As a self-directed investor, you have to carve out the time to do research. You’re minding your own empire, and you better know what’s going on with the exchequer.

One means of augmenting your due diligence–and let’s just get this out of the way right now–is to rely on e-zines such as Maple Leaf Memo and subscription-based advisories such as Canadian Edge. We take the time, so you don’t have to, to pore over quarterly and annual reports, to participate in company conference calls and to get in direct touch with management teams to clarify issues of concern on behalf of our readership.

We’re a naturally curious bunch, and it also serves our own interests to make sure we provide the best possible information. Our colleague, Personal Finance Editor Neil George, is among the more inquisitive individuals in the investment newsletter arena, and he recently sought out the management team at Enerplus Resources for a teleconference on how the Canadian royalty trust was planning for the 2011 tax on distributions.

Opinions and judgments on the wisdom of specific business decisions vary within our team; there’s no “party line.” But we all value honesty, forthrightness and realism, particularly as those concepts apply to the people making decisions for the companies in which we invest. 

A wise man once said, “This is a simple game: You throw the ball, you hit the ball, you catch the ball.”

Enerplus sticks as close to the basics as you can in the energy industry. The company identifies resource plays–typically large, extensive accumulations of discovered oil and natural gas–and efficiently develops them. Enerplus also offers investors a relatively generous cut of cash flow in the form of monthly distributions.

Management sticks to what it does best: low-risk development opportunities. Chief Financial Officer Robert Waters emphasized during the call last week that Enerplus wouldn’t abandon this operational focus.

It’s as much about keeping the game simple as it is about recognizing its opportunities as a publicly traded company. Management has a track record of finding, acquiring and developing assets efficiently–a model that lends well to paying a relatively high distribution to shareholders.

Enerplus recently acquired a 90 percent interest in the Kirby Oil Sands Partnership, a privately held partnership operating in the Athabasca oil sands fairway of Alberta, for CD182.5 million, consisting of CD127.8 million in cash and the issuance of roughly 1.1 million trust units at a deemed price of CD49.55.

In addition to the trust units to be issued pursuant to the acquisition, Enerplus agreed to issue 4.1 million trust units through a bought deal financing at a price of CD49.55 per trust unit for gross proceeds of CD200.7 million. The proceeds of the equity financing will reduce the fund’s outstanding bank debt, including indebtedness incurred in connection with the Kirby acquisition and the previously announced acquisition of a gross overriding royalty interest in the Jonah natural gas field in Wyoming for CD60 million, which closed on Jan. 31, 2007, and for future capital and general corporate expenditures.

New York Yankees owner George Steinbrenner has one mandate for his ballclub: Win the World Series. That makes the simple game a lot more complex. It’s sort of the “maximize shareholder value” component of the public equities contest.

And here’s where some concerns may crop up: The oil sands acquisition and related financial transactions resulted in the short-term dilution of existing unitholders.

Management has acknowledged this fact. But oil sands assets are a key resource play for Enerplus given their lower geologic risk and the scalable development associated with these types of assets. This fits with what the company’s been doing, and it represents long-term value, particularly as technology advances and drives oil-sands development costs down. 

One of the key points the Enerplus team—Waters, Vice President-Investor Relations JoAnne Caza and Investor Relations Senior Analyst Jason Fleury—emphasized last week was flexibility.

Because the proposed tax on distributions won’t take affect until 2011, Enerplus and other income and royalty trusts essentially have a now three-and-a-half-year tax window. For well-managed trusts that maintained low payout ratios and debt ratios, the time between now and 2011 holds significant benefits. Absent overwhelming takeover offers, those trusts won’t soon abandon the trust structure.

As well, Enerplus has gradually expanded its US presence; 14 percent of 2006 production came from this side of the border, and the company has established offices in Denver. Future development opportunities are split basically 50-50 between Canada and the US.

This expansion into the US avails Enerplus of a future opportunity to unlock shareholder value by spinning off assets into a publicly traded partnership. This is an option that few other Canadian energy trusts presently enjoy.

Enerplus doesn’t want to get out in front of the 2011 distribution tax because government policy is, as ever, subject to change. Why would it make a precipitous move to forfeit the tax window when, as remote as the possibility is, the proposal could change?  

The bottom line is that Enerplus has the flexibility to be able to take advantage of any of several opportunities. Recent acquisitions fit from an operational standpoint and also bolster the fund’s ability to follow a yield-based model. Enerplus recognizes that its foundation in the public market is its high-dividend status; it leads to lower capital costs, and it makes sense based on the business model.

The Roundup

Oil and Gas

Baytex Energy Trust (BTE.UN, NYSE: BTE) is acquiring oil and natural gas assets in the Pembina and Lindbergh areas of Alberta from Dominion Resources for USD238 million. The transaction adds about 4,500 barrels of daily production, made up of 2,200 barrels of light oil and gas liquids and 8 million cubic feet of gas from the Pembina area and 1,000 barrels of heavy oil from the Lindbergh area.

Annual net operating profits from the properties is estimated to range between CD45 million and CD50 million based on current commodity prices. When the property acquisition closes, Baytex’ production will rise to about 38,500 barrels a day and will require a capital budget boost for 2007 to CD155 million.

In a related deal, Baytex said it’s entered into a bought deal financing agreement with investment dealers to sell 7 million subscription receipts at CD21.35 each to raise CD149.5 million. Baytex Energy Trust is a buy up to USD20.

Paramount Energy Trust (PMT.UN, PMGYF) has agreed to buy natural gas-producing properties in Alberta from Dominion Resources for CD392 million (USD366 million). The properties produce 47 million cubic feet of gas equivalent a day and bring proved and probable reserves equivalent to 269.1 billion cubic feet of gas.

Paramount is financing the acquisition with debt, a CD75 million convertible debenture issue and by issuing CD250.5 million in subscription receipts. The acquisition will raise Paramount’s daily production by about 29 percent to 160 million cubic feet a day equivalent. Proved and probable reserves will double to 527.8 billion cubic feet equivalent.

Paramount said it will pay CD43,725 per barrel of oil equivalent (BOE) of daily production and CD7.62 per BOE of proved and probable reserves. The properties are in east-central Alberta and include stakes in 13 gas plants, compressor facilities and 232,000 acres of exploration lands. Paramount Energy Trust is a buy up to USD12.

Pengrowth Energy Trust (PGF.UN, NYSE: PGH) offered the following comment May 25 on an unsolicited mini-tender offer by <i>TRC Capital Corp</i> to purchase up to 2 million trust units of Pengrowth, representing about 0.8 percent of outstanding units:

TRC’s offer price of CD19.00 represents, as TRC’s own offer document acknowledges, a 2.56 percent DISCOUNT to the closing price of Pengrowth’s trust units on the Toronto Stock Exchange on May 14, 2007 (CD19.50), the day prior to the date of the offer and represents a further DISCOUNT of 6.54 percent to today’s closing price on the TSX (CD20.33). Pengrowth recommends that unitholders DO NOT tender their trust units in response to TRC’s unsolicited mini-tender offer. Mini-tender offers, such as this one, avoid many of the investor protections provided by Canadian and U.S. securities laws through circumventing most filing, disclosure and procedural requirements. Pengrowth is in no way associated with TRC, its mini-tender offer or the offer documentation.

Pengrowth Energy Trust is a hold.

Gas/Propane

AltaGas Income Trust (ALA.UN, ATGFF) is building a gas-processing facility and associated gathering and sales lines near Acme, Alberta, approximately 85 kilometers northeast of Calgary. Capable of processing 10 million cubic feet per day of natural gas, the facility will process coal bed methane (CBM) for Ember Resources.

The construction of the pipelines and facility is expected to cost approximately CD11 million. AltaGas will own 100 percent of the Acme plant, which will consist of 21 kilometers of 10-inch plastic gathering pipelines and 10 kilometers of six-inch steel sales pipelines, as well as compression and dehydration facilities. The trust will operate the plant, which is expected to be in service in the fourth quarter of 2007.

The project is subject to provincial regulatory approvals. AltaGas will operate the facility under a binding agreement with Ember for firm gas gathering and processing capacity, including a dedication of reserves provision that covers approximately 165 sections of land. Ember has active development plans for drilling CBM wells within the gathering area of the pipeline system.

The binding agreement is subject to certain regulatory conditions precedent. AltaGas Income Trust is a buy up to USD26.

Energy Savings Income Fund (SIF.UN, ESIUF) acquired the utility compliant billing platform as well as the supply procurement and marketing platforms of Texas deregulated electricity marketer Just Energy LP for USD34 million. Energy Savings will pay USD16 million in cash and issue USD18 million in units, which will vest over a three-year period.

The deal provides entry for Energy Savings into the 20 million customer Texas market. Just Energy currently serves approximately 130,000 residential and small and midsized business customers. Energy Savings Income Fund is a buy up to USD15.

Wellco Energy Services Trust (WLL.UN, WLLUF) has entered into an exclusivity agreement with a third party in order to facilitate discussions with such third party regarding a potential transaction that may involve the acquisition of Wellco or other material transactions. No agreement has been reached, and there’s no guarantee of one.

Wellco will provide further updates at the appropriate time. Wellco Energy Services Trust remains a buy up to USD6.

Business Trusts

Boston Pizza Royalties Income Fund (BPF.UN, BPZZF) boosted its monthly cash distribution from 11.1 cents Canadian per unit to 11.3 cents Canadian per unit. The distribution will be paid to unitholders of record at the close of business on June 21, 2007, and will be payable on June 29, 2007. Hold Boston Pizza Royalties Income Fund.

CI Financial Income Fund (CIX.UN, CIXUF) has received Toronto Stock Exchange approval to purchase and cancel up to 12 million of its trust units in a normal course issuer bid, about 10 percent of the public float. CI may make purchases from May 29 until May 28, 2008, or until the purchases are completed or the buyback program is terminated.

CI bought back 5.75 million of its units at an average price of CD25.77 per unit during the past 12 months. CI Financial Income Fund is a hold.

Newport Partners Income Fund (NPF.UN, NWPIF) has invested CD18.2 million in cash for a 77.5 percent interest in the business of Toronto-based Baird MacGregor Insurance Brokers LP, an insurance broker specializing in the transportation and logistics industries in Ontario. Newport is also providing CD2.3 million through its credit facilities for working capital and to replace a pre-existing operating line for Baird McGregor Insurance’s premium financing business. Hold Newport Partners Income Fund.

Priszm Income Fund (QSR.UN, PSZMF) will issue CD30 million in 6.5 percent convertible unsecured subordinated debentures due June 30, 2012, to raise money for store expansion. The units can be converted into Priszm units at CD12.28 each.

Priszm is taking on additional financing to complete 30 to 40 new projects in the next 24 months. The offering is expected to close June 22. Priszm Income Fund has a 60.2 percent interest in Priszm LP and its general partner, Priszm, which owns and operates 483 quick service restaurants and employs 9,000 people at KFC, Taco Bell, Pizza Hut and Long John Silver’s restaurants in Canada. Priszm Income Fund is a hold.

Yellow Pages Income Fund (YLO.UN, YLWPF) is raising CD200 million in a share offering by a subsidiary and will use the proceeds partly to repay debt. The YPG Holdings unit will issue 8 million cumulative redeemable preferred shares on a bought deal basis to a syndicate of underwriters led by RBC Capital Markets and Scotia Capital.

The shares will pay cumulative dividends of CD1.25 per share a year to yield 5 percent a year, payable quarterly. Yellow Pages, which will also use a portion of the proceeds for general corporate purposes, said the offering is scheduled to close on June 8. Buy Yellow Pages Income Fund up to USD14.

Real Estate Trusts

Boardwalk REIT (BEI.UN, BOWFF) boosted its annual distribution by 8.1 percent in the wake of solid financial results for the first quarter of 2007. For the first quarter ended March 31, 2007, the REIT reported funds from operations (FFO) of CD22.8 million (40 cents Canadian per unit), up 32.5 percent from FFO of CD17.2 million (32 cents Canadian per unit) for the same period last year.

Distributable income for the quarter was CD23.6 million (42 cents Canadian per unit), up 27.3 percent from CD17.7 million (33 cents Canadian per unit). Rental revenue was up 15 percent to CD87.6 million, while net operating income rose 19.4 percent to CD51 million. Boardwalk REIT is a buy up to USD33.

Dundee REIT (D.UN, DUNTF) has entered into a definitive agreement to sell its portfolio of real estate assets located principally in Ontario, Quebec and Newfoundland to GE Real Estate for about CD2.4 billion (USD2.3 billion), including the assumption of liabilities by GE Real Estate relating to the portfolio. Dundee will continue to own CD1.5 billion of real estate assets in Western Canada.

GE Real Estate has agreed to purchase CD165 million of outstanding units of Dundee REIT at CD47.50 per unit, which will give GE Real Estate about an 18 percent equity interest in Dundee. A meeting of unitholders to approve the transaction is anticipated to be held in August, with completion of the transaction to occur by the end of August. Dundee REIT is now a hold.

Natural Resources Trusts

Acadian Timber Income Fund (ADN.UN, ATBUF) reported that Fraser Papers filed with Canadian securities regulatory authorities a notice of intention to distribute securities under National Instrument 45-102 Resale of Securities, subject to required approvals of the Toronto Stock Exchange. Fraser Papers holds securities that are indirectly exchangeable for 3.61 million units of the fund, representing approximately 21.8 percent of the outstanding units.

Fraser Papers indicated in its June 1 filings that it intends to pursue the sale of up to all of such units; Acadian added that there’s no assurance that any such sales will be completed. Acadian Timber Income Fund remains a buy up to USD11.