Msg 2706 of 2773 at 1/24/2012 4:52:43 PM by
ronstaug
A Preferred that may be of interest to some
I mistakingly posted this on another board with almost the same name, but it's mainly for Canadians.
After doubling up yesterday, we now have very full positions of GASTAR's new preferred GST-A or GST-PA depending on which site you use.
Our CFP and I have done a lot of D.D. on this one & studied all the analysts reports. Their CEO & CFO have both been kind enough to communicate with us. IMO, both are seasoned veterans in the drilling space.
While they're mainly in Nat Gas, much of their newer drilling will be liquids & oil. Their hedging is being updated going forward & we feel good about their prospects.
We own it in our taxable account where GST-A is currently 100% tax deferred & it's on DRIP in the Ira's. The call price is $25 & this morning the price was in the $19.50 range. I believe they've issued about 33 million $'s of their planned 100 million $'s. They issued this perpetual preferred rather than access the junk bond market. Their website has a good presentation from the CEO which talks about why they chose this avenue.
*don't be misled by the current price, that's about where they're issuing the preferred as they know that the yield on the coupon won't fetch that 100 million they want.
GST-A pays .17969 monthly for a yearly payout of $2.15625 or about 11.05% yield. I believe the tax rate if held in a taxable account is still qualified, that would be 15% for now. ZACKS.COM rates GST as a “buy”. With all of this said, please don't interpret this as any kind of a recommendation, it's not. Just a “heads up” of something we & lots of others in our group like a lot. I would suggest anyone who's remotely interested study their website & review all the links. Ron
vGastar Exploration (GST) is a natural gas and oil company focused on the U.S. The company acquires, explores and develops deep structural reserves. It holds leases on over 120,000 gross acres as well as a 40% non-operated working interest in a 43,400 acre parcel in the Powder River Basin. GST opened trading December 12 at $3.33 a share with a one-year target estimate of $5.43. Unlike a lot of other oil and gas companies, GST does not offer a dividend, but its strong upside makes up for it. GST is priced at 13.12 times its forward earnings. It has much lower quarterly revenue growth than DVN or XOM at just 10.80%, but the company has practically no debt. It also has a beta around 0.82, meaning it is much less volatile than the market in general. Pickens upped his stake in GST by almost 5% in the third quarter, bringing his total position in the company to 1.26M shares – a value of $3.78M or 3.27% of his total portfolio. It was the only position that Pickens increased during the third quarter. GST is also a favorite of Paul Reeder and Ed Shapiro’s Par Capital Management.