Exploration spending will raise output

Article Excerpt

PEYTO ENERGY TRUST $17.17 (Toronto symbol PEY.UN; Units outstanding: 121.9 million; Market cap: $2.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 8.4%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 23,775 barrels of oil equivalent (including natural gas) is weighted 86% toward gas and 14% to oil. At current production rates, Peyto has proven oil and natural-gas reserves that should last 14 years. Peyto’s cash flow was $0.47 a unit in the three months ended September 30, 2010, up 20.5% from $0.39 a year earlier. The units trade at 9.1 times the trust’s annualized cash flow, based on the latest quarter. The trust’s long-term debt of $455 million is a reasonable 21.7% of its $2.1-billion market cap. Right now, Peyto pays a monthly distribution of $0.12, for an 8.4% yield. The trust paid out a relatively low 77% of its cash flow as distributions in the latest quarter. However, it plans to cut its monthly…

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