Fairborne Falls on Exploration Conversion Plan

Fairborne Energy Trust fell the most in almost a year after the Canadian oil and natural-gas trust said it plans to convert to an exploration and production company.

Calgary-based Fairborne dropped 45 cents, or 6.5 percent, to C$6.45 on the Toronto Stock Exchange. They declined as much as 13 percent earlier.

Fairborne will also issue 13.4 million shares of the new company to U.S. private equity firm Denham Commodity Partners Fund IV LP. at C$7.45 each, an 8 percent premium over Friday's price, the trust said in a statement today. The proceeds of about C$100 million ($102 million) will initially be used to cut debt.

Canadian trusts have been consolidating since the federal government in October 2006 announced it would begin taxing income funds in 2011. The S&P/TSX Capped Income Trust Index has lost 10 percent of its value since the Oct. 31, 2006, announcement. So far, trusts are exempt from most taxes because they pay almost all of their cash flow to investors.

To contact the reporter on this story: Sonja Franklin in Calgary at sfranklin6@bloomberg.net

To contact the editor responsible for this story: Tony Cox in Houston at acox3@bloomberg.net

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