Jack Yetiv

Buy Opportunities Like These Do Not Come Along Very Often

Paultaut, I am amazed to hear you hold HTE. Of all the Canroys, I consider that one at highest risk of cutting the dividend because last two quarter's payout ratios were over 100%. yet you complain about PWE, whose payout ratio last quarter was 58%!

Indeed, HTE cut its dividend last year from 38 to 30 cents per month, whereas PWE has paid the same dividend for over two years.

Also, HTE's refinery will prevent HTE from recording the same benefits from a high commodity price environment relative to its peers because crack spreads have been squeezed and I think will continue to be squeezed.

Jack

Buy Opportunities Like These Do Not Come Along Very Often

For those interested in PWE, you should look up the presentation just posted on the PWE website. In it, the CEO shows a graph that indicates that with oil at $120 and gas at $11, cash flow will be $3.2 billion this year. Deducting dividends of $1.2 billion and capex of $1 billion leaves free cash flow of $1 billion--and that DESPITE the company's low hedges.

I suspect that about $700 million of that billion will be used to retire debt to get debt-to-cash-flow ratio of 1-to-1, and that the other $300 million will be used to slightly increase dividends (which are already pretty high) and to increase drilling program.

By the way, please note that the second quarter is almost over and that oil and gas have probably averaged close to $120 and $11 this quarter. Therefore, I expect record cash flow this quarter of about $750 million, with record free cash flow of almost $200 million, and a payout ratio of about 42-47%.

If someone thinks PWE is NOT a buy, tell me what fact or what analysis I have missed above.

Jack