oil and gas

WAJAX CORP. $37.46 (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (905-212-3300; www.wajax.ca; Shares outstanding:16.7 million; Market cap: $627.2 million; Dividend yield: 6.4%) 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 December 31, 2013, Wajax’s revenue rose 7.3%, to $391.7 million from $364.9 million a year earlier....

Many observers draw scary conclusions from Russia’s annexation of the Crimea. They fear it’s just the first in a series of land grabs. They think the ease of the takeover will embolden Russia, and lead it to rapidly stir up trouble among other nations with large Russian-speaking minorities. (This includes three NATO members—Estonia, Latvia and Lithuania.) Some even worry that a future Russia/U.S. head-butting contest could cascade into a nuclear war. On the other hand, the stock market reacted to the news of the Crimean referendum vote with two days of substantial gains. I’d say this is a favourable response to the Crimea news, and a realistic one. Putin simply took advantage of a highly unusual situation. The Crimea was part of Russia for hundreds of years, until Nikita Khrushchev gave it back to Ukraine in 1954. If the past couple of decades are any guide, Crimeans will be better off as subjects of Russia than of Ukraine. Energy exports have given Russia some degree of prosperity. Putin’s reign has brought stability, if not justice or democracy. Ukraine’s economy and governance have been far less successful....

Atwood Oceanics, $46.27, symbol ATW on New York (Shares outstanding: 64.2 million; Market cap: $2.9 billion; www.atwd.com), operates 13 deepwater drilling rigs, with a 14th scheduled for completion in June 2014. The company’s fleet is modern, so its utilization rates are high, with most of its rigs under contract until 2015. The company mostly drills in foreign waters, including off the coast of West Africa, Australia and elsewhere. The drilling business is highly volatile. It depends not only on oil and gas prices, but also on the supply and demand for rigs among many competitors and customers....

SASOL LTD. (ADR), $52.87, symbol SSL on New York, has developed a technology to convert coal and natural gas into motor fuels. The company is now the world’s largest producer of fuel from coal at its facility in Secunda, South Africa. It also makes synthetic fuels from natural gas at plants in Qatar and Nigeria. In addition, Sasol has substantial chemical production interests and produces oil and gas in Africa. It’s also South Africa’s third-largest coal producer. In Sasol’s 2014 fiscal first half, which ended December 31, 2013, its revenue rose 23.1%, to 98.3 billion South African rand (1 rand = $0.10 U.S.) from 79.9 billion rand in the first half of fiscal 2013. Earnings per ADR rose 25.7%, to 30.19 rand from 24.01 rand. Oil prices were relatively flat, and chemical prices were higher. The U.S. dollar also rose against the South African rand, which increased the value of Sasol’s sales outside South Africa....

CANADIAN PACIFIC RAILWAY LTD., $169.99, Toronto symbol CP, and CANADIAN NATIONAL RAILWAY CO., $61.98, Toronto symbol CNR, have had trouble shipping last year’s record grain harvest on the Prairies to Canada’s west coast due to bad winter weather. To help clear the backlog, Ottawa now plans to fine CP and CN if they fail to ship a minimum amount of grain per day. The railways already plan to increase shipments as the weather improves, so any fines should be small next to their earnings. CP Rail and CN Rail are still buys....

Cambridge High Income Fund is a balanced mutual fund that holds 81.5% of its assets in stocks, 14.8% in bonds and 3.7% in cash. It has a 2.38% MER. We don’t currently recommend balanced funds, which hold both stocks and bonds. That’s because bonds are unlikely to perform as well in the next few years as they have in the past, mainly because interest rates will likely hold steady or rise. (Bond prices and interest rates are inversely linked. When interest rates go up, bond prices go down, and vice versa.) That means the fund would only earn interest income on its bonds; instead of capital gains, its bond holdings could produce capital losses. The fund’s stocks are of reasonably good quality, although it does focus on high-yielding REITs and former oil and gas trusts. It also takes on above-average risk with its bonds, including holdings from issuers like Inmet Mining and Perpetual Energy....

Baytex Energy, $42.34, symbol BTE on Toronto (Shares outstanding: 124.9 million; Market cap: $5.3 billion; www.baytex.ab.ca), produces oil and gas in Western Canada and the U.S. Until recently, Baytex was focused on heavy oil, which added risk. That’s because extracting the tar-like bitumen from oil sands is much more expensive than conventional oil wells. However, new technologies, such as steam-assisted gravity drainage (SAGD), have lowered the industry’s costs. SAGD systems inject steam into the ground to melt the bitumen, making it easier to pump to the surface. The company just bought Australia’s Aurora Oil & Gas, which has big shale oil holdings in Texas’s Eagle Ford area, for $2.6 billion. Aurora produces 24,678 barrels of oil equivalent a day, while Baytex averaged 57,100 barrels a day in 2013....

Kodiak Oil & Gas Corp., $11.31, symbol KOG on Nasdaq (Shares outstanding: 266.3 million; Market cap: $3.1 billion; www.kodiakog.com), develops, produces and explores for oil and natural gas in the Williston Basin, in the U.S. Rocky Mountains. Kodiak continues to increase its production and reserves. The oil and gas it’s drilling for is hard to reach, but it is making good use of modern drilling techniques. The company ships about 80% of its oil by rail and 20% by pipeline. Rail is the costlier option, but new pipelines will eventually replace trains and cut Kodiak’s transportation costs. That would push up the company’s cash flow....

DOMINO’S PIZZA INC., $79.34, symbol DPZ on New York, is the world’s largest chain of pizza stores that offer takeout and delivery. It operates 10,800 outlets in the U.S. and over 70 other countries. Franchisees run most of them. In the three months ended December 29, 2013, the company’s earnings per share rose 21.9%, to $0.78 from $0.64 a year earlier, beating the consensus estimate of $0.76. Sales gained 5.0%, to $566.5 million from $539.7 million. Same-store sales rose 7.0% internationally and 3.7% in the U.S. Domino’s continues to boost its sales by aggressively promoting its new pizza recipes. It’s also profiting as more customers order online and through smartphone apps. In addition, Domino’s still has lots of growth potential overseas....

Imperial Oil plans to almost double its production, to 600,000 barrels of oil a day, by the end of this decade. A big part of that gain will come from its Kearl oil sands project in Alberta. Kearl, which started up last year, added 78,100 barrels to the company’s daily output....