encana

CANADIAN TIRE CORP., $120.92, Toronto symbol CTC.A, hit a new all-time high of $121.66 this week after announcing a new three-year growth plan. The company’s strategy mainly involves building new stores, upgrading existing ones and expanding its e-commerce businesses. It will spend $575 million a year on these initiatives from 2015 to 2017. To put that in context, Canadian Tire earned $169.9 million, or $2.12 a share, in the quarter ended June 28, 2014. The company feels these improvements will increase annual sales by 3% at its Canadian Tire stores, 5% at the Mark’s casual clothing chain and 9% at its sporting goods stores, including Sport Chek. It also expects its earnings per share to rise 8% to 10% each year over the next three years....

ENCANA CORP., $23.86, Toronto symbol ECA, has agreed to buy Athlon Energy Inc. (New York symbol ATHL). Athlon produces 30,000 barrels of oil equivalent (80% oil and 20% natural gas) a day from 1,138 wells in Texas’s Midland Basin. To put that in context, Encana’s daily output was 491,700 barrels (86% gas, 14% oil) in the second quarter of 2014. Right now, Athlon uses traditional vertical drilling techniques. However, Encana feels it can use its expertise with horizontal drilling to make Athlon’s wells more productive. That will help Encana reach its goal of producing 250,000 barrels of oil a day by 2017....

ENCANA CORP. $23.88 (Toronto symbol ECA; Shares outstanding: 741.0 million; Market cap: $17.8 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.encana.com) has agreed to buy Athlon Energy (New York symbol ATHL) for $7.1 billion U.S. Athlon produces 30,000 barrels of oil equivalent (80% oil and 20% natural gas) a day from 1,138 wells in Texas’s Midland Basin. To put that in context, Encana produces 491,700 barrels (86% gas, 14% oil) a day. Encana recently completed the sale of its remaining 54% stake in PrairieSky Royalty (Toronto symbol PSK) for $2.6 billion. The cash from this sale will help it pay for Athlon....

RIOCAN REAL ESTATE INVESTMENT TRUST $25.67 (Toronto symbol REI.UN; Units outstanding: 306.7 million; Market cap: $7.9 billion; TSINetwork Rating: Average; Dividend yield: 5.5%; www.riocan.com) is Canada’s largest real estate investment trust (REIT), with interests in 340 shopping malls containing over 81 million square feet of leasable area. That total includes 47 U.S. malls with over 13 million square feet. In the three months ended June 30, 2014, RioCan’s revenue increased 8.5%, to $295 million from $272 million a year earlier. Cash flow per unit rose 5.0%, to $0.42 from $0.40. RioCan continues to see growth opportunities in Canada and the U.S. In 2013, it spent $849 million on 32 properties. In the first half of 2014, it added four more for a total of $45 million....

ENCANA CORP., $24.89, Toronto symbol ECA, announced this week that it will sell its remaining 54% stake in PriarieSky Royalty Ltd. (Toronto symbol PSK) to a group of underwriters. The company recently set up PrairieSky as a new firm to hold its Clearwater properties in southern Alberta. PriarieSky owns the oil and natural gas rights to 5.2 million acres. It does not drill wells or explore for new reserves. Instead, it collects royalties from other oil and gas producers. Encana will receive $2.6 billion when it completes the sale later this month. That’s equal to 14% of its $18.6-billion market cap....

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors. In the past few years, it has become common to do both. The parent company starts by selling a portion of the new company to the public, to establish a market and a following among investors. That way, by the time of the spin-off, stock in the new company may be liquid enough to be sold relatively easily, or retained with some confidence as a worthwhile investment. In our experience, and in most academic studies of the subject, this helps the parent and the spin-off. Both generally do better than comparable companies for at least several years after the spin-off takes place....

Oil prices have held steady at around $100 a barrel, even as the U.S. shale boom has increased that country’s production by 70% in the past five years. That’s mainly due to fears that unrest in the Middle East and Ukraine could threaten world oil supplies. We feel the best way to invest in the cyclical oil and gas industry is through well-established producers like these four. Their high-quality operations give them plenty of cash flow to replenish their reserves and pay for share buybacks and dividends. However, not all are buys right now. CHEVRON CORP. $129 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $245.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.3%; TSINetwork Rating: Above Average; www.chevron.com) is the second-largest integrated oil company in the U.S. by revenue, after ExxonMobil (New York symbol XOM)....

ENCANA CORP. $23 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 741.0 million; Market cap: $17.0 billion; Price-to-sales ratio: 2.6; Dividend yield: 1.3%; TSINetwork Rating: Average; www.encana.com) reported that its cash flow fell 1.4% in the quarter ended June 30, 2014, to $656 million, or $0.89 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, its cash flow was $665 million, or $0.90 a share. Earnings per share declined 32.4%, to $0.23 from $0.34.

These declines are mainly because the company continues to sell less-important assets as part of its plan to focus on six core properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico), Tuscaloosa Marine Shale (Louisiana) and Eagle Ford (Texas).

These areas contain large amounts of oil and natural gas liquids, such as butane and propane. These commodities supplied 14% of Encana’s output in the latest quarter, up from 9% a year ago. That cuts its exposure to weak gas prices.

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ENCANA CORP. $22.86 (Toronto symbol ECA; Shares outstanding: 741.0 million; Market cap: $16.9 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.encana.com) is one of North America’s largest natural gas producers.

Encana continues to benefit from its new plan to focus on six main properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico), the Tuscaloosa Marine Shale (Louisiana) and Texas’s Eagle Ford oil shale.

These fields produce oil and natural gas liquids (NGLs), such as butane and propane, and should last decades. That cuts Encana’s natural gas exposure.

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AGRIUM INC. $99 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 143.7 million; Market cap: $14.2 billion; Price-to-sales ratio: 0.9; Dividend yield 3.3%; TSINetwork Rating: Average; www.agrium.com) has suspended operations at its Vanscoy, Saskatchewan, potash mine because the main hoist system failed. Agrium will use the shutdown to speed up its plan to increase the mine’s capacity. The company expects the outage to cost $40 million (all amounts except share price and market cap in U.S. dollars). To put that in context, Agrium earned $625 million, or $4.34 a share, in the second quarter of 2014. That’s down 16.0% from $744 million, or $5.00 a share, a year earlier. Record earnings from Agrium’s retail stores, which sell fertilizers and seeds to farmers in North America, South America and Australia, offset lower bulk fertilizer prices....