Protected Principal Retirement Strategy: Let The Eagle Fly

| About: Eagle Energy (EGRGF)

I last devoted an entire article to Eagle Energy Trust (ENYTF.PK) on March 7 of this year (here). At this time we looked at the potential reasons for the decline in price of this Canadian royalty trust.

In recent days ENYTF.PK has seemingly come alive with the share price increasing from $7.17 on June 27 to $8.11 today (as I write this article). I monitor the monthly distribution announcements, and there has been no change to the steady $.0875 monthly payout.

Looking a bit further into its operations and corporate updates I found the following items of note.

2013 Annual Report

In the annual meeting this June, the company released data pertaining to past year operations and provided some updated guidance relative to future operations through the end of 2013.

As I mentioned in the previous article, ENYTF.PK is a Canadian royalty trust whose operations focus primarily on the Permian Basin in Texas. Royalty payouts are made on 95 percent light oil and 5 percent natural gas liquids.

The following are highlights from the annual meeting of shareholders:

  • Production levels remain at 2900 - 3100 BOE/Day
  • Capital expenditures are increasing while overall operating costs have declined somewhat
  • Funds from operations (FFO) for the quarter ending March 2013 were $11.9 million, an increase of 30 percent year-over-year
  • 2013 updated guidance is for an increase of annual FFO of $5 million as opposed to prior guidance of $41 million
  • Proven reserves have increased 188 percent
  • Reserve life is now approximately 14.3 years
  • Payout ratio guidance was reduced to 71 percent from former levels of 77 percent

Why The Recent Price Movement

ENYTF.PK stock has traded within a range of $6.28 and $10.94 over the past 52 weeks. At today's price, the stock is still below the mid-point of this range which is $8.61.

At the present price of $8.11, ENYTF.PK has a yield of 12.95 percent.

The company has favorable hedges in place that lock in about 1,600 BOE/Day at West Texas Intermediate (WTI) prices ranging between $87 and $108 per barrel. This accounts for approximately 51 percent of forecast 2013 production.

In recent weeks the WTI prices have climbed steadily, outpacing the pricing of Brent Crude. I noticed this morning that WTI and Brent prices were exactly equal. The WTI price increase is certainly advantageous to ENYTF.PK, particularly from the standpoint of potential future hedging.


Earlier this year we added to our position of ENYTF.PK in the Protected Principal Retirement Strategy portfolio. I have no immediate plans relative to increasing this position until the second quarter 2013 report is released.

At this time I believe that the recent increase in the price of ENYTF.PK's stock is primarily due to increasing prices of WTI (presently almost $108/bbl.).

It will be interesting to see if recent increasing oil prices will translate to an increased distribution. ENYTF.PK to my knowledge has never increased its distribution since public trading began.

Disclosure: I am long ENYTF.PK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article does not constitute a recommendation to buy or sell any of the stocks mentioned.