Kastel,
The Baytex hedges have already started coming off-and some were already renegotiated at higher prices.
Here's a comment on the new hedges as of Q2:
The Trust has taken advantage of recent market conditions and entered into several WTI costless collar contracts for calendar 2005. These contracts are for an aggregate volume of 8,000 bbl/d, have a floor price of US$35.00 and an average cap price of US$42.55, thus providing significant downside protection to 2005 cash flow while allowing for participation in the benefits of continued high oil prices.
biz.yahoo.com
I just looked at their Q1 financials:
2004 hedging was $24 (floor)-$32 (collar)
Excuse me but the floor and cap have increased 45% and 33% respectively!!
Where's my money? I know they have to wait until 2005 for this to kick in but considering what investors have been through with they're hedging losses and considering some production is unhedged, plus the fact they made an acquisition, you'd think they could do 10%.
Baytex intends to still hedge some production-to the dismay of some, who would rather see it more unhedged. (BTE is my #2 holding).
Baytex still suffers some kind of 'old mans trust' stigma probably partly due to the management style and their heavy oil (even after this recent acquisition) holdings seem to hold them back.
That said, I think they're still a good trust-run prudently, efficiently.
As I said to Jay, I don't see the 30% increase in oil prices in distributions for these energy trusts. Unless we see distribution increases, I may have to rethink trusts as an inflation hedge. Among other increases, we just got hit with a 17% increase in NG costs here in WA state. I can point quite a few other mid and large cap energy and commodity stocks that are outperforming these trusts even with the dividend income (which kind of begs the question: "What happens to all that extra cash they save by paying less taxes?") I can only imagine these trusts think they need that cash for acquisitions. At the current spot price-and with the runup in valuations, many juniors are looking expensive as well. But why not issue more units and debt to fund expansion and give us unitholders a raise. Its not like the management haven't been doling out bonuses.
We've seen the increase in gasoline prices here as well. They dropped a bit in front of the peak driving season in April but now the refiners have to switch to heating oil gasoline is up again. In Canada you are getting hosed-that price is expensive for an oil exporter. By the way, did you know in most parts of the US it is cheaper to heat a home with heating oil than NG. Either way, it seems like the refiners are coining it. Time to buy some VLO? I'm seriously thinking of a major rebalance of my CRTs not that yields have dropped below 10% on ARC and ERF. A Kerry win would not be good for the CRTs either.
I know this CRT ownership legislation may provide a buying opportunity but I'm more worried about the Noranda effect. I suppose Noranda provided such diffuculty to Brascan they just wanted to unload to the first purchaser who would give them current price for it. There may be a shareholder lawsuit but the damage is done. What message does that send? Can Canadian resources be had for a song? Noranda may go for a price that will leave the Chinese laughing the next 15 years. Brascan is pathetic to be doing this at the front end of a commodity bull.
That said, I see Sinopec sniffing around the tarsands. I wonder what else they can get for NAV or a song? If they can buy my trusts for NAV, considering the trusts trade above NAV right now, that would be a haircut for my Canadian portfolio. Maybe I'd be better off in BP, NHY, STO and some other majors?
Cheers,
David |
