oil and gas

TRILOGY ENERGY CORP. $28.25 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290- 2900; www.trilogy.com; Shares outstanding: 116.5 million; Market cap: $3.3 billion; Dividend yield: 1.5%) owns oil and gas properties in the Kaybob and Grande Prairie areas of central Alberta. About 62% of Trilogy’s production is natural gas. The remaining 38% is oil. In the three months ended September 30, 2012, Trilogy produced 33,412 barrels of oil equivalent per day (including gas). That’s up 15.1% from 29,035 barrels a year earlier. But even with the higher production, a 40.1% decline in gas prices pushed down the company’s cash flow per share by 21.6%, to $0.40 from $0.51. Trilogy pays out just 26% of its cash flow as dividends. That gives it a low 1.5% yield, but it’s also letting the company maintain an active drilling program. In the first three quarters of 2012, Trilogy spent $274 million on exploration and development, up 10.5% from $248 million in the same period a year earlier. The company drilled 55 wells, up 25.0% from 44....

PRECISION DRILLING CORP. (Toronto symbol PD; www.precisiondrilling.com) provides contract-drilling services to land-based oil and gas producers, mainly in North America. It had 363 rigs in service as of September 30, 2012. The company is slowly expanding its international operations: it now has a total of eight rigs in Mexico and Saudi Arabia. Precision’s overseas business now accounts for 5% of its revenue, up from just 1% a year ago....

SASOL LTD. (ADR), $42.53, 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, the company has substantial chemical production interests and produces oil and gas in Africa. It’s also South Africa’s third-largest coal producer. Sasol is now considering spending up to $21 billion to build a complex in Louisiana to turn natural gas into chemicals, diesel and other fuels. The company expects to spend $5 billion to $7 billion on a chemical plant. It would later add an $11-billion to $14-billion gas-to-liquids facility. Sasol will make a final decision on the project in 2014....

PRECISION DRILLING CORP. $7.48 (Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding: 276.3 million; Market cap: $2.1 billion; Price-to-sales ratio: 1.0; No dividends paid since February 2009; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) provides contract-drilling services to land-based oil and gas producers, mainly in North America. It had 363 rigs in service as of September 30, 2012. The company is slowly expanding its international operations: it now has a total of eight rigs in Mexico and Saudi Arabia. Precision’s overseas business now accounts for 5% of its revenue, up from just 1% a year ago. In the three months ended September 30, 2012, the company’s earnings fell 52.8%, to $39.4 million, or $0.14 a share. A year earlier, it earned $83.5 million, or $0.29 a share....

CRESCENT POINT ENERGY CORP. $39.03 (Toronto symbol CPG; Shares outstanding: 350.1 million; Market cap: $13.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 7.1%; www.crescentpointenergy.com) produces oil and natural gas in western Canada. Its production is weighted 90% toward oil and 10% to natural gas. The company continues to focus on its Bakken light-oil development in southeastern Saskatchewan. In the three months ended September 30, 2012, Crescent Point’s cash flow per share rose 3.7%, to $1.13 from $1.09 a year earlier. The company’s shares yield a high 7.0%. Crescent Point paid out just 62% of its cash flow as dividends in the latest quarter, so its current payout rate looks sustainable....

Chinese stocks are up roughly 16% since early September. That’s largely because the country’s industrial production and exports are picking up, and government measures to stimulate the economy are taking effect. China’s growth rate could reach 8.2% nextyear, and its long-term outlook is positive. Here are two Chinese exchange traded fund (ETF) recommendations. One invests in all publicly traded Chinese stocks available to foreign investors. The other holds small cap Chinese stocks. SPDR S&P CHINA ETF $68.92 (New York Exchange symbol GXC; buy or sell through brokers; www.spdrs.com) is an ETF that aims to track the S&P China BMI Index, which is made up of all publicly traded Chinese stocks that are available to foreign investors. Right now, SPDR S&P China ETF holds 184 stocks....

Emerging markets continue to have sound longterm outlooks. A good way to profit from their growth with less risk is through low-fee exchange traded funds (ETFs). Here are two we see as buys. ISHARES S&P INDIA NIFTY 50 INDEX FUND $23.67 (Nasdaq symbol INDY; buy or sell through brokers; us.ishares.com) is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities. The fund’s top holdings are ITC Ltd. (conglomerate), 8.8%; Reliance Industries Ltd. (conglomerate), 7.2%; HDFC Bank, 6.9%; Housing Development Finance, 6.8%; ICICI Bank, 6.7%; Infosys Technologies (software), 6.4%; Larsen & Toubro Ltd. (conglomerate), 4.8%; Tata Consultancy Services (information technology), 3.7%; Hindustan Unilever (consumer goods), 3.1%; and State Bank of India, 3.1%....

PENN WEST PETROLEUM $12.97 (Toronto symbol PWT; Shares outstanding: 472.9 million; Market cap: $6.1 billion; TSINetwork Rating: Average; Dividend yield: 8.3%) has agreed to sell $1.3 billion worth of non-core properties. In all, these produce about 12,000 barrels per day.

To put that figure in perspective, it’s 7.4% of the 163,181 barrels a day that Penn West produced in the quarter ended June 30, 2012.

The company now aims to sharply reduce its long-term debt of $3.4 billion, which is a somewhat high 55.7% of its market cap. That will lower its interest costs and let it invest more money in its highest-potential oil and gas properties.

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Chimera Energy, $0.05, symbol CHMR on the U.S. over-the-counter bulletin board (Shares outstanding: 66.0 million; Market cap: $3.3 million; www.chimeraenergyusa.com), believes it has developed a fracking method that uses no water and no chemicals. (Current fracking methods involve the high-pressure injection of water, sand, and chemicals into shale rock formations to break them up and make it easier to retrieve oil and gas reserves.) Full details of this process, which appears to use hot gases and very light pumice rocks to keep the fractures open so oil and gas can flow, have not yet been made public due to what the company says are patent concerns. Chimera had revenue of just $3,920 in the three months ended February 29, 2012, the date of its last report. It lost $15,534, or nil per share. It held cash of $136,811 and had $100,000 of debt....

HNZ Group, $22.56, symbol HNZ.A on Toronto (Shares outstanding: 13.1 million; Market cap: $295.5 million; www.hnz.com), is the new name of Canadian Helicopters Group. The company feels the new banner will make it more marketable around the world. It also aims to distinguish itself from similarly named Canadian competitors. HNZ provides helicopter transportation services to clients in a broad range of industries, including infrastructure, utilities, oil and gas, mining, forestry, construction and emergency medical services. The company also supports military operations in Afghanistan. In July 2011, HNZ completed its $127-million purchase of Helicopter (NZ) Ltd., which is New Zealand’s largest helicopter owner....