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

Harvest Energy Trust (HTE.UN.TO)

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HOLD

(Market Call Minute.) In conventional oil/gas and in refining and marketing. Refining and marketing has low margins right now. Too late to sell.

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COMMENT

15.5% yield. Doesn't like the balance sheet. Too many issues of convertible debt. Have a refinery in Come by Chance Newfoundland, which has been going through a seasonally weak period and will likely come into a seasonally strong period through July and August. Would Sell, but wait until the strong period.

DON'T BUY

A year ago it was throwing off a lot of cash with good refining margins. In the last year, there has been a squeeze in margins. Doesn't see this alleviating in the near future. 16.2% yield indicates people are worried about the company going forward.

COMMENT

Focused on heavy oil production but also have a significant part of their business in a refinery in Come- by-Chance Newfoundland. Refinery had some down time, which affected their cash flow and earnings. Concerned about their balance sheet because of their higher debt relative to their peers.

HOLD

(Market Call Minute.)

COMMENT

Because of the refinery side, the production side doesn't need to churn. Well run. Likes it better than the other income trusts, but still prefers to go elsewhere for his oil exposure.

WEAK BUY

Likes the yield on it. Likes the name and sector, but is not ready to get into it yet. Would rather like ener plus, and arc energy better. The high yield raises a red flag.

DON'T BUY

Think very highly of management. Having fairly strong production declines, struggling to keep production up in their traditional upstream business. They may potentially cut the distribution.

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BUY

2 businesses. Normal oil/gas trust in Western Canada, but also acquired the Come By Chance refinery in Newfoundland. This is great diversification for them and a good long-term business. The timing of it however was that they got it when margins where near their peak and have come down quite a bit. They had to cut their distribution. 15.8% yield.

DON'T BUY

Downstream operation is actually doing very well. Crack spreads have come off since last year as costs have gone up. Feels their coker project is on hold while they assess the market. Debt is relatively high. Distribution of 15.7% indicates a concern.

DON'T BUY

Has stumbled in the past. Became more negative on it when it bought the refinery in Newfoundland. Refinery business is very difficult to run a lack of sustainability of cash flow. 90% payout ratio so he could see a distribution cut.

DON'T BUY

Have an exposure to refining that a lot of other trusts don't. Investors were buying last year because of higher refining margins but when margins began to tighten there was some selling pressure. Have had some weakness on both upstream and downstream operations. At current prices, there is almost a 16% yield, which is a red flag. Selling at a fairly large multiple.

HOLD

Market is beating up on the units because it is anticipating a cut in distribution. Likes their refinery, which is their major asset in the Maritimes. Recently, spreads on refining have narrowed significantly but he thinks they are going to open up again. There is a shortage of refining space in North America and this is strategically placed. 18% yield.

DON'T BUY

Balance sheet is a little bit stretched. Thinks oil prices are heading back down. Sold his holdings earlier this year.

DON'T BUY

Unique story in the oil/gas trust space. Bought a refinery in Newfoundland. Did very well the first part of this year with healthy refining margins. Conventional assets disappointed in 2nd and 3rd quarters and refining margins have now fallen out of bed. Doesn't have a lot of confidence in refining margins, which can be very volatile.

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Harvest Energy Trust (HTE.UN.TO)