encana

VERESEN $14.40 (Toronto symbol VSN; Shares outstanding: 193.7 million; Market cap: $2.8 billion; TSINetwork Rating: Average; Yield: 6.9%) owns pipelines, power plants and natural gas processing facilities across North America. One of its major holdings is 50% of the Alliance gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge owns the other 50%.

As well, the company owns the Alberta Ethane Gathering System, and Veresen and Enbridge together own 85.4% of the Aux Sable natural gas liquids plant.

In December 2011, Veresen bought the Hythe/ Steeprock gas gathering and processing complex in the Montney region of B.C. and Alberta from Encana Corp. for $920 million. Encana has also agreed to buy most of the facility’s gas under a long-term contract.

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ENCANA CORP. $20.61 (Toronto symbol ECA; Shares outstanding: 735.4 million; Market cap: $15.2 billion; TSINetwork Rating: Average; Dividend yield: 4.3%; www.encana.com) expects to earn $1.02 a share this year. However, cash flow could be as high as $4.58 a share.

Encana’s forecast 2012 cash flow is so much higher than earnings because it includes not only earnings, but also non-cash charges including depletion of its natural gas assets.

In Encana’s case, those depletion charges include writing off natural gas assets acquired at much higher prices.

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CANADIAN PACIFIC RAILWAY LTD., $74.11, Toronto symbol CP, rose 1% this week after U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of the company, succeeded in replacing seven of CP’s 16 directors with its own nominees. CP’s chairman, John Cleghorn, and chief executive officer, Fred Green, also resigned. Pershing Square will probably try to install Hunter Harrison, the successful former CEO of CN Rail, as CP’s new chief executive officer. Even if CP hires someone other than Mr. Harrison, the company will continue to work on improving its efficiency by purchasing new locomotives, upgrading its tracks and streamlining its schedules....

ENCANA CORP. $20.61 (Toronto symbol ECA; Shares outstanding: 735.4 million; Market cap: $15.2 billion; TSINetwork Rating: Average; Dividend yield: 4.3%; www.encana.com) expects to earn $1.02 a share this year. However, cash flow could be as high as $4.58 a share. Encana’s forecast 2012 cash flow is so much higher than earnings because it includes not only earnings, but also non-cash charges including depletion of its natural gas assets. In Encana’s case, those depletion charges include writing off natural gas assets acquired at much higher prices....

PEMBINA PIPELINE $29.78 (Toronto symbol PPL; Shares outstanding: 285.0 million; Market cap: $8.5 billion; TSI Network Rating: Average; Dividend yield: 5.4%; www.pembina.com) owns pipeline systems with a total length of over 7,500 kilometres. These lines pump oil and gas from fields in B.C. and Alberta to refineries, or feed into major pipelines, such as the Enbridge Pipeline System. Pembina also owns the Syncrude, Horizon and Cheecham pipelines, which pump crude oil from the Alberta oil sands. In addition, the company holds a 50% stake in the Fort Saskatchewan Ethylene Storage Limited Partnership. It also owns the Cutbank Complex, a network of natural gas gathering and processing facilities. In the three months ended December 31, 2011, Pembina’s cash flow rose 2.9%, to $66.8 million, or $0.40 a share, from $64.9 million, or $0.39 a share, a year earlier....

CANADIAN REIT $38.74 (Toronto symbol REF.UN; Units outstanding: 67.6 million; Market cap: $2.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.7%; www.creit.ca) owns over 190 properties, including retail, industrial and office buildings, located across Canada and in the Chicago area. These properties contain over 24 million square feet of leasable area. Its occupancy rate is 94.4%. In the three months ended December 31, 2011, the real estate investment trust’s revenue rose 8.9%, to $90.0 million from $82.6 million a year earlier. Cash flow per unit rose 6.9%, to $0.62 from $0.58. The REIT bought $264.5 million of properties in 2011, including its June purchase of two fully leased malls in Mississauga, Ontario, for $174.4 million. In March 2012, it bought 50% of the 310,000- square-foot Altius Centre in Calgary for $89.9 million. In April, it paid $156.0 million for 50% of Calgary Place, a 575,000-square-foot office and retail complex, also in Calgary....

ENCANA CORP. $18.92 (Toronto symbol ECA; Shares outstanding: 735.4 million; Market cap: $13.9 billion; TSINetwork Rating: Average; Dividend yield: 4.3%; www.encana.com) uses hydraulic fracturing, or fracking, to recover natural gas from shale deposits. This process involves pumping a mix of water, chemicals and other materials into the shale formations. This fractures the rock and releases the gas.

In December 2011, the U.S. Environmental Protection Agency (EPA) published a draft report that claimed fracking chemicals at Encana’s Wyoming well contaminated local drinking water.

However, Encana disputes the findings. This week, the EPA announced that it would re-test the area’s aquifer as part of a larger study that it is conducting on the impact of fracking on drinking water.

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CANADIAN NATIONAL RAILWAY CO., $84.39, Toronto symbol CNR, operates Canada’s largest freight-rail network. The company also serves 16 U.S. states. CN earned $775 million in the three months ended March 31, 2012. That’s up 16.0% from $668 million a year earlier. Earnings per share rose 20.7%, to $1.75 from $1.45, on fewer shares outstanding. If you exclude one-time items in both years, such as gains on the sale of rail lines in Southern Ontario, earnings per share rose 31.1%, to $1.18 from $0.90. On this basis, CN’s earnings beat the consensus estimate of $1.03 a share....

ENCANA CORP. $18.92 (Toronto symbol ECA; Shares outstanding: 735.4 million; Market cap: $13.9 billion; TSINetwork Rating: Average; Dividend yield: 4.3%; www.encana.com) uses hydraulic fracturing, or fracking, to recover natural gas from shale deposits. This process involves pumping a mix of water, chemicals and other materials into the shale formations. This fractures the rock and releases the gas. In December 2011, the U.S. Environmental Protection Agency (EPA) published a draft report that claimed fracking chemicals at Encana’s Wyoming well contaminated local drinking water. However, Encana disputes the findings. This week, the EPA announced that it would re-test the area’s aquifer as part of a larger study that it is conducting on the impact of fracking on drinking water....

PLEASE NOTE: Our next Hotline will go out on Thursday, April 5, 2012. MCCORMICK & CO. INC., $54.43, New York symbol MKC, makes spices, herbs, seasonings, specialty foods and flavours. It sells these products to grocery stores and other clients in the food industry. In its fiscal 2012 first quarter, which ended February 29, 2012, McCormick’s sales rose 15.8%, to $906.7 million from $782.8 million a year earlier. About half of this increase came from recently acquired spice makers and food companies in India and Eastern Europe....