Oil and gas producers: 1 buy and 1 hold

Article Excerpt

ARC RESOURCES $21.14 (Toronto symbol ARX; Shares outstanding: 340.0 million; Market cap: $7.4 billion; TSINetwork Rating: Speculative; Dividend yield: 5.7%; www.arcresources.com) produces oil and natural gas in Western Canada. Its average daily output of 120,354 barrels of oil equivalent is 64% gas and 36% oil. In the quarter ended March 31, 2015, ARC’s cash flow per share fell 38.7%, to $0.57 from $0.93 a year earlier. Production gained 13.9%, but its realized oil price fell 49.0% and its gas price declined 45.5%. Like many oil and gas producers, ARC is cutting back on exploration and development spending. This year, it will devote $550.0 million to this purpose, down sharply from $945.5 million in 2014. The smaller investment will cut ARC’s average 2015 production to 107,000 barrels a day or less. However, it’s now building a new gas-processing plant that should restore its output to as high as 126,000 barrels a day by the end of this year. But with oil…