Material Change Report / TIER III Portfolio
I have reinvested imposed profits back into the Tier III portfolio to bring the portfolio up to date – in fact, fully invested into. I used just about all the cash component of the portfolio also.
You might ask, what do I mean by imposed profits? So, I might once again use this part of the message as a Forward moving document. As in the past, my portfolio of oil and gas companies focused on the full cycle oil and gas exploration and development companies – and do not include the flavor of the day and more popular Energy Trusts.
There is absolutely nothing wrong with Energy Trusts, I just look for superior returns over the nearer term with E&P companies. In fact, if you are more income orientated in your investment objectives, the energy trust would better fit your needs. However, that objective is somewhat diluted in our financial marketplace of today – because of the abundance of energy trusts that are available and the variance in the overall quality is becoming more apparent. Bottom line in that thought – be prepared to perform proper due diligence and just don’t jump into anything because a name ends in Energy Trust.
Let’s return to the Tier III portfolio with some brief comments. Most of the changes in the portfolio have resulted in either buyouts by Energy Trust Companies or, some kind of Plan of Arrangement where a company is converted into an Energy Trust. This time around, we lost the share positions in Rocky Mountain Energy, TUSK Energy and Viracocha Energy for these reasons. The portfolio is about to lose the positions taken in Defiant Energy and E3 Energy for they are in the stage of a Plan of Arrangement, converting into Energy Trusts. Last, Zapata Energy, the crown jewel of this portfolio, is currently in the process of reviewing strategic alternatives to enhance shareholder value and of course, an Energy Trust is one possibility as they have reported. Word is also out on Bay Street that Real Resources is going to be a strong Energy Trust possibility – but the timing is about 9-15 months out in time. They need to drill and develop to a production rate of at least 10,000 boe/d while substantially increasing and shoring up their reserves. Folk’s, that may happen sooner than later.
Count them, I just mentioned seven companies that I have established positions in before these portfolio revisions or, soon to be revisions. We had also witnessed the same extent of revisions to the portfolio over the prior 12 month period. As practiced in the past, I will immediately continue to convert our Trust Units into cash and then buy immediately into shares of other E&P companies or, - build the cash component of the portfolio.
Spin off companies, in most cases, are attractive to me and we will maintain positions in those companies until we can determine the true potential of these operations. There are quite a few rewarding positions existing in the portfolio as a result of this investment strategy.
With the exception of spin off companies, there is nothing new in this portfolio. What I have done is focus on the existing listed companies and increased holdings as I saw fit. Before I get the emails asking about the better holdings – those with better near term share price appreciation, let me mention a few now.
My two strong buys at this time are Tempest Energy and Zapata Energy, both seeing shares near their 52-week high currently. However, even shares at their current level are reasonably priced for 12-month share appreciation. If you are a bottom dweller fishing for valued investments, perhaps Flowing Energy is just that. There are also additional buys recommended, and you can get an idea by the below moves I made.
However, to get a good bearing on the companies whose shares are portfolio holdings, feel free to request the details via email from me. kermskorner@yahoo.com I will be happy to send the information to you, along with the previous issue for you to compare. The Portfolio Report has all the bells and whistles. For those of you who would be new to the portfolio, that means it is loaded with links for you to dig deep into your own research to investigate the portfolio listed companies.
Since the portfolio’s inception, I have grown it to a value of $155,000 from a net investment of $32,000. As I did last year, I will probably restructure all three portfolios with each containing companies in a group based upon market value ranges. There are a group of companies in this portfolio who will be graduating into the TIER II Portfolio.
TIER III Material Change Report Effective 11/26/2004
Last Report April 5, 2004
Beginning Cash Component $13,431.72
Rio Alto Resources International: Shareholders received $1.32 cash in a reverse takeover by West Energy Ltd. (WTL) which closed 09/28/04. The Portfolio position was 8,000 shares purchased at an average price of $0.83 (rounded) for a total cost of $6,600.00. Total proceeds received was $10,560.00, yielding a profit of $3,960.00 (60%). Proceeds were added to the cash component of the portfolio.
Sub-Total Cash Component $23,991.72
Rocky Mountain Energy: The company was acquired by Enterra Energy Trust effective 09/29/04 for cash consideration of $6.10/share. The portfolio position was 1000 shares acquired at an average of $3.76/share for a total investment of $3,760.00. Buyout proceeds amounted to a total of $6,100.00 and such amount has been added to the cash component of the portfolio.
Sub-Total Cash Component $30.091.72
TUSK Energy Inc: The company was reorganized into an energy trust (TKE Energy Trust) and an exploration company to be known as TUSK Energy Corporation by way of a Plan of Arrangement. The Portfolio position in Tusk Energy Inc. was 1,200 shares acquired at $3.76/share for a total amount of $4,512.00. The Plan Of Arrangement created 600 Units of the energy trust and a 600 share spin off of the new company Tusk Energy Corp.
Sub-Total Cash Component $30,091.72
Tusk Energy Corp.: Shares of TKE Energy Trust (TKE.UN) and Tusk Energy Corp. (TSK) commenced trading on November 5, 2004. At that time, 600 Units of the Energy Trust were sold at $9.99/share for a total amount of $5,994.00. In addition, 900 shares of Tusk Energy Corp. were acquired at a cost of $2.36/share, a total investment of $2,124.00 – thus increasing total holdings to 1,500 shares. The excess $3,870cash was added to the cash component of the portfolio.
Sub-Total Cash Component $33,961.72
Viracocha Energy: Plan of Arrangement with Provident Energy Trust whereas Viracocha shareholders received 0.248 of a Provident Trust Unit and 0.100 shares in a new junior oil company named Chamaelo Energy. Portfolio holdings were 2500 shares of Viracocha which were obtained at a cost of $2.27/share for a total cost of $5,675.00. The Plan Of Arrangement created 620 shares of Provident Energy Trust Units and 250 shares of Chamaelo Energy Inc. (CLO).
Sub-Total Cash Component $33,961.72
Chamaelo Energy Inc.: Commenced trading on the Toronto Stock Exchange on June 8, 2004 under the symbol "CLO". At that time, 620 units of Provident Energy Trust were sold at a price of #10.85/share, for total proceeds of $6,727.00. In addition, 750 shares of Chamaelo Energy were purchased at a cost of $4.40/shere for a total of $3,300.00, thus increasing total holdings to 1,000 shares in the new company. The excess cash was added to the cash component of the portfolio.
Sub-Total Cash Component $37,388.72
Clear Energy: Increased holdings to 1000 shares on 11/26/04 with the acquisition of 600 shares @ $4.75/share for a total investment transaction amounting to $2,850.00.
Sub-Total Cash Component $34,538.72
Find Energy: Increased holdings to 1500 shares on 11/26/04 with the acquisition of 500 shares @$4.19/share for a total investment transaction amounting to $2,095.00.
Sub-Total Cash Component $32,443.72
Flowing Energy: Increased holdings to 3000 shares on 11/26/04 with the acquisition of 1000 shares @ $1.62 for a total investment transaction amounting to $1,620.00.
Sub-Total Cash Component $30,823.72
Galleon Energy: Increased holdings to 1500 shares on 11/26/04 with the acquisition of 500 shares @ $11.45 for a total investment transaction amounting to $5,725.00.
Sub-Total Cash Component $25,098.72
Gentry Resources: Increased holdings to 4000 shares on 11/26/04 with the acquisition of 1800 shares @ $3.25 for a total investment transaction amounting to $5,850.00.
Sub-Total Cash Component $19,248.72
High Point Resources: Increased holdings to 4000 shares on 11/26/04 with the acquisition of 500 shares @ $1.85 for a total investment transaction amounting to $925.00.
Sub-Total Cash Component $18,323.72
Rock Creek Resources: Increased holdings to 2500 shares on 11/26/04 with the acquisition of 500 shares @ $2.60 for a total investment transaction amounting to $1,300.00.
Sub-Total Cash Component $17023.72
Tempest Energy: Increased holdings to 2000 shares on 11/26/04 with the acquisition of 1300 shares @ $7.05 for a total investment transaction amounting to $9,165.00.
Sub-Total Cash Component $7,858.72
Zapata Energy: Increased holdings to 1500 shares on 11/26/04 with the acquisition of 500 shares @ $14.99/share for a total investment transaction of $7,495.00.
Cash Component End Balance $363.72 |
