Trilogy Energy Corp (TET.TO) Buy, Sell or Hold

Trilogy Energy Corp (TET.TO)

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9 watching

HOLD

(Market Call Minute.) Gas prices have still not rallied. If he was going to play the gas market, there are other names he would prefer.

HOLD

(Market Call Minute.) Gas prices have still not rallied. If he was going to play the gas market, there are other names he would prefer.

COMMENT

Predominantly natural gas. Low payout ratio, so he would expect a distribution increase. Benefits from a 20% ownership of Paramount Resources (POU-T). If you own, consider taking some profits after the distribution increase. There are better alternatives.

DON'T BUY

Gas weighted. Relatively short reserve life. Has a history of putting distributions. Instability historically.

COMMENT

Company is paying out about 50% of their cash flow. If natural gas prices recover to $9 in Q4 of 08 and prices firming up from their, then royalty trusts should see significant upside. Distribution should be safe.

SELL

Natural gas focused. Would put Focus (FET.UN-T), Peyto (PEY.UN-T) or even Progress (PGX.UN-T) ahead of it. Cut the distribution earlier this year. Good discount to NAV. Debt ratio is a bit higher than he would like.

DON'T BUY

Rising costs in the western Canadian basin and gas not trading at the traditional 6 to 1 heating ratio has put considerable pressure on them. Some questions on their balance sheet. Possible distribution cuts or another share issue.

COMMENT

3 gas-weighted companies that he feels will cut distributions are Trilogy (TET.UN-T), Advantage Energy (AVN.UN-T) and Prime West (PWI.UN-T).

DON'T BUY

Natural gas focused. Would prefer others such as Progress Energy (PGX.UN-T) or Focus Energy (FET.UN-T). Has had a chequered past and has not been as steady a performer as others.

BUY ON WEAKNESS

Mainly gas production. Good assets. Have made aggressive acquisitions in the past, which has cost them. Will do well in the latter part of this year as gas prices strengthen. When you see drops in gas prices, Buy and Hold.

PAST TOP PICK

(A Top Pick Mar 6/06. Down 50%.) Sold his holdings but not nearly at a 50% loss. Well-managed and good assets.

BUY

Cut distributions substantially in the last little while giving them a 60%-65% payout ratio. Very good entry point. Predominantly gas weighted.

SELL

They really hacked the last cut down to a point where he doesn't think they'll need to cut again. Have about 40% hedged. The yield is not very high so you are not getting paid to wait. Good operators. 100% gas. He would go somewhere else until the fall.

BUY

Thinks this one will survive in the long term. A pure natural gas play. Have cut their distributions to a much more sustainable level. If you believe in gas, this is a good buy.

DON'T BUY

Paying 17%, but expects they will have to cut distributions one more time this year because of their higher debt levels.

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Trilogy Energy Corp (TET.TO)