Paramount Energy Trust responses to statements made by paul_livermore.

Re: Paramount Energy Trust responses to ...re Paul Livermore

Frank Tabbert:

Since you are suggesting paul_livermore consider shorting Paramount Energy Trust as he did with Boeing.

I say why stop there why not short Baytex Energy Trust BTE.UN which just recently raised it's dividend 50% from 12 cents to 18 cents a month, which means they will be paying $2.16 versus EPS of $1.90 in the latest year. Regardless of a higher payout then their reported earnings the stock went up $4.50 after they announced the increase in dividends.  Since their March low of last year of about $10 BTE.UN has risen 300% to $31.16.  Making it during that period a very bad short indeed.

Also why not short Silvercorp Metals Inc. SVM which has a dividend of 8 cents a year inspite of minus 12 cents in earnings in their latest year. Regardless of this the shares have done extremely well.

Thankfully I went significantly long in both of these companies.

Many companies impliment dividend policies because they like the discipline that it imploses on them. So even though during certain periods of time their earnings may be lower then their dividends they resist lowering or cancelling them.

Before I invest in any company I check into it's management and when I feel it has good management and prospects I will invest in it. Should I get a dividend as well that is all to the good.

The most important thing for me as far as Paramount Energy Trust being a play on Natural Gas is it's Management, which I consider to be very good. Their past history in developing oil and natural gas companies gives me confidence in their abilities in carrying on the business of PMT.UN in the best interests of it's shareholders. 

I have made money in PMT.UN several times and always from going long. Even though I currently have shares in it, I am not married to the company, I will not hesitate to sell it if I feel it is warrented.

Any buy or sale of it's shares are based primarily on the what I feel is the direction of natural gas prices. Right now the bullish talk about NG makes me feel uncomfortable, I started to feel that, when PMT.UN was about 50 cents higher then it is now, a point that I have sold it in the past, but due to it being winter I decided to hold on. I have even been considering to have it as my long term natural gas hold. 

I start off fresh each trading day so what I was thinking one day will not necessarily be the same the next day.  

The reason the Canadian government allowed the formation of Income Trusts in the first place in 1986 was to encourage the development of oil and natural gas resources.  Being an Income Trust these companies did not have to pay corporation taxes on their earnings. This was attractive to companies with mature OIL and NG properties, receiving good cash flow from them to escape corp. taxes.

Because they were now able to pay high dividends they became very attractive investments by individuals, mutual funds and pension funds. This made it very easy for them to raise capital which these companies used to make acquisitions. These acquisitions made a big difference in the landscape of the oil and nat gas industry in Canada instead of being predominately owned by foreign companies mainly American it was rapidly becoming Canadian.

Since the trust model was not specifically for oil and nat gas companies other companies decided to become Income Trusts to escape paying corporate taxes.  

Up to Oct. of 2006 there was about 200 Income Trusts in Canada. When Bell Canada BCE Canada's largest Telecom decided to become an Income Trust and there was fear the Canadian Banks would also do so. Because of the preception of tax leakage the government of Canada decided to call a halt to the creation of Income Trusts and that existing Income Trusts would face a corporation tax of 31.5% in 2011.

Due to this impending corp. tax on Income Trusts, they will no longer exist in 2011. Fifty nine of these Income Trusts have been taken over so far by canadian, foreign companies and pension funds, many through leverge buyouts (using the companies cash flow to pay for the acquisitions). Also some turned themselves into private companies.

There has been a great debate going on about the government's wisness in destroying the Income Trust model being lead by Brent Fullard head of the Canadian Association of Income Trust Investors CAITI. They claim the government will receive more in income taxes ( because of taxes on dividends ) as Income Trusts, then they will when these companies become corporations and the fact of leverage buyouts of some of them and take overs by non-tax paying pensions funds they will be receiving an even lessor amount. Information concerning their claims can be found on their web site.

During the Income Trust era some of them raised, lowered or cancelled dividends depending on their circumstances. For certain periods of time these dividends could be higher then earnings for some Trusts, and for various reasons they like any other corporation may decide not to lower them.

Many of these current Income Trusts have stated that they will remain as dividend paying corporations. Most feel that the corporate tax burden on former Oil and Natural Gas Income Trusts will be around 15%.

Paramount Energy Trust plans to remain as an E&P dividend paying corporation. 

Inaddition to PMT.UN's attractiveness to me as a Natural Gas play is it's oil sand holdings and the 50 sections of land it owns in the Cardium Area, this is an oil play which has been very hot, resulting in a hulgely rewarding take over of a junior oil company and driven other junior companies to much higher levels in share prices just on drilling a couple of holes.  PMT.UN has not yet drill on their holdings, when they do and should they be as successful as others in the Cardium area and comparing the number of shares they have outstanding to other companies in the area, it should be significant to it's share valuation.

I will not comment on paul_livermores PMT.UN capex expenditures other then to say that they made a big acquisition in May of 2007 and their exploration expenses have allowed them to grow the company to 2 million acres of undeveloped land with a great many drilling locations enabling them to produce Nat Gas for many years. Another thing I would like to add PMT.UN has been creating Nat Gas storage facilities for their own use and other companies that they will earn money from.     

Other then those comments I cannot say any more about PET's capex expenditures due to fact as an ordinary investor in the company I do not have all the facts.