oil and gas

These three leading industrial companies all face rising costs for labour and raw materials. However, all three continue to win new contracts that will help them offset these expenses. Moreover, all three continue to trade at attractive multiples to earnings. SNC-LAVALIN GROUP INC. $55 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.8 million; Market cap: $8.3 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.snclavalin.com) continues to win new contracts, thanks in part to its strong reputation. SNC is a leading Canadian engineering and construction company. It designs and builds large-scale public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds mines, chemical plants and electrical-power systems....

CAMECO CORP., $27.56, symbol CCO on Toronto, dropped to as low as $26.61 this week after the German government announced that it plans to shut down all of its nuclear reactors by 2022. The stock has since recovered most of the loss. Germany’s decision is the result of anti-nuclear sentiment in the wake of the Japanese earthquake and tsunami, which damaged the Fukushima nuclear plant and allowed radiation to escape. As well, German Chancellor Angela Merkel’s centre-right Christian Democrats lost seats to the Green Party in recent state elections. Right now, nuclear reactors supply about a quarter of Germany’s electricity. It’s doubtful that Merkel can replace that production with wind and solar. The country is more likely to import more electricity from France, which relies on nuclear power for about 80% of its electricity generation....

The long-term outlook for China and India, and for Chinese and Indian stocks, is bright. And one of the best ways for you to tap into that growth is through low-fee exchange-traded funds (ETFs). ISHARES S&P INDIA NIFTY 50 INDEX FUND $28.21 (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 Reliance Industries (conglomerate), 9.7%; Infosys Technologies (software), 8.1%; ICICI Bank, 7.6%; ITC Ltd. (conglomerate), 6.2%; Housing Development Finance, 5.4%; Larsen & Toubro Ltd. (conglomerate), 5.3%; HDFC Bank, 5.2%; State Bank of India, 3.6%; Tata Consultancy Services (information technology), 3.5%; and Bharti Airtel (wireless), 2.7%....

PENN WEST PETROLEUM LTD. $24.65 (Toronto symbol PWT; Shares outstanding: 447.6 million; Market cap: $11.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.4%) is one of North America’s largest oil and gas producers. The company produces an average of 166,135 barrels of oil equivalent per day (weighted 63% to oil and 37% to natural gas). In the three months ended March 31, 2011, cash flow per unit fell 4.9%, to $0.77 from $0.81. That’s mostly because Penn West sold properties, and brought fewer new wells into production. The company has a 50/50 joint venture with Japan’s Mitsubishi Corp. to develop Penn West’s shale-gas properties in B.C.’s Cordova Embayment area. The joint venture will also develop some of Penn West’s conventional-gas properties in the Wildboy area of northeastern B.C. Mitsubishi will spend $850 million to earn its 50% interest....

PEMBINA PIPELINE CORPORATION $24.55 (Toronto symbol PPL; Shares outstanding: 163.8 million; Market cap: $4.1 billion; TSI Network Rating: Extra Risk; Dividend yield: 6.4%; www.pembina.com) owns nine pipeline systems with a total length of over 8,000 kilometres. These pipelines bring oil and gas from fields in northeastern B.C. and western and northern Alberta to refineries, or feed into major pipelines, such as the Enbridge Pipeline System. It also owns the Syncrude, Horizon and Cheecham pipelines, which pump crude oil from the Alberta oil sands. As well, it holds a 50% stake in the Fort Saskatchewan Ethylene Storage Limited Partnership. It also owns the Cutbank Complex, a network of natural-gas gathering and processing facilities. In the three months ended March 31, 2011, Pembina’s cash flow rose 12%, to $74.5 million, or $0.45 a share, from $66.5 million, or $0.41 a share, a year earlier....

GASFRAC Energy Services, $10.37, symbol GFS on Toronto (Shares outstanding: 42.1 million; Market cap: $598.4 million; www.gasfrac.com), is a Calgary-based oil-and-gas service company. GASFRAC mainly provides liquefied petroleum gas (LPG) fracturing services to oil and gas companies in Canada and the U.S. GASFRAC changed its name from Kierland Capital, and began trading on the Toronto Exchange as GASFRAC on August 12, 2010. Hydraulic fracturing, or “fracking,” involves pumping water and chemicals into rock formations that contain oil or natural gas. This fractures the rock and releases the oil and gas. The difference with GASFRAC is that it uses gelled LPG instead of conventional fracturing fluids. The company believes its gelled LPG extracts more oil and gas than conventional fluids, and saves on fluid costs and fracture cleanup....

Flint Energy Services Ltd., $13.87 (Toronto symbol FES; Shares outstanding: 46 million; Market cap: $629.9 million; www.flintenergy.com), provides transportation, manufacturing, construction and maintenance services to the oil and gas industry in western North America. In the three months ended March 31, 2011, Flint’s revenue fell 22.8%, to $326.8 million from $423.2 million. The company lost $4.5 million, or $0.10 a share. That was much worse than the consensus estimate of a profit of $0.10 a share. A year earlier, the company earned $18.0 million, or $0.39 a share. The declines came partly from poor weather and delayed project start-ups. However, the lower results were mainly caused by the company’s failure to replace all of its expiring contracts with new ones....

AEROPOSTALE INC., $19.08, symbol ARO on New York, is a mall-based retailer of casual clothing and accessories. The company has 974 Aeropostale stores in the U.S., Canada and Puerto Rico. It mainly sells its clothing to 14-to-17-year-olds. Aeropostale’s 57 “P.S. from Aeropostale” stores in the U.S. are aimed at seven-to-12-year-old elementary-school children. In the three months ended April 30, 2011, Aeropostale’s sales rose 1.2% to $469.2 million from $463.6 million. Same-store sales declined 7%, compared with an increase of 8% a year earlier. Sales from the company’s e-commerce business jumped 18.5%, to $28.2 million from $23.8 million. Despite the higher sales, Aeropostale’s earnings dropped 63.9%, to $16.4 million from $45.4 million a year earlier. During the quarter, the company bought back 4.2 million of its shares for $100.1 million. Due to fewer shares outstanding, earnings per share fell 58.3%, to $0.20 from $0.48....

Russel Metals, symbol RUS on Toronto, is one of North America’s largest metal distribution companies. Russel has three divisions: metals service centres (55% of sales) sells carbon steel and non-ferrous metals; energy tubular products (34%) sells tubular products to the energy industry in Western Canada and the U.S.; and steel distributors (11%) sells steel in large volumes, mainly to other metals distributors and original equipment manufacturers in Canada and the U.S. The Canadian dividend stock’s quarterly payout is $0.274 a share. That gives the shares a 4.5% yield on an annualized basis. In the three months ended March 31, 2011, Russel earned $33 million, or $0.55 a share. That’s up sharply from $9.1 million, or $0.15 a share, a year earlier....

Husky Energy Inc., $28.22, symbol HSE on Toronto (Shares outstanding: 897.2 million; Market cap: $25.3 billion; www.huskyenergy.com), is an integrated oil and gas company. Hong Kong-based billionaire Li Ka-Shing owns 70.5% of Husky’s shares. Husky produces conventional oil and gas across western Canada, as well as heavy oil (a heavy, black viscous oil) at Lloydminster, Saskatchewan, and from the oil sands at Tucker, Alberta. Husky also has major holdings in eastern Canada, including interests in Newfoundland’s Terra Nova and White Rose offshore oil fields. Apart from its exploration and production activities, Husky owns a number of refineries, including a light-oil refinery at Prince George, B.C., and an asphalt refinery at Lloydminster, where it also has a heavy-oil upgrader. (Heavy-oil upgraders take heavy oil and process it into high-quality conventional crude oil.)...