imperial oil

NOVA CHEMICALS CORP., $4.76, Toronto symbol NCX, fell 20% this week on fears that the credit crisis will hurt its ability to refinance part of its debt, particularly as the slowing economy has lowered demand for its industrial plastics. Nova’s long-term debt at September 30, 2008 was $1.5 billion U.S., which is equal to 4.7 times its current market cap. This figure excludes a $250-million U.S. bond due in April 2009. Nova has $575 million U.S. in cash and untapped credit lines, so it can easily meet this obligation. The company aims to negotiate better terms for its remaining debt, which includes over $1 billion U.S. due over the next two years. Due to the current economic slowdown, Nova is expanding its cost-cutting program, including reducing its workforce by 15%. These moves should save it $100 million U.S. in 2009 and help Nova pay down its debt....

IMPERIAL OIL $40.18 (Toronto symbol IMO; Shares outstanding: 869.7 million; Market cap: $34.9 billion; SI Rating: Average) is Canada’s largest integrated oil company. Imperial’s 2,000 retail gas stations under the “Esso” banner provide diversification. ExxonMobil owns 69.6% of Imperial’s stock. Imperial’s production is set to rise in the long term, thanks to its new oil sands projects. This includes the 70%-owned Kearl Lake project. Imperial had hoped Kearl Lake would begin production by 2011. Now, however, it will probably delay work on the project until oil prices improve. The outlook for Imperial’s refining business is strong, partly due to a shortage of competition. Imperial’s refining profits could also keep expanding, since gasoline takes longer to fall than oil....

ENCANA CORP. $57.80 (Toronto symbol ECA; Shares outstanding: 749.8 million; Market cap: $43.3 billion; SI Rating: Average) is a leading North American producer of natural gas and oil. Natural gas accounts for 80% of its production. EnCana focuses on unconventional properties, such as early-stage gas fields and oil sands. These have much longer production lives than conventional properties. Right now, that gives EnCana a longer term resource base than Imperial Oil, although a return to high oil and gas prices would let Imperial continue to develop some of its higher-cost oil sands and Arctic natural gas prospects. EnCana has postponed its plan to break itself up into two separate companies — one focusing on natural gas, the other on oil sands and oil refineries. That’s because falling energy prices and the problems in credit markets would likely make it difficult for the two new smaller companies to raise capital to fund new projects....

Our oil and gas trust recommendations hit record highs in 2007 and 2008, mainly in line with soaring oil and gas prices. In mid-2008, oil hit a record peak of $147 U.S. a barrel. Natural gas prices reached as high as $14 U.S. per thousand cubic feet. Oil and gas stocks have fallen since those highs. Oil is currently trading at just $43 U.S. a barrel. Natural gas prices are now at around $5.87 U.S. per thousand cubic feet. We still advise against over-indulging in oil and gas trusts or stocks, and we’d continue to confine investments to well-established companies or trusts that can survive during the inevitable price setbacks....

IMPERIAL OIL LTD. $42 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 869.7 million; Market cap: $33.0 billion; SI Rating: Average) is Canada’s largest integrated oil company. It also operates over 1,900 retail gas stations under the “Esso” banner. ExxonMobil owns 69.6% of Imperial’s stock. Imperial gets about 90% of its daily crude oil production from its oil sands properties, mainly its 100% interest in the Cold Lake development and its 25% stake in the Syncrude partnership. Cold Lake’s reserves should last 13 more years, while Syncrude should continue for 28 more years. The company is now developing a new oil sands project at Kearl Lake. Imperial owns 70% of this project and will operate it; ExxonMobil owns the remaining 30%. Kearl Lake’s reserves should last 40 years....

Oil prices have dropped from $148 U.S. a barrel in July, 2008 to its current price of around $44 U.S. That has prompted oil companies to delay big investments in Alberta’s oil sands until conditions improve. Still, oil sands projects have huge long-term potential, and will provide decades of growth for Imperial Oil, EnCana and Petro-Canada. Companies such as Finning International that supply equipment and services to oil sands operators should also see huge gains. All four of these companies have moved down lately, but we still see them as buys for long-term gains....

IMPERIAL OIL $40.32 (Toronto symbol IMO; Shares outstanding: 869.7 million; Market cap: $35.1 billion; SI Rating: Average) is Canada’s largest integrated oil company. Imperial also operates 2,000 retail gas stations under the “Esso” banner. In the three months ended September 30, 2008, earnings per share rose 78.4%, to a record $1.57 from $0.88. The improvement came from higher oil and gas prices, plus higher profit margins at the company’s refining and chemical operations. Revenues rose 48%, to $9.5 billion from $6.4 billion. Imperial’s cash flow rose 78.5%, to $1.7 billion from $958 million in the latest quarter. Cash flow per share rose 87.5%, to $1.95 from $1.04, due to continued aggressive stock buybacks....

IVY CANADIAN FUND $24.81 (CWA Rating: Conservative) invests in high-quality, large capitalization stocks. The $2.6 billion fund’s top holdings include Shoppers Drug Mart, Toronto-Dominion Bank, Manulife Financial, Canadian National Railway, Becton Dickinson & Co., Enbridge, McDonald’s Corp., Thomson Reuters, Imperial Oil and Nestle SA. Ivy Canadian’s breakdown by industry is: Consumer staples, 30.4%; Financials, 18.8%; Consumer discretionary, 13.5%; Energy, 10.9%; Industrials, 9.7%; Health care, 6.7%; and Information technology, 4.7%....

IVY GROWTH AND INCOME FUND $20.21 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund, holding a mixture of stocks, bonds and cash. The fund has returned 5.7% annually for the 10 years. It lost 0.8% over the last year. The fund’s MER is 2.09%. The fund’s top stock holdings are Shoppers Drug Mart, Manulife Financial, Enbridge, Canadian National Railway, McDonald’s Corporation, Thomson Reuters Corp., Toronto-Dominion Bank and Imperial Oil. The $2.4 billion Ivy Growth & Income Fund holds 22% of its assets in bonds. Interest rates on bonds are now under 5% annually in Canada. That’s the total return that a bond can provide, from today until it matures. However, bonds leave investors at the mercy of inflation, which shrinks the purchasing power of all fixed-return investments. In fact, an upsurge in inflation could wipe out all returns on bonds, and some of their principal besides....

At one time, mutual funds within a particular ‘fund family’ often shared some key investment characteristic, such as a conservative or aggressive investment approach, or a stress on value as opposed to growth. However, due to corporate mergers and takeovers in the mutual-funds industry, and more aggressive marketing, a fund’s membership in a fund family now has little bearing on its investment approach or appeal as an investment. Below, for instance, we analyse five funds from the Ivy Group. (Note that Ivy is now part of Mackenzie Financial, which in turn is part of IGM Financial. The contact information listed for Ivy Growth and Income also applies to the other four.)...