Penn West Energy Trust Update
The Penn West Energy Trust closed today at $16.96, about a dollar up from the closing price on October 28. The Canroys seem to be tracking the Dow Jones and the stock market in general. It makes sense in that the Dow is tracking the economic growth expectations in the market. If the economic growth expectations go up, the expectations of demand and price for oil and consequently the Canroys stock prices go up in tandem and vice versa. The price of oil seems to be trending down, although it is difficult to say if it is at the bottom, or how long it will stay that way. It seems for sure that the oil prices are not going to be anywhere near the historic highs of $147 per barrel in the coming year.
I expected lower dividends in line with falling oil prices. The Canroys have generally maintained their distributions till October. Enerplus Resources Fund (ERF) is the first to reduce monthly cash distribution level from $0.47/unit to $0.38/unit effective with the November distribution payment. That is about a 20% reduction in dividends.
I am anxious to see what Penn West comes out with. A similar reduction would not be too drastic. The stock price seems to account for that already.
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