Yesterday I was able to pick up some more Provident Energy (PVX: chart, web, Y!) shares for $11.70.

Today the stock was down $0.14 to $11.77 on average volume. I suspect that Tuesdays trading (remember Monday is a holiday) will reveal another push towards $13.  Memorial Day is the official start of the driving season, and even if driving is down this summer, oil will maintain levels above $110 for the majority of the hot months.  This will leave the electrical power generation companies turning to natural gas ($natgas: chart) vs. heavy oil.

Additionally, the hurricane center predicted that this will be another active season with as many as 5 major hurricanes predicted.

The future is bright for natural gas this summer.

Energy, Investing, Royalty Trusts hurricane forecast, oil and gas, PVX

Over a week ago Provident Energy (PVX: chart, web, Y!) released their 2008 first quarter results.  After venturing out of town on business for a week, I’m finally starting to catch up on the market events, which, by industry standards are now old news.

A few highlights from the report:

• Funds flow from operations in the Canadian Oil and Gas Production and Midstream business units, as well as oil and gas production in the U.S. was up 107% to $180 million or $0.71 per unit.
• Distributions for Q1 totaled $0.36 per unit, equating to a payout ratio of 59%, down from 91% in Q1 2007.
• Production increased to 52,300 boed, up 61% from Q1 2007 due to acquisitions and internal development.
• Canadian oil and gas production averaged 27,600 boed in Q1 ‘08 as compared to 24,300 boed in Q1 ‘07, an increase of 13%.
• Production remains fairly balanced at 51% natural gas and 49% crude oil and NGL (natural gas liquids).
• The May distribution will continue to be $0.12 CDN payable on June 13th.

Corner Office Thoughts

This company continues to impress me.  We’re starting to see the results of well tendered acquisitions in 2007 as an effort to replace reserves and increase production and drilling potential.

It’s good to see the payout ratio drop as I thought it would, but I had no idea it would drop by 32%.  The effect is that this leaves good opportunity for one of two moves: increase the monthly distribution, or continue to invest in acquisitions to replace reserves and increase production.  Personally I’d like to see the distribution left alone, and the added net cash flow used to further production.

As of today’s writing, Provident stock stands at $11.94 per share.  This time last year I’d consider taking some off the table and buying back on the dips below $11.  However, with the increase in production (funds flow from operations doubled) and the lowered payout ratio, Provident is starting to look cheap, even at these levels.

I’m looking to buy more PVX in small chunks, but only after we see a retrace of the price action over the last couple days.  The stock has seen a solid run up, spurred on by the Q1 report, and I think there may be some profit taking in the works over the next week.  An order placed at $11.50 per share is reasonable.

Investing, Oil & Gas, Royalty Trusts oil and gas, PVX

I bought more Provident Energy (PVX: chart, web, Y!) today, adding another 50 shares to my holdings. Crude oil ($wtic: chart) spiked on the news that Benazir Bhutto was assassinated in Pakistan, and natural gas ($natgas: chart) is holding its own above $7 going into the cold weather season.

I’m playing the trend. I’m in the stock for the dividend, but if the price rises to $13 I’ll definitely take some off the table. 30% price appreciation is too much to pass up, especially when you see it coming. The fundamentals of the company remain intact, and the only other thing that is weighing on the canroys is increasing production costs and the lingering Canadian tax policy.

Investing, Oil & Gas, Royalty Trusts CANROYS, Provident Energy, PVX