Message fro their investor relations dept. Dear NCE Petrofund unitholder:
Thank you for your e-mail dated July 18, 2001. I am pleased to have this opportunity to provide you with an update on NCE Petrofund and explain how developments in global oil and gas markets have affected both its price and its distributions. Recent events in oil and gas equity markets have served to remind us of the inherent volatility that exists in cyclical industries such as oil and gas. Consider that average oil and gas prices on a barrel of oil equivalent (boe) basis (natural gas converted at 6 mcf per barrel) in April, May and June 2001 were approximately 23% lower than the prices received from December 2000 to March 2001. This decline in oil and gas prices reflects a similar decline in NCE Petrofund's distribution per unit for July. Distributions are directly related to the price of oil and natural gas. When these prices decline, oil and gas royalty trusts' distributions may also decline. Due to the lower commodity prices, NCE Petrofund received lower revenues for the oil and natural gas it produces and paid a lower distribution for the month of July (accounting for the one-for-three unit consolidation on July 6, 2001). Consequently, the lower distribution contributed to a decline in the unit price. Indices that measure the performance of oil and gas royalty trusts show that the entire sector has experienced declining distributions and unit prices during the past few weeks. Nevertheless, please trust that management believes that the current unit price does not fully reflect the value of NCE Petrofund. Based on the Trust's net asset value, its monthly distributions and its historical trading ranges, there is evidence to suggest that the Trust's unit price should be higher. NCE Petrofund's unit price is dictated by the trading activity on the Toronto Stock Exchange and the American Stock Exchange. NCE cannot affect trading directly. We believe that the Trust is undervalued at these prices and we are continuing our investor relations efforts to inform investors about the value and benefits of NCE Petrofund. NCE Petrofund has several important strengths that will help it operate in the current market conditions: Based on a unit price of $15.00, the July distribution of $0.36 represents an annualized income yield of 28.8% and the trailing distributions represent an annualized yield of 31.4%. These are high rates or return that should appeal to investors. Based on the present value of its reserves as at December 31, 2000, NCE Petrofund's net asset value was $18.63. The Trust is currently trading at approximately a 20% discount to its net asset value. The Trust's portfolio of properties is diverse in terms of geography and features a balanced mix between oil and natural gas so that the Trust is not dependent on any one property. One important component of managing risk and volatility is proper diversification. Historical research has shown that a long-term investor's portfolio can benefit from including investments in oil and gas. Royalty and income trusts such as NCE Petrofund continue to be an effective way of investing directly in oil and gas, while returning high income potential. The oil and gas industry can be cyclical in nature and oil price fluctuations are not unusual. Total income distributions, income tax benefits and the advantages of portfolio diversification need to be considered when evaluating your investment. I hope this information has been useful for you. Thank you for writing tous.
Thank you for the post. I have more than doubled my postion in NCN, over the last 2 days. There are several trusts that I have decided to stay in for the long haul...3+years, NCN is one of them. ERF is another. The management of both these trusts are First Class. Within the next 60 days,I plan to add 20% more to my current holdings. If the $ is right in the next couple of days, I will add it all. Good Luck