Wednesday, May 19, 2010

Penn West Energy Trust

I am going back to reviewing the stocks that I own for which I have received an annual report in 2009. In 1998, I bought a stock called Maximum Energy Trust. Over the years what I had has merged and been bought out etc and what I have left is this stock, Penn West Energy Trust (TSX-PWT.UN). According to Quicken, I have made a total return of 8% per year on my purchase.

I have very little of this stock and the initial purchase as small. Why I have any oil and gas stock is to try to get track of what is happening in this Canadian resource. Although I do not buy much in resource stock, I feel that it is important to keep track of what is happening in this area, as resources do affect greatly the Canadian economy.

The first thing to talk about is that I have apparently done better with my investment then this spreadsheet shows. The spreadsheet tracks Petrofund into the current Penn West Company. Penn West and Petrofund merged in 2006. With this stock, you have to track some past stock into this one because of the past amalgamations and buyouts, and I chose Petrofund because that is what I had prior to the changes in 2006. My 5 year total return is 11.7% per year and this spreadsheet shows a 5 year total return of 8.8% per year.

All the past buyouts and amalgamations has caused the number of shares to increase at a high rate of 60% per year. When you look at growth values per shares, this stock has done poorly compared to the growth in the particular values. For example, the book value over the past 10 years has increased by just over 8,000%, but the growth in book value per share has only increased by 88% or 6.5% per year. I think in the final analysis, the growth per share is what really counts. When you buy a company, you are buying shares in the company. Therefore, value on a per share basis is what really counts to you.

The other thing that is very noticeable on this stock is that the stock’s value has not increased over the past 5 and 10 years. The only reason that the total return is positive and good is because of the dividend payments received. The capital gain portion of the total return over the last 5 and 10 years is -.6.5% per year and - .5% respectively, compared with the total returns of 8.8% per year and 23.9% per year, respectively. Another way of putting this is that the return over the past 10 years is all dividends, nothing else. However, we are in a recession and oil prices are low.

Although the Liquidity Ratio is low at 0.68, the Asset/Liability Ratio is very good at 2.43. The Leverage Ratio (Asset to Book Value) is fine at rather low of 1.70. It would be nice if the cash flow statement had some positive value, but it was 0 for both 2008 and 2009. For the 1st quarter of 2010, the cash flow (and therefore the deficit) was equal to the distributions paid out.

It will be interesting to see what the analysts say about this stock. I shall look at this tomorrow. I will continue to keep this stock and track it at present.

It is the largest conventional oil and natural gas producing trust in North America. They operate only in Alberta. Its web site is here Penn West. See my spreadsheet at pwt.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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