the peer group.
Investment Risks (Impediments)
PrimeWest maintains a NYSE listing and has attracted strong interest from international investors, with its foreign ownership levels estimated to be in the range of 75%. Measures that may be contemplated by the Government of Canada with respect to the foreign ownership issue and the achievement of its tax revenue objectives could potentially curtail foreign demand for PrimeWest trust units over time.
Oil & gas trusts have historically been dependent on acquisition opportunities and the use of equity to partially fund acquisitions and internal development programs. To the extent acquisition opportunities and equity markets are constrained, financial results could be affected. Unanticipated changes in commodity prices, interest rates and foreign exchange rates may also materially affect financial results.
The tax efficiency of the business model is also dependent on status as a mutual fund trust under Canadian tax laws, which may be subject to legislative or regulatory changes that are not generally predictable.
Mentioned as a SIDELINE reference to energy
in general but the fuel burning in Canada
is being scoped out by the enviromentalist
and could benefit from coal burning as an alternative. Since these are not "Real"
canroys maybe not--you appear to be the expert. At least in terms of attempted shorting. If you can understand Options and
are good at shorting stocks then more POWER
to ya'. Good Luck!
Also alluding to Hedgeing a little on energy stocks like MEE. A nice investment now that Bush is helping it out in speeches concering