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Sunday, November 11, 2007

NAL Oil and Gas Trust -NAE.UN-T- Has Interesting Exploration Upside

RBC reports that Q3 Results are good with 45% production from natural gas and 55% from oil.

At the close of the third quarter 2007, NAL had 650 boe/d of production ready to be tied in, which will occur in Q4 2007. Furthermore, NAL is primed to increase its production as a result of a number of development projects now underway.

The next milestone are the three high impact Seneca Wells which are getting closer . The results of three high impact wells from the Seneca acquisition are nearing release. Depending on the outcome of the three Seneca wells, NAL should have further development potential opportunities with its partners.

RBC's target price and Rating Unchanged. RBC are maintaining their 12-month price target of $12.25 /unit, and an Outperform but RBC have not included the possible results of the three new wells.

We believe NAL has an interesting mix of exploration and development prospects converging in 2008, which could prove financially rewarding to patient investors.

I had a large position in NAE in 2006 but I sold it all because of the Halloween 2006 Tax Fairness Plan massacre.

Presently, NAE has has a $0.16 per month ($1.92 per year) distribution resulting in a yield of 15.6%. The payout ratio 69% and the payout ratio including capital expenditures is 114%. This Trust has some exploration upside potential. With a +15% yield you get paid to wait. Hopefully we not only get our distibutions but some capital gains potential too.

Now that is investing for income!

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