oil and gas

GENERAL ELECTRIC CO. $19 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.6 billion; Market cap: $201.4 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.ge.com) is one of the world’s largest manufacturers. It makes equipment for generating and distributing electricity, such as turbines (31% of revenue, 32% of earnings); aircraft engines (13%, 17%); health care equipment, such as medical scanners (13%, 14%); home appliances and lighting (6%, 1%); and locomotives (3%, 4%).

Following the 2008/2009 financial crisis, the company scaled back the activities of its GE Capital subsidiary, which provides loans and other financial services to GE’s customers. This business now accounts for 34% of GE’s revenue and 32% of its earnings.

Recession took a toll …

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SASOL LTD. (ADR), $45.65, 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. Sasol also produces 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. Sasol is also South Africa’s third-largest coal producer. In the six months ended December 31, 2011, Sasol’s revenue rose 23.9%, to $11.0 billion from $8.9 billion a year earlier (all figures in U.S. dollars). Earnings per ADR rose 81.8%, to $3.04 from $1.67. Higher oil prices were the main reason for the gains. A stronger U.S. dollar against the South African rand also pushed up the value of sales outside South Africa....

CANADIAN PACIFIC RAILWAY LTD., $75.67, Toronto symbol CP, is starting to benefit from its recent efficiency improvements. As well, more of its trains are running on time, thanks to the warmer-than-usual winter. In the three months ended March 31, 2012, CP’s average train speed rose 27% from a year earlier. It also had 28% more railcars in service, and terminal dwell (the time to load and unload railcars) fell 27%. As a result, CP now believes that it earned $0.80 to $0.83 a share in the quarter. That’s a lot better than the consensus estimate of $0.65 a share....

Companies that supply equipment and services to oil and gas explorers give investors another way to profit from rising oil prices. To cut your risk, stick with proven market leaders like Precision Drilling and ShawCor. PRECISION DRILLING CORP. $8.91 (Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding: 276.1 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.3; 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 337 rigs in service at the end of 2011....

Wavefront Technology Solutions, $0.75, symbol WEE on Toronto (Shares outstanding: 82.8 million; Market cap: $62.1 million; www.onthewavefront.com), develops techniques and tools that help oil companies get more out of their wells. It also removes pollution from groundwater. In early 2009, the company changed its name from Wavefront Energy and Environmental Services. Wavefront’s main technology is called Powerwave. This system generates pulses of pressure that momentarily expand rock and soil pores and improve fluid flow in the ground. In addition to oil, the system can be used to distribute chemicals that help clean up contaminated underground sites. Powerwave is marketed to environmental clients as Primawave. In the three months ended November 30, 2011, Wavefront’s revenue rose 27.8%, to $1.1 million from $869,672 a year earlier. The company lost $0.01 a share, compared to a loss of $0.02 a share. It holds cash of $23.4 million, or $0.28 a share, and has no debt....

Chinese stocks are up over 30% since September 2011. That’s largely because investors believe that a global recovery will raise China’s exports and improve its domestic economy. As well, the country’s inflation rate is easing. That gives it more options to boost growth, including cutting interest rates. Here are two Chinese exchange traded funds (ETFs) that we cover in Canadian Wealth Advisor newsletter. One holds publicly traded Chinese stocks available to foreign investors, and the other holds small cap Chinese stocks....

SHAMARAN PETROLEUM $0.23 (Toronto symbol SNM; TSINetwork Rating: Speculative) (416-364-8820; www.shamaranpetroleum.com; Shares outstanding: 808.0 million; Market cap: $185.8 million) holds oil and gas exploration interests in Kurdistan. Kurdistan is the most stable area of Iraq, but operating there still entails considerable political risk.

ShaMaran and its partners have struck oil, but they need to do much more drilling to decide whether to bring their new wells into production.

Meanwhile, the company will have to keep making dilutive share issues at today’s low prices to finance further exploration. ShaMaran’s development efforts also face a lot of uncertainty.

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MCCOY CORP. $3.60 (Toronto symbol MCB; TSINetwork Rating: Speculative) (780-453-8451; www.mccoyglobal.com; Shares outstanding: 26.5 million; Market cap: $95.4 million; Dividend yield: 3.3%) operates through two divisions: Mobile Solutions and Energy Products and Services.

Energy Products and Services sells hydraulic equipment, including power tongs, for drilling rigs. Power tongs are large wrench-like tools that tighten and loosen the pipe in the drill hole.

Mobile Solutions builds heavy-duty trailers for clients in the oil and gas, wind energy, infrastructure and construction industries. It also makes trailer-mounted vacuum tanks and operates a truck dealership.

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Chinese stocks are up over 30% since September 2011. That’s largely because investors believe that a global recovery will raise China’s exports and improve its domestic economy. As well, the country’s inflation rate is easing. That gives it more options to boost growth, including cutting interest rates. 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 $68.38 (New York Exchange symbol GXC; buy or sell through brokers; www.spdrs.com) is an exchange traded fund that aims to track the S&P China BMI Index. This index is made up of all the publicly traded Chinese stocks that are available to foreign investors. Right now, SPDR S&P China ETF holds 184 stocks....

CANADIAN PACIFIC RAILWAY $75.47 (Toronto symbol CP; Shares outstanding: 170.9 million; Market cap: $12.9 billion; TSINetwork Rating: Average; Dividend yield: 1.6%; www.cpr.ca) continues to expand its rail network in the Bakken area, which could contain more than 500 billion barrels of oil. This region covers parts of Montana, North Dakota and Saskatchewan. Texas-based U.S. Development Group LLC is almost finished building a new hub in North Dakota to handle Bakken’s rising production. This hub will transfer oil from trucks to trains, which will then ship it to market. CP is the only railway that will connect to this hub. That puts it in a great position to profit as shale oil and gas production continues to increase: the company expects its shipments from Bakken to jump to 125,000 barrels a day from 23,000 in 2011....