Canadian PVX Is the Whole Energy Package

Provident Energy Trust (PVX - commentary - Cramer's Take) may not be one of the biggest players in the Canadian energy trust market on the basis of oil equivalent per day, but that's not the whole story. A diversified business strategy that combines upstream oil and gas production with substantial midstream activity makes this trust worth a closer look.

Provident's upstream business is far from shabby. In the fourth quarter of 2007, its Canadian and U.S. gas and oil operations produced 48,200 barrels of oil equivalent per day. And the trust can increase production by drilling new wells within the 413,000 acres of open land it owns - it is not beholden to making acquisitions in order to replace production.

PVX had a drilling success rate of 99% in 2007 -- not exactly a wildcatter's profile. Building on the success of its conservative exploration practices plus strategic acquisitions, the trust has built up a healthy Reserve Life Index (RLI); its Canadian gas and oil operations currently show a proven and probable RLI of 9.7 years, while its consolidated proven and probable RLI for all operations is 16.9 years.

But Provident's activities don't end there. What differentiates this company from other energy trusts is a midstream business that brings in annual revenue of $1.5 billion, with plenty of room for growth. Provident is one of the largest players in Canada's natural gas liquid (NGL) value chain, owning extraction, fractionation, pipeline, rail and truck transportation, loading and storage facilities across the continent.

An analyst at my firm visited the company a few weeks ago, and of all the diverse but related activities Provident supplies, we think its terminal operations and condensate businesses may offer the greatest opportunities for growth. I've talked before about the potential of Alberta's oil sands region -- a key future energy source with reserves that rival those of Saudi Arabia -- and about specific companies in that region, and many investors are already salivating over the growth potential for trusts with upstream participation in this area.

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At the time of publication, Hanlon was long Provident, although positions may change at any time.

Charles P. Hanlon focuses on non-dollar investments. He is currently the president of Delta Global Advisors. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Investing in foreign markets involves unique risks including, but not limited to, currency fluctuation and political risk. In addition, international investing is typically more expensive for U.S. investors than buying shares listed on a U.S. exchange. Hanlon appreciates your feedback; click here to send him an email.