Peyto

Peyto Energy Trust (TSX: PEY.UN)



Market value(14/11/2008): C$1.21 billion

Yield:17%(C$0.15/month)

Production(YTD-08):19,930 boe/d(87% natural gas, 13% oil & NGL(mostly NGL))

RLI(P+P): 21 years

Total assets(000's):$1,250,973

Total liabilities(000's): $714,000


Three year figures
Production 2005: 22,219 boe/d 2006:22,873 boe/d 2007:20,669boe/d

Reserves(P+P):2005:153,448 mboe 2006:163,464 mboe 2007:164,759 mboe

Realized prices:
Natural gas(per mcf): 2005: $8.78 2006: $8.46 2007: $8.42
NGL & Oil(per bbl): 2005: $55.48 2006: $61.00 2007: $67.88

Operating costs per boe: 2005:$1.55 2006:$2.16 2007:$2.57

Netback: 2005:$37.83, 2006:$39.25 2007:$41.06

Funds from operations per unit: 2005:$3.01 2006:$2.93 2007:$2.65

Payout ratio 2005: 46% 2006: 57% 2007:63%

Comments:
The supply of natural gas is increasing in North America, mainly due to unconventional resource plays, a strong reason to stay away from natural gas focused energy trusts. Peyto's low operating costs and long-life reserves do balance the picture quite a bit. Unlike most trusts Peyto has maintained and increased it's reserves through the drill bit instead of M&A.
What is Peyto worth? Three year average netback multiplied with 20% discounted proved&probable reserves, minus total liabilities((37.83+39.25+41.06)/3)x(0.80x164,7)-714=4461, in this equation one assumes that there will be no significant surprises with the reserves and that operating costs and realized prices do not significantly deviate from figures from recent years. In a more conservative estimate the three year average netback will be discounted with 30% and the reserves also with 30%=2456. With a current market value of $1.21 billion Peyto would seem to be ~51% undervalued.

UPDATE (02/12/2008)

Insider activity in October and November:

President, CEO, Director Darren J.Gee bought 10 000 shares
Exec. VP, COO Scott Robinson bought 4000 shares
Director Rick Braund bought 8500 shares
Director Don T. Gray bought 150 300 shares
Director Ian Mottersheap sold 70 000 shares