oil and gas

DEVON ENERGY CORP. $58.73 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235-3611; www.dvn.com; Shares outstanding: 404.4 million; Market cap: $23.8 billion; Dividend yield: 1.4%) 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 completed the sale of 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 properties, which include conventional production, shale oil in Texas and oil sands in Alberta.

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Shares of many natural-gas-weighted producers are down sharply from last year’s highs. That’s mostly due to record low gas prices. Shale gas discoveries continue to increase supply at a time of slowing demand in a weak global economy. Shale gas is trapped in rock formations. To extract it, water and chemicals are pumped into the rock. This fractures the rock and releases the natural gas. Gas production is also growing as a by-product of drilling for higherprofit crude oil and natural gas liquids, such as propane and butane....

Sometimes, the market’s reaction to a news item can tell you something about the importance of the news item. It may also tell you something about the market’s underlying direction. For instance, on June 6, the Dow industrials moved up by 125 points after a two-month decline. Many investors assumed the gain was due to some European crisis development they missed that day. I assumed the rise came about because of political news from Wisconsin, and from the second- and third-largest California cities, San Jose and San Diego. I saw it that way because of today’s key investor concern: can governments around the world manage to tame their debts and their budget deficits without raising taxes to economically crippling levels? To do this, governments will have to break out of the stranglehold that pressure groups and entrenched special interests seem to have on them....

Pat McKeough responds to many personal questions on buying 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. This past week, an Inner Circle member asked us about a company that clearly benefits when the global economy is doing well. This American heavy-equipment manufacturer already makes the majority of its sales outside the U.S. and it’s looking to developing economies to fuel even more growth....

MART RESOURCES, $1.36, symbol MMT on Toronto, jumped over 28% this week after the company declared a special dividend of $0.10 a share, payable on August 8, 2012. Mart will then begin paying quarterly dividends of $0.05 a share starting in September 2012. The stock is now up 288.6% since we first recommended it in our May 2010 issue at $0.35. Mart is focused on developing, producing and drilling for oil at its properties in Africa. The company is currently producing oil at its 50%-held Umusadege field in Nigeria....

Caterpillar Inc., $82.19, symbol CAT on New York (Shares outstanding: 646.6 million; Market cap: $53.1 billion; www.caterpillar.com), is the world’s largest maker of earth-moving equipment, including tractors, scrapers, graders, compactors, loaders and pipe layers. It also makes lift trucks and diesel and turbine engines. The company gets 70% of its sales from outside the U.S. Its clients are mainly in the mining, logging, farming, construction and oil and gas industries. Caterpillar sells its machines through a worldwide dealer network. It also provides dealers and customers with equipment financing and insurance....

Quantum Rare Earth Developments Corp., $0.13, symbol QRE on Toronto (Shares outstanding: 86.0 million; Market cap: $11.2 million; www.quantumrareearth.com), is developing its 100%-owned niobium project at Elk Creek, Nevada. The company believes this property could contain North America’s largest, highest-grade niobium deposit. Niobium is a rare metal that when used as an additive makes steel stronger, more heat resistant and easier to weld. Niobium is widely used in automobiles and oil and gas pipelines. Right now, China accounts for about 25% of worldwide niobium consumption. Quantum acquired the Elk Creek site, a former Molycorp project, in 2010. Molycorp drilled 110 holes in the 1970s and 1980s. Now, with rising niobium prices, Quantum aims to define a large, mineable resource. The company has also identified what it believes is a high-grade rare-earth deposit 2.5 kilometres away from the niobium deposit. So far, the company has drilled two holes at its niobium deposit and three on the rare-earth site....

This is the latest in a series of video interviews in which Pat McKeough gives his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and in still others he serves as an investment counsellor as he discusses events that are affecting the markets and the economy. That’s his role this week as he discusses the anxiety many have about the ongoing crisis in Greece. Pat turns the general sense of pessimism on its head—the markets frequently move up before crises are solved, while there’s often more cause to worry when things look good. And he adds an optimistic postscript about energy in the years ahead.
The Crisis in Greece: Be Ready for an Upturn...

SHAWCOR LTD. $33 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.7 million; Market cap: $2.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 1.2%; TSINetwork Rating: Average; www.shawcor.com) makes sealants and coatings that keep oil and gas pipelines from rusting (88% of revenue). It also manufactures electrical wire and protective sheaths (12% of revenue).

So far this year, ShawCor has won over $45 million U.S. of coating orders related to big offshore natural gas projects near Australia. In addition, it has received a $30-million U.S. contract to coat undersea pipelines for a gas platform off the coast of Indonesia.

Meanwhile, ShawCor’s revenue rose 11.7% in the three months ended March 31, 2012, to $312.3 million from $279.5 million a year earlier. The company is benefiting as pipeline operators expand their operations to handle higher oil and gas production in North America and Latin America.

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Heckman Corp., $3.38, symbol HEK on New York (Shares outstanding: 149.0 million; Market cap: $503.6 million; www.heckmancorp.com), disposes of the waste water that results from unconventional oil and gas exploration and production. That includes waste water from the fracking methods used in shale oil and gas production. (Fracking involves the high-pressure injection of water, sand and chemicals into rock formations to break them up and make it easier to retrieve oil and gas reserves.) The company has more than 635 trucks in service. It also rents out more than 1,100 “frack tanks” for containing waste water....