Steven Ward

Outrageous Opportunities in Upstream MLPs

Wow. Look at the firestorm I started with a slight comment on PWE's EIBTDA to dividend payout ratio.
I have been hesitant to do an article on PWE for two reasons.
1. I am not hankering to take on Kurt Wolfe who recommends PWE.
2. To make a valid comparison you need to sight CanRoyTrust performance with trusts thaT TRADE MOSTLY ON THE tORONTO eXCHANGE and SA is reluctant to run articles citing "Foreign Stocks".

Yes, PWE is a great story for the future. But if you had bought at 30 plus you are wondering when it gets back to equal for your portfolio. Reserve life is damn important. I just wrote an article for SA on Endeavour and I cited a short current asset reserve life, yet I still advocated its purchase for its future prospects. Clearly, PWE has great reserves and great prospects.. BUT, last year you had a nefgative total return of 7%. You still lost money even with PWE's high dividend.
Clearly, PWE at 23 and change was a steal, now at 28 more fairly priced. PWE needs cashfor future developments that all require secondary and tertiary recovery methods, at least for her oil deposits.
If the dividend constitutes 126% to 129% of EBITDA, which it does, then where does she get the cash? Borrowing, dilution of share base or a miraculous increase in production without investment that borders on the divine. If Pwe slashed their dividend to yield 9 t0 11 % at current unit price of 28 and change; the stock price of the trust units would soar 10 to 15%, netting the investor at 28 a positive total return exceeding the 1/3 loss in the dividend and a 10% yield.


Yes, hold your PWE, defend it with gusto and misterchan, PWE is a better trust for you than Harvest. Why? Murray Edwards, that's why.

Mr. Edwards, co-founder of CNRL, is the largest individual human being shareholder in PWE. Murray got most of his shares lower than 28, so he don't care too much where the unit price goes.He likes that dividend and PWE will keep paying that dividend as long as Murray and company want it that high.

PWE is smart, they bought a bunch of new properties and production in other trusts. PWE got them cheap. The managements threw in the towel too soon in fear of the new law ending oil and gas trusts and they got greedy, they want that high in the sky dividend too. So they sold their shareholders on it as well. Who in their right mind turns down 12 to 15 % PWE is smart, boy are they smart and so is Murray Edwards. PWE will keep that high dividend as long as there are trusts to be bought and they can buy them cheap by the management and the boards of the prospective trusts how much money they can make on that dividend. Heck with the price of the units, look at the dividend and by the way PWE will tell these Can Roy trusts, "We have enogh tax credits to not pay any income taxes for 2 to 3 years, so heck with the new law", " you can still get your sky high dividend for another couple of years". And Mr. Murray won't say a thing until it is time for CNRL to buy Penn West. Got it. Let's just hope Penn West gets a better premium than PWE paid out to the purchased trusts that hjas made PWE so large. Its got nothing to do with accounting or valuations, that high dividend enables PWE to buyout trusts on the cheap and you the shareholder get to pay for it.
Hello all you future CNRL shareholders, did you like the ride?