The Successful Investor Hotline – Friday, October 2, 2009

Article Excerpt

PENGROWTH ENERGY TRUST, $10.28, Toronto symbol PGF.UN, fell 7% on Friday after it cut its monthly distribution by 30%, to $0.07 a unit from $0.10. The new annual rate of $0.84 yields 8.2%. Pengrowth wants to conserve cash to pay down its $1.4-billion long-term debt, which is equal to 50% of its $2.8-billion market cap. The distribution cut should save Pengrowth roughly $93 million a year. The trust also wants to spend more on developing its oil and natural-gas properties in western Canada. These have large, proven reserves, so there is little risk in investing in them. The extra cash will also help Pengrowth buy other nearby properties. As well, the trust plans to step up its spending on projects with longer-term potential, such as its Lindbergh oil-sands project. Pengrowth is building a pilot project on this site that should start operating in 2012. The trust aims to begin producing oil at Lindbergh in 2016. Pengrowth also plans to develop its properties in…