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Ravi Sood Vault Energy Trust VNG.UN-T PAST TOP PICK Apr 21, 2008

(A Top Pick Nov 17/06. Down 1%.) Acquired by Penn West Energy (PWT.UN-T)

Ravi Sood

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$3.880

Stock price when the opinion was issued

oil gas

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WAIT

Missed production numbers a couple of times and has more leverage than he likes. Has a good asset base, so has the opportunity to fix itself going forward. Because it is gas weighted, not a good time to enter.

DON'T BUY

There are better producers. Smaller cap and there are safer places to invest in. Yield of about 20% is a red flag that they may have to drop their distributions.

HOLD

An interesting situation. Quite a small trust and would be an early consolidation candidate. Distribution gives about a 20% yield, yet it has one of the lower payout ratios in the sector at about 110%.

DON'T BUY

35% of their natural gas is hedged at $7.60. Had some disappointing production and drill results, and he sold his position. Thinks it is a takeover target within the next year, but doesn't think it will get too much of a premium.

COMMENT

Just released reserves, which met analysts’ expectations. Debt to cash flow is over 2 X’s. Payout ratio is around 80%. Have set production guidance in the past and had trouble meeting it. Have a lot of tax pool, which is becoming very valuable. Possible takeover candidate. Doesn't meet his criteria.

COMMENT

Historically have missed on their production numbers and he would like to seat management meet their numbers before owning. F&D costs were quite high this year. Have a lot of tax pools. Trading below its net asset value.

DON'T BUY

Higher cost production. They have a capital allocation problem. Distributions plus Cap-X is greater than their cash flow so they need an external source of capital to fund some of their distribution. Too much debt.

COMMENT

Trading below net asset value. Difficult asset base causing them to miss production in the past. Near 20% yield. Looking interesting.

COMMENT

Has declined significantly in the last 2 months. Part of it is due to the decline in gas prices. Also, their payout ratio is a little high. Market is looking for a distribution cut. Currently they are up for sale.

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Ravi Sood Vault Energy Trust VNG.UN-T PAST TOP PICK Apr 21, 2008

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