oil and gas

ARCHER DANIELS MIDLAND CO., $47.85, New York symbol ADM, processes corn, wheat, soybeans, canola, flax seed, peanuts, cocoa and other crops into a wide variety of food ingredients, such as flour, oils and sweeteners. It is also the largest maker of ethanol from corn in the U.S. This week, the company agreed to buy Switzerland-based WILD Flavors, a privately held firm that supplies natural ingredients to over 3,000 food and beverage makers. Archer Daniels will pay 2.3 billion euros (or $3.1 billion U.S.) for WILD when the deal closes by the end of 2014. That’s equal to 10% of Archer Daniels’ $31.3-billion market cap (or the total value of all its outstanding shares)....

PENGROWTH ENERGY $7.35 (Toronto symbol PGF; Shares outstanding: 527.5 million; Market cap: $3.9 billion; TSINetwork Rating: Average; Dividend yield: 6.5%; www.pengrowth.com) produces oil and natural gas in Western Canada and off the Nova Scotia coast. Gas accounts for 55% of its production; the other 45% is oil. Pengrowth produced 75,102 barrels a day (including gas) in the first quarter of 2014, down 16.3% from 89,702 a year earlier. That’s mainly because it sold several less important oil and gas properties in Western Canada. It’s investing the proceeds in more promising projects, including its Lindbergh oil sands development in Alberta’s Cold Lake region. The company’s cash flow fell 6.9%, to $0.27 a share from $0.29....

ENCANA CORP. $25.05 (Toronto symbol ECA; Shares outstanding: 741.0 million; Market cap: $17.8 billion; TSINetwork Rating: Average; Dividend yield: 1.3%; www.encana.com) has completed its plan to sell shares of subsidiary PrairieSky Royalty Ltd. (Toronto symbol PSK) to the public. Encana sold the shares at $28 each. They have since jumped 40%, to $39.23. PrairieSky Royalty owns the oil and natural gas rights to 5.2 million acres in Alberta. It will not drill wells or explore for new reserves. Instead, it will collect royalties from other oil and gas producers. That should generate steady cash flows for monthly dividends. The sale proceeds were $1.67 billion, and Encana now owns 54% of PrairieSky. In the future, it may hand out that stake as a special dividend to its shareholders....

Aecon Group Inc., $16.82, symbol ARE on Toronto (Shares outstanding: 56.4 million; Market cap: $956.8 million; www.aecon.com), is one of Canada’s largest infrastructure developers. Aecon and its predecessors built Canadian landmarks like the CN Tower, the St. Lawrence Seaway, the Calgary Olympic Oval and the Halifax Shipyards. Aecon has three main divisions: The Energy Group, which accounted for 54% of the company’s revenue in the latest quarter, builds various facilities and components for clients in the power industry, including nuclear reactors....

COMPUTER MODELLING GROUP (Toronto symbol CMG; www.cmgroup.com) sells software and consulting services that help oil and gas producers use advanced recovery techniques to get more out of their wells. It has customers in over 50 countries and offices in Calgary, Houston, London, Caracas, Bogota, Kuala Lumpur and Dubai. The company is a leader in complex heavy oil and oil sands simulations. In the quarter ended March 31, 2014, Computer Modelling’s revenue rose 3.6%, to $20.0 million from $19.3 million a year earlier. Software licence sales (89% of total revenue) rose slightly, but consulting and professional services (11%) jumped 39.1%, thanks to new projects and a large consulting agreement. Earnings gained 6.7%, to $7.7 million from $7.25 million. Per-share earnings jumped 18.8%, to $0.095 from $0.08, on fewer shares outstanding....

CAE INC., $14.29, Toronto symbol CAE, has won new contracts to supply flight simulators and related services and equipment to several military clients, including the German and New Zealand air forces. In all, these deals are worth $110 million, or 5% of CAE’s $2.1 billion of annual revenue. The company’s military-related businesses supply 40% of its revenue, which cuts its reliance on cyclical commercial airlines. CAE is our #1 buy for 2014....

Rock Energy, $6.49, symbol RE on Toronto (Shares outstanding: 39.9 million; Market cap: $259.0 million; www.rockenergy.ca), produces oil and gas in Western Canada, with a focus on the greater Lloydminster area, along the Alberta/Saskatchewan border. Its output is 94% oil and 6% gas. In the three months ended March 31, 2014, the company produced 4,899 barrels of oil equivalent a day, up 52.4% from 3,214 barrels a year earlier. Rock’s cash flow per share jumped to $0.39 from $0.08. The company’s total debt of $17.8 million is just 6.9% of its $259.0-million market cap. That, plus its rising cash flow, gives it the funds to keep drilling and increasing its output. The stock trades at 4.3 times the company’s forecast 2014 cash flow of $1.52 a share....

WAJAX CORP. $35.12 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:16.8 million; Market cap: $586.4 million; Dividend yield: 6.8%) sells and services cranes, forklifts and other heavy equipment. It also provides related parts (such as bearings, motors, hoses and fittings) and power systems (including diesel engines and transmissions).

The company’s customers are in the natural resource, construction, manufacturing and transportation industries.

In the three months ended March 31, 2014, Wajax’s revenue fell 1.5%, to $331.4 million from $336.3 million a year earlier. The decline mostly came from weakness in oil and gas and mining markets.

...

ZARGON OIL & GAS $9.03 (Toronto symbol ZAR; TSINetwork Rating: Speculative) (403- 264-9992; www.zargon.ca; Shares outstanding: 30.1 million; Market cap: $270.9 million; Dividend yield: 8.0%) produces natural gas and oil in Alberta, Manitoba, Saskatchewan and North Dakota.

In the quarter ended March 31, 2014, the company produced 6,662 barrels of oil equivalent a day, down 12.9% from 7,648 a year earlier. That’s mainly because the company sold some less important properties.

The lower output was more than offset by higher oil and gas prices in the latest quarter, increasing Zargon’s cash flow per share by 10.9%, to $0.51 from $0.46.

...

CIMAREX ENERGY $148.50 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 87.0 million; Market cap: $12.5 billion; Dividend yield: 0.4%) produces and explores for natural gas and oil. Gas makes up 48% of its output.

Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (50% of production); the Permian Basin of western Texas and southeastern New Mexico (47%); and the Texas Gulf Coast (3%).

In the three months ended March 31, 2014, Cimarex’s production averaged 740.4 million cubic feet of natural gas equivalent per day (including oil). That’s up 12.0% from 661.1 million cubic feet a year earlier.

...