Falling energy prices aren't expected to slow acquisitions by cash-rich trusts such as Enerplus Resources and Bonavista Energy.
With Enerplus flush with $500-million after exiting the Joslyn oil sands play, and Bonavista sporting a muscular balance sheet, Peters & Co. analyst Jeff Martin predicted Monday that these two trusts will use acquisitions to build reserves in coming months.
Enerplus and Bonavista qualify as two of the country's strongest trusts when their cash-on-cash returns are plotted against their payout ratios. In simple terms, these trusts are handing out a relatively large portion of their cash to unitholders, yet still plowing lots of capital back into the business.
When Peters & Co. crunched the numbers, NAL Oil & Gas featured the most admirable combination of high cash-on-cash return - just under 13 per cent - and conservative payout rate, at 85 per cent of projected 2009 chas flow.
Industry wide, the trusts that Peters & Co. follows feature an 11 per cent average cash return and a 107-per-cent payout of forecast 2009 cash flow.
Enerplus also emerged as a strong trust, with a 105-per-cent payout rate, 12 per cent cash return and plenty of cash, which Mr. Martin expects will be used in takeover. The Peters & Co. analyst said Bonavista "performs well" when measured on returns and payout ratios, adding "we expect the trust will lower its payout ratio by utilizing its strong balance sheet to expand cash-generating assets."