Harvest Trust Energy (HTE) – Part 1 - Introduction

Harvest Trust Energy (HTE), a Canadian Oil and Natural Gas royalty trust formed in 2002, had its initial public offering (IPO) on December 5, 2002. It raised then $34.5M at $8 per share and a secondary offering in February 2003 raised another $15M at $10 per share. The trust also initiated its monthly dividend distribution immediately after the IPO. The first distribution was for 20c per share. The distribution progressively went up to 38c per share and remained at that level for a couple of years before the recent slash to 30c per share.

The business plans at IPO was based on acquiring mature properties and then eke out additional value by using production enhancement and optimization efforts. The initial acquisitions were mature oil producing properties in Eastern Alberta. Since then, the company diversified into natural gas properties although production is weighted 70% in favor to oil. In October 2006, they acquired North Atlantic refinery for C$1.6B.

Harvest is structured as a Canadian Royalty Trust (CanRoy) and has a monthly dividend distribution policy. CanRoys have certain tax advantages both for the company (set to expire 2011) and for the investor. Harvest announced a 20% dividend cut in mid-November which prompted an immediate sell off. The yield is now close to 16%.

Below is the properties map and a summary of their upstream business activity:


































AssetLocationFocusComments
WainwrightEastern AlbertaEnhanced Oil Recovery (EOR)100% working interest Sparky medium gravity oil pool - 133mmboe net Harvest Original Oil In Place (OOIP). Indications are for pool-wide recovery factors to exceed 50%, compared to current recovery factors of approximately 35%.
Bellshill LakeEastern AlbertaEnhanced Oil Recovery (EOR)99% working interest - 216 mmboe net Harvest OOIP with a recovery factor of 49%. Potential to add up to 16mmboe which will increase P&P reserves by 125%.
HayterEastern AlbertaEnhanced Oil Recovery (EOR)138mmboe net Harvest OOIP - Dina heavy oil resource with ~20% recovery factor. Pilots to determine the most effective enhanced recovery technique in progress.
KindersleySouthwest SaskatchewanEnhanced Oil Recovery (EOR)79% working interest – 80mmboe of OOIP (Light Oil) with ~28% recovery factor. Working with a 3rd party to determine the most effective enhanced recovery technique.
Hay RiverBritish ColombiaEnhanced Oil Recovery (EOR)200 mmboe of OOIP (medium gravity) with 8% recovery to date. Working on enhancing the longer-term recovery potential.
Oil Sands AlbertaEnhanced Oil Recovery (EOR)47,000 net acres of oil sands leases. Test evaluation wells to confirm the estimated 1 billion bbl of OOIP in progress.
MarkervilleAlbertaExploration Activities 100% Harvest working interest. Pilot indicated about 500 boepd including liquids. 3-5 additional locations to be drilled as part of the 2008 program.
Central AlbertaAlbertaExploration Activities 100% Harvest working interest. Pilots indicate 800 boepd including liquids. At least one follow-up location for 2008 to downspace further to maximize recovery.
LloydminsterAlbertaExploration ActivitiesCurrent production of 1500 boepd heavy oil. Further exploration activity in progress.



Below is a summary of their downstream businesses:
















BusinessProduct DetailsComments
Medium sour crude oil refining115000 bbl/day. Output sold 10% locally and the rest internationally (Boston, New York, Europe, etc.). Crude oil feedstock from Middle East, Russia, South America, and AfricaThe refinery takes in medium sour crude oil and vacuum gas oil at a rough ratio of 11:1 and produces distillate products, gasoline, and heavy fuel oil in the ratio 41:32:27.
Marine Terminal and Related AssetsYear-round deep water ice free jetty with two births (90-326K dwt), averages 325 ships, and has a tank farm capacity of 7.5M barrels of crudeManages and escorts fuel traffic from and to the refinery. Owns two tugs and has arrangement with adjacent facility to meet demand surges.
MarketingFive Segments: Retail, Wholesale, Home heat, Commercial, and Bunkers (fuel for ships)64 retail locations and six home heat stores. 14.6% overall NL market share.


Related Posts:

  1. Harvest Trust Energy (HTE) - Part 1 - Introduction.
  2. Harvest Trust Energy (HTE) - Part 2 - Business Issues.
  3. Harvest Trust Energy (HTE) - Part 3 - Outlook.

3 comments :

MR MUTT said...

I recently bought HTE and started receiving dividends. Taxes were withheld from my dividend. Where does this tax money go? Do I qualify for a refund. Is the dividend, which is part of my "ROTH" IRA, subject to being reported on my tax refund since any other gains and earnings are not taxed either now or when I retire.

Help me out with understanding this. You can email with an explanation at ezcookin123@yahoo.com

thanks..Frank (USA)

I don't want to sell this stock, unless it becomes a pain in the neck

ks said...

There was a very informative comment regarding the tax implications in an IRA account in our HTE article in Seeking Alpha:

http://seekingalpha.com/article/67092-is-harvest-energy-trust-s-premium-valuation-justified

Here is the comment:

To User 167894. I hold HTE in my IRA. The only way I have found to reclaim the 15% Canadian tax witholding is by withdrawing the dividends from my IRA (I'm over 59 1/2) so the earnings become part of my gross income (AGI). I then claim the foriegn tax credit for the HTE dividend income on my tax return. According to the IRS rules, the foriegn tax credit can only be claimed on income that is part of your taxable AGI. Since dividend income in an IRA is not part of your AGI, the foriegn tax credit cannot be taken if it remains in the IRA.

Thank you jander!

Regards,

186map said...

Now that hte has sold us out i'm wondering if any one knows where all the millions of dollars withheld for future tax liabilities has gone and who ends up with it now

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