oil and gas

GREAT-WEST LIFECO INC., $27.11, Toronto symbol GWO, has agreed to buy Irish Life Group Ltd., Ireland’s largest pension manager and life insurance provider. The company has over 1 million clients and $50 billion of assets under management. The government of Ireland purchased Irish Life in June 2012, after its former parent company, Irish Life & Permanent, ran into financial difficulty. Great-West will pay $1.75 billion for Irish Life when the deal closes in July 2013. To put that in context, Great-West earned $2.0 billion, or $2.06 a share, in 2012. To help pay for this purchase, Great-West will sell $1.25 billion of new common shares at $25.70 each. That will increase the number of shares outstanding by 5%....

Pat McKeough responds to many personal questions about investing in stocks and other topics on investment and the economy from the members of his Inner Circle. 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, Pat received a question from an Inner Circle member about a stock that provides a different approach to excavating for the petroleum and utility industries. Pat assesses the company’s unique arrangement with its operating partners and whether or not it can continue to improve its results in a recovering economy....

APACHE CORP. $75 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 392.0 million; Market cap: $29.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.1%; TSINetwork Rating: Average; www.apachecorp.com) spent $16 billion buying oil and gas properties in the past three years, which helped increase its long-term debt to $11.4 billion....

TransForce Inc., $22.24, symbol TFI on Toronto (Shares outstanding: 92.8 million; Market cap: $2.1 billion; www.transforcecompany.com), is a leading Canadian trucking company. Its fleet is the largest in the country, with 11,330 trucks and 11,850 trailers. The company also has exclusive partnerships that extend its reach into the U.S. Montreal-based TransForce was an income trust from September 2002 to May 2008. It has four main divisions: Package and Courier (which supplies 37% of TransForce’s revenue) delivers parcels between businesses under the Canpar, Loomis Express and ICS Courier banners....

Badger Daylighting, $35.50, symbol BAD on Toronto (Shares outstanding: 12.3 million; Market cap: $436.7 million; www.badgerinc.com), is a North American provider of excavating services that are less destructive than methods that use heavy equipment, such as backhoes. Most of Badger’s customers are in the utility and petroleum industries. Badger makes the truck-mounted Badger Hydrovac, which is its main product. The Badger Hydrovac is mainly used for digging in challenging conditions, such as congested areas. The system uses a pressurized water stream to liquefy the soil cover. A powerful vacuum then removes the soil and stores it in a tank. The company operates through what it calls operating partners in the U.S. and Canada. Badger provides the expertise, trucks and marketing and administration support. The partners deliver the service by operating the equipment and building relationships with customers in their areas. There are currently 289 Badger Hydrovac units operating in Canada and 311 in the U.S....

APACHE CORP. $75 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 392.0 million; Market cap: $29.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.1%; TSINetwork Rating: Average; www.apachecorp.com) spent $16 billion buying oil and gas properties in the past three years, which helped increase its long-term debt to $11.4 billion. It now plans to sell $2 billion of land to help pay down its debt.

Thanks to these purchases, Apache’s average daily production rose 5.4% in 2012, to 779,000 barrels (51% oil and 49% gas). That pushed up its revenue by 1.1%, to a record $16.9 billion from $16.8 billion in 2011. However, higher depletion charges (the cost of replenishing its reserves) cut earnings by 19.0%, to $3.8 billion, or $9.48 a share. In 2011, it earned $4.7 billion, or $11.83 a share.

The company’s production will likely rise 3% to 5% in 2013. The stock trades at just 8.0 times its forecast earnings of $9.39 a share.

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WESTJET AIRLINES, $21.88, symbol WJA on Toronto, is our “Stock of the Year” for 2013. The company serves 81 destinations in North America, Central America and the Caribbean. Its fleet of 100 modern Boeing 737s are 30% more fuel efficient than older jets. WestJet plans to take delivery of 35 more 737s through 2018. WestJet continues to add ticketing and baggage-transfer alliances with other airlines, including Cathay Pacific, British Airways, Delta Airlines and American Airlines. This lets it reach new markets while limiting its risk. The company has also invested heavily in a state-of-the-art computer reservation system....

Weak natural gas prices have hurt oil and gas producers with a high gas component. In June 2012, the price of gas dropped below $2 U.S. per million British thermal units (BTUs). That was the lowest price in over 10 years, and down 87% from an all-time high of $15.40 in December 2005. High inventories and record-warm temperatures were the main reasons for the price decline. Gas has since risen to around $3.37. The long-term outlook for natural gas is positive, although in the short term, shale gas discoveries continue to rapidly increase supply. That’s keeping prices low. Shale gas is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas....

Pat McKeough responds to many personal questions about investing in stocks and other investment topics from the members of his Inner Circle. 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, an Inner Circle member asked us about an industrial stock that is making its name in several fields, but especially in hydraulic fracturing or “fracking” for the oil and gas industry. As the company’s sales and earnings keep rising, Pat examines the prospects for this stock that has been trading for less than a year. ...

The long-term outlook for natural gas is positive, although in the short term, shale gas discoveries continue to rapidly increase supply. That’s keeping prices low—and pushing down shares of natural-gas weighted producers.

We advise against going overboard in any one sector....