Oil and gas trusts may also be referred to as royalty trusts. Royalty trusts are a form of income trust. They profit from royalties associated with the sale of oil, natural gas or minerals.
On January 1, 2011, Ottawa imposed a tax on distributions of income trusts and royalty trusts. Virtually all oil royalty trusts then converted into conventional corporations.
Oil royalty trusts were a form of income trust. Income trusts were a type of investment trust that held income-producing assets. Canada offered special tax treatment for income trusts for many years. They flowed their income through to their unitholders, without paying much if any corporate tax. Investors paid tax on most of the distributions as ordinary income (although some distributions qualified as a tax-free return of capital).
Oil and gas trusts often involved far more risk than most investors realize.
An example of an oil and gas trust was Pengrowth Energy Trust, which produced oil and gas and traded on Toronto under the symbol PGF.UN. The stock converted and is now called Pengrowth Energy Corp., symbol PGF on Toronto.
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ENDEV ENERGY INC., $1.34, symbol ENE on Toronto, rose over 13% this week after receiving a buyout offer from Penn West Energy Trust, $33.81, symbol PWT.UN on Toronto.
Endev shareholders will receive 0.041 of a Penn West unit for each Endev share held, which is… Read More
20-20 TECHNOLOGIES, $6.75, symbol TWT on Toronto, is a leading maker of computer-aided design, sales, engineering and manufacturing software for the interior design and furniture industries. The Montreal-based company serves clients in 100 countries and markets software in 23 languages.
In the three months ended January… Read More
Pengrowth is down from its highs lately along with most other oil and gas trusts. However, we feel it has dropped enough to reflect today’s lower natural gas prices, ongoing volatility in crude oil markets and investor worries about further distribution cuts. Pengrowth is an… Read More
The Alberta government is reviewing proposals aimed at raising royalties on oil and gas production. Some producers are outraged. But oil prices and revenues have expanded well above consensus forecasts, and the province wants its share.
The increased royalties would represent a new cost for oil… Read More
ZARGON ENERGY TRUST $27.40 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264- 9992; www.zargon.ca; Shares outstanding: 17.0 million; Market cap: $466.2 million) has oil and gas production assets in Alberta, Manitoba, Saskatchewan and North Dakota. Output is weighted 56% toward gas and 44% to oil.
In the… Read More
PENN WEST ENERGY TRUST $33.70 (Toronto symbol PWT.UN; SI Rating: Speculative) is one of the largest conventional oil and gas trusts in North America. It operates in Saskatchewan, Alberta and British Columbia.
In the three months ended December 31, 2006, Penn West’s revenues rose 4.3%, to… Read More
Our oil and gas trust recommendations have moved sideways since the start of this year, mainly in line with oil and gas prices.
Oil is currently trading at around $65 U.S. a barrel, down from the record high of over $78 it reached in July of… Read More
ZARGON ENERGY TRUST $27 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264-9992; www.zargon.ca; Shares outstanding: 16.9 million; Market cap: $457.4 million) has oil and gas production assets in Alberta, B.C., Manitoba and Saskatchewan. Zargon’s production is weighted approximately 55% toward natural gas and 45% to oil.
In… Read More
CANADIAN UTILITIES LTD. $46 (Toronto symbol CU; Income Portfolio, Utilities sector; SI Rating: Above average) has abandoned its plan to convert its unregulated gas processing and storage businesses into income trusts after Ottawa changed the taxation rules of trusts. The company will probably hang on… Read More
ARC ENERGY TRUST $28.25 (Toronto symbol AET.UN; SI Rating: Speculative) produces oil and gas in western Canada. Like most oil and gas trusts, ARC holds mature, low-risk properties, with a focus on short-term cash flow for payout.
In the three months ended March 31, 2006, ARC’s… Read More
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