Two oil and gas trusts with 2011 pluses

Article Excerpt

ARC ENERGY TRUST $19.84 (Toronto symbol AET.UN; Units outstanding: 235.9 million; Market cap: $4.7 billion; SI Rating: Speculative) produces oil and gas in western Canada. Its average daily production of 62,824 barrels of oil equivalent (this measurement includes natural gas) is weighted 49% to oil and 51% to natural gas. In the three months ended September 30, 2009, ARC’s revenue fell 50.8%, to $239.2 million from $485.7 million. Cash flow per unit fell 54.3%, to $0.53 from $1.16. Lower oil and natural-gas prices were the main reasons for the declines. ARC pays a monthly distribution of $0.10. The units yield 6.1%. The trust plans to convert to a conventional corporation on January 1, 2011. That’s when Ottawa will start taxing income trusts. However, ARC has over $2.2 billion in tax losses that it can use to delay paying taxes. As well, it paid out only 56% of its cash flow to its unitholders as distributions in the latest quarter. That low payout…

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