oil and gas

ENCANA CORP. $22 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) is one of North America’s largest natural gas producers. The U.S. accounts for 55% of Encana’s production, while Canada supplies the remaining 45%. The company’s proven reserves should last over 14 years. If you include properties where estimates are less well defined, Encana’s reserves could last 50 years.

On December 1, 2009, the old EnCana Corp. split itself into two new companies: the new Encana and Cenovus Energy Toronto symbol CVE), which specializes in oil sands projects, oil refineries and conventional natural gas. The new Encana’s revenue fell 4.5%, from $8.9 billion in 2010 to $8.5 billion in 2011 (all amounts except share price and market cap in U.S. dollars). New techniques, such as horizontal drilling, have unlocked large amounts of shale gas. This has increased inventories and cut gas prices: the company sold its gas for $4.96 per thousand cubic feet in 2011, down 9.5% from $5.48 in 2010.

Earnings fell 33.3%, to $0.54 a share (or a total of $398 million) from $0.81 (or $598 million). Cash flow per share fell 5.4%, to $5.66 from $5.98.

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AIMIA INC., $14.70, symbol AIM on Toronto, owns and operates Aeroplan, Canada’s largest loyalty program, and Nectar, the U.K.’s biggest loyalty program. In addition, Aimia has interests in Air Miles Middle East and Nectar Italia, as well as Club Premier, the leading loyalty program in Mexico. In the nine months ended September 30, 2012, Aimia’s revenue rose 1.0%, to $1.63 billion from $1.61 billion a year earlier. Excluding one-time items, earnings per share rose 33.8%, to $1.03 from $0.77. The company’s cost per mile awarded dropped significantly, partly because it is making better use of its computer systems. Redemptions also fell. Aimia continues to diversify its operations geographically. That’s offsetting the risk of its Canadian business: Air Canada, a major Aeroplan partner, is vulnerable to labour disputes that can disrupt its service....

DEVON ENERGY CORP. $53.06 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 404.5 million; Market cap: $21.5 billion; Dividend yield: 1.5%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 63% gas and 37% oil. Last year, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta. Devon is forming joint ventures to cut the risk of its big development projects. Earlier this year, it sold a one-third stake in shale oil and gas fields in five U.S. states to giant Chinese state-owned petroleum and chemical firm Sinopec for $2.2 billion. More recently, Japan’s Sumitomo Corp. agreed to buy 30% of the Cline and Wolfcamp shales in Texas for $1.4 billion....

STANTEC INC. $36.68 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.9 million; Market cap: $1.7 billion; Dividend yield: 1.6%) sells a range of consulting, project delivery, design and technology services. Stantec’s clients operate in a variety of industries, including transportation, construction and oil and gas. In the three months ended September 30, 2012, Stantec’s revenue rose 12.4%, to $483.7 million from $430.4 million a year earlier. Acquisitions were one reason for the gains. Stantec is also working on several new projects. Earnings rose 17.9%, to $34.1 million, or $0.74 a share, from $28.9 million, or $0.63. Stantec continues to grow by acquisition. In 2011, it bought five companies. Its purchases this year include engineering-consulting firm Cimarron Engineering, which develops, designs, installs and maintains oil and gas pipeline systems and station facilities. Demand for these services is growing quickly....

WESTJET AIRLINES LTD., $18.17, symbol WJA on Toronto, reports that its revenue rose 11.8% in the three months ended September 30, 2012, to $866.5 million from $775.3 million a year earlier. Demand for the company’s flights remains high, and it has entered into new partnerships with other airlines; these were the main reasons for the increase. WestJet’s load factor rose to a record 84.6%. Load factor is the percentage of available seats that are occupied by paying passengers. More important, the rise came despite the fact that the company increased its capacity by 2% to meet higher demand....

Encana, a long-time favourite of ours, was a pioneer in the development of unconventional gas reserves (also called “tight gas”). This is natural gas that is trapped in rock formations. However, as the technology to extract tight gas improved, gas production ballooned. This rise in gas production, along with warmer-than-normal winter weather, pushed down gas prices. This in turn depressed Encana’s earnings and stock price. We feel Encana’s large gas reserves offer a lot of long-term value. It seems ExxonMobil Corp. (New York symbol XOM), the world’s largest oil company, agrees. It’s buying Celtic Explorations Ltd. (Toronto symbol CLT), which owns tight gas reserves along the B.C.-Alberta border, near Encana’s properties. That spurred speculation that Encana may also become a takeover target. ENCANA CORP. $22 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) is one of North America’s largest natural gas producers. The U.S. accounts for 55% of Encana’s production, while Canada supplies the remaining 45%. The company’s proven reserves should last over 14 years. If you include properties where estimates are less well defined, Encana’s reserves could last 50 years....

Sure Energy, $0.54, symbol SHR on Toronto (Shares outstanding: 60.6 million; Market cap: $32.7 million; www.sureenergyinc.com), explores for and produces oil and natural gas in Alberta and Saskatchewan. Gas makes up 41% of Sure’s daily output; the remaining 59% is oil. In the three months ended June 30, 2012, Sure’s average daily output rose 13.3%, to 1,201 barrels of oil equivalent (including natural gas) from 1,060 barrels a year earlier. By August, production was up to 1,385 barrels per day. Cash flow fell to $0.04 from $0.05 a year earlier, due to lower oil and gas prices. The company’s debt of $22.2 million is a high 67.9% of its $32.7-million market cap....

STANTEC INC. $36.68 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.9 million; Market cap: $1.7 billion; Dividend yield: 1.6%) sells a range of consulting, project delivery, design and technology services. Stantec’s clients operate in a variety of industries, including transportation, construction and oil and gas.

In the three months ended September 30, 2012, Stantec’s revenue rose 12.4%, to $483.7 million from $430.4 million a year earlier. Acquisitions were one reason for the gains. Stantec is also working on several new projects. Earnings rose 17.9%, to $34.1 million, or $0.74 a share, from $28.9 million, or $0.63.

Stantec continues to grow by acquisition. In 2011, it bought five companies. Its purchases this year include engineering-consulting firm Cimarron Engineering, which develops, designs, installs and maintains oil and gas pipeline systems and station facilities. Demand for these services is growing quickly.

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DEVON ENERGY CORP. $53.06 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 404.5 million; Market cap: $21.5 billion; Dividend yield: 1.5%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 63% gas and 37% oil.

Last year, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company is now focused on its North American projects, which include conventional production, shale oil in Texas and oil sands in Alberta.

Devon is forming joint ventures to cut the risk of its big development projects. Earlier this year, it sold a one-third stake in shale oil and gas fields in five U.S. states to giant Chinese state-owned petroleum and chemical firm Sinopec for $2.2 billion. More recently, Japan’s Sumitomo Corp. agreed to buy 30% of the Cline and Wolfcamp shales in Texas for $1.4 billion.

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AIMIA INC., $15.34, symbol AIM on Toronto, has agreed to raise its stake in the loyalty program of Grupo Aeromexico, Mexico’s biggest airline. Aimia will pay $88 million U.S. to raise its interest in Club Premier Loyalty & Marketing to 49% from 29%. Grupo Aeromexico will continue to own 51%. Club Premier is Mexico’s leading loyalty program, with more than 2.8 million members and 50 partners. Club Premier members can earn and redeem points on Aeromexico, which offers 550 daily flights throughout the Americas and to Europe and Asia. As well, members can earn points on 14 other airlines, including China Eastern, Delta and Air France-KLM. They also get points for using their American Express and Banamex co-branded credit cards....