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Enerplus Corporation Message Board

  • lizahuang54321 lizahuang54321 Feb 22, 2013 11:01 AM Flag

    not 'silly cheap' - most ex-Canroys in the same boat

    ERF, PWE, PGH, AAV, Petrobakken, Zargon, Bonavista, Perpetual, etc, not to mention Progress, Daylight, NAL before they were acquired at low prices.
    Saying one is silly cheap ignores the fact that they are all facing profit issues (escalating costs, relatively low
    commodity prices) and have a history as trusts in paying out more than covered by operational cash flow.
    No doubt a few more will be acquired but likely not at large premiums.
    Saying ERF is 'silly cheap' because it is down so much is silly when almost the entire sector is in the same boat.
    There have been a few well-managed exceptions: BTE still doing well despite very low prices for its heavy oil, Peyto (the best low cost NG producer), Bonaterra.

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    • When I fell into this Can-Roy trap 5-6 yrs ago I narrowed it down between BTE (Baytex) and HTE (Harvest Energy)...I picked HTE and we all know how that FIASCO turned out...I sell ERFcovered calls every month to juice my dividend and its made a bad situation not quite as bad...these entities are losers any way you slice it...The cHTE goon squad ran the stock down to $3 before they sold it to the Koreans for $10 a share...

      • 1 Reply to mr_ortooglo
      • Yes, with a few exceptions most of the group have been disasters for the past 5 years or so.
        Contrast with the US MLP sector and it's night and day. The Alerian MLP index sets new all time highs almost every month. The Alerian total return index (ticker ^AMZX) was started in 1997 with an initial value of 100. Today it stands at 1380. So a 14 bagger in about 15 years of the worst investing decade most have seen in their lifetimes. No other investment class comes close over the same period. Luckily I have much more of my investments in MLPs than in ex-Canroys.

        Consider one ex-Canroy which has done well and which I didn't mention. The old Provident (PVX) was bought by Pembina Pipeline with the merger resulting in a capital premium plus nice increase in dividends to PVX holders. Also consider other Canadian pipeline/midstream companies: IPL-UN.to and KEY.TO. Both still raising distributions. Those three being midstream and pipeline operations and more comparable to the largest part of the MLP sector. The US E&P MLPs while not disasters like the ex-Canroys have mostly been laggards relative to the MLP sector as a whole with slow distribution growth.

        That is the lesson. For several years, the money to be made has not been in the E&P sector (despite high commodity prices compared to some years ago, drilling costs have increased even faster). Rather pipelines and midstreams have been the moneymakers.
        Instead of ERF, you should have been in companies like Pembina or MLPs like EPD, SXL, PAA, MMP, GEL, MWE, OKS, NGLS, ACMP and many other huge winners.

    • Yeah BTE is the only one that seems to be doing reasonably well that I could find. Not sure if it was a Canroy or not though. You make good points (as usual)

      • 1 Reply to rhianni
      • BTE was a Canroy. In all the names I mentioned above, Petrobakken was the only non-Canroy but it is a high dividend player so I included it as being relevant.
        The main one I didn't mention is Crescent Point which has also held up pretty well, but there are a lot of people who think it will come down too - personally I am not convinced they are right, so I would include it in the small list of the exceptions.
        When you look at the list of E&P ex-Canroys which are still around or which got acquired in the last year, about 75% of them have collapsed like ERF, only 25% bucked the trend.
        So the people here who imply ERF is 'crazy low' priced ignore the fact that it's not just ERF, it's almost the entire sector and that should tell them they are wrong.

 
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