imperial oil

PETRO-CANADA $51 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 495.8 million; Market cap: $25.3 billion; SI Rating: Average) is Canada’s secondlargest integrated oil company after Imperial Oil. The company operates several properties in Western Canada as well as offshore platforms near Newfoundland. It also operates refineries and over 1,300 retail gas stations. Canada accounts for roughly 90% of Petro-Canada’s revenue. Internationally, the company owns or participates in projects in the North Sea, Libya, and Trinidad and Tobago. In the three months ended March 31, 2007, Petro-Canada earned $1.17 a share before unusual items, up 23.2% from $0.95 a year earlier....

Oil and gas producers must spend large amounts every year to replace diminishing reserves, which cuts their short-term profits. But if done right, these projects should last decades. In Canada, most big energy companies are expanding their operations in Alberta’s oil sands region. Although new environmental regulations could add to the already high costs of developing the oil sands, higher oil prices will probably offset these extra costs. Higher prices will also help offset the costs of other expensive projects, such as new pipelines and offshore platforms. These three top energy companies are all doing a good job holding down their operating and capital costs in a volatile sector. All three are also attractive in relation to earnings and cash flow....

IMPERIAL OIL $43.49 (Toronto symbol IMO; SI Rating: Average) is Canada’s largest integrated oil company, with operations in all phases of the petroleum industry. Imperial had to cut production by 50% at its Nanticoke refinery in Sarnia, Ontario due to a fire in December, 2006. This plant accounted for about 25% of Imperial’s refining capacity, and the slowdown led to shortages at many of its Ontario gas stations. The plant restarted at the end of February, and has now returned to full capacity. It’s unlikely the fire will have a material impact on Imperial’s 2007 profits....

BMO DIVIDEND FUND $50.87 (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 58.3% of its portfolio in the Financial services industry. Its largest holding is Energy at 16.1%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Enbridge, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Brookfield Asset Management, Thomson Corporation, BCE Inc. and Sun Life Financial. Over the last five years, the $5.7 billion BMO Dividend Fund has posted a 13.2% annual rate of return. That’s just under the S&P/TSX 60’s gain of 13.4%. The fund gained 9.9% over the last year, compared to a gain of 15.0% for the S&P/TSX 60. BMO Dividend’s MER is 1.73%....

BMO Dividend and Royal Dividend hold mostly high-quality stocks. These stocks sometimes run into deep 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....

IMPERIAL OIL LTD. $41 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; Shares outstanding: 953.0 million; Market cap: $39.1 billion; SI Rating: Average) had to cut production by 50% at its Nanticoke refinery in Ontario due to a fire. This plant accounts for about 25% of Imperial’s refining capacity, and the slowdown led to shortages at many of its Ontario gas stations. It will probably take a few more weeks for the plant to return to full capacity, but it’s unlikely the fire will have a material impact on Imperial’s 2007 profits. Imperial Oil is a buy. DUNDEE CORP. $52 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 25.1 million; Market cap: $1.3 billion; SI Rating: Average) has increased its stake in Breakwater Resources Ltd., from 18.4% to 21.55%. (Breakwater operates zinc mines in British Columbia, Honduras and Chile.) The extra shares cost Dundee $3.1 million, which is slightly less than the $0.13 a share (total $3.5 million) it earned in the third quarter of 2006....

IMPERIAL OIL LTD. $38 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; SI Rating: Average) is Canada’s largest oil company, based on reserves and production. It also operates refineries, and 2,000 gas stations under the “Esso” banner. ExxonMobil Corp. owns roughly 70% of Imperial’s shares. This puts it in a strong position to weather the current downturn in oil prices. Imperial’s revenue fell from $17.3 billion in 2001 to $17.0 billion in 2002, but jumped to $28.2 billion in 2005 thanks to rising oil prices. Income slipped from $1.26 billion in 2001 to $1.22 billion in 2002. However, per-share earnings rose from $1.06 to $1.08 due to fewer shares outstanding. Earnings rose to $2.53 a share (total $2.6 billion) in 2005. Cash flow per share fell from $1.71 in 2001 to $0.41 in 2002, but grew to $3.07 in 2005. Revenue in 2006 probably fell to around $26 billion, as energy prices moved down. However, the company needs natural gas to run its Alberta oil sands projects, so it benefits from lower gas prices. Consequently, Imperial’s earnings in 2006 should grow to around $2.90 a share ($2.8 billion). The stock trades at 13.1 times that estimate. The $0.32 dividend yields 0.8%....

PETRO-CANADA $50 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) operates major oil and natural gas projects in Western Canada and Newfoundland. Canada accounts for 75% of its total production. Petro-Canada has expanded its international presence in the past few years, and now gets 25% of its production from the North Sea, Algeria and Libya. Oil accounts for roughly two-thirds of total production, and natural gas accounts for the remaining third. It also operates refineries, and a nationwide chain of over 1,300 retail gas stations. In the third quarter of 2006, earnings before unusual items fell 8.1%, to $1.13 a share (total $564 million) from $1.23 a share ($638 million) a year earlier. The company had to shut down its Terra Nova offshore oil platform near Newfoundland for repairs, and production in the latest quarter fell 6%. (Petro-Canada owns 34% of Terra Nova and operates it.) However, higher oil prices raised cash flow per share 12.4%, to $2.17 from $1.93. Revenue grew 10.6%, to $5.2 billion from $4.7 billion....

IMPERIAL OIL LTD. $42 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; SI Rating: Average) is Canada’s largest oil company, with major operations in Alberta and the Northwest Territories. Oil accounts for over 70% of its production, while natural gas supplies the other 30%. Imperial also refines crude oil into gasoline and other petrochemicals, and operates over 2,000 gas stations under the “Esso” banner. ExxonMobil Corp. owns 69.6% of the stock. In the three months ended September 30, 2006, Imperial’s revenue fell 13.6% to $6.65 billion from $7.7 billion a year earlier. Overall oil production grew 12% due to rising output at its oil sands facilities, but conventional oil and natural gas volumes fell. Despite the lower revenue, income rose 31.3%, to $0.84 a share (total $822 million) from $0.64 a share ($652 million). That’s because the company earned higher profits from heavy oil and chemicals than from conventional oil and gas. Cash flow per share rose 60.9%, to $1.11 from $0.69. Imperial is Canada’s largest oil sands operator. It owns 25% of the massive Syncrude joint venture, and runs it. It also owns its own oil sands project at Cold Lake, Alberta. These operations accounted for 71% of its third quarter crude oil production....

Oil prices rose to close to $80 U.S. a barrel last summer, mainly due to tensions in the Mideast. But the price has dropped to below $60, as the slowdown in the United States economy cut demand and raised inventories. We’ve probably hit a new high plateau for oil prices, between $40 and $80. We feel conservative investors should have only modest commitments in oil and gas stocks. They should focus on well-established companies, such as these three. Their large reserves and diversified operations will let them profit from higher prices, and help shield them from the inevitable downturns. IMPERIAL OIL LTD. $42 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; SI Rating: Average) is Canada’s largest oil company, with major operations in Alberta and the Northwest Territories. Oil accounts for over 70% of its production, while natural gas supplies the other 30%. Imperial also refines crude oil into gasoline and other petrochemicals, and operates over 2,000 gas stations under the “Esso” banner. ExxonMobil Corp. owns 69.6% of the stock....