Steven Ward

How to Pick an MLP for This Market

Those whopping yields are contingent on current and future oil and gas prices along with the expense ratio. Those yields won't last with current pricing unless the hedges were 100percent.

Mamagement has too much control in an MLP without the corresponding unit ownership. Royalty Trusts are better.

Outrageous Opportunities in Upstream MLPs

To misterchan:
Contact SA via their email link. Tell them to forward to me the email address you wish for me to contact you by. I need to know more about your risk tolerance, age etc. before offering any investment advice. DO NOT put any personal ibfo on the website.

Outrageous Opportunities in Upstream MLPs

My sincere apologies to Mr. Kurt Wulff for the mis-spelling of his name in my above comments.

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?

Outrageous Opportunities in Upstream MLPs

Misterchan, I'll take a stab at it in brief since I follow mostly Canadian and Western European oil stocks.

In brief: This is Harvest Energy Trust, the only upstream and downstream CanRoy in existence. HTE b0ught a refinery in Newfoundland a year or so ago. Upstream she produces about 80,000 BOED if memory serves me correct. She has more oil than gas by about 3 to 1. HTE is unable to fully realize the integration of her refinery with her uppstream refinery due to a lack of a pipeline.
HTE' has large amounts of original oil in place (2 billion boe) and uses mostly secondary and tertiary recovery technologies. HTE also has 1 billion in heavy oil.

Her refinery is capacity at 115,000 BOED. It sells to eastern US and Western Europe. The feedstock comes from the world over, but none from Canada.

She made a profit last year and recorded a loss for the 3rd quarter. HTE has reduced the payout over the last 6 months, it is now 89 percent of cash flow.

HTE has a complex financial structure with 7 different convertible debentures, each with their own redemption provisions.

HTE is now dependent on the refinery increasing the crack spread to make any money. Whatever she makes on oil in the upstream she throws out the window when she has to buy oil from Russia, Venezuela and other countries. She can't refine her own crude and that hurts.

HTE will have to pour more money into the refinery just to keep it running at its current condition and capacity and if expansion or environmental changes occur it will be more money.

Somewhere HTE in the future, I feel, must reduce her dividend again, if the crack spreads don't widen.

When I started writing articles for Seeking Alpha I made a decision not to knock a company or analysts if I disagreed with their efforts and views. If I didn't have anything good to say I wouldn'y say anything at all. But you asked. I would not be a holder of the trust. There are better things out there. Don't strtch just for yield. As the refining business goes so goes HTE.

Outrageous Opportunities in Upstream MLPs

I have never been happy with MLP's. The GP is always capable of selling off assets, reducing the return and takes excessive compensation. The Canadian Trusts in many cases were and still are paying out dividends in excess of EBITDA. I think this explains Penn West's negative total return last year even though it's paying a whopping dividend.

The royalty trust model is better as Kurt Wolfe points out in his McDep website. The investor must still put up with the vagries of cost and commodity pricing.