Jack Yetiv

ARC Energy Trust: Shares Jump on Distribution Increase

This is a harbinger of things to come. Earnings season for the Canadian Royalty trusts starts in a few weeks, and I suspect they will generally announce blowout earnings, with falling payout ratios and anticipation of even better earnings as 2008 hedges fall off.

My favorites are PWE and AAV, as I have written in articles on this site. They both had low payout ratios in the first quarter (53 and 58%, as I recall), meaning their payout ratios should get to an incredibly low level in the 40's this quarter.

The extra money will be able to be put into (a) paying down debt, (b) increasing dividends, and/or (c) increasing drilling and acquisitions. My guess is that most of the Canroys will do all three, except that PWE probably won't increase dividends this quarter (I think they will next quarter if oil and gas prices stay where they are) because they want to pay down debt more quickly.

Regardless of which one of the three things the Canroys do, it's all to the good. I expect a stupendous earnings season for the Canroys--as well as many other oil and gas concerns.

Jack Yetiv