imperial oil

CGI GROUP INC., $14.70, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. This week, the company reported earnings that matched the consensus estimate. But an unexpected revenue drop caused stock to fall 10%. In its third quarter, which ended June 30, 2010, CGI earned $85.9 million. That’s up 12.0% from $76.7 million a year earlier. Earnings per share rose 20.0%, to $0.30 from $0.25, on fewer shares outstanding....

The BP oil spill in the Gulf of Mexico will probably lead to greater regulation of offshore drilling. Because of the extra costs, energy-exploration firms may turn their attention to safer onshore oil and natural-gas deposits, like Canada’s oil sands. That would help these three companies, which supply equipment and services to oil-sands producers. However, only two are buys right now. SNC-LAVALIN GROUP INC. $45 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.0 million; Market cap: $6.8 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.5%; SI Rating: Average) is a leading Canadian engineering and construction company. SNC designs and builds large public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds mines, chemical plants and electrical power systems. Petroleum and chemical projects accounted for 14% of SNC’s 2009 revenue. Last year, the company designed a new steam-assisted gravity-drainage system for Husky Energy Inc.’s Sunrise oil-sands project. This technology injects steam into a well to loosen the heavy oil and make it easier to pump to the surface. SNC is working on similar systems for oil-sands projects jointly owned by Teck Resources Ltd. and UTS Energy Corp....

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices then more than doubled, to $90 U.S. in May 2010. They have since fallen to $72 U.S., mostly due to worries about a slower-than-expected economic recovery. It will take years before oil exceeds its 2008 high. But it could rebound to $90 or higher. As well, oil is a good hedge against inflation. We feel the best way to cut your risk in the volatile oil industry is by investing in well-established producers like IMPERIAL OIL $38.99 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $33.0 billion; SI Rating: Average; Dividend yield: 1.1%)....

Royal Dutch Shell plc (ADR), $50.27, symbol RDS.A on New York (Shares outstanding: 1.8 billion; Market cap: $89.1 billion), owns interests in the many companies that make up the Royal Dutch Shell Group. Together, these companies are engaged in various aspects of the oil and gas industry around the world. Shell also has interests in chemical companies and other energy-related businesses. Shell has interests in deepwater oil and gas production in the Gulf of Mexico, but that’s just part of its wide range of worldwide production operations. The company produces oil and gas in countries as diverse as Iraq, Nigeria and China. The stock trades at just 10.6 times Shell’s latest 12 months of earnings, and has a 6.7% yield....

The Data Group Income Fund, $7.27, symbol DGI.UN on Toronto (Units outstanding: 23.5 million; Market cap: $170.8 million), sells commercial-printing and related services to a wide variety of customers, including Canada Post, Bell Canada, Manulife Financial Corp., Bank of Montreal, Imperial Oil, Ontario Lottery and Gaming Corp. and British Columbia Lottery Corp. By outsourcing their printing needs to Data Group, the fund’s clients can focus on their main businesses and improve their efficiency. Data Group has three divisions:...

BP plc (ADR), $26.98, symbol BP on New York (Shares outstanding: 3.1 billion; Market cap: $84.5 billion), is now down more than 55% from the $60 level, where it traded before the Gulf of Mexico oil spill. But the company still faces many risks. On June 16, BP agreed to deposit $20 billion in an escrow fund to help individuals and businesses affected by the spill. It also halted its dividend. These moves remove some near-term uncertainties. However, the spill continues to release oil into the Gulf of Mexico, and the upcoming hurricane season adds risk that more of this oil will reach land and generate untold environmental devastation, and lawsuits to match. Moreover, the U.S. government and its agencies continue to investigate the spill. That adds further risk, because it raises the possibility that BP will have to pay further penalties and face ever more stringent regulation....

MOLSON COORS CANADA INC. $43 is paying $40 million for 51% of a new joint venture with Chinese brewer Hebei Si’hai Beer Company (all amounts except share price in U.S. dollars). This will help Molson Coors make its Coors Light beer more available in China....

Canadian Oil Sands Trust, $31.24, symbol COS.UN on Toronto (Units outstanding: 484.0 million: Market cap: $15.1 billion), has a 36.74% interest in Syncrude Canada Ltd. Canadian Oil Sands’ share of Syncrude’s current oil production is about 103,100 barrels per day. Syncrude is the largest producing oil-sands project in the world, and Canadian Oil Sands Trust is Syncrude’s biggest stakeholder. Other partners in the Syncrude Canada venture include Imperial Oil (25%); Suncor Energy (12%); ConocoPhillips (9.03%); Nexen Oil Sands Partnership (7.23%); Mocal Energy (5%); and Murphy Oil (5%). ConocoPhillips recently agreed to sell its 9.03% stake in Syncrude to China’s Sinopec for $4.65 billion U.S. Based on that price, Canadian Oil Sands’ 36.74% interest in Syncrude is potentially worth $18.9 billion U.S. That’s 28.6% more than the trust’s current market cap. The sale should close in the third quarter of 2010....

BANK OF NOVA SCOTIA $50 (Toronto symbol BNS: Shares outstanding: 1.0 billion; Market cap: $51.4 billion; SI Rating: Above Average; Dividend yield: 3.9%) has reported better-than-expected earnings in the latest quarter. In its first quarter, which ended January 31, 2010, the bank earned $988 million. That’s up 17.3% from $842 million a year earlier. Earnings per share rose 13.8%, to $0.91 from $0.80, on more shares outstanding. That beat the consensus earnings estimate of $0.88 a share. Most of the gains came from the bank’s Canadian retail-banking operations, where earnings rose 27.9%. That’s mainly because low interest rates continue to fuel strong demand for home mortgages and personal loans. As well, improving financial markets have made it easier for companies to issue new shares and debt securities. That pushed up earnings at the bank’s capital-markets division by 27.0%....

Husky Energy Inc., $29.99, symbol HSE on Toronto (Shares outstanding: 849.9 million; Market cap: $25.5 billion), is an integrated oil and gas company. Hong Kong-based billionaire Li Ka-Shing owns 70.5% of Husky’s shares. Husky produces conventional oil and gas across western Canada, as well as heavy oil (a heavy, black viscous oil) at Lloydminster, Saskatchewan, and from the oil sands at Tucker, Alberta. Husky also has major holdings in eastern Canada, including interests in Newfoundland’s Terra Nova and White Rose offshore oil fields. Apart from its exploration and production activities, Husky owns a number of refineries, including a light-oil refinery at Prince George, B.C., and an asphalt refinery at Lloydminster, where it also has a heavy-oil upgrader. (Heavy-oil upgraders take heavy oil and process it into high-quality conventional crude oil.)...