Maple Leaf Memo
No Sufferin’ for Potash
Global grain inventories have declined significantly during the last seven years on increased consumption, a growing world population, improving diets in developing countries and the advent of biofuels.
Grain prices initially lagged the changing supply/demand metric and didn’t provide enough incentive for growers to increase output. But grain prices have recently responded to low inventory levels.
Recent cash prices for wheat, soybeans and corn are up dramatically from two years ago. Wheat prices have been near USD10 a bushel, more than USD6 a bushel higher. Cash prices for soybeans are about USD13 a bushel, up more than USD7 a bushel. Corn is pricing at almost USD5 a bushel, an increase of greater than USD3 a bushel. Growers are reacting with increased production, and that requires an overall increase in plant nutrients.
The fertilizer industry will be essential in helping growers produce more grain than has ever been produced–simply to meet annual demand, let alone rebuild low grain inventories. That means higher fertilizer prices for at least the next several years–and higher prices for the stuff that’s used to make fertilizer.
In a recent research note to clients, Goldman Sachs analyst Edlain Rodriguez wrote, “We believe the tight potash market is allowing producers to raise prices at will. Given the underlying strength in commodity prices, farmers are still more concerned about maximizing yield and profits rather than controlling fertilizer costs.”
Potash is used primarily as an agricultural fertilizer (plant nutrient) because it’s a source of soluble potassium, one of the three primary plant nutrients. (The others are fixed nitrogen and soluble phosphorus.) Potash, along with phosphorous and nitrogen, is critical to modern agriculture. The three major nutrients have no substitutes.
According to the International Fertilizer Industry Association, overall global potash market conditions in 2008 are expected to remain tight.
Saskatchewan-based Potash Corp is the world’s leading producer of potash; its annual production capacity represents more than 20 percent of global capacity.
The stock is up more than 20 percent in 2008 and 200 percent for the trailing 12 months, trading at around USD175 a share. But meteoric as its recent rise may have been, Potash Corp’s bull run may still be in its early stages.
Under terms of a new supply agreement reached last week, Indian Potash will pay Belarusian Potash Co (BPC) USD625 per ton delivered for the period May 2008 to March 2009, a 130 percent boost from USD270 per ton.
China usually buys at a discount paid by importers in other markets. In years past, it made its potash arrangements ahead of India. The Indian contract could pressure China to reach a settlement with BPC and Canpotex, a marketing vehicle owned by Saskatchewan-based potash producers Potash Corp, Agrium and Mosaic. Canpotex said April 2 it would raise the price of standard-grade potash for buyers in Southeast Asia by 38 percent and in Brazil by 85 percent to USD750 a ton as of June 1.
The annual talks with China, the world’s largest potash fertilizer consumer, could result in prices similar to what India recently agreed to pay, according to Agrium CEO Mike Wilson. The ultimate result of these talks is an open question at this point, but if China waits much longer, it risks depleting its existing stock by the end of the year.
Aside from the parabolic rise in the stock prices of Potash Corp, Mosaic and Agrium, there are further notes of caution. High grain prices have been great for the fertilizer industry, but even higher prices may be too much of a good thing.
High food and grain prices have triggered public protests and even riots in several developing countries. Governments are feeling pressure to intervene with export taxes and caps on fertilizer prices. That pressure would only rise if prices continued to climb.
Agrium forecast 2008 gross margin of USD2 billion, double the 2007 level, and Agrium expects gross profits from its retail operations to approach USD676 in 2008, a nearly 100 percent increase over 2007. Gross profits from potash should at least double from USD167 million.
Potash Corp CEO Bill Doyle expects record volumes and prices in 2008 even without any sales to China.
Speaking Engagements
It’s time: Vegas, baby! Neil, Elliott and I will head to the desert paradise May 12-15, 2008, for the Las Vegas Money Show at Mandalay Bay. Go to www.lasvegasmoneyshow.com or call 800-970-4355 and refer to priority code 010583 to do the “what happens here stays here” thing as my guest.
The Roundup
As has become our custom, below we aggregate our breakdowns of fourth quarter and full-year 2007 earnings reports for CE Portfolio trusts.
Conservative Portfolio
Algonquin Power Income Fund (TSX: APF-U, OTC: AGQNF) reported fourth quarter cash available for distribution of CAD19.9 million (26 cents Canadian per unit), up from CAD17.5 million (23 cents Canadian per unit) a year ago. The fund distributed 23 cents Canadian per unit during the fourth quarter of both 2006 and 2007.
Revenue for the fourth quarter of 2007 was CAD44.3 million, down from CAD52 million a year ago. Net earnings from continuing operations came in at CAD8.8 million (12 cents Canadian per unit), up from CAD3.7 million (6 cents Canadian per unit) in the fourth quarter of 2006.
For the year ended Dec. 31, 2007, Algonquin generated cash available for distribution of CAD72.3 million (95 cents Canadian per unit), up from CAD67.5 million (93 cents Canadian per unit) in 2006. Revenue was CAD186.2 million for the year, down from CAD193.2 million in 2006. Net earnings from continuing operations totaled CAD24.8 million (34 cents Canadian per unit), compared to CAD30.7 million (43 cents Canadian per unit) in 2006.
Lower-than-long-term-average hydrology, lower production and lower average energy rates caused the fourth quarter and full-year revenue declines. The increase in cash available for distribution for 2007 is primarily due to one-time gains related to the termination fee in connection with the offer for Clean Power Income Fund, cash from discontinued operations and adjustments related to the fund’s investment in the St. Leon facility. Algonquin Power Income Fund is a buy up to USD9.50.
AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF) reported fourth quarter net income of CAD31.8 million (55 cents Canadian per unit), a 16 percent increase from CAD27.3 million (49 cents Canadian per unit) a year ago. That figure includes a CAD6.1 million income tax recovery. Excluding the noncash tax recovery, fourth quarter net income was CAD25.7 million. Fourth quarter revenue was off slightly to CAD336.5 million from CAD367.4 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were CAD40.3 million (70 cents Canadian per unit) in the fourth quarter, compared to CAD44.5 million (79 cents Canadian per unit) in the same quarter in 2006. Cash from operations was CAD59.8 million (CAD1.03 per unit) for fourth quarter 2007, up from CAD36.6 million (65 cents Canadian per unit) for the same period in 2006. Funds from operations (FFO) were CAD37.8 million (65 cents Canadian per unit) for fourth quarter 2007, compared to CAD41.4 million (74 cents Canadian per unit) for the same period in 2006.
Full-year 2007 net income was CAD108.8 million (CAD1.89 per unit), down from CAD114.5 million (CAD2.06 per unit). Excluding one-time tax items, net income was CAD108.1 million, up slightly from CAD107.9 million. Revenue increased to CAD1.4 billion from CAD1.36 billion.
EBITDA for full-year 2007 was CAD173.7 million (CAD3.03 per unit), compared to CAD173.1 million (CAD3.12 per unit) in 2006. Cash from operations for full-year 2007 was CAD183.3 million (CAD3.19 per unit), up from CAD146.9 million (CAD2.65 per unit) in 2006. FFO for the year were CAD162.9 million (CAD2.84 per unit), up from CAD161.7 million (CAD2.91 per unit) in 2006.
Total debt as of Dec. 31, 2007, was CAD220.7 million, compared to CAD265.5 million at Dec. 31, 2006. The trust’s debt-to-total capitalization ratio was 27.4 percent versus 33.4 percent at the end of 2006. AltaGas Income Trust is a buy up to USD28.
Artis REIT (TSX: AX-U, OTC: ARESF) reported fourth quarter FFO rose to CAD12.3 million (39 cents Canadian per unit) from CAD4.6 million (30 cents Canadian per unit) a year ago. Distributable income increased to CAD12.7 million (41 cents Canadian per unit) from CAD5.2 million (34 cents Canadian per unit) during the fourth quarter of 2006.
Revenue for the recently concluded quarter was up 93.2 percent to CAD31.9 million from CAD16.5 million. As of Dec. 31, 2007, mortgage debt-to-gross book value decreased to 49.2 percent from 52.1 percent on Dec. 31, 2006.
The REIT’s occupancy rate increased throughout 2007 to 97.4 percent from 95.8 percent. Artis REIT is a buy up to USD18.
Atlantic Power Corp (TSX: ATP-U, OTC: ATPWF) reported a 28 percent rise in distributable cash for 2007 to USD74 million from USD57.9 million in 2006. The boost was driven mainly by a full-year contribution from its Path 15 transmission line, which was acquired Sept. 15, 2006.
Atlantic distributed USD61.4 million during the year, for a payout ratio of 83 percent. For the three months ended Dec. 31, 2007, distributable cash was USD20.7 million, a 78 percent increase from USD11.6 million a year ago.
Adjusted EBITDA increased 11 percent to USD166.9 million for 2007. Adjusted EBITDA for the fourth quarter was down 5 percent to USD40.7 million compared to the fourth quarter of 2006.
Atlantic reported a project loss of USD113.4 million for 2007, including noncash charges related to the change in fair value of derivative instruments of USD128.4 million and a goodwill impairment charge of USD71.7 million. The net loss for the three months and year ended Dec. 31, 2007, was USD74.2 million (USD1.21 per unit) and USD149.2 million (USD2.43 per unit), respectively.
Excluding noncash charges related to changes in the fair value of derivative instruments and goodwill impairment charges, the net loss for the three months and year ended Dec. 31, 2007 would have been USD8.1 million (13 cents Canadian per unit) and USD29.1 million (47 cents Canadian per unit), respectively. Atlantic Power Corp is a buy up to USD12.
Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF) reported operating revenue increased by 2.6 percent compared to the same period a year earlier to CAD858.7 million (USD860.1 million) because of growth in a range of services including Internet access.
Internet revenue grew by CAD6.4 million, or 7.7 percent, year-over-year, with high-speed subscribers increasing by 17.1 percent. Bell Aliant completed its rollout of fiber-to-the-node (FTTN) broadband technology in the quarter, bringing the total number of homes passed to 188,000 at the end of December.
Local and long-distance revenue declined by CAD8.3 million (2.3 percent) and CAD2 million (1.7 percent), respectively. Bell Aliant reported a decline of 42,282 local access lines during the fourth quarter.
EBITDA rose 1.7 percent to CAD370.2 million. Capital expenditures rose 9.9 percent to CAD144.1 million for the quarter and 4.9 percent to CAD543 million for 2007.
The fund reported distributions of CAD89.5 million (70.5 cents Canadian per unit), up 5.2 percent from the same quarter in 2006. The fund also announced it would boost distributions to CAD0.2417 per unit per month (CAD2.90 per unit per year) beginning with the February payment.
For the full year, revenue rose to CAD3.37 billion with EBITDA of CAD1.45 billion, operating income of CAD515.4 million and net income of CAD584.3 million. For 2008, Bell Aliant is projecting CAD3.37 billion to CAD3.44 billion in operating revenue and CAD720 million to CAD740 million in distributable cash. Bell Aliant Regional Communications Income Fund is a buy up to USD33.
Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF, CAP REIT) reported FFO increased 10.5 percent to CAD72.3 million (CAD1.197 per unit) from CAD65.4 million (CAD1.157 per unit) for 2007. FFO for the fourth quarter was up 15.8 percent to CAD19 million (30.1 cents Canadian per unit) from CAD16.4 million (27.8 cents Canadian per unit).
Operating revenue for the year ended Dec. 31, 2007, was up 8.4 percent to CAD294 million from CAD271 million in 2006. Operating revenues in the fourth quarter of 2007 rose 11.3 percent to CAD77.2 million from CAD69.4 million a year ago.
Net operating income (NOI) for 2007 rose 10.2 percent to CAD155.6 million from CAD141.2 million. For the fourth quarter, NOI was up 13.6 percent to CAD40.3 million.
Average monthly rents increased to CAD913 from CAD886 for 2006, and occupancy was up to 97.8 percent from 97.2 percent. Distributable income was CAD73.1 million (CAD1.21 per unit), up from CAD66.2 million (CAD1.17 per unit) a year ago; for the fourth quarter, it rose to CAD19 million (30 cents Canadian per unit) from CAD16.4 million (27.8 cents Canadian per unit) a year ago.
CAP REIT’s payout ratio improved to 91.3 percent as of Dec. 31 from 94.1 percent a year ago. The REIT reported a net loss for 2007 of CAD50.2 million (83.1 cents Canadian per unit), compared to net income a year ago of CAD720,000 (1.3 cents Canadian per unit) because a noncash charge to earnings of CAD51.8 million was recorded relating to temporary differences between the accounting and tax basis of CAP REIT’s assets and liabilities. The charge has no impact on distributable income or FFO.
For the fourth quarter, net income increased to CAD9.1 million (14.5 cents Canadian per unit) compared to a net loss of CAD210,000 (0.4 cents Canadian per unit) a year ago. The REIT’s debt-to-book ratio as of Dec. 31, 2007, was 61.6 percent.
The weighted average interest rate of its total mortgage portfolio was 5.37 percent at Dec. 31, and the weighted average term to maturity was 5.5 years. Canadian Apartment Properties REIT is a buy up to USD20.
Energy Savings Income Fund (TSX: SIF-U, OTC: ESIUF) reported a 10 percent increase in seasonally adjusted sales for its fiscal third quarter (the period ending Dec. 31, 2007) from CAD417.2 million to CAD459.4 million. Distributable cash grew by 16 percent year-over-year to CAD42.5 million (39 cents Canadian per unit) from CAD36.5 million (34 cents Canadian per unit).
Distributions to unitholders were up 20 percent to CAD33 million (30 cents Canadian per unit) from CAD27.5 million (26 cents Canadian per unit). Margins per customer were up during the period because of low commodity prices; for the third consecutive quarter, margin per new customer exceeded projections by 11 percent for the period ended Dec. 31.
Energy Savings added 99,000 customers during its third quarter, consistent with first and second fiscal 2008 quarters but a 52 percent jump from the comparable period of fiscal 2007. The additions continue Energy Savings’ shift in customer growth from Canada to the US.
Fiscal fourth quarter 2008 customer additions are likely to lag previous quarters, and total additions for fiscal 2008 will probably come in below forecast. But management has affirmed gross margin and distributable cash growth guidance of between 15 percent and 20 percent.
Results for its fiscal fourth quarter could be impacted by negative regulatory developments: On Feb. 7, 2008, the attorney general of Illinois filed a complaint against Illinois Energy Savings Corp, a wholly owned subsidiary of the fund, alleging deceptive practices by agents in the sale of Energy Savings contracts to Illinois customers.
Energy Savings continues to assess its options in light of Canada’s decision to tax income trusts at the entity level and will provide updates as necessary. Energy Savings Income Fund is a buy up to USD18.
GMP Capital Trust (TSX: GMP-U, OTC: GMCPF) reported fourth quarter net income of CAD23.8 million (38 cents Canadian per unit), down from CAD30.6 million (48 cents Canadian per unit) a year ago. Revenue in the period was CAD101.5 million, down from CAD103.6 million. Distributable cash was CAD29.3 million (46 cents Canadian per unit), down from CAD36 million (58 cents Canadian per unit) a year earlier.
Full-year 2007 net income was CAD146.1 million, a 22 percent increase from 2006, on revenue of CAD473.9 million, which was up 33 percent. Distributable cash for 2007 was CAD171.7 million (CAD2.73 per unit), up from CAD131.5 million (CAD2.20 per unit) in 2006. GMP’s payout ratio for the fourth quarter was 88 percent. GMP Capital Trust is a buy up to USD25.
Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF) reported net earnings of CAD40 million (64 cents Canadian per unit) for the fourth quarter of 2007, up from CAD14.9 million (24 cents Canadian per unit) a year ago. Revenues in the quarter were CAD436.2 million compared to CAD340.7 million for the same quarter last year.
Net earnings for 2007 were CAD14.5 million (24 cents Canadian per unit) compared to CAD68.1 million (CAD1.10 per unit) in 2006; during the second quarter of 2007, the company recorded a CAD80 million noncash future income tax expense related to the pending tax on income trusts. Revenues for 2007 were CAD1.47 billion, up from CAD1.36 billion in 2006.
Cash flow from operating activities in 2007 was CAD119.8 million. Distributions totaled CAD90.2 million (CAD1.48 per unit). Fourth quarter distributions were CAD23 million (37.5 cents Canadian per unit). Distributable cash flow was CAD143.5 million in 2007 (CAD2.35 per unit), up 42 percent from 2006. Fourth quarter distributable cash flow was CAD41.4 million (68 cents Canadian per unit).
The full-year payout ratio for 2007 was 63 percent; for the fourth quarter, it was 55 percent. Cash flow contribution from gathering and processing was CAD87.4 million, up 19 percent from last year. The natural gas liquids (NGL) infrastructure contribution was CAD46.8 million, up 4 percent, and the contribution from Keyera’s marketing business was CAD41.9 million, 70 percent higher than in the previous year.
Keyera recently announced an 8 percent increase in its monthly distribution from 12.5 cents Canadian per unit per month to 13.5 cents Canadian. Keyera Facilities Income Fund is a buy up to USD22.
Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF) reported 2007 revenue of CAD122.8 million, up from CAD90 million in 2006. The increase was driven by the contribution of the assets the fund acquired in its takeover of Clean Power Income Fund, higher power prices and increased power production.
Operating income was CAD23.3 million, up from CAD10.6 million for 2006. These factors were partially offset by a CAD10.2 million increase in operating costs. The revenue increase was also offset by a CAD2.6 million increase in administrative expenses.
Distributable cash for 2007 was CAD48.8 million (CAD1.21 per unit), up from CAD34.1 million (CAD1.133 per unit) in 2006. The fund distributed CAD42.9 million (CAD1.03 per unit), up from CAD30.4 million (CAD1.012 per unit) in 2006.
The payout ratio for 2007 was 88 percent, down slightly from 89 percent in 2006. The fund reported a debt-to-capitalization ratio of 38.8 percent as of Dec. 31, 2007. Total power production for the year was 1,687,059 megawatt hours (MWh), compared with 1,227,214 MWh last year as facilities achieved high overall availability and capacity factors.
Leisureworld Senior Care LP, in which the fund holds a 45 percent equity interest, reported a 5.6 percent increase in revenue and 7.2 percent increase in income from operations on improved occupancy, greater use of higher-cost facilities and increased government funding. Average total occupancy for the year was 98.4 percent, up from 95.3 percent in 2006. Average preferred occupancy was 83.2 percent, up from 79 percent. Macquarie Power & Infrastructure Income Fund is a buy up to USD12.
Northern Property REIT (TSX: NPR-U, OTC: NPRUF) reported net income of CAD7.69 million (34 cents Canadian per unit) for fiscal 2007, compared to CAD16.26 million (85 cents Canadian per unit) in 2006. Revenue for the year was CAD104.42 million, up from CAD84.01 million in 2006.
Distributable income per unit (DIPU) rose 10 percent to CAD1.82 from CAD1.64. During the fourth quarter, DIPU increased 15 percent over fourth quarter 2006 levels to 45 cents Canadian.
The REIT reported vacancy loss at 3.8 percent for the year, consistent with prior years, and year-end commercial vacancy of 1.6 percent. Northern Property’s payout ratio was 77.2 percent of DIPU for 2007; it ticked up to 80.2 percent during the fourth quarter because the REIT boosted its distribution 7 percent to CAD1.48 per unit on an annualized basis.
Weighted average interest costs on its financing decreased to 5.39 percent from 5.55 percent in 2006. Debt to gross book value as of Dec. 31, 2007, was 53.8 percent. Northern Property REIT is a buy up to USD25.
Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF) reported a 31 percent increase in cash flow from operations for the year ended Dec. 31, 2007, to CAD189.5 million (CAD1.52 per unit) from CAD143.9 million (CAD1.18 per unit). Pembina generated NOI of CAD260.1 million on revenue of CAD389.7 million; in 2006, NOI was CAD215.2 million on revenue of CAD335.8 million.
Average throughput on Pembina’s Alberta pipelines was off slightly to 422,700 barrels per day (bpd), but that figure ticked up to 454,300 bpd during the last month of 2007. Pembina forecast an increase in 2008 cash flow from operations from its conventional pipeline system.
The Syncrude Pipeline transported an average of 310,800 bpd during 2007 and generated revenue of CAD57.1 million; completion of the Horizon Pipeline in midyear should boost 2008 revenue. Operating income from Pembina’s midstream business surged 57 percent to CAD70.3 million, and the factors driving that increase should persist through 2008.
For the quarter ended Dec. 31, 2007, Pembina reported revenue of CAD101.2 million and NOI of CAD65.3 million, up 17.5 percent from a year ago. Pembina Pipeline Income Fund is a buy up to USD18.
RioCan REIT (TSX: REI-U, OTC: RIOCF) earned CAD65.1 million (32 cents Canadian per unit) during the fourth quarter, up from CAD43.4 million (22 cents Canadian per unit) a year ago. For 2007, RioCan reported net earnings of CAD32.4 million (16 cents Canadian per unit) compared to net earnings of CAD163.8 million (83 cents Canadian per unit) in 2006.
FFO were up 13 percent to CAD87.5 million (42 cents Canadian per unit) from CAD77.1 million (39 cents Canadian per unit) during the fourth quarter of 2006. FFO for the year ended Dec. 31, 2007, was up 10 percent to CAD314.6 (CAD1.51 per unit) from CAD286.6 (CAD1.45 per unit) in 2006.
Fourth quarter 2007 rental revenue was up 9 percent to CAD165.2 million from CAD151.2 million. Full-year 2007 rental revenue was up 12 percent to CAD648.9 million from CAD580.5 million in 2006. Portfolio occupancy at the end of 2007 was 97.6 percent.
RioCan’s net earnings for the three and 12 months ended Dec. 31, 2007, include noncash charges for future income tax recovery of CAD13 million and future income tax expense of CAD144 million, respectively. These noncash charges have no impact on RioCan’s cash flows or distributions and relate to RioCan’s future income tax liabilities as a result of passage of Canada’s 2007-08 federal budget, which includes a provision to tax income trusts beginning in 2011.
The provision won’t apply to an entity that meets specific defined requirements under the legislation for the REIT exemption; RioCan intends to take the necessary steps to qualify for the REIT exemption prior to 2011. RioCan REIT is a buy up to USD25.
TransForce Income Fund (TSX: TIF-U, OTC: TIFUF) generated fourth quarter revenue of CAD493.5 million, up from CAD456.8 million a year ago, but took a CAD56 million goodwill writedown that left it with a CAD30.9 million loss for the period. Operating income was CAD61.1 million, down from CAD65.8 million a year ago.
Cash flow from operating activities was CAD51.1 million, down from CAD55.9 million during the fourth quarter of 2006. Distributable cash was CAD49.8 million, down from CAD60.7 million. TransForce’s payout ratio rose to 155.9 percent in the fourth quarter, up from 90.3 percent a year ago.
Full-year 2007 revenue increased to CAD1.9 billion from CAD1.8 billion in 2006. Operating income for the 12 months ended Dec. 31, 2007, was up 1 percent to CAD243 million from CAD241.7 million in 2006. The full-year payout ratio was 97 percent, up from 81.9 percent in 2006. TransForce Income Fund is a buy up to USD9.
Yellow Pages Income Fund’s (TSX: YLO-U, OTC: YLWPF) fourth quarter profit rose 39 percent to CAD157 million (29 cents Canadian per unit) from CAD113 million (21 cents Canadian per unit) a year earlier. Revenue for the quarter was up to CAD412.5 million from CAD378.9 million.
EBITDA increased to CAD221 million from CAD197 million. Distributable cash increased by 11.6 percent in the quarter to CAD176.3 million, and 10 percent on a per-unit basis to CAD0.33 per unit.
Full-year 2007 earnings rose 22 percent to CAD527.7 million from CAD431.9 million in 2006, while revenue increased 17 percent to CAD1.6 billion. Cash distributions were increased by 3.7 percent to CAD1.13 from CAD1.09 effective Dec. 17, and distributable cash improved by 15 percent over 2006 to CAD700.5 million, and nearly 12 percent on a per-unit basis to CAD1.32 a unit.
The company maintained guidance for 2008, with revenue expected to climb between 4 percent and 5 percent and earnings from the directories business expected to grow by between 4 percent and 7 percent. Online revenue is expected to grow by 30 percent.
Yellow also announced it’s purchased Thunder Bay, Ontario-based TBayTel’s directory business for an undisclosed amount. Yellow has been producing the TBayTel directory, which has a circulation of more than 120,000, since 1982.
Yellow Pages Income Fund is a buy up to USD16.
Aggressive Portfolio
Advantage Energy Income Fund (NYSE: AAV, TSX: AVN-U) reported fourth quarter net income of CAD13.8 million (10 cents Canadian per unit), up from CAD8.74 million (8 cents Canadian per unit) a year ago. FFO totaled CAD80.52 million, up 28 percent from CAD62.74 million a year ago. FFO on a per-unit basis fell 2 percent to 58 cents Canadian from 59 cents Canadian.
Revenue for the quarter was up 30 percent to CAD165.95 million from CAD127.54 million in the fourth quarter of 2006. For the year ended Dec. 31, 2007, Advantage reported a net loss of CAD7.54 million (6 cents Canadian per unit); in 2006, the fund reported net income of CAD49.81 million (62 cents Canadian per unit).
Full-year FFO was up 26 percent to CAD271.14 million from CAD214.76 million a year earlier; on a per-unit basis, full-year FFO fell 16 percent to CAD2.22 million from CAD2.65 million. Revenue before royalties was up 33 percent to CAD557.36 million from CAD419.73 million.
For 2008, Advantage has sold forward about 51 percent of net natural gas production at an average floor price of CAD7.43 per thousand cubic feet and 38 percent of oil production at an average floor price of CAD94.07 per barrel. Buy Advantage Energy Income Fund up to USD12.
ARC Energy Trust’s (TSX: AET-U, OTC: AETUF) 2007 bottom line suffered as the strong loonie chipped away at the price of oil in Canadian dollar terms, but the company still reported a 7 percent profit rise on high oil prices.
Fourth quarter net income was CAD106.3 million (51 cents Canadian per unit), up 87 percent from CAD56.6 million (28 cents Canadian per unit) for the fourth quarter of 2006. Revenues were CAD338 million, up from CAD292.5 million a year ago.
ARC reported 2007 net income of CAD495.3 million (CAD2.39 per unit), up from CAD460.1 million (CAD2.28 per unit) in 2006. Revenue before royalties ticked up slightly to CAD1.25 billion from CAD1.23 billion in 2006.
ARC said the price of oil in US dollars increased by 9 percent for the full year of 2007, while the Canadian dollar equivalent increased by 3 percent. And higher oil prices were partially offset by lower realized natural gas prices compared to 2006.
Production averaged 62,723 barrels of oil equivalent per day (boe/d) in 2007 compared to 63,056 boe/d day in 2006. Of that, oil production decreased slightly to 28,682 boe/d from 29,042 boe/d in 2006.
Natural gas production was 180.1 million cubic feet per day (MMcf/d) in 2007, essentially unchanged from the 179.1 MMcf/d in 2006. ARC forecast 2008 oil and gas production to average approximately 63,000 boe/d. ARC, an early adopter of the trust format, also indicated it’s closer to reverting back to a corporation in anticipation of the 2011 tax on trust distributions.
“Management and the board of directors continue to review the impact of this tax on our business strategy, and while there has not been a decision as to ARC’s future direction at this time, we are of the opinion that the conversion from a trust to a corporation may be the most logical and tax efficient alternative for ARC unitholders,” read a statement attributed to CEO John Dielwart as part of ARC’s earnings release. ARC Energy Trust is a buy up to USD26.
Arctic Glacier Income Fund (TSX: AG-U, OTC: AGUNF) reported a fourth quarter loss of CAD3.7 million (10 cents Canadian per unit), an improvement from a loss of CAD6.2 million (19 cents Canadian per unit) a year ago. Ice is a seasonally sensitive business, so the fourth quarter is typically Arctic Glacier’s weakest period.
Sales in the period were off 9 percent to CAD36.3 million as a strong Canadian dollar took a CAD4.5 million bite. Sales for 2007 were up 14 percent to CAD249.1 million, the gain largely based on acquisitions. The strong loonie decreased US-based sales by CAD11.3 million compared to 2006.
Earnings for the year were CAD20.4 million (54 cents Canadian per unit), a 17 percent increase from 2006. The fund generated distributable cash of CAD43.5 million (CAD1.14 per unit).
Arctic Glacier raised a total of CAD67.8 million in 2007 from equity issues to finance acquisitions, growth capital expenditures and debt reduction. Distributions to unitholders increased 23 percent to CAD42.1 million during 2007. The payout ratio increased to 96.8 percent from 87.2 percent.
As of Dec. 31, 2007, Arctic Glacier’s total debt, excluding convertible debentures, was CAD150.3 million, down from CAD186.1 million a year ago. Arctic Glacier Income Fund is a hold.
Boralex Power Income Fund (TSX: BPT-U, OTC: BLXJF) reported a net loss of CAD5.5 million (9 cents Canadian per unit); in the fourth quarter of 2006, the fund generated net earnings of CAD7.4 million (12 cents Canadian per unit). Revenues were CAD24.5 million, down 18 percent from CAD30 million a year ago.
EBITDA amounted to CAD12.4 million, down from CAD18.9 million for the fourth quarter of 2006. Hydroelectric power generation was off 13.7 percent from historical averages because of lower hydrology; that translated into a decrease of about CAD5 million in revenue and EBITDA. A rising loonie reduced revenue and EBITDA by another CAD1.5 million.
Boralex also took a CAD14 million goodwill impairment charge related to its natural gas cogeneration facility. The fund recorded a net loss of CAD35.7 million (60 cents Canadian per unit) for full-year 2007. The fund reported EBITDA of CAD55.2 million for 2007 on revenue of CAD102.2 million. In 2006, Boralex made CAD70.9 million on CAD115.2 million in revenue.
Excluding the CAD42 million in future income taxes booked because of the change in Canadian tax legislation and the goodwill impairment charge, Boralex would have earned CAD20.3 million (34 cents Canadian per unit). The fund reduced its distribution to 70 cents Canadian per unit on an annualized basis, beginning with the March distribution payable in April. Hold Boralex Power Income Fund.
Enerplus Resources (NYSE: ERF, TSX: ERF-U) reported fourth quarter 2007 net income of CAD98.7 million (76 cents Canadian per unit), down from CAD110.2 million (89 cents Canadian per unit) a year ago. The decrease was caused by higher costs, hedging losses and the fluctuating Canadian dollar.
Oil and gas sales were CAD389.8 million, up from CAD369.5 million in the fourth quarter of 2006. Royalties paid increased to CAD73.2 million from CAD66.2 million, and commodity derivative instrument losses widened to CAD48.8 million from CAD5.4 million. Operating expenses were CAD8.53 per barrel of oil equivalent (boe), flat with CAD8.52 a year ago, but general and administrative expenses increased to CAD1.94 per boe from CAD1.88 per boe in the fourth quarter of 2006. Interest and foreign exchange expenses rose to CAD1.70 per boe from CAD1.02 per boe.
Production for the quarter averaged 80,959 boe/d, a decline of 7 percent from 87,092 boe/d in the same quarter of 2006. Average selling price for the quarter per boe was CAD52.33, up 13 percent from CAD46.11 a year ago on stronger crude prices.
For fiscal 2007, the company reported net income of CAD339.7 billion (CAD2.66 per unit), down from CAD544.8 billion (CAD4.47 per unit) in 2006. Net revenues for the full year declined to CAD1.22 billion from CAD1.30 billion. Oil and gas sales were CAD1.52 billion, down from CAD1.57 billion.
Enerplus forecast 2008 average daily production of approximately 98,000 boe/d and expects to spend CAD580 million on capital projects, up 50 percent from 2007; CAD475 million will go to conventional oil and gas production, with a slight bias toward oil over natural gas. Enerplus Resources is a buy up to USD50.
Newalta Income Fund (TSX: NAL-U, OTC: NALUF) reported a 54 percent increase in fourth quarter net income to CAD23.6 million (53 cents Canadian per unit) from CAD15.36 million (41 cents Canadian per unit) a year ago. Much of the increase came as a result of a decrease in Newalta’s estimated future income tax rate.
Revenue for the quarter ended Dec. 31, 2007, was up 12 percent to CAD137.1 million from CAD122.5 million. For full-year 2007, Newalta reported a decline in net income to CAD61.19 million (CAD1.51 per unit) from CAD75.57 million (CAD2.11 per unit) in 2006. Revenue for 2007 was up 13 percent to CAD499.9 million from CAD441 million in 2006, but lower margins, increased costs and higher borrowing costs offset the impact of future income tax recovery on the bottom line.
Newalta said it will maintain an 18.5-cents-Canadian, per-unit, per-month distribution for 2008. Buy Newalta Income Fund up to USD25.
Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF) reported net loss for the fourth quarter of CAD4.97 million (5 cents Canadian per unit), an improvement from a net loss of CAD687.25 million (80 cents Canadian per unit) a year ago. Funds flow for the quarter was CAD59.6 million (55 cents Canadian per unit), compared to CAD58.2 million (69 cents Canadian per unit).
Revenue for the quarter was CAD123.75 million, up from CAD104.17 million a year ago. Production in the quarter was 17.5 billion cubic feet equivalent (bcfe), up from 13.3 bcfe in the last quarter 2006. Paramount’s realized natural gas price decreased to CAD7.07 per thousand cubic feet equivalent (Mcfe) from CAD7.83 per Mcfe.
For 2007, Paramount lost CAD32.9 million (33 cents Canadian per unit) on CAD462.4 million in revenue. In 2006, the trust lost CAD18.9 million (22 cents Canadian per unit) on CAD420.8 million in revenue. The trust reported funds flow of CAD239.1 million (CAD2.44 per unit) for 2007, compared to CAD236.7 million (CAD2.82 per unit) in 2006.
Higher production levels were partially offset by higher operating, interest and general and administrative expenses. Paramount Energy Trust is a buy up to USD10.
Penn West Energy Trust (NYSE: PWE, TSX: PWT-U) reported a 3 percent rise in fourth quarter profit to CAD127 million (52 cents Canadian per unit) from CAD123 million (44 cents Canadian per unit) a year ago. Cash flow, which funds distributions, was up 14 percent to CAD347 million (CAD1.43 per unit) from CAD303 million (CAD1.22 per unit). Revenues were CAD644 million, up 11 percent from CAD578 million.
Fourth quarter production averaged 128,024 barrels of oil equivalent per day (boe/d), down 1 percent from the year before. Natural gas output fell 7 percent to 328 MMcf/d. Year-end production capacity, including the contribution from recently acquired Canetic Resources, was 206,000 boe/d.
Penn West realized an average of CAD55.44 per barrel of its oil and gas, up 18 percent from the fourth quarter of 2006. Oil prices were up more than 30 percent during 2007, but that surge was offset by a 9 percent decline in natural gas prices. Canadian gas has strengthened to more than CAD7 so far in 2008 because of cold weather.
CEO Bill Andrew reiterated his forecast that Penn West would remain a trust at least until 2011. Penn West will pay 34 cents Canadian per unit for February and will maintain that payment level through the second quarter. Buy Penn West Energy Trust up to USD38.
Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF) reported net earnings for the fourth quarter of CAD73.29 million (69 cents Canadian per unit), up from CAD47.01 million (44 cents Canadian per unit) a year ago. FFO for the quarter were CAD68.98 million (65 cents Canadian per unit), down from CAD77.36 million (74 cents Canadian per unit) in the fourth quarter of 2006.
Revenue fell to CAD99.39 million from CAD110.7 million. Production in the quarter was 21,134 boe/d, down from 22,550 boe/d a year ago.
For 2007, Peyto earned CAD208.9 million (CAD1.98 per unit) on CAD404 million in revenue. In 2006, Peyto earned CAD195.2 million (CAD1.86 per unit) on revenue of CAD439 million. Peyto Energy Trust is a buy up to USD20.
Provident Energy Trust (NYSE: PVX, TSX: PVE-U) reported net income for the fourth quarter of CAD68.6 million (28 cents Canadian per unit), reversing a net loss of CAD25.5 million (12 cents Canadian per unit) a year ago. Fourth quarter funds flow from operations climbed to CAD177.6 million (72 cents Canadian per unit), up from CAD122.7 million (58 cents Canadian per unit) in the fourth quarter of 2006.
Distributions declared increased 18 percent to CAD89.1 million from CAD75.6 million. Revenue declined 1 percent to CAD541.9 million from CAD548.1 million.
Production for the quarter averaged 48 boe/d, up from 33,800 boe/d on acquisitions made in Canada and the US. Provident’s midstream segment generated income of CAD89 million, up 20 percent from CAD74 million a year ago.
For 2007, Provident reported net income of CAD30.4 million (13 cents Canadian per unit), down from CAD140.9 million (72 cents Canadian per unit) in 2006. Full-year funds flow increased 8 percent to CAD468.3 million (CAD2.04 per unit), compared to CAD432.7 million (CAD2.20 per unit) in 2006.
Revenues for 2007 totaled CAD2.17 billion, down 1 percent from CAD2.19 billion in 2006. Production for the year was up 22 percent to 38,600 boe/d. Full-year midstream income amounted to CAD226 million, up from CAD220 million in 2006. Provident Energy Trust is a buy up to USD14.
Trinidad Drilling (TSX: TDG, OTC: TDGCF) reported fourth quarter net income of CAD17.9 million (21 cents Canadian per unit), down from CAD31.3 million (37 cents Canadian per unit) a year ago. Canadian drilling operations continued to decline during the period, and rising US revenue and margins couldn’t compensate.
Funds flow was CAD32.2 million (38 cents Canadian per unit), down from CAD54.7 million (65 cents Canadian per unit). Revenue declined to CAD145.8 million from CAD161.9 million. Canadian operations generated CAD63 million, approximately 43.2 percent of total revenue.
For 2007, Trinidad reported net income of CAD79.52 million (94 cents Canadian per unit), down from CAD123.71 million (CAD1.46 per unit) in 2006. Funds flow for the full year was CAD174.77 million (CAD2.06 per unit), compared to CAD196.92 million (CAD2.33 per unit). Revenue for 2007 increased to CAD629.68 million from CAD579.86 million in 2006.
Trinidad’s 2008 expansion plans will focus primarily outside Canada. Trinidad Drilling is a buy up to USD14.
Vermilion Energy Trust (TSX: VET-U, OTC: VETMF) reported fourth quarter net income of CAD43.2 million (62 cents Canadian per unit), up from CAD17.6 million (27 cents Canadian per unit) a year ago. Revenue for the quarter was up to CAD205.7 million from CAD155.7 million as higher oil prices offset higher operating costs.
For the year ended Dec. 31, 2007, Vermilion earned CAD164.3 million (CAD2.48 per unit), up from CAD146.9 million (CAD2.30 per unit) in 2006. Revenue for the year was CAD707.3 million, up from CAD618 million.
Annual production rose 14 percent to 31,325 boe/d from 27,401 boe/d in 2006. Vermilion forecast 2008 production of 31,000 to 32,000 boe/d and an average per-barrel oil price of USD70. Buy Vermilion Energy Trust up to USD40.
Global grain inventories have declined significantly during the last seven years on increased consumption, a growing world population, improving diets in developing countries and the advent of biofuels.
Grain prices initially lagged the changing supply/demand metric and didn’t provide enough incentive for growers to increase output. But grain prices have recently responded to low inventory levels.
Recent cash prices for wheat, soybeans and corn are up dramatically from two years ago. Wheat prices have been near USD10 a bushel, more than USD6 a bushel higher. Cash prices for soybeans are about USD13 a bushel, up more than USD7 a bushel. Corn is pricing at almost USD5 a bushel, an increase of greater than USD3 a bushel. Growers are reacting with increased production, and that requires an overall increase in plant nutrients.
The fertilizer industry will be essential in helping growers produce more grain than has ever been produced–simply to meet annual demand, let alone rebuild low grain inventories. That means higher fertilizer prices for at least the next several years–and higher prices for the stuff that’s used to make fertilizer.
In a recent research note to clients, Goldman Sachs analyst Edlain Rodriguez wrote, “We believe the tight potash market is allowing producers to raise prices at will. Given the underlying strength in commodity prices, farmers are still more concerned about maximizing yield and profits rather than controlling fertilizer costs.”
Potash is used primarily as an agricultural fertilizer (plant nutrient) because it’s a source of soluble potassium, one of the three primary plant nutrients. (The others are fixed nitrogen and soluble phosphorus.) Potash, along with phosphorous and nitrogen, is critical to modern agriculture. The three major nutrients have no substitutes.
According to the International Fertilizer Industry Association, overall global potash market conditions in 2008 are expected to remain tight.
Saskatchewan-based Potash Corp is the world’s leading producer of potash; its annual production capacity represents more than 20 percent of global capacity.
The stock is up more than 20 percent in 2008 and 200 percent for the trailing 12 months, trading at around USD175 a share. But meteoric as its recent rise may have been, Potash Corp’s bull run may still be in its early stages.
Under terms of a new supply agreement reached last week, Indian Potash will pay Belarusian Potash Co (BPC) USD625 per ton delivered for the period May 2008 to March 2009, a 130 percent boost from USD270 per ton.
China usually buys at a discount paid by importers in other markets. In years past, it made its potash arrangements ahead of India. The Indian contract could pressure China to reach a settlement with BPC and Canpotex, a marketing vehicle owned by Saskatchewan-based potash producers Potash Corp, Agrium and Mosaic. Canpotex said April 2 it would raise the price of standard-grade potash for buyers in Southeast Asia by 38 percent and in Brazil by 85 percent to USD750 a ton as of June 1.
The annual talks with China, the world’s largest potash fertilizer consumer, could result in prices similar to what India recently agreed to pay, according to Agrium CEO Mike Wilson. The ultimate result of these talks is an open question at this point, but if China waits much longer, it risks depleting its existing stock by the end of the year.
Aside from the parabolic rise in the stock prices of Potash Corp, Mosaic and Agrium, there are further notes of caution. High grain prices have been great for the fertilizer industry, but even higher prices may be too much of a good thing.
High food and grain prices have triggered public protests and even riots in several developing countries. Governments are feeling pressure to intervene with export taxes and caps on fertilizer prices. That pressure would only rise if prices continued to climb.
Agrium forecast 2008 gross margin of USD2 billion, double the 2007 level, and Agrium expects gross profits from its retail operations to approach USD676 in 2008, a nearly 100 percent increase over 2007. Gross profits from potash should at least double from USD167 million.
Potash Corp CEO Bill Doyle expects record volumes and prices in 2008 even without any sales to China.
Speaking Engagements
It’s time: Vegas, baby! Neil, Elliott and I will head to the desert paradise May 12-15, 2008, for the Las Vegas Money Show at Mandalay Bay. Go to www.lasvegasmoneyshow.com or call 800-970-4355 and refer to priority code 010583 to do the “what happens here stays here” thing as my guest.
The Roundup
As has become our custom, below we aggregate our breakdowns of fourth quarter and full-year 2007 earnings reports for CE Portfolio trusts.
Conservative Portfolio
Algonquin Power Income Fund (TSX: APF-U, OTC: AGQNF) reported fourth quarter cash available for distribution of CAD19.9 million (26 cents Canadian per unit), up from CAD17.5 million (23 cents Canadian per unit) a year ago. The fund distributed 23 cents Canadian per unit during the fourth quarter of both 2006 and 2007.
Revenue for the fourth quarter of 2007 was CAD44.3 million, down from CAD52 million a year ago. Net earnings from continuing operations came in at CAD8.8 million (12 cents Canadian per unit), up from CAD3.7 million (6 cents Canadian per unit) in the fourth quarter of 2006.
For the year ended Dec. 31, 2007, Algonquin generated cash available for distribution of CAD72.3 million (95 cents Canadian per unit), up from CAD67.5 million (93 cents Canadian per unit) in 2006. Revenue was CAD186.2 million for the year, down from CAD193.2 million in 2006. Net earnings from continuing operations totaled CAD24.8 million (34 cents Canadian per unit), compared to CAD30.7 million (43 cents Canadian per unit) in 2006.
Lower-than-long-term-average hydrology, lower production and lower average energy rates caused the fourth quarter and full-year revenue declines. The increase in cash available for distribution for 2007 is primarily due to one-time gains related to the termination fee in connection with the offer for Clean Power Income Fund, cash from discontinued operations and adjustments related to the fund’s investment in the St. Leon facility. Algonquin Power Income Fund is a buy up to USD9.50.
AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF) reported fourth quarter net income of CAD31.8 million (55 cents Canadian per unit), a 16 percent increase from CAD27.3 million (49 cents Canadian per unit) a year ago. That figure includes a CAD6.1 million income tax recovery. Excluding the noncash tax recovery, fourth quarter net income was CAD25.7 million. Fourth quarter revenue was off slightly to CAD336.5 million from CAD367.4 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were CAD40.3 million (70 cents Canadian per unit) in the fourth quarter, compared to CAD44.5 million (79 cents Canadian per unit) in the same quarter in 2006. Cash from operations was CAD59.8 million (CAD1.03 per unit) for fourth quarter 2007, up from CAD36.6 million (65 cents Canadian per unit) for the same period in 2006. Funds from operations (FFO) were CAD37.8 million (65 cents Canadian per unit) for fourth quarter 2007, compared to CAD41.4 million (74 cents Canadian per unit) for the same period in 2006.
Full-year 2007 net income was CAD108.8 million (CAD1.89 per unit), down from CAD114.5 million (CAD2.06 per unit). Excluding one-time tax items, net income was CAD108.1 million, up slightly from CAD107.9 million. Revenue increased to CAD1.4 billion from CAD1.36 billion.
EBITDA for full-year 2007 was CAD173.7 million (CAD3.03 per unit), compared to CAD173.1 million (CAD3.12 per unit) in 2006. Cash from operations for full-year 2007 was CAD183.3 million (CAD3.19 per unit), up from CAD146.9 million (CAD2.65 per unit) in 2006. FFO for the year were CAD162.9 million (CAD2.84 per unit), up from CAD161.7 million (CAD2.91 per unit) in 2006.
Total debt as of Dec. 31, 2007, was CAD220.7 million, compared to CAD265.5 million at Dec. 31, 2006. The trust’s debt-to-total capitalization ratio was 27.4 percent versus 33.4 percent at the end of 2006. AltaGas Income Trust is a buy up to USD28.
Artis REIT (TSX: AX-U, OTC: ARESF) reported fourth quarter FFO rose to CAD12.3 million (39 cents Canadian per unit) from CAD4.6 million (30 cents Canadian per unit) a year ago. Distributable income increased to CAD12.7 million (41 cents Canadian per unit) from CAD5.2 million (34 cents Canadian per unit) during the fourth quarter of 2006.
Revenue for the recently concluded quarter was up 93.2 percent to CAD31.9 million from CAD16.5 million. As of Dec. 31, 2007, mortgage debt-to-gross book value decreased to 49.2 percent from 52.1 percent on Dec. 31, 2006.
The REIT’s occupancy rate increased throughout 2007 to 97.4 percent from 95.8 percent. Artis REIT is a buy up to USD18.
Atlantic Power Corp (TSX: ATP-U, OTC: ATPWF) reported a 28 percent rise in distributable cash for 2007 to USD74 million from USD57.9 million in 2006. The boost was driven mainly by a full-year contribution from its Path 15 transmission line, which was acquired Sept. 15, 2006.
Atlantic distributed USD61.4 million during the year, for a payout ratio of 83 percent. For the three months ended Dec. 31, 2007, distributable cash was USD20.7 million, a 78 percent increase from USD11.6 million a year ago.
Adjusted EBITDA increased 11 percent to USD166.9 million for 2007. Adjusted EBITDA for the fourth quarter was down 5 percent to USD40.7 million compared to the fourth quarter of 2006.
Atlantic reported a project loss of USD113.4 million for 2007, including noncash charges related to the change in fair value of derivative instruments of USD128.4 million and a goodwill impairment charge of USD71.7 million. The net loss for the three months and year ended Dec. 31, 2007, was USD74.2 million (USD1.21 per unit) and USD149.2 million (USD2.43 per unit), respectively.
Excluding noncash charges related to changes in the fair value of derivative instruments and goodwill impairment charges, the net loss for the three months and year ended Dec. 31, 2007 would have been USD8.1 million (13 cents Canadian per unit) and USD29.1 million (47 cents Canadian per unit), respectively. Atlantic Power Corp is a buy up to USD12.
Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF) reported operating revenue increased by 2.6 percent compared to the same period a year earlier to CAD858.7 million (USD860.1 million) because of growth in a range of services including Internet access.
Internet revenue grew by CAD6.4 million, or 7.7 percent, year-over-year, with high-speed subscribers increasing by 17.1 percent. Bell Aliant completed its rollout of fiber-to-the-node (FTTN) broadband technology in the quarter, bringing the total number of homes passed to 188,000 at the end of December.
Local and long-distance revenue declined by CAD8.3 million (2.3 percent) and CAD2 million (1.7 percent), respectively. Bell Aliant reported a decline of 42,282 local access lines during the fourth quarter.
EBITDA rose 1.7 percent to CAD370.2 million. Capital expenditures rose 9.9 percent to CAD144.1 million for the quarter and 4.9 percent to CAD543 million for 2007.
The fund reported distributions of CAD89.5 million (70.5 cents Canadian per unit), up 5.2 percent from the same quarter in 2006. The fund also announced it would boost distributions to CAD0.2417 per unit per month (CAD2.90 per unit per year) beginning with the February payment.
For the full year, revenue rose to CAD3.37 billion with EBITDA of CAD1.45 billion, operating income of CAD515.4 million and net income of CAD584.3 million. For 2008, Bell Aliant is projecting CAD3.37 billion to CAD3.44 billion in operating revenue and CAD720 million to CAD740 million in distributable cash. Bell Aliant Regional Communications Income Fund is a buy up to USD33.
Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF, CAP REIT) reported FFO increased 10.5 percent to CAD72.3 million (CAD1.197 per unit) from CAD65.4 million (CAD1.157 per unit) for 2007. FFO for the fourth quarter was up 15.8 percent to CAD19 million (30.1 cents Canadian per unit) from CAD16.4 million (27.8 cents Canadian per unit).
Operating revenue for the year ended Dec. 31, 2007, was up 8.4 percent to CAD294 million from CAD271 million in 2006. Operating revenues in the fourth quarter of 2007 rose 11.3 percent to CAD77.2 million from CAD69.4 million a year ago.
Net operating income (NOI) for 2007 rose 10.2 percent to CAD155.6 million from CAD141.2 million. For the fourth quarter, NOI was up 13.6 percent to CAD40.3 million.
Average monthly rents increased to CAD913 from CAD886 for 2006, and occupancy was up to 97.8 percent from 97.2 percent. Distributable income was CAD73.1 million (CAD1.21 per unit), up from CAD66.2 million (CAD1.17 per unit) a year ago; for the fourth quarter, it rose to CAD19 million (30 cents Canadian per unit) from CAD16.4 million (27.8 cents Canadian per unit) a year ago.
CAP REIT’s payout ratio improved to 91.3 percent as of Dec. 31 from 94.1 percent a year ago. The REIT reported a net loss for 2007 of CAD50.2 million (83.1 cents Canadian per unit), compared to net income a year ago of CAD720,000 (1.3 cents Canadian per unit) because a noncash charge to earnings of CAD51.8 million was recorded relating to temporary differences between the accounting and tax basis of CAP REIT’s assets and liabilities. The charge has no impact on distributable income or FFO.
For the fourth quarter, net income increased to CAD9.1 million (14.5 cents Canadian per unit) compared to a net loss of CAD210,000 (0.4 cents Canadian per unit) a year ago. The REIT’s debt-to-book ratio as of Dec. 31, 2007, was 61.6 percent.
The weighted average interest rate of its total mortgage portfolio was 5.37 percent at Dec. 31, and the weighted average term to maturity was 5.5 years. Canadian Apartment Properties REIT is a buy up to USD20.
Energy Savings Income Fund (TSX: SIF-U, OTC: ESIUF) reported a 10 percent increase in seasonally adjusted sales for its fiscal third quarter (the period ending Dec. 31, 2007) from CAD417.2 million to CAD459.4 million. Distributable cash grew by 16 percent year-over-year to CAD42.5 million (39 cents Canadian per unit) from CAD36.5 million (34 cents Canadian per unit).
Distributions to unitholders were up 20 percent to CAD33 million (30 cents Canadian per unit) from CAD27.5 million (26 cents Canadian per unit). Margins per customer were up during the period because of low commodity prices; for the third consecutive quarter, margin per new customer exceeded projections by 11 percent for the period ended Dec. 31.
Energy Savings added 99,000 customers during its third quarter, consistent with first and second fiscal 2008 quarters but a 52 percent jump from the comparable period of fiscal 2007. The additions continue Energy Savings’ shift in customer growth from Canada to the US.
Fiscal fourth quarter 2008 customer additions are likely to lag previous quarters, and total additions for fiscal 2008 will probably come in below forecast. But management has affirmed gross margin and distributable cash growth guidance of between 15 percent and 20 percent.
Results for its fiscal fourth quarter could be impacted by negative regulatory developments: On Feb. 7, 2008, the attorney general of Illinois filed a complaint against Illinois Energy Savings Corp, a wholly owned subsidiary of the fund, alleging deceptive practices by agents in the sale of Energy Savings contracts to Illinois customers.
Energy Savings continues to assess its options in light of Canada’s decision to tax income trusts at the entity level and will provide updates as necessary. Energy Savings Income Fund is a buy up to USD18.
GMP Capital Trust (TSX: GMP-U, OTC: GMCPF) reported fourth quarter net income of CAD23.8 million (38 cents Canadian per unit), down from CAD30.6 million (48 cents Canadian per unit) a year ago. Revenue in the period was CAD101.5 million, down from CAD103.6 million. Distributable cash was CAD29.3 million (46 cents Canadian per unit), down from CAD36 million (58 cents Canadian per unit) a year earlier.
Full-year 2007 net income was CAD146.1 million, a 22 percent increase from 2006, on revenue of CAD473.9 million, which was up 33 percent. Distributable cash for 2007 was CAD171.7 million (CAD2.73 per unit), up from CAD131.5 million (CAD2.20 per unit) in 2006. GMP’s payout ratio for the fourth quarter was 88 percent. GMP Capital Trust is a buy up to USD25.
Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF) reported net earnings of CAD40 million (64 cents Canadian per unit) for the fourth quarter of 2007, up from CAD14.9 million (24 cents Canadian per unit) a year ago. Revenues in the quarter were CAD436.2 million compared to CAD340.7 million for the same quarter last year.
Net earnings for 2007 were CAD14.5 million (24 cents Canadian per unit) compared to CAD68.1 million (CAD1.10 per unit) in 2006; during the second quarter of 2007, the company recorded a CAD80 million noncash future income tax expense related to the pending tax on income trusts. Revenues for 2007 were CAD1.47 billion, up from CAD1.36 billion in 2006.
Cash flow from operating activities in 2007 was CAD119.8 million. Distributions totaled CAD90.2 million (CAD1.48 per unit). Fourth quarter distributions were CAD23 million (37.5 cents Canadian per unit). Distributable cash flow was CAD143.5 million in 2007 (CAD2.35 per unit), up 42 percent from 2006. Fourth quarter distributable cash flow was CAD41.4 million (68 cents Canadian per unit).
The full-year payout ratio for 2007 was 63 percent; for the fourth quarter, it was 55 percent. Cash flow contribution from gathering and processing was CAD87.4 million, up 19 percent from last year. The natural gas liquids (NGL) infrastructure contribution was CAD46.8 million, up 4 percent, and the contribution from Keyera’s marketing business was CAD41.9 million, 70 percent higher than in the previous year.
Keyera recently announced an 8 percent increase in its monthly distribution from 12.5 cents Canadian per unit per month to 13.5 cents Canadian. Keyera Facilities Income Fund is a buy up to USD22.
Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF) reported 2007 revenue of CAD122.8 million, up from CAD90 million in 2006. The increase was driven by the contribution of the assets the fund acquired in its takeover of Clean Power Income Fund, higher power prices and increased power production.
Operating income was CAD23.3 million, up from CAD10.6 million for 2006. These factors were partially offset by a CAD10.2 million increase in operating costs. The revenue increase was also offset by a CAD2.6 million increase in administrative expenses.
Distributable cash for 2007 was CAD48.8 million (CAD1.21 per unit), up from CAD34.1 million (CAD1.133 per unit) in 2006. The fund distributed CAD42.9 million (CAD1.03 per unit), up from CAD30.4 million (CAD1.012 per unit) in 2006.
The payout ratio for 2007 was 88 percent, down slightly from 89 percent in 2006. The fund reported a debt-to-capitalization ratio of 38.8 percent as of Dec. 31, 2007. Total power production for the year was 1,687,059 megawatt hours (MWh), compared with 1,227,214 MWh last year as facilities achieved high overall availability and capacity factors.
Leisureworld Senior Care LP, in which the fund holds a 45 percent equity interest, reported a 5.6 percent increase in revenue and 7.2 percent increase in income from operations on improved occupancy, greater use of higher-cost facilities and increased government funding. Average total occupancy for the year was 98.4 percent, up from 95.3 percent in 2006. Average preferred occupancy was 83.2 percent, up from 79 percent. Macquarie Power & Infrastructure Income Fund is a buy up to USD12.
Northern Property REIT (TSX: NPR-U, OTC: NPRUF) reported net income of CAD7.69 million (34 cents Canadian per unit) for fiscal 2007, compared to CAD16.26 million (85 cents Canadian per unit) in 2006. Revenue for the year was CAD104.42 million, up from CAD84.01 million in 2006.
Distributable income per unit (DIPU) rose 10 percent to CAD1.82 from CAD1.64. During the fourth quarter, DIPU increased 15 percent over fourth quarter 2006 levels to 45 cents Canadian.
The REIT reported vacancy loss at 3.8 percent for the year, consistent with prior years, and year-end commercial vacancy of 1.6 percent. Northern Property’s payout ratio was 77.2 percent of DIPU for 2007; it ticked up to 80.2 percent during the fourth quarter because the REIT boosted its distribution 7 percent to CAD1.48 per unit on an annualized basis.
Weighted average interest costs on its financing decreased to 5.39 percent from 5.55 percent in 2006. Debt to gross book value as of Dec. 31, 2007, was 53.8 percent. Northern Property REIT is a buy up to USD25.
Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF) reported a 31 percent increase in cash flow from operations for the year ended Dec. 31, 2007, to CAD189.5 million (CAD1.52 per unit) from CAD143.9 million (CAD1.18 per unit). Pembina generated NOI of CAD260.1 million on revenue of CAD389.7 million; in 2006, NOI was CAD215.2 million on revenue of CAD335.8 million.
Average throughput on Pembina’s Alberta pipelines was off slightly to 422,700 barrels per day (bpd), but that figure ticked up to 454,300 bpd during the last month of 2007. Pembina forecast an increase in 2008 cash flow from operations from its conventional pipeline system.
The Syncrude Pipeline transported an average of 310,800 bpd during 2007 and generated revenue of CAD57.1 million; completion of the Horizon Pipeline in midyear should boost 2008 revenue. Operating income from Pembina’s midstream business surged 57 percent to CAD70.3 million, and the factors driving that increase should persist through 2008.
For the quarter ended Dec. 31, 2007, Pembina reported revenue of CAD101.2 million and NOI of CAD65.3 million, up 17.5 percent from a year ago. Pembina Pipeline Income Fund is a buy up to USD18.
RioCan REIT (TSX: REI-U, OTC: RIOCF) earned CAD65.1 million (32 cents Canadian per unit) during the fourth quarter, up from CAD43.4 million (22 cents Canadian per unit) a year ago. For 2007, RioCan reported net earnings of CAD32.4 million (16 cents Canadian per unit) compared to net earnings of CAD163.8 million (83 cents Canadian per unit) in 2006.
FFO were up 13 percent to CAD87.5 million (42 cents Canadian per unit) from CAD77.1 million (39 cents Canadian per unit) during the fourth quarter of 2006. FFO for the year ended Dec. 31, 2007, was up 10 percent to CAD314.6 (CAD1.51 per unit) from CAD286.6 (CAD1.45 per unit) in 2006.
Fourth quarter 2007 rental revenue was up 9 percent to CAD165.2 million from CAD151.2 million. Full-year 2007 rental revenue was up 12 percent to CAD648.9 million from CAD580.5 million in 2006. Portfolio occupancy at the end of 2007 was 97.6 percent.
RioCan’s net earnings for the three and 12 months ended Dec. 31, 2007, include noncash charges for future income tax recovery of CAD13 million and future income tax expense of CAD144 million, respectively. These noncash charges have no impact on RioCan’s cash flows or distributions and relate to RioCan’s future income tax liabilities as a result of passage of Canada’s 2007-08 federal budget, which includes a provision to tax income trusts beginning in 2011.
The provision won’t apply to an entity that meets specific defined requirements under the legislation for the REIT exemption; RioCan intends to take the necessary steps to qualify for the REIT exemption prior to 2011. RioCan REIT is a buy up to USD25.
TransForce Income Fund (TSX: TIF-U, OTC: TIFUF) generated fourth quarter revenue of CAD493.5 million, up from CAD456.8 million a year ago, but took a CAD56 million goodwill writedown that left it with a CAD30.9 million loss for the period. Operating income was CAD61.1 million, down from CAD65.8 million a year ago.
Cash flow from operating activities was CAD51.1 million, down from CAD55.9 million during the fourth quarter of 2006. Distributable cash was CAD49.8 million, down from CAD60.7 million. TransForce’s payout ratio rose to 155.9 percent in the fourth quarter, up from 90.3 percent a year ago.
Full-year 2007 revenue increased to CAD1.9 billion from CAD1.8 billion in 2006. Operating income for the 12 months ended Dec. 31, 2007, was up 1 percent to CAD243 million from CAD241.7 million in 2006. The full-year payout ratio was 97 percent, up from 81.9 percent in 2006. TransForce Income Fund is a buy up to USD9.
Yellow Pages Income Fund’s (TSX: YLO-U, OTC: YLWPF) fourth quarter profit rose 39 percent to CAD157 million (29 cents Canadian per unit) from CAD113 million (21 cents Canadian per unit) a year earlier. Revenue for the quarter was up to CAD412.5 million from CAD378.9 million.
EBITDA increased to CAD221 million from CAD197 million. Distributable cash increased by 11.6 percent in the quarter to CAD176.3 million, and 10 percent on a per-unit basis to CAD0.33 per unit.
Full-year 2007 earnings rose 22 percent to CAD527.7 million from CAD431.9 million in 2006, while revenue increased 17 percent to CAD1.6 billion. Cash distributions were increased by 3.7 percent to CAD1.13 from CAD1.09 effective Dec. 17, and distributable cash improved by 15 percent over 2006 to CAD700.5 million, and nearly 12 percent on a per-unit basis to CAD1.32 a unit.
The company maintained guidance for 2008, with revenue expected to climb between 4 percent and 5 percent and earnings from the directories business expected to grow by between 4 percent and 7 percent. Online revenue is expected to grow by 30 percent.
Yellow also announced it’s purchased Thunder Bay, Ontario-based TBayTel’s directory business for an undisclosed amount. Yellow has been producing the TBayTel directory, which has a circulation of more than 120,000, since 1982.
Yellow Pages Income Fund is a buy up to USD16.
Aggressive Portfolio
Advantage Energy Income Fund (NYSE: AAV, TSX: AVN-U) reported fourth quarter net income of CAD13.8 million (10 cents Canadian per unit), up from CAD8.74 million (8 cents Canadian per unit) a year ago. FFO totaled CAD80.52 million, up 28 percent from CAD62.74 million a year ago. FFO on a per-unit basis fell 2 percent to 58 cents Canadian from 59 cents Canadian.
Revenue for the quarter was up 30 percent to CAD165.95 million from CAD127.54 million in the fourth quarter of 2006. For the year ended Dec. 31, 2007, Advantage reported a net loss of CAD7.54 million (6 cents Canadian per unit); in 2006, the fund reported net income of CAD49.81 million (62 cents Canadian per unit).
Full-year FFO was up 26 percent to CAD271.14 million from CAD214.76 million a year earlier; on a per-unit basis, full-year FFO fell 16 percent to CAD2.22 million from CAD2.65 million. Revenue before royalties was up 33 percent to CAD557.36 million from CAD419.73 million.
For 2008, Advantage has sold forward about 51 percent of net natural gas production at an average floor price of CAD7.43 per thousand cubic feet and 38 percent of oil production at an average floor price of CAD94.07 per barrel. Buy Advantage Energy Income Fund up to USD12.
ARC Energy Trust’s (TSX: AET-U, OTC: AETUF) 2007 bottom line suffered as the strong loonie chipped away at the price of oil in Canadian dollar terms, but the company still reported a 7 percent profit rise on high oil prices.
Fourth quarter net income was CAD106.3 million (51 cents Canadian per unit), up 87 percent from CAD56.6 million (28 cents Canadian per unit) for the fourth quarter of 2006. Revenues were CAD338 million, up from CAD292.5 million a year ago.
ARC reported 2007 net income of CAD495.3 million (CAD2.39 per unit), up from CAD460.1 million (CAD2.28 per unit) in 2006. Revenue before royalties ticked up slightly to CAD1.25 billion from CAD1.23 billion in 2006.
ARC said the price of oil in US dollars increased by 9 percent for the full year of 2007, while the Canadian dollar equivalent increased by 3 percent. And higher oil prices were partially offset by lower realized natural gas prices compared to 2006.
Production averaged 62,723 barrels of oil equivalent per day (boe/d) in 2007 compared to 63,056 boe/d day in 2006. Of that, oil production decreased slightly to 28,682 boe/d from 29,042 boe/d in 2006.
Natural gas production was 180.1 million cubic feet per day (MMcf/d) in 2007, essentially unchanged from the 179.1 MMcf/d in 2006. ARC forecast 2008 oil and gas production to average approximately 63,000 boe/d. ARC, an early adopter of the trust format, also indicated it’s closer to reverting back to a corporation in anticipation of the 2011 tax on trust distributions.
“Management and the board of directors continue to review the impact of this tax on our business strategy, and while there has not been a decision as to ARC’s future direction at this time, we are of the opinion that the conversion from a trust to a corporation may be the most logical and tax efficient alternative for ARC unitholders,” read a statement attributed to CEO John Dielwart as part of ARC’s earnings release. ARC Energy Trust is a buy up to USD26.
Arctic Glacier Income Fund (TSX: AG-U, OTC: AGUNF) reported a fourth quarter loss of CAD3.7 million (10 cents Canadian per unit), an improvement from a loss of CAD6.2 million (19 cents Canadian per unit) a year ago. Ice is a seasonally sensitive business, so the fourth quarter is typically Arctic Glacier’s weakest period.
Sales in the period were off 9 percent to CAD36.3 million as a strong Canadian dollar took a CAD4.5 million bite. Sales for 2007 were up 14 percent to CAD249.1 million, the gain largely based on acquisitions. The strong loonie decreased US-based sales by CAD11.3 million compared to 2006.
Earnings for the year were CAD20.4 million (54 cents Canadian per unit), a 17 percent increase from 2006. The fund generated distributable cash of CAD43.5 million (CAD1.14 per unit).
Arctic Glacier raised a total of CAD67.8 million in 2007 from equity issues to finance acquisitions, growth capital expenditures and debt reduction. Distributions to unitholders increased 23 percent to CAD42.1 million during 2007. The payout ratio increased to 96.8 percent from 87.2 percent.
As of Dec. 31, 2007, Arctic Glacier’s total debt, excluding convertible debentures, was CAD150.3 million, down from CAD186.1 million a year ago. Arctic Glacier Income Fund is a hold.
Boralex Power Income Fund (TSX: BPT-U, OTC: BLXJF) reported a net loss of CAD5.5 million (9 cents Canadian per unit); in the fourth quarter of 2006, the fund generated net earnings of CAD7.4 million (12 cents Canadian per unit). Revenues were CAD24.5 million, down 18 percent from CAD30 million a year ago.
EBITDA amounted to CAD12.4 million, down from CAD18.9 million for the fourth quarter of 2006. Hydroelectric power generation was off 13.7 percent from historical averages because of lower hydrology; that translated into a decrease of about CAD5 million in revenue and EBITDA. A rising loonie reduced revenue and EBITDA by another CAD1.5 million.
Boralex also took a CAD14 million goodwill impairment charge related to its natural gas cogeneration facility. The fund recorded a net loss of CAD35.7 million (60 cents Canadian per unit) for full-year 2007. The fund reported EBITDA of CAD55.2 million for 2007 on revenue of CAD102.2 million. In 2006, Boralex made CAD70.9 million on CAD115.2 million in revenue.
Excluding the CAD42 million in future income taxes booked because of the change in Canadian tax legislation and the goodwill impairment charge, Boralex would have earned CAD20.3 million (34 cents Canadian per unit). The fund reduced its distribution to 70 cents Canadian per unit on an annualized basis, beginning with the March distribution payable in April. Hold Boralex Power Income Fund.
Enerplus Resources (NYSE: ERF, TSX: ERF-U) reported fourth quarter 2007 net income of CAD98.7 million (76 cents Canadian per unit), down from CAD110.2 million (89 cents Canadian per unit) a year ago. The decrease was caused by higher costs, hedging losses and the fluctuating Canadian dollar.
Oil and gas sales were CAD389.8 million, up from CAD369.5 million in the fourth quarter of 2006. Royalties paid increased to CAD73.2 million from CAD66.2 million, and commodity derivative instrument losses widened to CAD48.8 million from CAD5.4 million. Operating expenses were CAD8.53 per barrel of oil equivalent (boe), flat with CAD8.52 a year ago, but general and administrative expenses increased to CAD1.94 per boe from CAD1.88 per boe in the fourth quarter of 2006. Interest and foreign exchange expenses rose to CAD1.70 per boe from CAD1.02 per boe.
Production for the quarter averaged 80,959 boe/d, a decline of 7 percent from 87,092 boe/d in the same quarter of 2006. Average selling price for the quarter per boe was CAD52.33, up 13 percent from CAD46.11 a year ago on stronger crude prices.
For fiscal 2007, the company reported net income of CAD339.7 billion (CAD2.66 per unit), down from CAD544.8 billion (CAD4.47 per unit) in 2006. Net revenues for the full year declined to CAD1.22 billion from CAD1.30 billion. Oil and gas sales were CAD1.52 billion, down from CAD1.57 billion.
Enerplus forecast 2008 average daily production of approximately 98,000 boe/d and expects to spend CAD580 million on capital projects, up 50 percent from 2007; CAD475 million will go to conventional oil and gas production, with a slight bias toward oil over natural gas. Enerplus Resources is a buy up to USD50.
Newalta Income Fund (TSX: NAL-U, OTC: NALUF) reported a 54 percent increase in fourth quarter net income to CAD23.6 million (53 cents Canadian per unit) from CAD15.36 million (41 cents Canadian per unit) a year ago. Much of the increase came as a result of a decrease in Newalta’s estimated future income tax rate.
Revenue for the quarter ended Dec. 31, 2007, was up 12 percent to CAD137.1 million from CAD122.5 million. For full-year 2007, Newalta reported a decline in net income to CAD61.19 million (CAD1.51 per unit) from CAD75.57 million (CAD2.11 per unit) in 2006. Revenue for 2007 was up 13 percent to CAD499.9 million from CAD441 million in 2006, but lower margins, increased costs and higher borrowing costs offset the impact of future income tax recovery on the bottom line.
Newalta said it will maintain an 18.5-cents-Canadian, per-unit, per-month distribution for 2008. Buy Newalta Income Fund up to USD25.
Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF) reported net loss for the fourth quarter of CAD4.97 million (5 cents Canadian per unit), an improvement from a net loss of CAD687.25 million (80 cents Canadian per unit) a year ago. Funds flow for the quarter was CAD59.6 million (55 cents Canadian per unit), compared to CAD58.2 million (69 cents Canadian per unit).
Revenue for the quarter was CAD123.75 million, up from CAD104.17 million a year ago. Production in the quarter was 17.5 billion cubic feet equivalent (bcfe), up from 13.3 bcfe in the last quarter 2006. Paramount’s realized natural gas price decreased to CAD7.07 per thousand cubic feet equivalent (Mcfe) from CAD7.83 per Mcfe.
For 2007, Paramount lost CAD32.9 million (33 cents Canadian per unit) on CAD462.4 million in revenue. In 2006, the trust lost CAD18.9 million (22 cents Canadian per unit) on CAD420.8 million in revenue. The trust reported funds flow of CAD239.1 million (CAD2.44 per unit) for 2007, compared to CAD236.7 million (CAD2.82 per unit) in 2006.
Higher production levels were partially offset by higher operating, interest and general and administrative expenses. Paramount Energy Trust is a buy up to USD10.
Penn West Energy Trust (NYSE: PWE, TSX: PWT-U) reported a 3 percent rise in fourth quarter profit to CAD127 million (52 cents Canadian per unit) from CAD123 million (44 cents Canadian per unit) a year ago. Cash flow, which funds distributions, was up 14 percent to CAD347 million (CAD1.43 per unit) from CAD303 million (CAD1.22 per unit). Revenues were CAD644 million, up 11 percent from CAD578 million.
Fourth quarter production averaged 128,024 barrels of oil equivalent per day (boe/d), down 1 percent from the year before. Natural gas output fell 7 percent to 328 MMcf/d. Year-end production capacity, including the contribution from recently acquired Canetic Resources, was 206,000 boe/d.
Penn West realized an average of CAD55.44 per barrel of its oil and gas, up 18 percent from the fourth quarter of 2006. Oil prices were up more than 30 percent during 2007, but that surge was offset by a 9 percent decline in natural gas prices. Canadian gas has strengthened to more than CAD7 so far in 2008 because of cold weather.
CEO Bill Andrew reiterated his forecast that Penn West would remain a trust at least until 2011. Penn West will pay 34 cents Canadian per unit for February and will maintain that payment level through the second quarter. Buy Penn West Energy Trust up to USD38.
Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF) reported net earnings for the fourth quarter of CAD73.29 million (69 cents Canadian per unit), up from CAD47.01 million (44 cents Canadian per unit) a year ago. FFO for the quarter were CAD68.98 million (65 cents Canadian per unit), down from CAD77.36 million (74 cents Canadian per unit) in the fourth quarter of 2006.
Revenue fell to CAD99.39 million from CAD110.7 million. Production in the quarter was 21,134 boe/d, down from 22,550 boe/d a year ago.
For 2007, Peyto earned CAD208.9 million (CAD1.98 per unit) on CAD404 million in revenue. In 2006, Peyto earned CAD195.2 million (CAD1.86 per unit) on revenue of CAD439 million. Peyto Energy Trust is a buy up to USD20.
Provident Energy Trust (NYSE: PVX, TSX: PVE-U) reported net income for the fourth quarter of CAD68.6 million (28 cents Canadian per unit), reversing a net loss of CAD25.5 million (12 cents Canadian per unit) a year ago. Fourth quarter funds flow from operations climbed to CAD177.6 million (72 cents Canadian per unit), up from CAD122.7 million (58 cents Canadian per unit) in the fourth quarter of 2006.
Distributions declared increased 18 percent to CAD89.1 million from CAD75.6 million. Revenue declined 1 percent to CAD541.9 million from CAD548.1 million.
Production for the quarter averaged 48 boe/d, up from 33,800 boe/d on acquisitions made in Canada and the US. Provident’s midstream segment generated income of CAD89 million, up 20 percent from CAD74 million a year ago.
For 2007, Provident reported net income of CAD30.4 million (13 cents Canadian per unit), down from CAD140.9 million (72 cents Canadian per unit) in 2006. Full-year funds flow increased 8 percent to CAD468.3 million (CAD2.04 per unit), compared to CAD432.7 million (CAD2.20 per unit) in 2006.
Revenues for 2007 totaled CAD2.17 billion, down 1 percent from CAD2.19 billion in 2006. Production for the year was up 22 percent to 38,600 boe/d. Full-year midstream income amounted to CAD226 million, up from CAD220 million in 2006. Provident Energy Trust is a buy up to USD14.
Trinidad Drilling (TSX: TDG, OTC: TDGCF) reported fourth quarter net income of CAD17.9 million (21 cents Canadian per unit), down from CAD31.3 million (37 cents Canadian per unit) a year ago. Canadian drilling operations continued to decline during the period, and rising US revenue and margins couldn’t compensate.
Funds flow was CAD32.2 million (38 cents Canadian per unit), down from CAD54.7 million (65 cents Canadian per unit). Revenue declined to CAD145.8 million from CAD161.9 million. Canadian operations generated CAD63 million, approximately 43.2 percent of total revenue.
For 2007, Trinidad reported net income of CAD79.52 million (94 cents Canadian per unit), down from CAD123.71 million (CAD1.46 per unit) in 2006. Funds flow for the full year was CAD174.77 million (CAD2.06 per unit), compared to CAD196.92 million (CAD2.33 per unit). Revenue for 2007 increased to CAD629.68 million from CAD579.86 million in 2006.
Trinidad’s 2008 expansion plans will focus primarily outside Canada. Trinidad Drilling is a buy up to USD14.
Vermilion Energy Trust (TSX: VET-U, OTC: VETMF) reported fourth quarter net income of CAD43.2 million (62 cents Canadian per unit), up from CAD17.6 million (27 cents Canadian per unit) a year ago. Revenue for the quarter was up to CAD205.7 million from CAD155.7 million as higher oil prices offset higher operating costs.
For the year ended Dec. 31, 2007, Vermilion earned CAD164.3 million (CAD2.48 per unit), up from CAD146.9 million (CAD2.30 per unit) in 2006. Revenue for the year was CAD707.3 million, up from CAD618 million.
Annual production rose 14 percent to 31,325 boe/d from 27,401 boe/d in 2006. Vermilion forecast 2008 production of 31,000 to 32,000 boe/d and an average per-barrel oil price of USD70. Buy Vermilion Energy Trust up to USD40.
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