Maple Leaf Memo
Sprott’s IPO and the Commodity Cycle
We’ve written extensively here and in Canadian Edge about the global resource boom that sustains the economy up north and provides compelling stories for investors. So the headline “Sprott Hedge Fund IPO May Signal Top of Canada Commodity Rally” on a May 5 Bloomberg story caught our attention.
The CAD2.1 billion Sprott Canadian Equity Fund, Sprott Asset Management’s flagship, has returned 28 percent annually for the past decade, a track record that reflects excellent junior resource stock picking. Sprott Asset Management’s entire line of mutual funds and hedge funds have benefited from soaring prices for oil, gold and other metals.
Eric Sprott has earned a reputation as a guy who knows how to maximize opportunities. Sprott founded what’s now Cormark Securities in 1981 before selling the securities broker to employees and devoting his efforts entirely to Sprott Asset Management in 2001. As first reported in mid-April, Sprott Asset Management is offering up to 15 percent of itself to the public, with the shares expected to hit the street May 8.
Sprott Asset Management oversees CAD6.9 billion in mutual funds and hedge funds. It plans to sell as many as 23 million shares, according to the sale documents. The founder’s 78 percent stake would be worth about CAD1.17 billion at a CAD10-a-share offer price.
That the initial public offering (IPO) comes as oil tops USD120 per barrel strikes at least a couple analysts as ominous. The CAD230 million IPO reminds Stephen Jarislowsky, CEO of Montreal-based Jarislowsky Fraser, of the June 2007 share sale by Blackstone Group, which preceded a 56 percent decline in US mergers and acquisitions activity.
“When the LBO firms went public, the next day, the game was up,” said Jarislowsky to Bloomberg. “Why is he going public? If it’s going that well, why would you let anybody in on it? Why doesn’t he just sell to his partners?”
Said Greg Eckel of Toronto-based Morgan Meighen & Associates, “[Sprott’s] built his brand, he’s built his name. I guess my worry is, is this is an indicator of a peak?”
“Peak” is the word, but it’s relevance as far as Sprott’s motivation is best understood by reading his April commentary. Sprott, one of the most adamant, articulate advocates of the peak oil theory among high-profile money runners, writes:
It’s worth a read: Peak Oil: Alive and Well. That the Sprott Asset Management IPO indicates a peak in the commodity cycle may be borne out in some “post hoc, ergo propter hoc” sort of way, but the key from an investor’s perspective is that it’s a short-term top.
A couple other deals provide some insight into Sprott’s long-term outlook. Sprott Resource Corp (TSX: SCP), which is managed by an affiliate of Sprott Asset Management, and Lara Exploration (TSX V: LRA) have signed a letter of intent to form a strategic alliance targeting phosphates, potash and other fertilizer feedstock minerals outside Canada.
Sprott Resource will provide up to CAD3 million in initial seed capital in the venture, including CAD500,000 in the first year, with Lara acting as operator to seek acquisitions and undertake exploration. Sprott Resource and Lara first linked up for the Mantaro phosphate project in Peru, one of the largest undeveloped phosphate deposits on the Pacific Rim.
Sprott Resource has also hammered out a joint venture with Altius Minerals Corp (TSX: ALS) to explore for potash in the St. George’s Basin of southwestern Newfoundland. The St. Georges project consists of 1,400 claims (35,000 hectares) that cover four primary target areas for potash deposits.
Under the agreement, Sprott Resource may earn up to a 60 percent interest in the St. George’s project by spending CAD2.5 million over four years, subject to an underlying 2 percent gross sales royalty retained by Altius.
Fertilizer is in high demand, and Canada has a lot of one of the key ingredients, potash. Canpotex, the marketing and distribution company wholly owned by Potash Corp of Saskatchewan (NYSE: POT, TSX: POT), Alberta-based Agrium (NYSE: AGU, TSX: AGU) and Minnesota-based The Mosaic Co (NYSE: MOS), negotiated a USD576-per-ton price with China for 2008 potash, up from USD176 per ton in 2007.
The stocks have run like crazy. Potash Corp, which is up 37 percent in 2008 and 135 percent in the trailing 12 months, recently surpassed energy giant EnCana (NYSE: ECA, TSX: ECA) as the biggest Canadian company by market capitalization.
The supply/demand profile is clearly in Potash Corp, et al.’s, favor. April meetings of the International Monetary Fund in Washington, DC, quickly, surprisingly turned from the global credit crunch to the international food crisis, riots have broken out, and Wal-Mart is rationing rice. Boosting crop yields has become an urgent topic of discussion, and fertilizer is a key part of making it happen.
We’ve had interesting water-cooler debates about food, fertilizer and potash recently, and much of that discussion has made its way to this space. Potash Corp is a typical “put itself in position to benefit from good fortune” company. Management is focused and controls costs; this, on top of the favorable fundamentals, makes it a good business.
That’s the answer to the threshold question. Our internal debate has centered on the value question: Is Potash Corp specifically too expensive at these levels?
Here’s the relevance: Sprott made his bones and his billions betting on junior resource companies, the ones that look for and find the stuff necessary to make economies go. He, or at least another company with his name on it, sees value in a small fertilizer explorer. This is a bet on the long-term food story.
Crude is expensive, and it will pull back. Potash is expensive, and investments related to it will pull back as well. But the forces set in motion by Asia’s rapid rise—a growing middle class means more cars, which require more oil to be refined into gasoline, and more meat consumption, which requires a lot of feed, which requires higher crop yields—are impossible to reverse.
This is a long-term story.
It’s Better to Laugh…
The solution to the real estate problem: corngages.
Live Webcasts
Tune in to live webcast events from the upcoming Money Show in Las Vegas. Neil, Elliott and I will be presenting our latest insights and recommendations surrounding this year’s central theme, “Managing Your Portfolio in Uncertain Times.” I’ll also be presenting The Best Stocks Money Can Buy Thursday, May 15, at 11:30 am PST.
Earnings season for Canadian income trusts is well underway. The first set of summaries, as well as reporting dates for the remainder of CE Portfolio recommendations, follows.
Conservative Portfolio
Algonquin Power Income Fund (TSX: APF.UN, OTC: AGQNF) May 8
AltaGas Income Trust (TSX: ALA.UN, OTC: ATGFF) May 7
Artis REIT (TSX: AX.UN, OTC: ARESF) May 15
Atlantic Power Corp (TSX: ATP.UN, OTC: ATPWF) May 14
Bell Aliant Regional Communications Income Fund (TSX: BA.UN, OTC: BLIAF) May 6
Canadian Apartment Properties REIT (TSX: CAR.UN, OTC: CDPYF) May 14
Energy Savings Income Fund (TSX: SIF.UN, OTC: ESIUF) May 13
GMP Capital Trust (TSX: GMP.UN, OTC: GMCPF) May 9
Keyera Facilities Income Fund (TSX: KEY.UN, OTC: KEYUF) May 13
Macquarie Power & Infrastructure Income Fund (TSX: MPT.UN, OTC: MCQPF) May 6
Northern Property REIT (TSX: NPR.UN, OTC: NPRUF) May 9
Pembina Pipeline Income Fund (TSX: PIF.UN, OTC: PMBIF) reported a solid 7 percent increase in distributable cash in the first quarter, driving its payout ratio down to 81 percent from 90 percent a year earlier. Conventional pipelines enjoyed an 8 percent boost in sales and 5 percent rise in income on robust traffic and higher margins.
Midstream and marketing enjoyed a 19 percent jump in sales and a 23 percent boost in income, as the company continued to steadily expand its asset base. Finally, the oil sands division reported only a 1 percent boost in earnings.
More important, however, it remained on track to complete the Horizon Pipeline on budget by July 1, which will effectively double that division’s operating income. Cash flow from Horizon should set the stage for another solid dividend increase this year for the trust.
In the meantime, it continues to yield well more than 8 percent and remains the safest way for income investors to profit from the continued robust growth of Canada’s oil sands region. Buy Pembina Pipeline Income Fund up to USD18 if you haven’t already.
RioCan REIT (TSX: REI.UN, OTC: RIOCF), hurt by aggregate onetime charges of CAD3.2 million and depreciation of income properties totaling CAD3.4 million, reported first quarter net income of CAD30.3 million (14 cents Canadian per unit), down from CAD37.4 million (18 cents Canadian per unit) a year ago. Funds from operations (FFO), a key measure of REIT success, came in at CAD67.7 million (32 cents Canadian per unit), down from CAD71.3 million (35 cents Canadian per unit) in the first quarter of 2007.
Rental revenue rose 5 percent to CAD173.1 million from CAD165 million. The onetime cost relates to RioCan’s move to new corporate headquarters at RioCan Yonge Eglinton Centre and the departure of its now former chief financial officer.
RioCan’s portfolio occupancy at the end the quarter was 96.6 percent. CEO Edward Sonshine said RioCan’s full-year results would be “in line with our expectations.” RioCan’s disciplined debt management gives it plenty of room to raise capital via the debt market, even amid the current crunch. RioCan REIT is a buy up to USD25.
TransForce Income Fund (TSX: TIF.UN, OTC: TIFUF) rebounded from a worrisome fourth quarter, though fuel costs, the weak US economy and the impact of a strong loonie continued to impact results during the first quarter. Distributable cash flow from operating activities was basically flat compared to year-ago levels, CAD45.1 million in 2008 versus CAD45.6 million in 2007.
The fund reduced its payout ratio during the first quarter to 90.5 percent from 102.2 percent during the first three months of 2007 and from 155.9 percent during the fourth quarter of 2007. Revenue climbed 13 percent to CAD526.3 million from CAD464.8 million; earnings before interest, taxes, depreciation and amortization (EBITDA) rose from CAD56.9 million from CAD52.7 million, largely on the strength of acquisitions.
TransForce continues to hunt for takeover targets as it pursues its consolidation of the trucking market and has said it has more than CAD100 million in potential deals “that could be realized in the short term.” The fund announced that it would convert to a corporate form in order to better deliver for investors.
Holding onto more cash will allow TransForce to more easily pursue its growth, but it will still pay a relatively high dividend. Still a compelling income-plus-growth story, TransForce Income Fund is a buy up to USD9.
Yellow Pages Income Fund (TSX: YLO.UN, OTC: YLWPF) May 8
Aggressive Portfolio
Advantage Energy Income Fund (TSX: AVN.UN, NYSE: AAV) May 14
Ag Growth Income Fund (TSX: AFN.UN, OTC: AGGRF) May 9
ARC Energy Trust (TSX: AET.UN, OTC: AETUF) May 8
Arctic Glacier Income Fund (TSX: AG.UN, OTC: AGUNF) May 13
Boralex Power Income Fund (TSX: BPT.UN, OTC: BLXJF) realized higher electricity and steam prices during the first quarter, offsetting a decrease in total electricity generation, on recorded net income of CAD15.2 million (26 cents Canadian per unit), up CAD2.5 million from CAD12.7 million (21 cents Canadian per unit) in the first quarter of 2007.
The bottom line also benefited from a positive adjustment of CAD3.5 million related to the reversal of future income taxes. Revenue rose to CAD34.3 million, up from CAD33.9 million, while expenses ticked up to CAD12.6 million from CAD12.1 million.
Power production in the wood residue segment was lower because of a forced shutdown at the Senneterre unit in northwestern Quebec, while the hydro segment’s output was up 6 percent. The fund continues to benefit from high oil prices, which translate into higher steam prices.
Boralex continues to negotiate with AbitibiBowater (NYSE: ABH, TSX: ABH) to settle a dispute over the cogeneration plant at the Dolbeau paper mill. Its cash flow is more than able to cover the recently reduced monthly distribution. Boralex Power Income Fund is a buy up to USD6.
Enerplus Resources (NYSE: ERF, TSX: ERF.UN) May 9
Newalta Income Fund (TSX: NAL.UN, OTC: NALUF) May 6
Paramount Energy Trust (TSX: PMT.UN, OTC: PMGYF) May 9
Penn West Energy Trust (NYSE: PWE, TSX: PWT.UN) May 8
Peyto Energy Trust (TSX: PEY.UN, OTC: PEYUF) May 7
Provident Energy Trust (NYSE: PVX, TSX: PVE.UN) May 9
Trinidad Drilling (TSX: TDG, OTC: TDGCF) May 9
Vermilion Energy Trust’s (TSX: VET.UN, OTC: VETMF) first quarter numbers were depressed by the impact of a declining US dollar versus the loonie, which caused an unrealized foreign currency exchange loss of CAD28.2 million, or CAD9.18 per barrel of oil equivalent.
Net income was CAD26.2 million (38 cents Canadian per unit) on revenue of CAD229.5 million, down from CAD31.6 million (48 cents Canadian per unit) on revenue of CAD148.8 million during the first three months of 2007. Excluding the unrealized foreign exchange loss, earnings would have been CAD54.4 million. Vermilion generated FFO of CAD119.4 million (CAD1.59 per unit), up 57 percent on a total basis and 50 percent on a per-unit basis from 2007.
Vermilion produced 33,072 barrels of oil equivalent per day (boe/d) in the first quarter, compared to 33,070 boe/d in the fourth quarter, with Canadian production volumes boosted by the acquisition of properties in the Drayton Valley area of Alberta. The trust distributed 57 cents Canadian per unit during the quarter, or 56 percent of FFO. Vermilion Energy Trust, still with low debt and high free cash flow generation, is a buy up to USD40.
We’ve written extensively here and in Canadian Edge about the global resource boom that sustains the economy up north and provides compelling stories for investors. So the headline “Sprott Hedge Fund IPO May Signal Top of Canada Commodity Rally” on a May 5 Bloomberg story caught our attention.
The CAD2.1 billion Sprott Canadian Equity Fund, Sprott Asset Management’s flagship, has returned 28 percent annually for the past decade, a track record that reflects excellent junior resource stock picking. Sprott Asset Management’s entire line of mutual funds and hedge funds have benefited from soaring prices for oil, gold and other metals.
Eric Sprott has earned a reputation as a guy who knows how to maximize opportunities. Sprott founded what’s now Cormark Securities in 1981 before selling the securities broker to employees and devoting his efforts entirely to Sprott Asset Management in 2001. As first reported in mid-April, Sprott Asset Management is offering up to 15 percent of itself to the public, with the shares expected to hit the street May 8.
Sprott Asset Management oversees CAD6.9 billion in mutual funds and hedge funds. It plans to sell as many as 23 million shares, according to the sale documents. The founder’s 78 percent stake would be worth about CAD1.17 billion at a CAD10-a-share offer price.
That the initial public offering (IPO) comes as oil tops USD120 per barrel strikes at least a couple analysts as ominous. The CAD230 million IPO reminds Stephen Jarislowsky, CEO of Montreal-based Jarislowsky Fraser, of the June 2007 share sale by Blackstone Group, which preceded a 56 percent decline in US mergers and acquisitions activity.
“When the LBO firms went public, the next day, the game was up,” said Jarislowsky to Bloomberg. “Why is he going public? If it’s going that well, why would you let anybody in on it? Why doesn’t he just sell to his partners?”
Said Greg Eckel of Toronto-based Morgan Meighen & Associates, “[Sprott’s] built his brand, he’s built his name. I guess my worry is, is this is an indicator of a peak?”
“Peak” is the word, but it’s relevance as far as Sprott’s motivation is best understood by reading his April commentary. Sprott, one of the most adamant, articulate advocates of the peak oil theory among high-profile money runners, writes:
Our main argument, and the argument of those who are expert on the subject, has always been that, at its core, Peak Oil is all about the decline rate of producing conventional oilfields. The reality of decline rates, which we estimate average somewhere around 8% per year for conventional production, impose a mathematically insurmountable hurdle to the prospects for continually rising oil supply. It’s just not in the cards to overcome the loss of 6 million barrels per day of production each and every year when significant discoveries just aren’t there to make up for the shortfall, let alone contribute to rising global production. Peak Oil is set in stone – the question is not if, but when…
In a similar vein, Saudi Arabia’s King Abdullah, in a recent speech, suggested that he wants to preserve the nation’s oil wealth for future generations, saying “Let them [oil reserves] remain in the ground for our children and grandchildren who need them.” This, by our thinking, would be a smart move. After all, under a Peak Oil scenario, oil will be a much more valuable commodity in the future than it is now even at today’s record prices.
It’s worth a read: Peak Oil: Alive and Well. That the Sprott Asset Management IPO indicates a peak in the commodity cycle may be borne out in some “post hoc, ergo propter hoc” sort of way, but the key from an investor’s perspective is that it’s a short-term top.
A couple other deals provide some insight into Sprott’s long-term outlook. Sprott Resource Corp (TSX: SCP), which is managed by an affiliate of Sprott Asset Management, and Lara Exploration (TSX V: LRA) have signed a letter of intent to form a strategic alliance targeting phosphates, potash and other fertilizer feedstock minerals outside Canada.
Sprott Resource will provide up to CAD3 million in initial seed capital in the venture, including CAD500,000 in the first year, with Lara acting as operator to seek acquisitions and undertake exploration. Sprott Resource and Lara first linked up for the Mantaro phosphate project in Peru, one of the largest undeveloped phosphate deposits on the Pacific Rim.
Sprott Resource has also hammered out a joint venture with Altius Minerals Corp (TSX: ALS) to explore for potash in the St. George’s Basin of southwestern Newfoundland. The St. Georges project consists of 1,400 claims (35,000 hectares) that cover four primary target areas for potash deposits.
Under the agreement, Sprott Resource may earn up to a 60 percent interest in the St. George’s project by spending CAD2.5 million over four years, subject to an underlying 2 percent gross sales royalty retained by Altius.
Fertilizer is in high demand, and Canada has a lot of one of the key ingredients, potash. Canpotex, the marketing and distribution company wholly owned by Potash Corp of Saskatchewan (NYSE: POT, TSX: POT), Alberta-based Agrium (NYSE: AGU, TSX: AGU) and Minnesota-based The Mosaic Co (NYSE: MOS), negotiated a USD576-per-ton price with China for 2008 potash, up from USD176 per ton in 2007.
The stocks have run like crazy. Potash Corp, which is up 37 percent in 2008 and 135 percent in the trailing 12 months, recently surpassed energy giant EnCana (NYSE: ECA, TSX: ECA) as the biggest Canadian company by market capitalization.
The supply/demand profile is clearly in Potash Corp, et al.’s, favor. April meetings of the International Monetary Fund in Washington, DC, quickly, surprisingly turned from the global credit crunch to the international food crisis, riots have broken out, and Wal-Mart is rationing rice. Boosting crop yields has become an urgent topic of discussion, and fertilizer is a key part of making it happen.
We’ve had interesting water-cooler debates about food, fertilizer and potash recently, and much of that discussion has made its way to this space. Potash Corp is a typical “put itself in position to benefit from good fortune” company. Management is focused and controls costs; this, on top of the favorable fundamentals, makes it a good business.
That’s the answer to the threshold question. Our internal debate has centered on the value question: Is Potash Corp specifically too expensive at these levels?
Here’s the relevance: Sprott made his bones and his billions betting on junior resource companies, the ones that look for and find the stuff necessary to make economies go. He, or at least another company with his name on it, sees value in a small fertilizer explorer. This is a bet on the long-term food story.
Crude is expensive, and it will pull back. Potash is expensive, and investments related to it will pull back as well. But the forces set in motion by Asia’s rapid rise—a growing middle class means more cars, which require more oil to be refined into gasoline, and more meat consumption, which requires a lot of feed, which requires higher crop yields—are impossible to reverse.
This is a long-term story.
It’s Better to Laugh…
The solution to the real estate problem: corngages.
Live Webcasts
Tune in to live webcast events from the upcoming Money Show in Las Vegas. Neil, Elliott and I will be presenting our latest insights and recommendations surrounding this year’s central theme, “Managing Your Portfolio in Uncertain Times.” I’ll also be presenting The Best Stocks Money Can Buy Thursday, May 15, at 11:30 am PST.
Registration is free and can be completed at www.moneyshow.com, so please check out the our events and tune in May 12-15, 2008.
The RoundupEarnings season for Canadian income trusts is well underway. The first set of summaries, as well as reporting dates for the remainder of CE Portfolio recommendations, follows.
Conservative Portfolio
Algonquin Power Income Fund (TSX: APF.UN, OTC: AGQNF) May 8
AltaGas Income Trust (TSX: ALA.UN, OTC: ATGFF) May 7
Artis REIT (TSX: AX.UN, OTC: ARESF) May 15
Atlantic Power Corp (TSX: ATP.UN, OTC: ATPWF) May 14
Bell Aliant Regional Communications Income Fund (TSX: BA.UN, OTC: BLIAF) May 6
Canadian Apartment Properties REIT (TSX: CAR.UN, OTC: CDPYF) May 14
Energy Savings Income Fund (TSX: SIF.UN, OTC: ESIUF) May 13
GMP Capital Trust (TSX: GMP.UN, OTC: GMCPF) May 9
Keyera Facilities Income Fund (TSX: KEY.UN, OTC: KEYUF) May 13
Macquarie Power & Infrastructure Income Fund (TSX: MPT.UN, OTC: MCQPF) May 6
Northern Property REIT (TSX: NPR.UN, OTC: NPRUF) May 9
Pembina Pipeline Income Fund (TSX: PIF.UN, OTC: PMBIF) reported a solid 7 percent increase in distributable cash in the first quarter, driving its payout ratio down to 81 percent from 90 percent a year earlier. Conventional pipelines enjoyed an 8 percent boost in sales and 5 percent rise in income on robust traffic and higher margins.
Midstream and marketing enjoyed a 19 percent jump in sales and a 23 percent boost in income, as the company continued to steadily expand its asset base. Finally, the oil sands division reported only a 1 percent boost in earnings.
More important, however, it remained on track to complete the Horizon Pipeline on budget by July 1, which will effectively double that division’s operating income. Cash flow from Horizon should set the stage for another solid dividend increase this year for the trust.
In the meantime, it continues to yield well more than 8 percent and remains the safest way for income investors to profit from the continued robust growth of Canada’s oil sands region. Buy Pembina Pipeline Income Fund up to USD18 if you haven’t already.
RioCan REIT (TSX: REI.UN, OTC: RIOCF), hurt by aggregate onetime charges of CAD3.2 million and depreciation of income properties totaling CAD3.4 million, reported first quarter net income of CAD30.3 million (14 cents Canadian per unit), down from CAD37.4 million (18 cents Canadian per unit) a year ago. Funds from operations (FFO), a key measure of REIT success, came in at CAD67.7 million (32 cents Canadian per unit), down from CAD71.3 million (35 cents Canadian per unit) in the first quarter of 2007.
Rental revenue rose 5 percent to CAD173.1 million from CAD165 million. The onetime cost relates to RioCan’s move to new corporate headquarters at RioCan Yonge Eglinton Centre and the departure of its now former chief financial officer.
RioCan’s portfolio occupancy at the end the quarter was 96.6 percent. CEO Edward Sonshine said RioCan’s full-year results would be “in line with our expectations.” RioCan’s disciplined debt management gives it plenty of room to raise capital via the debt market, even amid the current crunch. RioCan REIT is a buy up to USD25.
TransForce Income Fund (TSX: TIF.UN, OTC: TIFUF) rebounded from a worrisome fourth quarter, though fuel costs, the weak US economy and the impact of a strong loonie continued to impact results during the first quarter. Distributable cash flow from operating activities was basically flat compared to year-ago levels, CAD45.1 million in 2008 versus CAD45.6 million in 2007.
The fund reduced its payout ratio during the first quarter to 90.5 percent from 102.2 percent during the first three months of 2007 and from 155.9 percent during the fourth quarter of 2007. Revenue climbed 13 percent to CAD526.3 million from CAD464.8 million; earnings before interest, taxes, depreciation and amortization (EBITDA) rose from CAD56.9 million from CAD52.7 million, largely on the strength of acquisitions.
TransForce continues to hunt for takeover targets as it pursues its consolidation of the trucking market and has said it has more than CAD100 million in potential deals “that could be realized in the short term.” The fund announced that it would convert to a corporate form in order to better deliver for investors.
Holding onto more cash will allow TransForce to more easily pursue its growth, but it will still pay a relatively high dividend. Still a compelling income-plus-growth story, TransForce Income Fund is a buy up to USD9.
Yellow Pages Income Fund (TSX: YLO.UN, OTC: YLWPF) May 8
Aggressive Portfolio
Advantage Energy Income Fund (TSX: AVN.UN, NYSE: AAV) May 14
Ag Growth Income Fund (TSX: AFN.UN, OTC: AGGRF) May 9
ARC Energy Trust (TSX: AET.UN, OTC: AETUF) May 8
Arctic Glacier Income Fund (TSX: AG.UN, OTC: AGUNF) May 13
Boralex Power Income Fund (TSX: BPT.UN, OTC: BLXJF) realized higher electricity and steam prices during the first quarter, offsetting a decrease in total electricity generation, on recorded net income of CAD15.2 million (26 cents Canadian per unit), up CAD2.5 million from CAD12.7 million (21 cents Canadian per unit) in the first quarter of 2007.
The bottom line also benefited from a positive adjustment of CAD3.5 million related to the reversal of future income taxes. Revenue rose to CAD34.3 million, up from CAD33.9 million, while expenses ticked up to CAD12.6 million from CAD12.1 million.
Power production in the wood residue segment was lower because of a forced shutdown at the Senneterre unit in northwestern Quebec, while the hydro segment’s output was up 6 percent. The fund continues to benefit from high oil prices, which translate into higher steam prices.
Boralex continues to negotiate with AbitibiBowater (NYSE: ABH, TSX: ABH) to settle a dispute over the cogeneration plant at the Dolbeau paper mill. Its cash flow is more than able to cover the recently reduced monthly distribution. Boralex Power Income Fund is a buy up to USD6.
Enerplus Resources (NYSE: ERF, TSX: ERF.UN) May 9
Newalta Income Fund (TSX: NAL.UN, OTC: NALUF) May 6
Paramount Energy Trust (TSX: PMT.UN, OTC: PMGYF) May 9
Penn West Energy Trust (NYSE: PWE, TSX: PWT.UN) May 8
Peyto Energy Trust (TSX: PEY.UN, OTC: PEYUF) May 7
Provident Energy Trust (NYSE: PVX, TSX: PVE.UN) May 9
Trinidad Drilling (TSX: TDG, OTC: TDGCF) May 9
Vermilion Energy Trust’s (TSX: VET.UN, OTC: VETMF) first quarter numbers were depressed by the impact of a declining US dollar versus the loonie, which caused an unrealized foreign currency exchange loss of CAD28.2 million, or CAD9.18 per barrel of oil equivalent.
Net income was CAD26.2 million (38 cents Canadian per unit) on revenue of CAD229.5 million, down from CAD31.6 million (48 cents Canadian per unit) on revenue of CAD148.8 million during the first three months of 2007. Excluding the unrealized foreign exchange loss, earnings would have been CAD54.4 million. Vermilion generated FFO of CAD119.4 million (CAD1.59 per unit), up 57 percent on a total basis and 50 percent on a per-unit basis from 2007.
Vermilion produced 33,072 barrels of oil equivalent per day (boe/d) in the first quarter, compared to 33,070 boe/d in the fourth quarter, with Canadian production volumes boosted by the acquisition of properties in the Drayton Valley area of Alberta. The trust distributed 57 cents Canadian per unit during the quarter, or 56 percent of FFO. Vermilion Energy Trust, still with low debt and high free cash flow generation, is a buy up to USD40.
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