oil and gas

Chinese stocks are down 12% since the start of this year on investor worries that the country’s economic growth will continue to lag along with its exports to Europe and the U.S. China’s inflation rate is also rising, which could make it more difficult to spur growth through stimulus spending or lower interest rates....

CRESCENT POINT ENERGY CORP. $36.81 (Toronto symbol CPG; Shares outstanding: 377.5 million; Market cap: $13.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 7.5%; www.crescentpointenergy.com) produces oil and natural gas in western Canada. Its production is weighted 90% toward oil and 10% to gas.

The company continues to focus on its Bakken light-oil development in southeastern Saskatchewan.

In the three months ended December 31, 2012, Crescent Point’s cash flow rose 12.7%, to $430.4 million from $381.9 million a year earlier.

The company raised its production by 33.0%, to 108,007 barrels of oil equivalent (including gas) from 81,210 a year earlier....

PRECISION DRILLING CORP. (Toronto symbol PD; www.precisiondrilling.com) sells contract drilling services to oil and gas producers, mainly in North America. It ended 2012 with 321 active rigs....

INTACT FINANCIAL CORP., $62.25, symbol IFC on Toronto, dropped about 4% this week on reports that Ontario’s minority Liberal party government may vote in support of an NDP motion calling for a 15% reduction in auto insurance premiums. The vote would be in exchange for NDP support on the next provincial budget, which would avoid triggering an election. The NDP points to premiums charged by insurers rising in 2011 even after the Ontario government introduced reforms in 2010 that lowered benefits for drivers and cut payouts on auto accident claims. Intact has enjoyed improved profits from its Ontario auto insurance business since the reforms were put in place, so it has some room to accommodate a rate reduction. And at the same time, the Liberals and NDP may work out a compromise, such as pushing insurers to lower premiums in exchange for the government doing more to combat fraud and clear a backlog of unresolved disputes between insurers and claimants....

ARC RESOURCES $25.67 (Toronto symbol ARX; Shares outstanding: 308.9 million; Market cap: $7.9 billion; TSINetwork Rating: Speculative; Dividend yield: 4.7%; www.arcresources.com) produces oil and gas in western Canada. Its average daily production of 95,725 barrels of oil equivalent is weighted 61% to gas and 39% to oil.

In the three months ended December 31, 2012, ARC’s cash flow per share fell 13.9%, to $0.68 from $0.79. Production rose 4.0%, but that was offset by a 3.2% decline in gas prices.

The company’s long-term debt is $747.7 million, or a low 9.5% of its market cap. ARC trades at 11.1 times its forecast 2012 cash flow of $2.32 a share.
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When I step back from looking at the market’s day-to-day fluctuations, and instead try to figure out where stock prices might go in the next five or 10 years and beyond, I feel increasingly optimistic. For one thing, the stock market has generally been going sideways or making little progress for much of the past 10 or 15 years. You might say the market mainly stayed within a wide trading range in that time—up in some years, down in others. But starting from the low point of spring 2009, stock prices have generally gone up. They’ve risen in a jagged pattern, and the start of every downturn sparked a burst of pessimism. But after each downturn, the market eventually regained its footing. It then went on to a new, higher peak, above the level where the previous downturn began. These lengthy sideways phases have happened in the past. In the end, they always gave way to a new rise that carried prices far above the previous sideways movement. In my view, this latest sideways movement is likely to end the same way....

PRECISION DRILLING CORP. $8.40 (Toronto symbol PD; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 276.3 million; Market cap: $2.3 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.4%; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) sells contract drilling services to oil and gas producers, mainly in North America. It ended 2012 with 321 active rigs.

The company is slowly expanding its international operations: it now has a total of eight rigs in Mexico and the Persian Gulf region.

In 2012, Precision’s earnings fell 72.9%, to $52.4 million, or $0.18 a share. It earned $193.5 million, or $0.67 a share, in 2011. If you exclude writedowns of older rigs, earnings per share would have declined by 12.9%, to $0.81 from $0.93.
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TECK RESOURCES LTD., $28.73, Toronto symbol TCK.B, fell 6% this week, along with other mining stocks, partly due to concerns about the outlook for prices of coal, copper and other commodities. China is a major resource consumer, and growth in the country has slowed along with its exports to Europe and the U.S. China’s inflation rate is also rising, which could make it more difficult to spur growth through stimulus spending or lower interest rates. As well, investors are concerned that Teck may buy control of privately held Iron Ore Company of Canada (IOC); Rio Tinto (New York symbol RIO) is IOC’s largest shareholder, with a 58.7% stake. This company mines and processes iron ore in Labrador City, Newfoundland. Trains then take the iron ore pellets to the port of Sept-Îles, Quebec, for shipment to steel mills around the world....

An American Depositary Receipt (ADR) is an investment unit for foreign companies that trade on U.S. stock markets. One ADR typically represents one or more shares of the overseas firm.

ADRs make its easier to invest in foreign companies, such as the three we analyze below, without the complications of buying or selling on foreign exchanges or in foreign currencies....

Here are some natural gas producers we recommend: Encana Corp., $20.18, symbol ECA on Toronto (Shares outstanding: 736.3 million; Market cap: $15.0 billion; www.encana.com), is a recommendation of The Successful Investor, our conservative-growth advisory. Encana is one of North America’s largest natural gas producers. The company was a pioneer in the development of unconventional gas reserves (also called “tight gas”). This is natural gas that is trapped in rock formations....