Jack Yetiv

Whither Oil Prices?

I agree that (1) the marginal cost of production (which is probably $70-$80/barrell) will set the floor, unless (2) OPEC chooses a different setpoint.

My guess is that OPEC will NOT want oil lower than $100, which means that oil might overshoot to maybe $90, but not much lower.

OPEC can achieve whatever price it wants by cutting the proper amount of production from global supply.

Jack Yetiv

Oil Price Helps Trusts Sustain Current Rate of Distribution

The idea of selling non-core assets is to get rid of assets providing a low ROI and replace them with something that offers a better return. For example, maybe these 16,000 barrells of production represent high-cost production due to their geology or location.

One speculation--PWE made the non-core asset deal a month or two months ago, when commodity prices were much higher. They may be able to replace those non-core assets with others at a lower price, and in places that "fit" their E & P activities better.

Until we know the terms, it's impossible to know if this sale was stupid, brilliant or somewhere in between.

Jack

Canadian Oil Sands, Penn West Energy Protected on the Downside

Beancounter, PWE has paid 34 cents per month for somewhere around 29 months, give or take a few. During that time, PWE has sold at realized prices for gas UNDER $7 per MCF, and oil at about $60. During those times, of course, the payout ratio was high--but obviously, it was sustainable.

Recall, also, that PWE hedges a fair bit of its future output. Oil and gas prices in the past five or six months have allowed PWE to forward-sell its oil and gas at well over $120 and $10. We will learn this Thurs how much production PWE has hedged, and at what price, but I guarantee you it will be substantial. Thus, even if nominal oil and gas prices drop from here, what PWE makes in the future can actually increase--SUBSTANTIALL...

Finally, remember that--despite the recent major drops--oil today at $120 and nat gas at $8.70 are still higher than at ANY time in 2007. Therefore, the Canroys are still on track to have a blow-out 2nd quarter, and a very strong 3rd--compared to any previous time in history. Of course, if what we are seeing now proves to be close to the lows, then some incredible returns will be made on the Canroys over the next few months.

But even if oil goes to $100, and nat gas stays in the $8's (both of which I doubt will happen), PWE will STILL make more money in 2008 than it EVER has previously. Thus, the dividend seems very secure.

To me, the downside risk is pretty limited, while the upside potential is significant--and you are collecting 14% all along.

Jack

Canadian Oil Sands, Penn West Energy Protected on the Downside

To Wsigler:

While criticizing my detailed articles, you write a couple of sentences that won't even pass for analysis. Why don't you actually ANALYZE something and CONTRIBUTE to this site, rather than just superficially dismissing someone else's analysis.

Since I began recommending stocks on this site nearly one year ago, the Dow and Nasdaq have dropped 20%. My recommendations have about broken even--while CSIQ has increased about 50%, TSL has dropped by about 30%. My PWE recommendation has gone down about 3%--but REAL dividends have more than compensated for that PAPER "loss" and I bought some more today at $28.50 for a div yield of 14.3%.

So my recommedations have just about broken even (actually, up a few percent), despite the broad markets having dropped by over 20%.

Many financial managers and experts have done FAR worse in the past year than breaking even.

Finally, let's revisit this issue in a couple of weeks, after TSL, CSIQ and PWE have reported.

In the meantime, what are YOUR recommendations to SA readers?

Jack Yetiv

Canadian Oil Sands, Penn West Energy Protected on the Downside

PWE is an absolute steal at a price of under $30, and a dividend yield in excess of 13%, and what I expect to be a payout ratio of under 50% this year.

With that payout ratio, PWE will be able to pay off a substantial amount of debt this year, increase capex, AND further increase its dividend at the end of 2008.

Although I doubt oil will go over $150 this year (barring an Israeli attack on Iran), I also think it unlikely that oil will go under $110 for any prolonged period of time this year. I also doubt we'll see nat gas averaging under $9.50 for any quarter this year (even though we're at about $9 now).

If I am right about oil and gas prices, PWE's free cash flow (cash flow not used to pay dividends) will more than double in 2008 versus 2007.

Jack

Canadian Oil Sands Trust: Increased Distribution Necessary to Meet Debt Target

Wouldn't most of what was said above also apply to quite a few of the other Canroys--eg, PWE, AAV, PVX, ERF?

And, indeed, wouldn't it apply to many domestic E & P companies?

Jack Yetiv

UBS: Energy Producers to Benefit from Rising Oil Prices

Yes, I like PVX as well as PWE.

I don't like HTE because payout ratios have been bvery high because crack spreads have been sucking, and I expect them to continue to do so as demand for gasoline decreases as its price increases--and *I don't see this relationship changing anytime soon.

In the current environment, I much prefer pure E & P companies versus integrateds.

Jack

UBS: Energy Producers to Benefit from Rising Oil Prices

Although I like BTE and Vermillion as well, I think PWE is the "undiscovered" gem of the Canroys. It essentially DOUBLED its cash flow per unit in the quarter it just reported and cash flow for all of 2008 will be more than a double assuming oil at $107 and gas at $8.50.

With oil at $115 in 2008 (a projection with which I agree) and gas at $9 (which I think is low, mine would be $10), PWE will substantially MORE than double its cash flow this year.

Unlike BTE and Vermillion, both of which have run nicely in the past few weeks (especially BTE), PWE has just started to move, giving it more upside in my view than the others. In addition, PWE's dividend yield at 12% is much better than BTE or Vermillion's, offering yet another attraction to PWE and adding to total return.

I think all the Canroy oil and gas trusts will do very well in 2008, but I think total return on PWE is likely to exceed the average.

Jack Yetiv