imperial oil

FORDING CANADIAN COAL $62.06 (Toronto symbol FDG.UN; SI Rating: Average) jumped 10% to a new all-time high recently after South Korean steelmaker Posco agreed to pay $308 U.S. a tonne for coal from BHP Billiton in the coal year that began on April 1, 2008. That’s 210% more than the industry benchmark price of $98 U.S. in the prior year. Fording is still negotiating new prices with its customers. Higher coal prices will help it offset rising labour, transportation and other costs. Fording units currently yield 3.2%. Fording is still a buy....

TRANSCANADA CORP. $37.50, Toronto symbol TRP, owns 50% of Broadwater Energy, a joint venture with Royal Dutch Shell, which hopes to build an offshore liquefied natural gas terminal in Long Island Sound. However, New York State and New Jersey have rejected the proposal. Broadwater now plans to appeal to the U.S. Commerce Department. The decision forced TransCanada to write off the $27 million it has already spent on the Broadwater project. If you exclude all unusual items, TransCanada’s earnings in the three months ended March 31, 2008 still rose 30.4%, to $326 million from $250 million a year earlier. Per-share earnings grew 22.4%, to $0.60 from $0.49, on more shares outstanding. Most of the higher earnings came from the acquisition of pipelines and natural gas storage facilities in February 2007. However, overall revenue fell 4.5%, to $2.1 billion from $2.2 billion, due to the temporary shutdown of a power plant in Quebec. TransCanada is a buy....

TRANSCANADA CORP. $36.34, Toronto symbol TRP, fell about 9% this week after it agreed to buy the Ravenswood power plant located in Queens, New York for $2.9 billion U.S. The plant has the capacity to service 21% of New York City’s peak electricity load. The price is 10% more than TransCanada’s 2007 cash flow of $2.6 billion or $4.95 a share. TransCanada will probably issue $1.2 billion worth of new common shares to help pay for this purchase. TransCanada foresees as much as $2 billion in investment opportunities for capacity expansion and efficiency improvements at the facility. As well, Ravenswood provides diversification in power generation and into the U.S....

IMPERIAL OIL LTD. $55 (Toronto symbol IMO) continues to ration gasoline deliveries to its 532 Esso gas stations in Western Canada due to problems at its refinery in Edmonton. The company is importing and buying fuel from other suppliers as it repairs the plant. It’s unlikely the problem will have a material impact on its earnings. Best Buy. MOLSON COORS CANADA INC. $52 (Toronto symbol TPX.B) moved down after the company said it will delay further share buybacks or dividend increases until after it determines the costs of its deal to merge its operations in the U.S. with those of rival brewer SABMiller plc. However, cost savings from the merger will help the company cope with rising prices for barley and hops. Buy. CANADA BREAD CO. LTD. $71 (Toronto symbol CBY) now accounts for over 95% of the market cap of parent company MAPLE LEAF FOODS INC. $13. Canada Bread is now a hold. For new buying, we recommend Maple Leaf Foods....

TERANET INCOME FUND $10 (Toronto symbol TF.UN; Aggressive Growth Portfolio: Manufacturing & Industry sector; Units outstanding: 155.0 million; Market cap: $1.6 billion; SI Rating: Speculative) has won a contract from the City of Toronto to collect a new tax on land transfers. Teranet will also process rebates for eligible home buyers. Teranet did not reveal the value of this deal, but it’s a good fit with its electronic land registry and information services. It could also lead to similar deals with other municipalities. Teranet is a buy....

BMO DIVIDEND FUND $44.37 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) currently holds about 49.0% of its portfolio in the Financial services industry. Its next-largest holdings are Energy at 15.1% and Consumer discretionary at 7.5%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Power Financial Corporation, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Shaw Communications, Enbridge Inc., Husky Energy and Sun Life Financial. Over the last five years, the $5.8 billion BMO Dividend Fund has posted a 14.6% annual rate of return. That’s under the S&P/TSX’s gain of 18.3%. However, the S&P/TSX index held a high 40% or so of its holdings in Resources shares. That’s been one of the best-performing, although riskiest, sectors. The fund gained 1.8% over the last year, compared to a gain of 9.8% for the S&P/TSX index. BMO Dividend’s MER is 1.71%....

BMO Dividend and RBC Canadian Dividend hold mostly high-quality stocks. These stocks sometimes run into trouble and go through lengthy struggles, just like lesser investments. Eventually, though, most solve their problems and go on to thrive anew. Both funds hold a high proportion of their assets in financial services stocks. However, if you must focus on something, finance is a relatively stable sector. If you do invest in these funds, be sure to adjust the rest of your portfolio so these funds won’t overly concentrate your holdings in the financial sector....

PETRO-CANADA $52 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 485.2 million; Market cap: $25.2 billion; SI Rating: Average) is Canada’s secondlargest integrated oil company after Imperial Oil. Main production areas include Western Canada, offshore platforms near Newfoundland, the North Sea, Libya and Trinidad and Tobago. The company also operates over 1,300 retail gas stations. Petro-Canada is investing heavily in long-term projects that should pay off for decades. For example, it owns 60% of the Fort Hills oil sands project, whose reserves should last up to 40 years. Production should begin in late 2011. Petro-Canada estimates its share of Fort Hill’s costs at $8.5 billion. To put that in context, the company earned $1.29 a share (total $630 million) before special items in the three months ended September 30, 2007, up 14.2% from $1.13 a share ($564 million) a year earlier. Revenue rose 5.8%, to $5.5 billion from $5.2 billion....

IMPERIAL OIL LTD. $52 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 914.2 million; Market cap: $47.5 billion; SI Rating: Average) is Canada’s largest integrated oil company. Imperial also operates 2,000 retail gas stations under the “Esso” banner. ExxonMobil Corp. owns 69.6% of Imperial’s stock. Imperial continues to invest heavily in new oil and gas projects. For example, it recently received regulatory approval to proceed with its Kearl Lake oil sands project, which contains roughly 4.6 billion barrels. That’s equal to 34% of Imperial proved and non-proved reserves of 13.5 billion barrels. Imperial owns 70% of Kearl Lake, while ExxonMobil owns the remaining 30%. Imperial estimates that Kearl Lake will cost $8 billion to develop. However, oil sands projects are extremely complex, and this figure will probably rise. To put that in context, Imperial earned $0.88 a share (total $816 million) in the third quarter of 2007, up 4.8% from $0.84 a share ($822 million) a year earlier. Revenue fell 3.8%, to $6.4 billion from $6.65 billion, due to lower natural gas production and prices....

Energy prices are inherently volatile. So it’s a good idea to focus on well-established oil and gas stocks that can withstand the inevitable price setbacks — and prosper anew when prices rebound. Here is our analysis of three of our long-term favourites. IMPERIAL OIL LTD. $52 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 914.2 million; Market cap: $47.5 billion; SI Rating: Average) is Canada’s largest integrated oil company. Imperial also operates 2,000 retail gas stations under the “Esso” banner. ExxonMobil Corp. owns 69.6% of Imperial’s stock. Imperial continues to invest heavily in new oil and gas projects. For example, it recently received regulatory approval to proceed with its Kearl Lake oil sands project, which contains roughly 4.6 billion barrels. That’s equal to 34% of Imperial proved and non-proved reserves of 13.5 billion barrels. Imperial owns 70% of Kearl Lake, while ExxonMobil owns the remaining 30%....