Say it ain’t so, Pengrowth!
September 10th, 2006 by Grant in: Investing, Stock ThoughtsThis afternoon, Pengrowth Energy Trust (PGH: chart, web) posted a regulatory filing indicating they may offer up $2 billion in trust units and subscription receipts.
Much like Chesapeake did a few months ago, Pengrowth said it will use the proceeds for “general trust purposes” including paying off debt.
As a shelf registration, the company may sell securities at any time, and withhold the details until they offer the securities up for the market.
The red flag can’t get any brighter in this case, as I’m looking to take advantage of continuing dividend payouts rather than true price appreciation. Offering up more shares to the market do nothing but devalue the shares already in play.
As with Chesapeake’s offering, I’d rather see Pengrowth use free cash flow to pay for debt. I’m more open to issuing shares for acquisition purposes, but the acquisition should be something my devalued shares will see a long-term benefit from. In other words, the acquisition had better pay off!
With natural gas ($natgas: chart) prices going down due to higher supply levels, the fact that the company is issuing shares tells me something isn’t quite right with their game plan, and they need a plan ‘b’ in case they come up short and can’t service their debt.
Until I see things turn around, I’ll stay away from Pengrowth.
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September 12th, 2006 at 1:06 pm
Man, I knew I should have put in a stop loss at $23 when PGH
came out with that strange 2bill offering. Now with oil around $65
I am just waiting for the next shoe to drop, like them cutting that
fat yield. If that happens I am stopin out at $20.
September 12th, 2006 at 8:15 pm
Brian,
I wouldn’t sweat it too much. I think the brunt of the fallout in the PGH value is not necessarily from the offering, but from the lack of strength in the entire sector.
Oil is down on a lowered demand forecast from the IEA, simmering Iran nuke talks, and relatively higher supply.
Take a look at the charts from PVX, PGH, SJT (just to name a few) and they all look the same.
That being said, set your stops and don’t move ‘em unless you have a darn good reason to do otherwise!
-Grant