oil and gas

One of the ways a company can try to unlock its own hidden value is by creating a separate company out of a subsidiary. The parent company can either sell stock in the new company to the public, or spin it off—hand the stock out to its own investors. In the past few years, it has become common to do both. The parent company starts by selling a portion of the new company to the public, to establish a market and a following among investors. That way, by the time of the spin-off, stock in the new company may be liquid enough to be sold relatively easily, or retained with some confidence as a worthwhile investment. In our experience, and in most academic studies of the subject, this helps the parent and the spin-off. Both generally do better than comparable companies for at least several years after the spin-off takes place....

Every Tuesday we bring you “Best Canadian Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You’ll read about stocks making moves you should know about, from coverage in one of our three newsletters featuring Canadian stocks—The Successful Investor, Stock Pickers Digest and Canadian Wealth Advisor. CRESCENT POINT ENERGY CORP. (Toronto symbol CPG; www.crescentpointenergy.com) produces oil and natural gas in Western Canada, with a focus on its Bakken light oil development in southeastern Saskatchewan. Its output is 91% oil and 9% gas. In the three months ended June 30, 2014, Crescent Point’s cash flow rose 26.2%, to $636.7 million from $504.4 million a year earlier....

Every Monday we feature “A Stock to Sell” as our daily post. With every stock we recommend as a sell, we give you a full explanation of why we advise against investing in the stock at this time. Keyera Corp. (symbol KEY on Toronto; www.keyera.com), provides a number of services to the oil and gas industry, including gathering, processing, storage and transportation....

BOMBARDIER INC., Toronto symbols BBD.A $3.70 and BBD.B $3.63, has fallen 5% in the past two weeks on concern about further setbacks for its new CSeries passenger jet. In late May 2014, an engine problem forced the company to suspend testing. The engine’s manufacturer has since investigated and feels it has fixed the fault. Bombardier is now testing the modified engines at its Montreal plant and plans to resume test flights by the end of this month. These problems have prompted Sweden’s Braathens Aviation to withdraw as the CSeries’ first customer. Braathens has not cancelled its order for 10 planes, but it will postpone delivery from the second half of 2015 to 2016 or later....

CRESCENT POINT ENERGY CORP. $43.17 (Toronto symbol CPG; Shares outstanding: 398.1 million; Market cap: $17.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 6.4%; www.crescentpointenergy.com) produces oil and natural gas in Western Canada, with a focus on its Bakken light oil development in southeastern Saskatchewan. Its output is 91% oil and 9% gas. In the three months ended June 30, 2014, Crescent Point’s cash flow rose 26.2%, to $636.7 million from $504.4 million a year earlier. The company increased its output by 16.7%, to 137,368 barrels of oil equivalent from 117,799. That, plus higher oil and gas prices, was the main reason for the higher cash flow. Cash flow per share rose at a slower rate of 18.3%, to $1.55 from $1.31, because Crescent Point issued shares to pay for acquisitions....

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. Here’s a look at six global ETFs:...

Every Thursday we bring you “Best U.S. Stocks.” You get our specific recommendation on the stocks we profile, with a full explanation of how we arrived at our opinion. You will read about stocks making moves you should know about, from coverage in our newsletter on U.S. investing, Wall Street Stock Forecaster. We feel the best way to invest in the cyclical oil and gas industry is through well-established producers whose high-quality operations give them plenty of cash flow to replenish their reserves and pay for share buybacks and dividends. CHEVRON CORP. (New York symbol CVX; www.chevron.com) is the second-largest integrated oil company in the U.S. by revenue, after ExxonMobil (New York symbol XOM)....

Penn West Petroleum, $8.30, symbol PWT on Toronto (Shares outstanding: 492.6 million; Market cap: $4.1 billion; www.pennwest.com), is one of Canada’s largest oil and gas producers. In May 2013, the company appointed former Suncor CEO Rick George as chairman to bring in much-needed measures to shore up its finances and boost its value. Penn West’s shares traded at $10 when George took over, down from a peak of $47 in 2006. The stock rose as high as $13.50 last year, but had moved back down to $10 in mid-July 2014. Since then, it has dropped a further 17%, to today’s price, after Penn West announced that it is re-examining its accounting practices going back several years....

Keyera Corp. $97.75, symbol KEY on Toronto (Shares outstanding: 83.9 million; Market cap: $8.2 billion; www.keyera.com), provides a number of services to the oil and gas industry, including gathering, processing, storage and transportation. In the three months ended June 30, 2014, the company reported cash flow of $1.04 a share, up 3.0% from $1.01 a year earlier. Keyera raised its monthly dividend by 7.5%, to $0.215 a share from $0.20, beginning with the June 2014 payment. The stock now yields 2.6%....

COMPUTER MODELLING GROUP $12.00 (Toronto symbol CMG; TSINetwork Rating: Speculative) (403-531-1300; www.cmgl.ca; Shares outstanding: 78.8 million; Market cap: $945.5 million; Dividend yield: 3.3%) sells software and consulting services that help oil and gas producers use advanced recovery techniques to get more out of their wells. It has clients in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai.

In the quarter ended June 30, 2014, Computer Modelling’s revenue rose 7.9%, to $19.6 million from $18.1 million a year earlier. Software licence sales (89% of total revenue) rose 6.8%, and consulting and professional services revenue (11%) increased 17.9%, thanks to new projects and a large consulting contract.

Even so, earnings fell 11.8%, to $6.2 million, or $0.08 a share, from $7.1 million or $0.09. The company hired more employees to support its growth. It also raised its research spending by 21.3%, to $4.2 million (or 22% of revenue) from $3.5 million (19%).

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