cenovus energy

HEWLETT-PACKARD CO. $14 (www.hp.com) recently wrote down its August 2008 purchase of Electronic Data Systems, provides computer services to large government agencies and corporations. It also wrote down its August 2011 purchase of U.K.-based Autonomy Corp., whose products help businesses organize a variety of information....

CENOVUS ENERGY INC. $34 (www.cenovus.com) has gained 33% since it became a separate company in December 2009. As a result, its long-term debt of $4.6 billion is now a more moderate 18% of its $25.5-billion market cap. That’s why we’ve upgraded Cenovus’s TSINetwork Rating from “Extra Risk” to “Average.” Buy.

The Successful Investor Hotline. Friday, December 14, 2012 Dear client,...

iShares S&P/TSX Capped Energy Index Fund, $15.56 symbol XEG on Toronto (Shares outstanding: 59.7 million; Market cap: $928.9 million; ca.ishares.com), aims to mirror the performance of the S&P/TSX Capped Energy Index, which is made up of the largest-capitalization energy stocks on the Toronto exchange....

CANADA BREAD CO. LTD. $50 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.8; Dividend yield: 4.0%; TSINetwork Rating: Above Average; www.canadabread.ca) reported that its sales fell 3.8% in the three months ended September 30, 2012, to $401.5 million from $417.2 million a year earlier. That’s partly because the company recently closed an unprofitable U.K. plant that made frozen products. Sales of fresh baked goods also declined during the quarter. If you exclude an unusual tax gain and costs related to the plant closure, earnings per share would have risen 11.6% to $0.96 from $0.86. Higher profits on frozen foods and gains from hedging contracts on raw materials offset lower earnings from pasta products. Canada Bread is still a hold....

ENCANA CORP. $22 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) is one of North America’s largest natural gas producers. The U.S. accounts for 55% of Encana’s production, while Canada supplies the remaining 45%. The company’s proven reserves should last over 14 years. If you include properties where estimates are less well defined, Encana’s reserves could last 50 years.

On December 1, 2009, the old EnCana Corp. split itself into two new companies: the new Encana and Cenovus Energy Toronto symbol CVE), which specializes in oil sands projects, oil refineries and conventional natural gas. The new Encana’s revenue fell 4.5%, from $8.9 billion in 2010 to $8.5 billion in 2011 (all amounts except share price and market cap in U.S. dollars). New techniques, such as horizontal drilling, have unlocked large amounts of shale gas. This has increased inventories and cut gas prices: the company sold its gas for $4.96 per thousand cubic feet in 2011, down 9.5% from $5.48 in 2010.

Earnings fell 33.3%, to $0.54 a share (or a total of $398 million) from $0.81 (or $598 million). Cash flow per share fell 5.4%, to $5.66 from $5.98.

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Encana, a long-time favourite of ours, was a pioneer in the development of unconventional gas reserves (also called “tight gas”). This is natural gas that is trapped in rock formations. However, as the technology to extract tight gas improved, gas production ballooned. This rise in gas production, along with warmer-than-normal winter weather, pushed down gas prices. This in turn depressed Encana’s earnings and stock price. We feel Encana’s large gas reserves offer a lot of long-term value. It seems ExxonMobil Corp. (New York symbol XOM), the world’s largest oil company, agrees. It’s buying Celtic Explorations Ltd. (Toronto symbol CLT), which owns tight gas reserves along the B.C.-Alberta border, near Encana’s properties. That spurred speculation that Encana may also become a takeover target. ENCANA CORP. $22 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) is one of North America’s largest natural gas producers. The U.S. accounts for 55% of Encana’s production, while Canada supplies the remaining 45%. The company’s proven reserves should last over 14 years. If you include properties where estimates are less well defined, Encana’s reserves could last 50 years....

ISHARES S&P/TSX 60 INDEX FUND $17.71 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.

The index mostly consists of high-quality companies. However, as the fund must ensure that all sectors are represented, it holds a few stocks we wouldn’t include.

The index’s top holdings are Royal Bank, 7.4%; TD Bank, 6.8%; Bank of Nova Scotia, 5.8%; Suncor Energy, 4.5%; Barrick Gold, 3.7%; CN Railway, 3.5%; Bank of Montreal, 3.4%; Potash Corp., 3.3%; Goldcorp, 3.3%; BCE Inc., 3.1%; Canadian Natural Resources, 3.0%; TransCanada Corp., 2.9%; CIBC, 2.8%; Enbridge, 2.8%; Cenovus Energy, 2.4%; and Telus Corp., 1.8%.

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CENOVUS ENERGY INC., $34.42, Toronto symbol CVE, has agreed to buy oil sands properties in northern Alberta and Saskatchewan held by Oilsands Quest, which went bankrupt in November 2011. Cenovus will pay $10 million when the sale closes next week. This is a small purchase for the company, which reported cash flow of $925 million, or $1.22 a share, in the three months ended June 30, 2012. Most of these new properties are next to to Cenovus’s 100%-owned Telephone Lake oil sands project. If regulators approve, the company could begin developing Telephone Lake in 2014....

Most stock markets have risen lately. But as always, they remain subject to unexpected downturns. Even so, the long-term outlook is for higher stock prices. One way to profit from rising markets is to add exchange traded funds (ETFs) that track major stock indexes to your portfolio. ETF’s trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You must pay brokerage commissions to buy and sell ETFs, but their low management fees still give them a cost advantage over most mutual funds....