longoil

6 Clean Power Income Trusts: A Good Way to Access High Yields

>>>One of the major risks facing income trusts is distribution cuts, something that generally happens when the fundamentals of the underlying business are severely diminished or distributions were set too high to begin with (in order to attract investors).<<<...

In regards to oil and gas income trusts, distribution cuts are normally not seen as a bad thing by investors. With the recent drop in crude oil prices, it makes sense the distributions should be cut as well. Quite often, these companies use the opportunity to acquire new assets at distressed prices or maintain debt targets. This is seen as a sign of good management.

From ERF news release:
"Enerplus Resources Fund ("Enerplus") is planning a conservative approach to 2009 in light of falling commodity prices with reductions in capital spending and distributions. We intend to preserve our financial strength and maintain flexibility in order to position us to take advantage of future opportunities to add quality assets in an increasingly attractive acquisition market. "

From COS news release:
""While our Syncrude operation is sound and strong, as a result of the deterioration in economic conditions, in particular the significant decline in crude oil prices and the heightened risk in the credit markets, we deem it prudent to reduce the distribution in order to maintain our strong balance sheet."