oil and gas

STANTEC INC. $69.35 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 46.7 million; Market cap: $3.2 billion; Dividend yield: 1.1%) sells a range of consulting, project-delivery, design and technology services. Its clients operate in a variety of industries, including oil and gas, transportation and construction.

In the quarter ended March 31, 2014, Stantec’s revenue rose 12.7%, to $481.3 million from $426.9 million a year earlier. Acquisitions were one reason for the gain. Stantec is also working on many new projects, including major pipelines and the huge Westside Subway Transit Corridor in southern California.

Earnings gained 17.9%, to $33.5 million, or $0.72 a share, from $28.4 million, or $0.62.

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SHERRITT INTERNATIONAL $4.45 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $1.3 billion; Dividend yield: 0.9%) recently sold off all of its coal interests for $793 million in cash.

The company is now focused on nickel production, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy nickel mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan, and manages 506 megawatts of power generation capacity in Cuba.

In the three months ended March 31, 2014, Sherritt’s revenue rose 13.0%, to $120.9 million from $107.0 million a year earlier. Cash flow per share was unchanged at $0.10.

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ALIMENTATION COUCHETARD $29.50 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard.com; Shares outstanding: 565.8 million; Market cap: $16.6 billion; Dividend yield: 0.5%) plans to keep looking for big acquisitions like its $2.7-billion purchase of Norway’s Statoil Fuel & Retail gas station chain in June 2012.

However, the company has a long history of not overpaying for acquisitions; in 2010, it dropped its $2-billion U.S. hostile takeover offer for Casey’s General Stores after competitor 7-Eleven outbid it. And earlier this year, it stayed out of the running to buy oil and gas giant Hess Corp.’s 1,354 U.S. gas stations and convenience stores. Marathon Petroleum eventually paid $2.9 billion.

Meanwhile, Couche-Tard’s sales rose 2.0% in the quarter ended April 27, 2014, to $9.0 billion from $8.8 billion a year ago. Earnings per share rose 10.0%, to $0.22 from $0.20. (All figures except share price and market cap in U.S. dollars. Per-share amounts adjusted for a 3-for-1 stock split on April 14, 2014).

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SNC-LAVALIN GROUP INC., $55.89, Toronto symbol SNC, rose 7% this week after announcing a major acquisition. The company has agreed to buy U.K.-based Kentz Corp. Ltd. (London exchange symbol KENZ), which provides engineering and construction services to the oil and gas industry. Kentz operates in 36 countries, which should increase SNC’s exposure to fast-growing regions like the Middle East, Asia and Australia....

MONSANTO CO., $125.12, New York symbol MON, reported better-than-expected quarterly earnings this week. It also announced a new share buyback plan. Monsanto sells technology-based agricultural products, such as genetically modified seeds, to farmers, grain processors and food companies. It also sells weed- and pest-control products. In the third quarter of its 2014 fiscal year, which ended May 31, 2014, Monsanto earned $858 million, down 5.6% from $909 million a year earlier. Earnings per share fell 3.6%, to $1.62 from $1.68, on fewer shares outstanding. But even with the decline, the latest earnings beat the consensus forecast of $1.54....

DOREL INDUSTRIES, $38.69, symbol DII.B on Toronto, has agreed to buy Hong Kong-based Lerado Group, a maker of baby strollers and infant car seats, for $120 million. Lerado also makes baby beds, high chairs and baby bouncers. The acquisition includes four facilities—a research centre in Taiwan and three manufacturing plants in China. These will be Dorel’s first company-owned factories in Asia, which reduces its reliance on third-party suppliers in the region; Dorel will now be able to make its own products to sell in China and export around the world. Right now, the company’s juvenile division gets only a small part of its sales from China. But China’s new infant-seat laws and growing middle class make it a great place for Dorel to expand....

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on specific stocks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. This week we had a question from an Inner Circle member on two Canadian energy stocks. In spite of its name, Tourmaline Oil has 85% of its output in natural gas. Whitecap Resources has the greater part of its production in oil. Both companies enjoy rising production—in Whitecap’s case, spurred in part by acquisitions. Pat examines both companies’ prospects for continued production increases and whether their share prices—and Whitecap’s dividend—can keep on rising. Q: Hi Pat: Can I have your view on Tourmaline Oil and Whitecap Resources? Thanks....

GE’s shares dropped 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. Meanwhile, GE is expanding its industrial operations, mainly through acquisitions. That’s generally riskier than internal growth, but these businesses have unique technologies that offer competitive advantages. GE has also entered into a new alliance with France’s Alstom that will help it expand in developing nations. GENERAL ELECTRIC CO. $26 (New York symbol GE; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 10.0 billion; Market cap: $260.0 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.4%; TSINetwork Rating: Above Average; www.ge.com) is one of the world’s largest manufacturers. It makes machinery for power generation and distribution, such as turbines, as well as other products, like jet engines, medical equipment, appliances, lighting and locomotives....

Pembina Pipeline and Veresen both trade at high multiples to their per-share cash flow. But both of these dividend stocks also currently maintain high yields. PEMBINA PIPELINE (Toronto symbol PPL; www.pembina.com) owns pipelines that carry half of Alberta’s conventional oil, 30% of Western Canada’s natural gas liquids (NGLs) and almost all of B.C.’s conventional oil. Pembina bought rival Provident Energy for $3.2 billion in 2012. Provident extracts, transports and stores natural gas liquids (NGLs)....

Tourmaline Oil, $56.78, symbol TOU on Toronto (Shares outstanding: 199.9 million; Market cap: $11.5 billion; www.tourmalineoil.com), has identified over 7,200 oil and gas drilling locations in Western Canada and has the funds for exploration. That should let it keep raising its production. Tourmaline’s daily output averaged a record 111,200 barrels of oil equivalent (including natural gas) in the first quarter of 2014, up 49.4% from 68,636 a year earlier. Cash flow per share doubled, to $1.28 from $0.64, mostly due to higher gas prices. About 85% of Tourmaline’s output is natural gas. The company continues to benefit from higher gas prices, while its steadily rising production pushes up its share price....