I don't see a distribution cut in the next several months for either Canetic or Penn West, but let's pretend that the very worst happens and they both cut by a full third, you will still be getting 10% or better. If we get a "normal" winter either in NA or Europe, increased NG and LNG prices will make both of these trusts pretty attractive, with the distributions looking very safe again even to the most pessimistic. If that happens, we will be looking at a possible 50% capital gain in 2008, with little downside risk, since the current prices are already discounting the worst.
The whole situation offers a reasonable risk/reward ratio in my book. In the meantime, 15% or so cash on cash is nice.
Tony. |
