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This Wednesday, May 9, 2012, file photo, shows a drilling rig near Kennedy, Texas. U.S. oil output is surging so fast that the United States could soon overtake Saudi Arabia as the world's biggest producer.Eric Gay/The Associated Press

Argent Energy Trust

Thursday's close: $10.18, down 12 cents, or 1.1 per cent

Trading range since IPO last August: $8.95 to $10.84 a share

Annual distribution: $1.05 a unit for a yield of 10.3 per cent

Analysts' ratings: There were 3 buys, 1 hold and no sells, according to Bloomberg data. Four analysts all had a target of $12 per unit.

Recent history: The Calgary-based energy trust has gained 9 per cent since it went public last year with most of that return coming from monthly distributions. Argent Energy, which is drilling for oil in Texas and Oklahoma, is part of a new wave of cross-border income trusts that can avoid paying Canadian corporate taxes because they own foreign assets. The former income trust model went into the dustbin after Ottawa passed new rules requiring trusts to convert to corporations by 2011. They lost tax advantages that allowed them to offer hefty payouts. However, those rules only apply to income generated in Canada. Argent Energy, which was listed last August at $10 a unit, raised $212.3-million. It had originally been promoting an IPO in the $325-million range, but a weakening oil price reduced investors' appetite for energy offerings. The trust, which is focused on the Eagle Ford, Austin Chalk and Buda shale plays, aims to make acquisitions that can add to cash flow per share. Since the IPO, it has come to the market to raise money several times, and that has put some pressure on its units.

Manager insight: Yield-hungry investors may be attracted to Argent Energy Trust for income, but it is also an oil play that offers more potential upside and is "a bit off the radar," says Michael Decter, president of Toronto-based investment firm LDIC Inc.

While it is a Canadian-listed company, the plays are found in areas in Texas and Oklahoma that "look to be long-life assets," said Mr. Decter, who bought some units at the IPO, but has since increased his position. "You are essentially buying oil-producing assets down there that are also exposed to higher prices than Alberta at the moment."

Argent Energy is getting the price for light Louisiana sweet crude - as opposed to West Texas Intermediate - and that benchmark is closer to the higher Brent crude oil, he said. The company also plans on a U.S.-listing this year so that should also help attract investors south of the border, he added.

For Canadian investors, the company is attractive because it has structured itself to minimize any U.S. taxes by "using their tax pools and interest deductibility," he said. "They are not going to be hit with significant taxes until 2021."

But the key is that the company is drilling oil in a region where it has a very high probability of success, "so we think that will add to their reserves and production" and increase their cash flow, Mr. Decter said. "The company also has a strong management team on the Canadian and American side."

He expects 25 or 35 per cent upside in Argent Energy over next two years depending on the overall economy and market. "Any time that you own an oil and gas company that is drilling wells, there is also risk on the production side," he noted.

A major macro-economic event could cause the price of oil to fall globally, and "while we think the United States is recovering, you never know," he said. "But those risks are there pretty well for every oil and gas company."