Recently someone I know from Vancouver sent me info on a US oil income trust. He does some investment deals of small caps, and also some PR.
most of the companies (all 4) he has told me about have gone down, and are tied to jr. mining companies. not following any of these are they are small and have not advanced their projects.
in early December sent me info on a US oil income trust, there are two different oil/gas income trusts so let us review them.
Canadian oil/gas income trust
if you go back to 1998-1997 there were only a few oil/gas income trusts, they had 10 year of reserves.
the yield is what got my interest, in most cases 18%++ and yielded over 12% for a long period of time.
Enermark was one with 10 years of reserves however cdn. trusts unlike US ones, had large areas to drill and were easily replacing reserves. just had to hope for $18 oil, that was the main concern.
they were great investments, oil/gas went up sharply, actually have on tape a ceo of a large cdn energy trust stating natural gas should stay above $2.50.
also in Cdn. GIC/CD rates were dropping quickly so brokerages began to push the product. so we had a few reasons they rose quickly.
1. oil gas prices were moving up.
2. yields of 18% caused people who had low yielding gic/cd buy them for yiield.
3. taxes in Canada could be deferred on them.
have not owned an energy trust for over 3 years
maybe longer
Today
1.today oil gas prices are going down
2. ten years ago there were a few, now dozens, and they all compete for land.
3. most will have to cut distributions, also many were yielding at the height 7-9% whcih is tooo cheap considering the risks involved.
4. in Canada the taxes will be applied in 2011, only reits are exempt, in the income trust space.
there may be time to buy the best of these like the Cdn. oil sands, however would wait as even the top names can drop.
US oil gas income Trust
the one sent to me is similar to most US oil/gas income trusts.
you select a property and you produce, when it is all gone it is over, and you go on to the next project.
though the number on their projects since 2000 were great (around 12) you have to realize
1. prices rose sharply for oil/gas
2. also some of that is your return of capital since when the project is over you no longer have nothing.
they locked in $70 on this project however that is for year 1. after that the prices will be lower to lock in ( if prices stay the same).
also if I want my money it depends on reserves X current oil price, and that is annually. so it is not liquid.
never bought it, if you are bullish and want an energy play probably better off just buying an energy stock and writing a covered call.
you can see the results daily and it is much more liquid.
thanks
selkirk
most of the companies (all 4) he has told me about have gone down, and are tied to jr. mining companies. not following any of these are they are small and have not advanced their projects.
in early December sent me info on a US oil income trust, there are two different oil/gas income trusts so let us review them.
Canadian oil/gas income trust
if you go back to 1998-1997 there were only a few oil/gas income trusts, they had 10 year of reserves.
the yield is what got my interest, in most cases 18%++ and yielded over 12% for a long period of time.
Enermark was one with 10 years of reserves however cdn. trusts unlike US ones, had large areas to drill and were easily replacing reserves. just had to hope for $18 oil, that was the main concern.
they were great investments, oil/gas went up sharply, actually have on tape a ceo of a large cdn energy trust stating natural gas should stay above $2.50.
also in Cdn. GIC/CD rates were dropping quickly so brokerages began to push the product. so we had a few reasons they rose quickly.
1. oil gas prices were moving up.
2. yields of 18% caused people who had low yielding gic/cd buy them for yiield.
3. taxes in Canada could be deferred on them.
have not owned an energy trust for over 3 years
maybe longer
Today
1.today oil gas prices are going down
2. ten years ago there were a few, now dozens, and they all compete for land.
3. most will have to cut distributions, also many were yielding at the height 7-9% whcih is tooo cheap considering the risks involved.
4. in Canada the taxes will be applied in 2011, only reits are exempt, in the income trust space.
there may be time to buy the best of these like the Cdn. oil sands, however would wait as even the top names can drop.
US oil gas income Trust
the one sent to me is similar to most US oil/gas income trusts.
you select a property and you produce, when it is all gone it is over, and you go on to the next project.
though the number on their projects since 2000 were great (around 12) you have to realize
1. prices rose sharply for oil/gas
2. also some of that is your return of capital since when the project is over you no longer have nothing.
they locked in $70 on this project however that is for year 1. after that the prices will be lower to lock in ( if prices stay the same).
also if I want my money it depends on reserves X current oil price, and that is annually. so it is not liquid.
never bought it, if you are bullish and want an energy play probably better off just buying an energy stock and writing a covered call.
you can see the results daily and it is much more liquid.
thanks
selkirk
