As costs for acquisitions rise, some companies built on the acquire-and-exploit model are changing their tunes, if only slightly. Calgary-based Provident Energy Trust, for one, is holding on to a bit more cash with which to drill development wells, says Thomas W. Buchanan, chief executive officer. "In a trust, the E of E&P does not exist. It is D for development," he said at the recent IPAA Oil & Gas Investment Symposium in New York. "We have drilled 250 wells with a 99% success rate since inception, so that is clearly not exploration. We farm out to E&P companies anything else on our properties, retaining an override." Currently the trust is retaining 20% of its cash flow to fund development drilling and distributing the rest to unit-holders. A goal of the trust has been to increase its reserves-to-production (R/P) ratio. "We have two years of drilling inventory now that will replace about 50% of production," Buchanan said. "We are the only energy trust in Canada that can say that 40% of our cash flow comes from reserves with a life of 25-plus years." Provident extended its R/P ratio by buying California reserves through its acquisition of Los Angeles-based Breitburn Energy LLC last summer for C$190 million, and further boosts its cash flow by owning midstream assets in Canada. It also hedges some of its production, he said. Buchanan noted that the Canadian juniors of today differ from those of a few years ago. Because trusts trade at better multiples than regular E&P companies, and have low costs of capital, many Canadian juniors are converting themselves into trusts and spinning out their exploration assets to new juniors. Also, juniors are able to raise capital easier today, so they have the firepower to make acquisitions if they choose to remain independent and grow. "The repatriation of Canadian producing assets, from U.S. companies that bought in Canada a few years ago, back to Canadian buyers today has been substantial," he said. Some C$2- to C$2.5 billion of cash flow is held back each year by the trusts to reinvest, he adds. "We know Provident has a short window until more new trusts arrive-we are aware of several in the filing stage. We also foresee a lot of consolidation coming among the trusts." Provident has an enterprise value of C$2.3 billion, some 400 employees in the U.S. and Canada, and estimated 2005 production of at least 35,200 barrels of oil equivalent per day. Buchanan is looking in the U.S. and around the globe for additional deals. "The only question is, how do we repatriate that cash flow back to Canada?"