ConocoPhilips’ (NYSE: COP) announcement that it’s agreed to sell its 9.03 percent stake in the Syncrude oil sands project is intriguing for several reasons. The deal is a reminder of the long-term strategic value of Canada’s oil sands. But chief among the key points for income investors that one of the affected parties is now in better position to sustain–even grow–its distribution.

The USD4.65 billion purchase price caught a lot of folks on Bay Street and elsewhere a little off guard. China Petroleum & Chemical Corporation, better known as Sinopec (Hong Kong: 386, NYSE: SNP), outbid a group of Canadian public-sector pension plans and Canadian Oil Sands Trust (TSX: COS-U, OTC: COSWF), which already owns 36.74 percent of Syncrude, by tacking on a double-digit premium to previous valuations.

Sinopec, which in 2009 became the first Chinese company to crack the top 10 in Forbes’ Global 500 rankings, engages in a variety of activities, including oil and gas exploration and production. It’s also China’s largest refiner. The Syncrude purchase is yet another in a series of acquisitions by China through its various state-sponsored entities of energy assets around the world, though its ventures have a distinctly Canadian flavor.

Sinopec previously acquired 50 percent of France-based Total’s (NYSE: TOT) stake in the Northern Lights oil sands project, while PetroChina (Hong Kong: , NYSE: PTR) is investing CAD1.9 billion in two projects operated by Athabasca Oil Sands Corp (TSX: ATH). China, anxious to maintain the near double-digit pace of growth necessary to keep an itinerant population contented, is willing to pay a premium to secure increasingly vital energy supplies.

Resurgent growth among developing economies and the return to health of the developed world will combine to push oil prices higher through 2010 and into 2011. The Middle Kingdom is acting now–while its various agents are flush with cash–to snap up assets from exploration and production (E&P) companies looking to rationalize their own asset bases. It’s capitalizing on its relative strength to establish long-term energy security.

And China’s pursuit of its own interests will have an impact on oil prices around the world. According to various fresh calculations made by Bay Street analysts in the wake of the deal’s announcement, Sinopec’s purchase price implies a 12-month crude price between USD95 and USD106 per barrel. The upward trend they describe is consistent with the one our colleague and energy expert Elliott Gue forecast in his sector advisory The Energy Strategist.

Higher oil prices are good news for E&Ps, particularly those like Canadian Oil Sands that have high production costs. Sinopec’s price bodes well for margin growth. Units of Canadian Oil Sands jumped more than 5 percent on news of the deal. The reason for the rally is two-fold.

The nearly 6 percent single-day jump was fueled, of course, by the fact that Sinopec put a higher present value on Syncrude’s assets than was reflected by Canadian Oil Sands’ market price. As of midday Monday Canadian Oil Sands’ stake in Syncrude translated into a market capitalization of CAD15.8 billion. Sinopec’s USD4.65 billion offer for a stake in Syncrude that’s a quarter the size of Canadian Oil Sands’ stake implies an USD18.6 billion market cap for Canadian Oil Sands–or a unit price north of USD37.

The rally was also an expression of relief by unitholders that Canadian Oil Sands management wouldn’t be issuing new, potentially dilutive equity to fund its own purchase of Conoco’s Syncrude stake. Canadian Oil Sands is now in position–accepting as fact that Sinopec’s valuation better reflects oil prices’ trend–to boost its distribution in the year ahead. It no longer has a need to hang onto cash to cover another 9 percent of the Syncrude project, and an oil-price surge would provide it plenty of scope to share more with investors.

Canadian Oil Sands is the largest pure play on its namesake asset, an asset that’s becoming an increasingly important piece of the global energy puzzle. The cloud of a potential dilutive offering now removed and the prospect of higher oil prices ahead pushing profits higher, the unit price is likely to probe toward the upper USD30s.

More important, the company is in better position to sustain–even increase its payout in the near term. The payout hit a high of CAD1.25 per unit per quarter in mid-2008, after the price of oil hit a record high above USD140 a barrel. When the global economy imploded management cut the payout, first to CAD0.75 in November 2008, then to CAD0.15 in February 2009.

As of November 2009 Canadian Oil Sands is paying CAD0.35 per unit per quarter; it reported a payout ratio of just 51 percent for the fourth quarter. Not only do present circumstances suggest this level is entirely sustainable. But lower costs, higher oil prices and the removal of company-specific concerns all argue for a larger payout going forward.

Another way to play the oil sands–this one never cut its distribution and now pays CAD0.13 per unit per month–is longtime Canadian Edge Portfolio recommendation Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF). This pipeline operator has an exclusive contract for the Syncrude project–on a long-term, fee-for-service basis.

You Cruise, You Win

Roger Conrad and his KCI Investing colleagues have been combing the globe for their next luxury investment cruise: Any ports of call must be ripe with investment potential, of course, but they must provide a rich slice of the world’s treasures and unique insights into human luxury. And after the brutal year we just finished, who couldn’t use some luxuriant down time learning how to prepare their portfolios for what this next decade has in store.

Save the dates: Thursday, October 21, through Monday, November 1, 2010. Explore the wonders of Turkey and the Greek Isles while learning about the newest investment strategies from Roger, Elliott Gue, Yiannis Mostrous and GS Early.

While you enjoy unfettered access to the finest minds in investing today, Seabourn Cruises will upgrade the way you think about luxury cruising as you are feted aboard the brand new Seabourn Odyssey. From its all-included open bar of premium liquor, wine and beer to its almost better than 1-to1 staff-to-passenger ratio, to its maximum capacity of only 450 passengers, you will understand why it immediately jumped to the top of the luxury cruise line ratings charts when it hit the water in 2009.

For those of you lucky enough to have sailed with this keen crew in the past, you know you are in for a meticulously planned journey into the business, investment and cultural offerings of the region. KCI in partnership with Joseph H. Conlin Travel Management is offering this journey solely to KCI subscribers and their friends.

For more information and reservations, please click here.

The Roundup

Canadian Edge Portfolio Holdings continue to take advantage of favorable conditions to restructure balance sheets and reduce overall debt costs. And a couple Conservative Holdings have completed modest deals that still bolster long-term sustainability by building in reliable cash flows.

We’re gearing up for first-quarter earnings season, during which time we anticipate more clarity about post-Jan. 1, 2011, dividend policies. Below is the latest from Portfolio companies, including tentative earnings announcement dates, followed by a trip through the How They Rate universe.

Aggressive Holdings

Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF) is issuing 4.8 million trust units on a bought-deal basis at CAD13.45 per, for gross proceeds of approximately CAD65 million. Peyto will use the raised funds to pay down outstanding bank debt, fund the 2010 capital program and for general purposes. The deal is expected to close around April 27. Peyto Energy Trust is a buy up to USD15.

• Ag Growth International (TSX: AFN, OTC: AGGZF)–May 7
• ARC Energy Trust (TSX: AET-U, OTC: AETUF)–May 5 (confirmed)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 11
• Daylight Resources Trust (TSX: DAY-U, OTC: DAYYF)–May 6
• Enerplus Resources Fund (TSX: ERF-U, NYSE: ERF)–May 7
• Newalta Income Fund (TSX: NAL, OTC: NWLTF)–May 11
• Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF)–May 7
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)–May 6
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–May 13
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–May 13 (confirmed)
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–May 6
• Vermilion Energy Trust (TSX: VET-U, OTC: VETMF)–May 7

Conservative Holdings

Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF) has been awarded a CAD54 million fixed-price contract by Shell Canada Energy to build a truck shop, warehouse and an administrative facility; construction is underway and is expected to be completed in mid-2011. Bird Construction Income Fund is a buy up to USD33.

Brookfield Renewable Power Fund’s (TSX: BRC-U, OTC: BRPFF) 165 megawatt Comber Wind project in Ontario has been offered a 20-year contract under the province’s Feed-in Tariff Program. Comber is expected to begin construction later this year with a planned commercial operation date in 2011. Buy Brookfield Renewable Power Fund up to USD20.

Colabor Group (TSX: GCL, OTC: COLFF) is issuing CAD50 million worth of convertible unsecured subordinated debentures on a bought-deal basis through a syndicate of underwriters.  The debentures have a 5.7 percent coupon and mature Apr. 30, 2017. They’re convertible at the holder’s option into common shares at a rate of 59.347 per CAD1,000 principal amount, a conversion price of CAD16.85 per share.

The offer is expected to close April 27. Colabor will use the proceeds to pay down existing debt. Colabor Group is a buy up to USD12.

• AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF)–April 29 (confirmed)
• Artis REIT (TSX: AX-U, OTC: ARESF)–May 13
• Atlantic Power Corp (TSX: ATP, OTC: ATLIF)–May 14 (confirmed)
• Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF)–May 4 (confirmed)
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–May 13
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–May 12
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–May 11 (confirmed)
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)–May 7
• Colabor Group (TSX: GCL, OTC: COLFF)–April 29
• Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF)–April 27
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)–May 13
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–May 14
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–May 5
• Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF)–May 11 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–May 12
• Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF)–April 29
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–April 29 (confirmed)
• TransForce (TSX: TFI, OTC: TFIFF)–April 23 (confirmed)
• Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF)–May 6 (confirmed)

Oil and Gas

NAL Oil & Gas Trust (TSX: NAE-U, OTC: NOIGF) has entered into a bought-deal financing arrangement with a syndicate of underwriters whereby the syndicate will buy from NAL and sell to the public 7,550,000 units at CAD13.25 per; net proceeds to NAL, which will be used to fund a scaled-up 2010 capital program and for general corporate purposes, will be about CAD100 million. The offering is expected to close on or about April 14. NAL Oil & Gas Trust is a buy up to USD15.

Talisman Energy (TSX: TLM, NYSE: TLM) is selling non-core Canadian assets in five separate transactions for total proceeds of approximately CAD1.9 billion. The assets are currently producing 42,500 barrels of oil equivalent per day (boe/d), about 90 percent of which is natural gas, and proved reserves of about 120 million barrels of oil equivalent (boe).

The sale equates to approximately CAD44,000 per boe/d and CAD16/boe of proved reserves. The deals will close in the second quarter. Talisman Energy is a buy up to USD20.

Electric Power

Northland Power Income Fund (TSX: NPI-U, OTC: NPIFF) has won contracts from the Ontario Power Authority to build 216 megawatts worth of renewable energy projects in the province under the Feed-in Tariff Program. Northland is likely to spend upward of CAD1 billion to build the projects, the first of which could get underway this year, assuming a smooth permitting process.

Northland has also recently announced the completion of a 265 megawatt Ontario-based cogeneration plant and has nearly completed financing for an 86 megawatt peaking plant and 261 MW combined cycle plant, both in Saskatchewan. Buy Northland Power Income Fund up to USD13.

Business Trusts

IBI Income Fund (TSX: IBG-U, OTC: IBIBF) is issuing on a bought-deal basis CAD20 million of convertible unsecured subordinated debentures. The debentures have a maturity date of Jun. 30, 2017, and a coupon of 5.75 percent. Each CAD1,000 principal amount is convertible into approximately 48.7329 units of IBI, at any time, at the option of the holder; this represents a conversion price of CAD20.52 per unit.

IBI intends to use the net proceeds for general purposes of the fund, including potential acquisitions. IBI Income Fund is a buy up to USD17.

Real Estate Trusts

Cominar REIT (TSX: CUF-U, OTC: CMLEF) closed its offering of approximately 6 million trust units; following full exercise of the underwriting syndicates over-allotment option Cominar realized net proceeds of CAD110.1 million. Cominar will use the new funds to pay down existing credit-line debt that was rung up to complete acquisitions and for new deals. Cominar REIT is a buy up to USD18.

Natural Resources

Rogers Sugar Income Fund (TSX: RSI-U, OTC: RSGUF) closed an offering of CAD50 million worth of 5.7 percent convertible unsecured subordinated debentures. The debentures are convertible at the holder’s option at CAD6.50 per trust unit; they mature Apr. 30, 2017.

Rogers will use the proceeds to redeem the outstanding CAD50 million principal on Rogers’ 6 percent convertible unsecured subordinated debentures of Jun. 29, 2012, on or about Jun. 29, 2010. Rogers Sugar Income Fund is a buy up to USD5.

Energy Services

Mullen Group (TSX: MTL, OTC: MLLGF) has reached agreement in principle to buy privately held, Manitoba-based civil construction outfit Smook Bros. Smook provides infrastructure construction, mine site work and tailings ponds construction to the energy, natural resources and government sectors.

Due diligence has already begun and is expected to be completed in the next several weeks; the acquisition is scheduled to close Apr. 30, 2010. Mullen Group is a buy up to USD15.

Information Technology

FP Newspapers Income Fund (TSX: FP-U, OTC: FPNUF) will convert to a corporation on a one-for-one rollover basis, which should be a tax-deferred event for Canadian and US investors. In its information circular describing the transaction, management stated that the current distribution level of CAD0.06 per unit per month will remain in place “during the period up to but excluding the month in which the arrangement becomes effective.” FP will make a final distribution immediately before the “effective time” of the conversion equal to the difference between income accrued up to immediately before the effective time and total year-to-date distributions. FP’s successor entity–FP Newspapers Inc (FPI)–will assume responsibility for this payment.

As for dividend policy beyond Jan. 1, 2011, the information circular states that the board of the new FP will “authorize the declaration and payment of a dividend to be paid on a monthly basis” and that “it is anticipated that the dividends payable…will be consistent with the distributions payable by the fund immediately before the effective date, but potentially reduced to reflect the fact that amounts received by FPI from the Partnership will be taxed in the hands of FPI.” Unitholders will vote on the plan during the fund’s annual meeting May 5. FP Newspapers Income Fund is a hold.