Crude's strength could life Maximum Energy : unitholders receive 99% of net cash flow from any acquired assets in the form of tax-effective cast distributions - Trust

Money Digest, Sept, 1999 by Doug Hawkins

Maximum Energy Trust is a conventional oil and gas royalty trust. After closing its major initial acquisition of 18 million barrels of reserves in July, 1996, it became operational. Roughly 93% of initial established reserves were light sweet crude oil. Unitholders of this trust receive 99% of net cash flow derived from any acquired assets in the form of taxeffective monthly cash distributions.

Maximum's risk profile is reduced because it is restricted from funding exploration projects. It is, however, permitted to fund low-risk development drilling. In 1997, the Trust was reorganized, enabling it to do corporate takeovers and oil and gas property acquisitions, in addition to industry-related facility acquisitions. Maximum aims to sustain production levels through low-risk development drilling while maximizing ultimate reserve recovery through cost-effective technology. It also aims to grow the reserve base through complementary acquisitions.

Operations are focused in two core areas: Provost, Alberta, and Kindersley, Saskatchewan. Maximum has a 100% development drilling success record and a 92% average working interest, which gives it project control and focus.

Some of Maximum's distinguishing features are:

* Extremely long reserve life. Economic reserve life of 50 years; established reserve life index of 19 years;

* An inventory of low-risk development drilling opportunities;

* A lean corporate structure, with low royalty burdens;

* A high investor netback ($4.99 per barrel last year) at normal crude oil price level;

* Cash distributions of $0.54 over the last 12 months, the equivalent of a cash-on-cash yield of 23.5%.

Doug Hawkins, MBA, is an investment advisor with Canaccord Capital, a member of major stock exchanges and the Canadian Investor Protection Fund. Phone (905)683-9824; email: hawkins@yesic.com.