PrimeWest Energy (NYSE: PWI) agrees to a $2.4 billion buyout, highlighting the value of Candian oil and gas trusts.

• Sell PWI Near $26.35

• Buy CNE Near $14.82

Today PrimeWest Energy agreed to be acquired by Abu Dhabi National Energy. Under the terms of the agreement Abu Dhabi agreed to buy all of the outstanding shares of PrimeWest for $26.75 per share.

We decided to sell our shares of PrimeWest near $26.35 and roll the proceeds into Canetic Resources (NYSE: CNE). Canetic is another Canadian oil and gas trust that pays a dividend of 15%. Despite record oil prices, the Canadian oil and gas trusts have largely failed to rally in the last year. During this time, output has remained steady and the dividend yield has been on the rise.

We think that the purchase of PrimeWest for a 33% premium shows the underlying value of Canadian oil and gas trusts. Canetic will likely receive more investor interest as the result of the PrimeWest buyout and Canetic could also be a compelling takeover target.