Does anyone follow Penn West, Pengrowth and/or Enerplus? What are your thoughts? Are the payouts sustainable? Would you buy?
Study them a little more and you’ll realize that question cannot be answered because each trust has different payout ratios, acquisition policies (most must continually acquire to replenish reserves), financial leverage, reserve life, operating leverage, etc. These factors affect their sustainability. One trust that was mentioned on this board, Peyto, only pays out 1/2 it’s cashflow and has never made an acquisition or cut it’s distribution. I’d argue it is the MOST sustainable trust. It increases it’s reserves every year by organic growth. It has some of the highest profit margins of natural gas producer in Canada. I believe it has the longest reserve life. Thus, the peyto yield is lower than the others. ERF has been around a very long time and is considered the bluechip trust. I’ve heard that Pennwest has a good land base but the rest of their metrics don’t look so hot to me. The rug is being pulled out from under all these trusts because the Canadian government is going to change the way they are taxed in 2010.