Following Up On Our Oil & Gas Trust Picks

Article Excerpt

ZARGON ENERGY TRUST $27.40 (Toronto symbol ZAR.UN; SI Rating: Speculative) (403-264- 9992;; 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 three months ended June 30, 2007, Zargon reported cash flow per unit of $1.05, down 7.9% from $1.14 a year earlier. Production rose 1.7%, to 8,465 barrels of oil equivalent per day, from 8,322 barrels. The lower cash flow came from lower oil prices. Zargon now trades at around 6.5 times cash flow. The company’s debt of $46.7 million is equal to just over two quarters’ cash flow. Zargon’s monthly distribution of $0.18 gives the units a yield of 7.9%. The trust flows just 51% of its cash flow through to its shareholders. Some oil and gas trusts pay close to 100% of their cash flow out to unitholders to maintain high current yields. Unlike many oil and…

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