oil and gas

ALIMENTATION COUCHE-TARD, $62.68, symbol ATD.B on Toronto, has agreed to buy Ireland’s Topaz chain for an undisclosed amount. Topaz is the country’s leading operator of gas stations and convenience store stations, with a 35% share of the market. The chain consists of 464 locations across Ireland, including its recently acquired Esso network. Topaz owns 162 of these outlets, while dealers own the remaining 302. The agreement also includes a commercial-fuels operation with more than 30 depots and two terminals. Growth by acquisition can be risky, especially with a deal this big. But Couche-Tard has a long record of successfully integrating acquisitions, including Norway’s Statoil Fuel & Retail gas station chain, which it bought for $2.7 billion in June 2012. It also paid $1.7 billion for the Pantry, which has more than 1,500 convenience stores in 13 southern U.S. states, in March 2015....

We think conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus. The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of highquality stocks....

ENBRIDGE INC. $47.24 (Toronto symbol ENB; Shares outstanding: 860.1 million; Market cap: $40.5 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.enbridge.com) has paid $200 million U.S. for 100% of the New Creek Wind Project in West Virginia. This development consists of 49 wind turbines that can generate a total of 103 megawatts. It should start up in December 2016. The company has long-term contracts to sell this power at fixed rates, which cuts the risk of this investment. Including this purchase, Enbridge has invested $5 billion (Canadian) in renewable power projects with a total capacity of 2,000 megawatts....

Peak Oil theory believers thought we were in danger of running out of oil

SNC-Lavalin readies for more public works contracts, acquires oil and gas-focused contractor

Canadian Pacific Railway, Toronto Symbol CP, is one of our long-time favourites. However, we also have a very high opinion of its larger rival, Canadian National Railway—one of North America’s most efficient railways, Toronto symbol CNR.

Canadian Pacific Railway (CP) transports freight over a rail network between Montreal and Vancouver. In the U.S., subsidiaries connect CP’s Canadian lines to major hubs in the Midwest and Northeast. Alliances with other railways extend its reach to Mexico.

Not only was CP our #1 stock pick for 2012, but we recommended CP in our very first issue of The Successful Investor in January 1995. At that time, CP held a variety of businesses beyond railways, such as hotels, coal, and oil and gas. We saw these as undervalued assets. In 2001, CP unlocked some of this hidden value by spinning off these businesses as separate firms....

MANITOBA TELECOM SERVICES INC., $30.24, Toronto symbol MBT, has agreed to sell its Allstream division, which sells telephone, Internet and other communication services to businesses across Canada. Allstream supplies 40% of Manitoba Telecom’s revenue. The remaining 60% comes from its MTS division, which has 1.3 million telephone and wireless customers in Manitoba. The buyer is U.S.-based Zayo Group (New York symbol ZAYO), which will pay $465.0 million. Manitoba Telecom will probably use the proceeds to pay down its long-term debt of $677.1 million, which is equal to 28% of its $2.4-billion market cap (or the value of all outstanding shares)....

Falling commodity prices have hammered Sherritt International’s stock, but at under $1, this established producer has a lot to offer.

CENOVUS ENERGY $21.19 (Toronto symbol CVE; Shares outstanding: 833.3 million; Market cap: $17.7 billion; TSINetwork Rating: Average; Dividend yield: 3.0%; 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.

Refining—which gains from lower oil prices— supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. (Phillips 66 owns the other 50%.)

In the three months ended September 30, 2015, the company’s production rose 5.7%, to 210,422 barrels a day from 199,089 a year earlier. However, lower oil prices cut its cash flow per share by 59.2%, to $0.53 from $1.30.

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IMPERIAL OIL $44.63 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $37.8 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.imperialoil.ca) is a major integrated oil company with oil sands projects in Alberta and conventional oil and gas operations across Western Canada. It also operates three refineries and 1,700 Esso gas stations. Imperial recently finished the second phase of its 71%-owned Kearl oil sands project in northern Alberta.

In the three months ended September 30, 2015, Imperial’s share of Kearl’s output was 192,000 barrels a day. That helped push its overall production up 25.7%, to 386,000 barrels of oil equivalent a day from 307,000 a year earlier.

However, lower oil prices cut its revenue by 25.9%, to $7.2 billion from $9.7 billion. Cash flow per share fell 32.9%, to $1.10 from $1.64. Imperial plans to keep expanding Kearl and Cold Lake, its two main oil sands properties. These projects will prosper when oil prices recover, and they should last for decades. Meanwhile, the company’s refineries cut its exposure to falling oil prices, as cheaper crude cuts the refineries’ input costs and increases their profit margins.

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