HPR Exit StrategyHPR is trading at only $2.50, but Enterra Trust is at $28+, implying a value of $3.00 for HPR.
Expectation seems to be that Enterra share price will drop sharply on completion of the deal, in face of heavy selling by Canadians of Enterra units received for HPR stock.
However, with recent dividend increase to US$0.16 (US$1.92 per year = approx $C2.40) current HPR shareholders will get a 10.0% immediate yield on the effective Enterra cost of $23.80/unit (based on HPR=$2.50).
The HPR deal is supposed to be accretive for Enterra shareholders, so there is a good prospect of a further dividend increase once the HPR assets are on board. Maybe US$0.18? (equivalent to around C$2.70 per year). This would boost the yield to 11.3% on current HPR value - much closer to the payouts for the Canadian trusts and very attractive to yield starved Americans.
I can't see a lot of downside from waiting for the conversion to take place. We are no worse off, even if Enterra drops to $23.80, plus collect a few dividends along the way, while waiting for US shareholders to push the price back up.
If the HPR price does move closer to $3 it may be attractive to sell, but the risk does not seem too high of waiting for the conversion and selling in 6 months, after things have settled down and Enterra can report production, revenues, etc. with both HPR and the recent Rocky Mountain assets.
Its taken a long time for HPR to deliver value (I converted Mesquite? to HPR several years ago), so another 6 months is not a big deal.
When Paramount Energy Trust took out Cavell, holding the trust units for a year boosted the effective offer price for Cavell by around 50%. While I don't see that potential with Enterra, I do see some potential for some, or all, of the current gap to be closed.
Good luck to all remaining HPR shareholders
TVR