Canada : Harvest Energy Trust in C$4.1 billion sale to Korea National Oil Corporation

marketwire.com :

Harvest Energy Trust ("Harvest") (TSX:HTE.UN) (NYSE:HTE) today announces that it has entered into an agreement (the "Arrangement Agreement") with Korea National Oil Corporation ("KNOC") for the purchase of all the issued and outstanding trust units (the "Units") at a price of C$10.00 per Unit for a total cash consideration of approximately C$1.8 billion plus the assumption of C$2.3 billion of debt ... the Arrangement represents a 47% premium over the 30-day weighted average trading price of the Units on the Toronto Stock Exchange up to and including October 20, 2009 ... Harvest will suspend its distribution and Premium Distribution, Distribution Reinvestment and Optional Trust Unit Purchase Plan ("DRIP") effective immediately ...

- Puns about "Harvest gets harvested" aside, this move by the Korean national oil company in my opinion highlights a number of points :

1. The Asians need a lot of energy for their economic development and they need it fast.
2. The Asians have a lot of falling USD and they want to trade them in for tangible goods fast.
3. Canadian energy royalty trusts are undervalued and make for easy pickings.

Harvest was the energy trust I referred to earlier when I referred to it as my third-favourite energy trust, and it really was yielding over 40% at that point. Of course that couldn't be true for very long. Now that it is going to be bought over and de-listed from the TSX exchange, I am looking out for candidates to replace that part of my asset allocation.

With the multi-hundred-billion-dollar sovereign wealth funds, government investment companies and such now operating in this area, I fear it may be hard to be a buy-and-hold investor in this area going forward. There is going to be no participation for the individual retail investor if the big whales come into the room and simply buy up the whole place.

The timing of this purchase is also pretty curious from my point of view. It frustrates me no end to now have to scramble and re-deploy my capital toward another energy trust of equivalent size and enterprise value, just when the tidal wave of money supply is making its way into the economy and just as oil prices are being driven upwards in this wave of momentum. This tells me that the governments are now literally buying into the whole peak oil and resource depletion theme that the old-time peakoilers picked up on years ago. Oil prices are going up. Way up. Hold on for the ride!

(2009-10-23 20:54:36 SGT) [Energy] Permalink

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