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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Schnullie who wrote (84993)	5/21/2007 10:59:45 PM
From: Schnullie	Respond to of 206325

Canadian Royalty Trusts - The Next Generation CALGARY, Alberta, May 20 (Reuters) - All may not be lost for Canadian oil companies in their quest to raise cash by selling assets without losing control over them. It appeared Ottawa closed that door last year by deciding to remove the tax advantages income trusts have enjoyed. But look south: the master limited partnership, or MLP, market in the United States may offer some key benefits the exploration and production sector lost with income trusts, investment and energy industry sources said. MLPs could allow many Canadian firms to sell stakes in low-maintenance, mature properties to investors, spelling pay days for Bay Street as asset values rise, boosting shares of firms setting up partnerships, and presenting new advisory work for investment bankers. Companies and investors are starting to take notice. Shares in EnCana Corp. (ECA.TO: Quote, Profile, Research, Canada's biggest oil company, zoomed up 5 percent recently when investors speculated it was considering folding assets into one. "There's quite a movement afoot for MLPs to be created, much like the trust sector was here 10 years ago," said David Holm, vice-president of strategy and finance at Provident Energy Trust (PVE_u.TO: Quote, Profile, Research. We saw this coming and created the vehicle." Provident raised $111 million last year by floating Breitburn Energy Partners LP (BBEP.O: Quote, Profile, Research, an MLP that operates assets in California, Wyoming and Texas. Provident owns about three-quarters of it. As with trusts, investors buy publicly traded MLP units and get cash payouts to achieve a yield. General partners manage the assets. Another trust, Enerplus Resources Fund (ERF_u.TO: Quote, Profile, Research, said this month it is looking for U.S. MLP opportunities. Reuters Pictures Editors Choice: Best pictures from the last 24 hours. View Slideshow MLPs involving operations like pipelines and natural gas processing are big, well-known U.S. businesses, but there are just seven exploration and production partnerships with a total market value of $6.5 billion. Compare that to $70 billion worth of energy trusts, even after Canadian Finance Minister Jim Flaherty knocked the stuffing out of unit prices when he announced changes to the way trusts are taxed last Halloween, said Brian Prokop, vice-president of institutional sales at CanaccordAdams. "I could make an argument that the demographics (in the United States) are more compelling because the trust market is eight to 10 years older," Prokop said. "You've got a country that's 10 times as large so you could be talking about a trillion-dollar market." Not so fast. There are still plenty of unknowns, especially for Canadian companies, he said. Canadian investors may not find the units attractive for tax reasons and the location of assets, if outside the United States, could also mean tax consequences. "It's a very nebulous beast right now. There are a bunch of lawyers working on it," he said. Analyst Robert Lane, who follows MLPs for Sanders Morris Harris Group in Houston, said he knows of no specific restrictions on non-U.S. oil and gas assets. Partnerships with foreign assets can set up taxable subsidiaries and MLPs can garner dividends from them on a relatively tax-free basis, Lane said. He agreed the small market offers a opportunity for Canadian energy producers now that prospects for new trusts have withered. The numbers alone should make companies stand up and take notice as they search for new financing tools. According to Prokop's figures, U.S. MLPs have an average value of $175,000 per daily barrel of output and offer a yield of 5-1/2 percent, far outstripping the numbers for Canadian trusts.