oil and gas

IMPERIAL METALS CORP., $10.36, symbol III on Toronto, fell 38% this week after a dam broke at a tailings pond at the company’s Mount Polley gold/copper mine in B.C. The breach spilled an estimated 10 million cubic metres of wastewater and 4.5 million cubic meters of fine sand into nearby waterways. The extent of the damage to local lakes and rivers is unknown at this point, but the company will now submit an environmental impact assessment and cleanup plans to the B.C. Ministry of Environment. Estimates of the total liability for the cleanup are in the range of $225 million, or $3 per Imperial share....

Encana took its present form on December 1, 2009, after the old EnCana Corp. split itself into two new firms: the new Encana, which focuses on gas, and Cenovus Energy, which specializes in oil sands. Lower gas prices have pushed Encana’s shares down by about 20% since the split. Oil prices have risen, however, and Cenovus’s stock is up about 28%. ENCANA CORP. $22.86 (Toronto symbol ECA; Shares outstanding: 741.0 million; Market cap: $16.9 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.encana.com) is one of North America’s largest natural gas producers. Encana continues to benefit from its new plan to focus on six main properties: Montney (B.C.), Duvernay (Alberta), DJ Basin (Colorado), San Juan Basin (New Mexico), the Tuscaloosa Marine Shale (Louisiana) and Texas’s Eagle Ford oil shale....

PENN WEST $8.14 (Toronto symbol PWT; Shares outstanding: 492.6 million; Market cap: $4.0 billion; TSINetwork Rating: Average; Divd. yield: 6.9%; www.pennwest.com) appointed former Suncor CEO Rick George as chairman in May 2013 to bring in much-needed measures to shore up its finances and boost its value. The company’s shares traded at $10 when George took over, down from a peak of $47 in 2006. The shares moved up to as high as $13.50 last year, but had moved back down to $10 in mid-July 2014. That’s when they dropped a further 19%, to today’s price, after the company announced it was re-examining its accounting practices going back several years....

ISHARES FTSE/XINHUA CHINA 25 INDEX FUND $40.21 (New York symbol FXI; buy or sell through brokers) is an exchange traded fund that aims to track the FTSE/Xinhua China 25 Index, which is made up of the 25 largest, most liquid Chinese stocks. All of the stocks in the index trade on the Hong Kong exchange. Some also trade as American Depositary Receipts (ADRs) on New York. The fund’s top holdings are Tencent Holdings, 10.2%; China Construction Bank, 8.4%; China Mobile, 8.3%; Industrial & Commercial Bank, 6.9%; Bank of China, 5.4%; China Overseas Land & Investment, 4.3%; China Life, 4.0%; Ping An Insurance, 4.0%; China Shenhua Energy, 3.9%; PetroChina, 4.2%; China Merchants Bank, 3.7%; and CNOOC Ltd., 3.7%. The fund’s holdings give it the following industry breakdown: Financials, 54.1%; Telecommunications, 14.4%; Oil and Gas, 12.1%; Technology, 10.1%; Basic Materials, 4.0%; Industrials, 1.8%; and Consumer Goods, 1.7%. Its expense ratio is 0.73%....

Every Thursday we bring you “Our Top U.S. Stocks” as our daily post. In these posts, you’ll 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 covered in our newsletter on U.S. investing, Wall Street Stock Forecaster. “Our Top U.S. Stocks” is part of our new approach offering you regular buy, hold and sell advice in our daily posts. Every week you get “A Stock to Sell” on Monday, “Best Canadian Stocks” on Tuesday and on Friday, our advice on one of the stocks our Inner Circle members have asked about in their weekly Question & Answer sessions. GENERAL ELECTRIC CO. (New York symbol GE; www.ge.com) saw its shares drop from $42 in 2007 to under $6 in 2009, as the financial crisis caused big losses at its banking division. In response, the company decided to shrink this business’s assets to half of what they were before the recession. It expects to complete these cuts by the end of 2014....

Surge Energy, $8.26, symbol SGY on Toronto (Shares outstanding: 217.5 million; Market cap: $1.8 billion; www.surgeenergy.ca), produces oil and gas in central and northwestern Alberta and southwestern Saskatchewan. Its output is 84% oil and 16% gas. In the three months ended March 31, 2014, Surge produced 15,024 barrels of oil equivalent per day, up 55.9% from 9,636 barrels a year earlier. Acquisitions were the main reason for the gain. Cash flow jumped 109.2%, to $53.8 million from $25.7 million, on the increased output and higher realized oil and gas prices. However, per-share cash flow fell 13.9%, to $0.31 from $0.36, as the company issued more shares to pay for acquisitions, boosting the total number outstanding by 152%....

DeeThree Exploration Ltd., $11.00, symbol DTX on Toronto (Shares outstanding: 88.7 million; Market cap: $959.4 million; www.deethree.ca), produces oil and natural gas in Western Canada. It also acquires and develops oil and gas properties. The company mainly focuses on the Brazeau Belly River and Alberta Bakken areas. In the three months ended March 31, 2014, DeeThree produced 9,372 barrels of oil equivalent a day, up 58.2% from 5,926 barrels a year earlier. Its cash flow per share jumped to $0.43 from $0.23. The company’s total debt of $108.2 million is just 11.3% of its $959.4-million market cap. That low debt, plus DeeThree’s rising cash flow and the proceeds of a recent $73.4-million share issue, gives the company plenty of flexibility to keep drilling and increasing its output. The stock trades at 5.2 times DeeThree’s forecast 2014 cash flow of $2.11 a share....

DELPHI ENERGY $4.27 (Toronto symbol DEE; TSINetwork Rating: Speculative) (403-265-6171; www.delphienergy.ca; Shares outstanding: 155.2 million; Market cap: $670.6 million; No dividends paid) develops, produces and explores for oil and natural gas. About 67% of its output is gas. The remaining 33% is oil.

In the three months ended June 30, 2014, the company’s production rose 36.2%, to 10,397 barrels of oil equivalent a day from 7,635 barrels a year earlier.

Cash flow per share jumped to $0.09 from $0.05. The production increase was the main reason for the gain. The company also realized higher prices for its oil and gas in the latest quarter.

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BIRCHCLIFF ENERGY $11.92 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Shares outstanding: 145.9 million; Market cap: $1.7 billion; No dividends paid) develops, produces and explores for oil and gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 83% of its output is gas. The remaining 17% is oil.

In the three months ended June 30, 2014, Birchcliff’s production rose 29.1%, to 31,178 barrels of oil equivalent per day from 24,141 barrels a year earlier. Cash flow per share jumped 79.3%, to $0.52 from $0.29, on the increased output and higher oil and gas prices.

In 2012, Birchcliff completed Phase III of its gas plant expansion in Pouce Coupe, Alberta. This project doubled the facility’s capacity and is letting the company bring the additional gas it is now producing to market.

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RUSSEL METALS $37.45 (Toronto symbol RUS; TSINetwork Rating: Speculative) (905-819-7777; www.russelmetals.com; Shares outstanding: 61.4 million; Market cap: $2.3 billion; Dividend yield: 4.1%) is one of North America’s largest metal distributors. It serves 39,000 clients at 53 locations in Canada and 12 in the U.S.

In the quarter ended June 30, 2014, Russel’s revenue rose 17.8%, to $893.3 million from $758.1 million a year earlier. Higher demand and selling prices pushed up revenue at its metal services business by 11%. The energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 17%.

Earnings gained 53.3%, to $30.5 million, or $0.50 a share. A year earlier, the company earned $19.9 million, or $0.33. Russel has invested in new plants and processing equipment over the past three years, which has cut its costs and improved its efficiency. That’s paying off with higher profits.

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