oil and gas
CENOVUS ENERGY INC. $14 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.2 million; Market cap: $11.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 1.4%; TSINetwork Rating: Average; www.cenovus.com) gets 35% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells. Chief among these assets are its 50%-owned Christina Lake and Foster Creek oil sands projects; ConocoPhilips (New York symbol COP) owns the remaining 50%. Refining supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50%. Low crude prices have prompted Cenovus to cut its capital spending by 26.5%, to about $1.25 billion in 2016 from $1.7 billion in 2015....
ROYAL BANK OF CANADA $66 (Toronto symbol RY; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 1.5 billion; Market cap: $99.0 billion; Price-to-sales ratio: 2.9; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.rbc.com) is selling its RBC General Insurance subsidiary to Aviva Canada. This business mainly sells home and auto insurance. As part of the sale, Royal’s customers can also access all of Aviva’s insurance products for the next 15 years. The sale makes sense, as regulators prevent Canadian banks from selling insurance policies through their branches. That limits Royal’s ability to expand this business. However, the bank will continue to sell life and health insurance through separate offices and online....
Integrated oil producers, like the three we analyze below, are the best way for conservative investors to get oil exposure while shielding themselves from slumping crude prices. That’s because cheaper oil makes these companies’ refineries more profitable. We continue to see all three as buys for long-term gains. SUNCOR ENERGY INC. $30 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.4 billion; Market cap: $42.0 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.9%; TSINetwork Rating: Average; www. suncor.com) is Canada’s largest oil producer. It also operates four refineries and 1,500 Petro-Canada gas stations, which supply 63% of its revenue. The company produced an average of 577,800 barrels of oil equivalent a day in 2015, up 8.0% from 534,900 barrels in 2014. Suncor’s oil sands projects accounted for 80% of its output....
Revenue for DIRTT Environmental Solutions climbs on strong U.S. dollar and new clients in financial services
Birchcliff Energy will cut spending on oil exploration and development by 45% to protect cash flow in this down market
Fission Uranium, $0.66, symbol FCU on Toronto (Shares outstanding: 483.9 million; Market cap: $338.8 million; www.fissionuranium.net), is focused on its Patterson Lake South uranium discovery just south of Saskatchewan’s Athabasca basin.
Fission aims to build a profitable mine on the property, which it believes holds one of the world’s largest uranium deposits. It is now investing $7 million in a winter drilling program at Patterson to prepare a prefeasibility study on the economics of building the mine.
Last year, Fission rejected a $483-million merger with Denison Mines, symbol DML on Toronto. However, in December 2015, China’s state-owned CGN Mining bought 97 million Fission shares at $0.85 per share, giving it a 19.99% stake. CGN and Fission also plan to finalize an agreement for CGN Mining to buy all uranium production from Patterson if a mine is built.
The arrangement stays within Canadian foreign investment restrictions on strategic resources; Foreign companies are only barred from owning more than a 49% share in any producing uranium mine.
Anti-nuclear sentiment remains high following the March 2011 earthquake and tsunami that released radiation at the nuclear plant in Fukushima, Japan. This sentiment has curtailed plans for some new nuclear plants, especially in the U.S. However, regulators in that country are moving toward loosening regulations on nuclear plants. That could eventually revive nuclear plant construction in the U.S.—and uranium demand. But this nuclear revival, if it comes at all, will be a slow process.
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Fission aims to build a profitable mine on the property, which it believes holds one of the world’s largest uranium deposits. It is now investing $7 million in a winter drilling program at Patterson to prepare a prefeasibility study on the economics of building the mine.
Last year, Fission rejected a $483-million merger with Denison Mines, symbol DML on Toronto. However, in December 2015, China’s state-owned CGN Mining bought 97 million Fission shares at $0.85 per share, giving it a 19.99% stake. CGN and Fission also plan to finalize an agreement for CGN Mining to buy all uranium production from Patterson if a mine is built.
The arrangement stays within Canadian foreign investment restrictions on strategic resources; Foreign companies are only barred from owning more than a 49% share in any producing uranium mine.
Anti-nuclear sentiment remains high following the March 2011 earthquake and tsunami that released radiation at the nuclear plant in Fukushima, Japan. This sentiment has curtailed plans for some new nuclear plants, especially in the U.S. However, regulators in that country are moving toward loosening regulations on nuclear plants. That could eventually revive nuclear plant construction in the U.S.—and uranium demand. But this nuclear revival, if it comes at all, will be a slow process.
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General Electric Co. is selling 90% of the assets of its financing division. That should free up capital for new joint venture deals focused on renewable energy projects and nuclear power equipment. The company will also use the cash to pay for a $50 billion share buyback. GE is a buy.
GENERAL ELECTRIC CO. (New York symbol GE; www.ge.com has agreed to sell $157 billion in assets of its GE Capital financing division. So far, it has completed transactions equalling $104 billion.
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GENERAL ELECTRIC CO. (New York symbol GE; www.ge.com has agreed to sell $157 billion in assets of its GE Capital financing division. So far, it has completed transactions equalling $104 billion.
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BCE INC., $58.16, Toronto symbol BCE, continues to benefit from strong demand for its wireless, high-speed Internet and Fibe TV services. That’s offsetting weaker revenue from traditional telephone services. In the three months ended December 31, 2015, the company’s earnings rose 0.8%, to $615 million from $610 million a year earlier. Per-share profits were unchanged at $0.72 on more shares outstanding. These figures exclude unusual items, such as costs related to acquisitions and early debt repayments. On that basis, the latest earnings matched the consensus estimate....
ENERPLUS CORP. $4.34 (Toronto symbol ERF; Shares outstanding: 206.5 million; Market cap: $813.8 million; TSINetwork Rating: Extra Risk; Dividend yield: 8.3%) produces oil and gas from properties mainly in Alberta, Saskatchewan, B.C., North Dakota and Montana, as well as in the Marcellus Shale, which passes through Pennsylvania, New York, Ohio and West Virginia. Enerplus increased its output by 6.5% in the three months ended September 30, 2015, to an average of 110,794 barrels of oil equivalent per day (55% gas and 45% oil), from 104,035 a year earlier. However, that wasn’t enough to offset sharply lower oil and gas prices; cash flow per share fell 44.2%, to $0.58 from $1.04. Like Bonavista, Enerplus will cut exploration spending this year. Its outlays will now total $350.0 million, down 31.4% from $510.0 million in 2015. It spent $811.0 million in 2014....
BONAVISTA ENERGY $1.83 (Toronto symbol BNP; Shares outstanding: 211.7 million; Market cap: $367.5 million; TSINetwork Rating: Extra Risk; Dividend yield: 6.6%; www.bonavistaenergy.com) explores for oil and gas in Alberta, Saskatchewan and B.C. Its output is 75% gas and 25% oil. In the quarter ended September 30, 2015, Bonavista’s cash flow per share fell 26.7%, to $0.44 from $0.60 a year earlier. Most of that drop came from lower oil and gas prices; output rose 5.2%, to 78,599 barrels of oil equivalent a day from 74,720 barrels. Like many producers, the company is cutting back on exploration and development spending. In 2016, it will devote $210 million to this purpose. That’s down from the $283.4 million it spent in 2015, and down sharply from its $639.6 million in 2014....