encana

PRECISION DRILLING CORP., $9.54, Toronto symbol PD, sells contract-drilling services to oil and natural-gas producers. Precision owns 360 drilling rigs in Canada, the U.S. and Mexico. The company continues to see strong demand for its Super Series horizontal-drilling rigs. Horizontal drilling involves drilling development wells sideways or at an angle to reach isolated pockets of oil or gas, or to follow a reservoir spread out in a narrow layer. Horizontal drilling works well in situations where conventional drilling is either impossible or too expensive. This week, Precision announced that it will build eight more Super Series rigs. That brings the total number of Super Series rigs it will build this year up to 38. Precision expects to deliver 18 of these rigs in 2011, and the remaining 20 in 2012. Customers have already signed long-term contracts for these rigs. That cuts the risk of these investments....

ENCANA CORP. $19.59 (Toronto symbol ECA; Shares outstanding: 738.6 million; Market cap: $14.4 billion; TSINetwork Rating: Average; Dividend yield: 4.0%; www.encana.com) has agreed to sell its midstream operations in Colorado’s Piceance basin. These operations mainly consist of pipelines that collect natural gas from nearby wells and transport it to storage and processing facilities. Encana will hang to its gas wells in this region. The company will receive $590 million when the deal closes later this year (all amounts except share price in U.S. dollars). This sale will help Encana reach its goal of selling $1 billion to $2 billion worth of secondary assets by the end of 2011. That will let the company focus on its main gas-producing properties in Alberta, B.C., Wyoming, Colorado and Louisiana....

CANADIAN REIT $34.99 (Toronto symbol REF.UN; Units outstanding: 67.0 million; Market cap: $2.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.1%; www.creit.ca) owns over 160 properties, including retail, industrial and office buildings, located across Canada and in the Chicago area. These properties contain over 22 million square feet of leasable area. Its occupancy rate is 93.3%. In the three months ended June 30, 2011, the real estate investment trust’s revenue rose slightly, to $80.3 million from $79.9 million a year earlier. Cash flow per unit rose 1.8%, to $0.58 from $0.57. In June 2011, Canadian REIT bought two fully leased malls in Mississauga, Ontario, for $174.4 million. Tenants include Future Shop, Famous Players, Chapters, Rona and National Sports. Earlier this year, the REIT raised its annual distribution by 2.1%, to $1.44 a unit from $1.41. It now yields 4.1%....

Encana Corp., Toronto symbol ECA, has agreed to sell its midstream operations in Colorado’s Piceance basin. These operations mainly consist of pipelines that collect natural gas from nearby wells and transport it to storage and processing facilities. Encana will hang to its gas wells in this region. The company will receive $590 million when the deal closes later this year (all amounts in U.S. dollars). To put this figure in context, this natural gas stock’s cash flow was $2.0 billion, or $2.77 a share, in the first half of 2011. This sale will help Encana reach its goal of selling $1 billion to $2 billion worth of non-core assets by the end of 2011. That will let the company focus on its main gas-producing properties in Alberta, B.C., Wyoming, Colorado and Louisiana. The cash from these sales will also let Encana keep paying quarterly dividends of $0.20 U.S. a share, for an annualized yield of 3.5%....

BANK OF NOVA SCOTIA, $51.63, Toronto symbol BNS, continues to build up its operations in China. This week, Bank of Nova Scotia agreed to buy 19.99% of the Bank of Guangzhou; the Chinese government owns the remaining 80.01%. This bank is the 29th largest in China, with 84 branches. Bank of Nova Scotia will pay $719 million when the deal closes in December 2011. To put that in context, it earned $1.2 billion, or $1.11 a share, in the three months ended July 31, 2011....

IMPERIAL OIL $40.16 (Toronto symbol IMO; Shares outstanding: 853.9 million; Market cap: $33.1 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.imperialoil.ca) continues to work on its Kearl oil-sands project in northern Alberta. Imperial owns 71% of Kearl. ExxonMobil Corp. (New York symbol XOM) owns the remaining 29%. Exxon also owns 69.6% of Imperial. The company had to import some of the larger mining equipment it needs from South Korea. This gear is now in Idaho. Due to problems securing permits to truck this equipment to the Kearl site, Imperial and Exxon are now taking apart most of this equipment so it will fit on smaller trucks. Kearl is now 68% complete. When the first phase starts up in late 2012, it will add 78,100 barrels to Imperial’s daily production; in the latest quarter, the company produced 231,000 barrels of oil equivalent a day (including natural gas). Imperial’s share of Kearl’s output will jump to 245,000 barrels a day when the project reaches full production later this decade. Kearl’s reserves should last at least 40 years....

BANK OF MONTREAL, $59.24, Toronto symbol BMO, recently completed its purchase of U.S. banking firm Marshall & Ilsley Corp. for $4.0 billion in stock. In addition, Bank of Montreal paid an additional $1.7 billion U.S. for all of the preferred shares and warrants that Marshall & Ilsley sold to the U.S. Treasury under the Troubled Asset Relief Program. Adding Marshall & Ilsley more than doubled the number of branches that Bank of Montreal operates in the U.S., and added 2 million customers. The bank will also save over $300 million U.S. a year by combining these new operations with its existing U.S. banking business....

ENCANA CORP. $27.16 (Toronto symbol ECA; Shares outstanding: 739.8 million; Market cap: $20.0 billion; TSINetwork Rating: Average; Dividend yield: 2.9%; www.encana.com) earned $0.22 a share in the three months ended June 30, 2011. That was up sharply from $0.09 a share a year earlier. Even with the higher earnings, cash flow per share fell 10.9%, to $1.47 from $1.65. That’s mainly because the company’s average selling price for gas fell 7.5%, to $5.09 per thousand cubic feet from $5.50 a year earlier (gas accounts for 96% of Encana’s total production). Average daily gas production rose 3.3%. Encana sold its oil at an average price per barrel of $92.66, up 38.2% from $67.05....

Real estate investment trusts (REITs) are exempt from Ottawa’s income-trust tax, which came into effect on January 1, 2011. That exemption makes REITs’ high yields more attractive, because most trusts have converted to corporations or cut their distributions in response to the new tax. Our REIT recommendations have all moved up, but we still think they offer attractive long-term returns at relatively low risk. ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $22.90 (Toronto symbol AP.UN; Units outstanding: 40.1 million; Market cap: $1.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.8%) owns office buildings in Toronto, Montreal, Quebec City and Winnipeg. These mainly Class I properties contain over 6.7 million square feet of leasable area....

ENCANA CORP., $28.92, Toronto symbol ECA, reported sharply higher earnings this week. In the three months ended June 30, 2011, Encana earned $166 million, or $0.22 a share (all amounts except share price in U.S. dollars). That’s up 151.5% from $66 million, or $0.09 a share a year earlier. These figures exclude several unusual items, particularly losses related to hedging and foreign exchange. On this basis, the latest earnings easily beat the consensus estimate of $0.14 a share. Even so, cash flow per share fell 10.9%, to $1.47 from $1.65. That’s mainly because the company’s average selling price for gas fell 7.5% to $5.09 per thousand cubic feet from $5.50 a year earlier (gas accounts for 96% of Encana’s overall production). Average daily gas production rose 3.3%. Encana sold its oil for at an average price per barrel of $92.66, up 38.2% from $67.05....