ZARGON ENERGY TRUST $16 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264-9992; www.zargon.ca; Units outstanding: 22.4 million; Market cap: $359.0 million) produces oil and gas in Alberta, Manitoba, Saskatchewan and North Dakota. Its output is weighted 51% toward natural gas and 49% to oil. In the three months ended March 31, 2009, Zargon’s production rose 2.2%, to 9,213 barrels of oil equivalent per day (this measurement includes natural gas) from 9,015. As well, Zargon recently paid $41.4 million for Masters Energy. This will add 1,275 barrels of oil equivalent per day to Zargon’s production, bringing it to an expected average of 10,200 barrels per day this year. Zargon’s $85.8-million debt is low, at around 23% of its market cap. The trust’s $0.18 monthly distribution gives the units a 13.5% yield. Zargon flows just 50% of its cash flow through to unitholders, so a distribution cut is unlikely. The units trade at 4.1 times Zargon’s forecast 2009 cash flow of $3.90 a unit. Zargon Energy is a buy.
ZARGON ENERGY TRUST $16 - Toronto symbol ZAR.UN
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