Stock Trades: Sold Eagle Energy Trust

Today, I sold 500 shares of Eagle Energy Trust (TSX:EGL.UN) at $9.85.

In at $8.62, out at $9.85, profit=??+13.81%??after commissions excluding dividends.

Trade Commentary??

This morning I reduced my holdings in Eagle Energy Trust across all accounts leaving me only with a 1,000 share position in my public portfolio. I am lucky to have bought under $9 a few months back so the exit has been profitable and more if I include the dividends.

The Q3 report was very disappointing; on top of growing pains distorting the sustainability ratio we get operational hiccups. That was not a pleasant surprise! As a result, production guidance took a hit and the sustainability ratio for 2012 is now too high to my liking especially with the credit line more than 75% drawn at years end.

Eagle is still my favorite cross border income trust but the stock was overweight in my portfolio and I had to reduce. I am still keeping a foothold in EGL.UN for a simple reason; that miss is not the end of the world. I used my O&G analysis software to annualize the cash flow for 3,600 boed in average production next year. That represents a 9% increase in production above the exit rate of 3,300 boed.

I am assuming the same capex of $43 million in 2013. ??I am also assuming a commodity price deck of $90 WTI ‘ remember that they realize a $2 per barrel premium to WTI.

The sustainability ratio estimate comes around 105% (saved by DRIP proceeds) for a deficit of $2.5M that can be easily absorbed by the bank line. The DCF ratio would be estimated at around 0.7x to cash flow.

The only problem with my scenario is the risk with the price of oil which is partially mitigated through a nice hedge book. I will be back to update this post once I get hold of management.

[UPDATE] Following my??discussion??with the CFO, the 3,800 figure went lower to 3,600 and the sustainability ratio ticked to 105% from 102%. Overall my numbers are pretty close.

Junior dividend paying E&P companies got hit across the board today except for Mart Resources which eked out +1.1% and more impressively a +100% YTD!

What do you think of EGL.UN?