oil and gas

TRILOGY ENERGY CORP., $35.29, symbol TET on Toronto, owns oil and gas properties in the Kaybob and Grande Prairie areas of central Alberta. About 71% of Trilogy’s production is natural gas. The remaining 29% is oil. In the three months ended September 30, 2011, Trilogy produced an average of 29,035 barrels of oil equivalent per day (including natural gas). That was up 29.3% from 22,462 barrels a day a year earlier. Trilogy’s daily production should rise to an average of 30,000 barrels for all of 2011. Cash flow per share rose 82.1%, to $0.51 from $0.28 a year earlier; the production increase and higher oil prices were the main reasons for the gain....

Enbridge continues to build new oil and gas pipelines. These are expensive projects, but the company’s regulated businesses give it lots of cash flow to keep expanding and raising its dividend. ENBRIDGE INC. $34.46 (Toronto symbol ENB; Shares outstanding: 760.0 million; Market cap: $26.2 billion; TSINetwork Rating: Above Average; Dividend yield: 2.8%; www.enbridge.com) gets 80% of its revenue by operating pipelines that pump crude oil and natural gas from western Canada to eastern Canada and the U.S. The remaining 20% mainly comes from distributing gas to two million consumers in Ontario, Quebec and parts of New York State. It’s also developing a gas distribution system in New Brunswick....

MOSAID TECHNOLOGIES INC., $45.95, symbol MSD on Toronto, has agreed to a friendly, $46.00-a-share, all-cash takeover offer from U.S.-based private-equity firm Sterling Partners. Mosaid mainly licenses computer chip and telecommunications technology, including patents for technology used in smartphones and laptops. The Sterling Partners bid counters last week’s $42-a-share hostile offer from Wi-LAN. Prior to that, Wi-LAN had offered $38 a share....

Recently, some of our portfolio management clients have asked questions about the Greek situation and where it might lead. “What’s the worst outcome you can think of for the Greek debt crisis? Do you think the Greeks will ever accept austerity and pay what they owe? They are already rioting, and the real budget cuts have not yet begun.” One problem with worst-case-scenario questions like these is that no matter how bad things get, you can always think of something else that can go wrong. That means you’d never get to the worst-case scenario. You’d simply have a never-ending string of bad-case scenarios. Meanwhile, focusing on the worst outcome of a single factor may lead you to overlook the risk or potential of other factors. For instance, some commentators say that Greece is virtually certain to go broke, and that this will inevitably lead to the breakup of the eurozone. My guess (and no one can do more than guess) is that this outcome has a probability well below 5%. On the other hand, an outbreak of serious worldwide inflation over the next few years has a probability of 25% or more in my view. Why focus on Greece’s debt when you face heavier risk from worldwide inflation?...

SandRidge Energy, $6.89, symbol SD on New York (Shares outstanding: 409.9 million; Market cap: $2.8 billion; www.sandridgeenergy.com), is an Oklahoma City-based oil and gas firm. The company mainly explores for oil and natural gas in west Texas, the Cotton Valley Trend in east Texas, the Gulf Coast, the mid-continent region and the Gulf of Mexico. SandRidge and its subsidiaries own and operate gas-gathering and processing plants and carbon-dioxide treatment and transportation facilities. In addition, one of the company’s subsidiaries, wholly owned Lariat Services, Inc., owns and operates a drilling rig and a related oilfield services business....

Savanna Energy Services, $8.08, symbol SVY on Toronto (Shares outstanding: 82.7 million; Market cap: $668.2 million; www.savannaenergy.com), operates 99 drilling rigs and 83 service rigs, mainly in western Canada and the U.S. The company recently started operating in Australia. In the three months ended June 30, 2011, Savanna’s revenue rose 39.3%, to $94.5 million from $67.9 million a year earlier. Cash flow jumped to $0.16 a share from $0.05. The gains mainly resulted from higher demand for the company’s drilling rigs. That let it raise its prices. On June 1, 2011, Savanna bought Performance Services Ltd. This purchase added 16 mobile service rigs to its fleet. As well, it recently completed its acquisition of Silverstar Well Servicing Ltd. That brought an additional 17 rigs....

Over the past decade, political upheaval around the world has caused many to worry about secure sources of energy supply. Some North American energy stocks have simply decided that overseas risk is not worth the trouble and expense. Devon Energy Corp., (New York symbol DVN; www.devonenergy.com) is one of them....

SASOL LTD. (ADR), $46.17, 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 at 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 fiscal year ended June 30, 2011, Sasol’s revenue rose 16.1%, to $19.5 billion from $16.8 billion a year earlier (all figures in U.S. dollars). Earnings per ADR rose 27.4%, to $4.65 from $3.65. Higher oil prices were the main reason for these gains.

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PASON SYSTEMS $12.77 (Toronto symbol PSI; TSINetwork Rating: Speculative) (403-301-3400; www.pason.com; Shares outstanding: 91.3 million; Market cap: $1.0 billion; Dividend yield: 2.8%) rents equipment for monitoring and managing oil and gas rigs. It also sells communications systems, such as its satellite system, which companies use to remotely collect data from their drilling operations. Pason serves oil and gas companies and drilling contractors throughout Canada, the U.S., Mexico and Argentina. In the three months ended June 30, 2011, Pason’s revenue rose 22.3%, to $62.4 million from $51.0 million a year earlier. The company benefited as its clients increased their drilling, especially for shale gas and oil. Earnings rose 33.5%, to $8.2 million, or $0.10 a share, from $6.2 million, or $0.08 a share. The increased drilling pushed up Pason’s earnings. Strong demand also let the company raise its prices. Cash flow per share rose 21.7%, to $0.28 from $0.23....

CIMAREX ENERGY $66.72 (New York symbol XEC; TSINetwork Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 86.1 million; Market cap: $5.5 billion; Dividend yield: 0.6%) produces and explores for oil and natural gas. Gas makes up 55% of its output. Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas; the Permian Basin of western Texas and southeastern New Mexico; and the Texas Gulf Coast. In the three months ended June 30, 2011, Cimarex’s production averaged a record 585.7 million cubic feet of natural gas equivalent per day (including oil). That’s down 1.5% from a year earlier. The company did not offset natural declines at its Gulf Coast wells with new production....