Fairborne Energy Trust (FEL.UN.TO) Buy, Sell…

Fairborne Energy Trust (FEL.UN.TO)

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TOP PICK

About 80% of revenues is from natural gas. Growth oriented. Have probably 500 targets they can drill over the next couple of years. Have a nice diversified portfolio.

TOP PICK

80% natural gas. A beneficiary of the increase in sulphur prices. Good management. Undervalued relative to its peers.

TOP PICK

Roughly 77% gas. Produces about 13.5 thousand barrels a day. Good management. Has started to sell its sulphur, which has brought in more revenue for them. Has one well that is 15% of its revenue but management is managing that.

PARTIAL BUY

$9.77 is its resistance point and $11.15 is the next one. A good time to buy. If it breaks through the 2 levels than you buy additional amounts. Use $7.50 as your downside guide.

TOP PICK

Strong management team and a great suite of assets. Using new technology of multistage fracs and horizontal wells that opens up formations and gives much higher production. Going to be a beneficiary of changes in Alberta's royalty review because they are drilling deeper gas wells. Much cheaper than their peer group.

DON'T BUY

Recently decided to convert to a corporation but haven't said what their dividend policy will be. Balance sheet was leveraged. Received an equity infusion from a US firm. Like some of their assets, but until they make crystal clear what their dividend policy is, he is staying away from it.

BUY

Distributions are going to be cut to zero as they prematurely covert into a corporation. At under $7 he believes there is significant upside. Management has a good track record to grow.

HOLD

Abu Dhabi’s acquisition of Prime West (PWI.UN-T) put a positive spin on this type of trust.

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SELL

Sold most of their position. Will merge with it's corporate counterpart. Not much success with their drill bit.

HOLD

Compared to other income trusts’ metrics, not considered cheap. 55% payout ratio. Merging with Fairquest Energy (FQE-T), which should provide economies of scale. Very highly leveraged to gas.

COMMENT

Will be merging with Fairquest Energy (FQE-T). Recently cut distributions. They are targeting a 60%-65% payout ratio. Debt level is a bit higher than what he likes, but anticipates that over the next few months it will come down. Have a lot of good drilling opportunities. Could be softness over the next couple of months.

WAIT

Hasn't been his favourite. In the process of buying back Fairquest Energy (FQT-T), which may turn out to be all right. Reasonably priced. Would wait to see what the budget does.

SELL

Likes the general business plan. Unfortunately, with their type of gas wells being coal bed methane lower gas really hurts them. Has sold his holdings.

DON'T BUY

Excellent management. As a number of coal bed methane projects. This is not very economical in the current gas price. Have a lot of opportunities to replace their production by the drill bit. Distributions could be at risk.

HOLD

Payout ratio is 67%. 16% yield, which is high and reflects the softness in the market. Gas oriented. 3rd quarter was slightly disappointing. Well managed.

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Fairborne Energy Trust (FEL.UN.TO)