PrairieSky Royalty (PSK.TO)

This was a spin out from Encana (ECA-T) on the royalty lands they held. These were fee lands granted to CP Rail (CP-T) when it was built in the 1800s. This is an asset base that is very unique and could not be replicated. There is significant production of about 15,000 BOE’s a day, so there is a lot of cash flow. Dividend is quite secure. The curious thing about a royalty barrel is that there is no cost attached to it. A producer produces 100 barrels of oil, gives this company their 10 barrels, and pays everything out of his 90 barrels. The upside is that there are 5,000,000+ acres of land that is undeveloped, and producers are coming with proposals to drill. Upside could be quite material. At the upper end of valuation, but don’t rule out additional drilling on the lands. If you are a long-term player, it is probably something you want to own in your portfolio.

It is always hard to tell where the issue price is going to meet up with the market price on IPOs. He would rather wait, and see how it settles out and trades in the marketplace. If it is a good stock now; it will be a good one in 5, 10 and 15 years. No need to be in too much of a rush. Prefers Freehold Royalties (FRU-T), which trades at almost half the valuation and twice the yield.