oil and gas
COMPUTER MODELLING GROUP $12.53 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgl.ca; Shares outstanding: 79.0 million; Market cap: $976.3 million; Dividend yield: 3.2%) sells software and services that help conventional oil and gas producers create 3-D models of reservoirs. That lets them squeeze more out of those reservoirs using advanced recovery techniques, such as injecting steam or chemicals. Typically, only 25% to 30% of oil and gas is recovered during primary production.
Unconventional producers using hydraulic fracturing, or fracking, of oil and gas-bearing shale can also use Computer Modelling’s software to determine optimal drilling locations and depths.
In the three months ended June 30, 2015, the company’s revenue rose 9.7%, to $21.4 million from $19.6 million a year earlier. Software licensing revenue (90% of the total) rose 10.9%, while consulting and professional services revenue (10%) fell slightly.
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Unconventional producers using hydraulic fracturing, or fracking, of oil and gas-bearing shale can also use Computer Modelling’s software to determine optimal drilling locations and depths.
In the three months ended June 30, 2015, the company’s revenue rose 9.7%, to $21.4 million from $19.6 million a year earlier. Software licensing revenue (90% of the total) rose 10.9%, while consulting and professional services revenue (10%) fell slightly.
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SHERRITT INTERNATIONAL $0.98 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 293.9 million; Market cap: $285.1 million; Dividend yield: 4.1%) reported revenue of $99.6 million in the three months ended June 30, 2015, down 23.5% from $130.2 million a year earlier, mostly due to lower oil and gas prices.
However, cash flow per share doubled, to $0.08 from $0.04, mostly because of lower interest and tax payments. Sherritt has also cut about 10% of its salaried workforce.
The company needs an improving global economy to fuel commodity demand, but it’s well positioned to profit from a rebound.
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However, cash flow per share doubled, to $0.08 from $0.04, mostly because of lower interest and tax payments. Sherritt has also cut about 10% of its salaried workforce.
The company needs an improving global economy to fuel commodity demand, but it’s well positioned to profit from a rebound.
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Twin Butte Energy, $0.39, symbol TBE on Toronto (Shares outstanding: 353.4 million; Market cap: $122.1 million; www.twinbutteenergy.com), produces oil and gas in Western Canada, with a focus on the greater Lloydminster area, along the Alberta/Saskatchewan border. Its output is 88% oil and 12% gas. In the three months ended June 30, 2015, Twin Butte produced 17,351 barrels of oil equivalent a day, down 17.8% from 21,109 barrels a year earlier. But even with the lower output and falling oil and gas prices, Twin Butte’s cash flow rose 17.4%, to $57.0 million, or $0.16 a share, from $48.5 million, or $0.14. That’s because it realized a $25.3-million gain on its hedging strategy: for the second half of 2015, it has hedged about 6,000 barrels a day at $80 U.S. (compared to today’s market price of $42), and in 2016, it has hedged 1,000 barrels a day at $65....
Today, we look at a value stock that has the potential for a strong rebound when oil and gas prices recover. Enerflex, an independent company since it was spun off by Toromont Industries (Toronto symbol TIH) in 2011, is a major supplier of equipment to the natural gas industry. A timely U.S. acquisition in 2014 has helped Enerflex generate positive earnings despite a decline in orders, and also enhances the company’s international growth prospects. And the dividend, which yields 3.2%, appears safe.
ENERFLEX LTD. (Toronto symbol EFX; www.enerflex.com) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration gear and power generators.
On June 30, 2014, the company closed its $431- million U.S. acquisition of two businesses owned by privately held Axip Energy Services: an international contract compression and processing subsidiary and a division that provides aftermarket services.
In the three months ended June 30, 2015, Enerflex’s revenue fell 8.3%, to $389.7 million from $424.9 million a year earlier. But earnings per share more than doubled, to $0.34 from $0.15. International contributions from the Axip businesses pushed up earnings and almost offset weaker revenue in the U.S. and Canada. However, falling oil and gas prices are now hurting the company’s orders.
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ENERFLEX LTD. (Toronto symbol EFX; www.enerflex.com) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration gear and power generators.
On June 30, 2014, the company closed its $431- million U.S. acquisition of two businesses owned by privately held Axip Energy Services: an international contract compression and processing subsidiary and a division that provides aftermarket services.
In the three months ended June 30, 2015, Enerflex’s revenue fell 8.3%, to $389.7 million from $424.9 million a year earlier. But earnings per share more than doubled, to $0.34 from $0.15. International contributions from the Axip businesses pushed up earnings and almost offset weaker revenue in the U.S. and Canada. However, falling oil and gas prices are now hurting the company’s orders.
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NEW GOLD INC., $3.00, symbol NGD on Toronto, has four mines: Mesquite in the U.S., Cerro San Pedro in Mexico, the Peak mine in Australia and the New Afton mine in B.C. The company also owns 30% of the El Morro copper/gold project in Chile, 100% of the Blackwater property in B.C. and 100% of Ontario’s Rainy River project. New Gold has just agreed to sell its El Morro stake to Goldcorp (Toronto symbol G) for $90 million in cash, 4% of El Morro’s gold production when a mine is built, and the cancellation of a $93-million loan from Goldcorp....
TORONTO-DOMINION BANK, $52.91, Toronto symbol TD, reported that its earnings rose 5.4% in its fiscal 2015 third quarter, which ended July 31, 2015, to $2.3 billion from $2.2 billion a year earlier. Earnings per share rose at a slower rate of 4.3%, to $1.20 from $1.15, on more shares outstanding. These figures exclude several unusual items, such as investment gains and a recovery of costs related to a lawsuit settlement. On that basis, the latest earnings beat the consensus estimate of $1.18. Earnings at the Canadian banking division (63% of the total) rose 7.9%, thanks to strong loan demand and gains from its wealth-management and insurance businesses. The U.S. banking division’s earnings (27%) jumped 16.5%, largely because the low Canadian dollar enhanced this business’s profits. The wholesale banking division (10%) saw its earnings rise 10.6% on higher trading volumes, stronger demand for corporate loans and higher advisory fees on mergers and acquisitions....
Clarke Inc., $10.62, symbol CKI on Toronto (Shares outstanding: 15.6 million; Market cap: $164.1 million; www.clarkeinc.com), is a holding company with interests in products and services in the transportation, industrial, energy and consumer areas. It also invests in securities. Clarke continues to evolve from a trucking firm into an investment holding company. However, its strategy mainly involves investing in and turning around small, distressed firms, which adds risk. From time to time, it also buys hard assets: in February 2015 it sold its container vessel, the MV Shamrock for $4.6 million U.S. It made a small profit, but the purchase of the ship at a tax-lien auction in 2004 never paid off as expected....
PENGROWTH ENERGY CORP. $1.71 (Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 540.7 million; Market cap: $924.6 million; Price-to-sales ratio: 0.9; Dividend yield: 14.0%; TSINetwork Rating: Average; www.pengrowth.com) plans to spend $190 million to $210 million on its oil and gas properties in 2015, down from its earlier forecast of $220 million to $240 million.
The company also wants to sell $600 million worth of less important assets. It will use the cash to pay down its debt of $1.9 billion, which is a high 2.1 times its market cap.
Meanwhile, Pengrowth continues to benefit from its hedging program, which locks in selling prices above today’s low oil and gas prices. That should help it keep paying monthly dividends of $0.02 a share. The annual rate of $0.24 yields a high 14.0% due to the stock’s depressed price.
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The company also wants to sell $600 million worth of less important assets. It will use the cash to pay down its debt of $1.9 billion, which is a high 2.1 times its market cap.
Meanwhile, Pengrowth continues to benefit from its hedging program, which locks in selling prices above today’s low oil and gas prices. That should help it keep paying monthly dividends of $0.02 a share. The annual rate of $0.24 yields a high 14.0% due to the stock’s depressed price.
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CENOVUS ENERGY INC. $19 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.2 million; Market cap: $15.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.4%; TSINetwork Rating: Average) 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% of these operations. Cenovus’s refineries help cut its exposure to falling oil prices, as cheaper crude lowers their operating costs.
Cenovus still plans to spend $1.8 billion to $2.0 billion on expansions and upgrades in 2015, unchanged from its previous estimate. These projects should add 50,000 barrels a day to its production by the end of 2016.
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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% of these operations. Cenovus’s refineries help cut its exposure to falling oil prices, as cheaper crude lowers their operating costs.
Cenovus still plans to spend $1.8 billion to $2.0 billion on expansions and upgrades in 2015, unchanged from its previous estimate. These projects should add 50,000 barrels a day to its production by the end of 2016.
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