Harvest Energy Trust (HTE.UN.TO) Buy, Sell or…

Harvest Energy Trust (HTE.UN.TO)

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COMMENT

Pretty hard hit last year because refinery margins got crushed. Lately they have been coming back a little. Financial position has been improving. He takes a look at this one from time to time.

DON'T BUY

Took on a lot of debt when they bought the refinery in Newfoundland. Have recently raised money, which has paid down some of their debt but it is still higher than what he likes. Just had a spectacular quarter in the crack spreads. Doesn't expect this to last. 8.2% distribution is probably sustainable.

BUY

Just reported a very strong quarter. Achieve higher margins than expected on its Come by Chance refinery. Was also successful in raising money on an equity issue. Still high levered but with oil prices doing what they are doing and what they showed on the last quarter, he thinks it will get through.

COMMENT

(Market Call Minute.) Looks like it is coming down. Put a Buy order in at $7 and see what happens.

DON'T BUY

Good management. Currently they have some problems with their big bet on refining and the big debt associated with this.

SELL

Have some pretty significant balance sheet issues. The refinery part of their business is relatively muted and the upstream part has not been performing particularly well. Expect there will be a distribution cut.

DON'T BUY

Oil and gas and a refinery in Newfoundland. Doesn't like trusts that have refineries, as there is a lot of CapX. Earnings and cash flow are quite volatile. This one has far too much debt.

SELL

Bought a refinery, which is a very expensive, not very useful business for them to own. Could go to zero or near zero.

DON'T BUY

Have $1.6 billion outstanding on a line of credit. Upstream production in Alberta hasn’t been great. Their refining has been under incredible pressure. Think they will make it but doesn’t see any reason to own it.

TOP PICK

(My deepest Apologies. This was on Tuesday night's show and I missed it.) 6.5% bond due Dec 2010. Currently yielding 9%. So out of the money that it is trading like debt. Trust cut its distribution 83%. Don’t buy the unit, only the bond. (Amanda says DANGER!)

DON'T BUY

Balance sheet problems. Too much debt. Need to renegotiate an operating line over the next year. 60% distribution

DON'T BUY

38.8% yield, which he expects will be cut. Not only a producer but bought a refinery, which is probably one of the worst businesses you could get into.

DON'T BUY

Have something in the order of 8 or 9 outstanding issues of convertible debt plus a fairly substantial bank line. Not comfortable with highly levered commodity cyclicals.

DON'T BUY

(Market Call Minute.) He can’t buy any trusts until they resolve the price of oil.

SELL

(Market Call Minute.) Would be tempted to sell this. A lot of their earnings come from their refinery operations, which is where they have had big swings in the earnings.

Showing 16 to 30 of 141 entries

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Harvest Energy Trust (HTE.UN.TO)