oil prices

Economic forecasts attract far more investor attention than they deserve, in view of the meagre advantage, if any, they provide in terms of investing advice. That’s especially true today in light of the debt crisis that keeps flaring up in Europe and the uncertainty that lingers in the U.S. Small wonder, then, that most experienced, successful investors feel skeptical, if not downright cynical, about economic forecasts, for three reasons....

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....

ENCANA CORP. $21 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $15.4 billion; Price-to-sales ratio: 1.9; Dividend yield: 3.9%; TSINetwork Rating: Average; www.encana.com) is down 29% since the start of 2011. The company is partly a victim of its own success. Encana was an early pioneer in the development of unconventional gas reserves such as shale gas, which is natural gas that is trapped in rock formations. New technologies that Encana helped develop have cut the cost of extracting shale gas, which has let other companies expand their own shale gas production. This has greatly added to the supply of natural gas, and pushed down gas prices. However, like most commodities, gas prices are inherently volatile. In particular, one cold winter could quickly push up prices....

EUROPEAN GOLDFIELDS, $9.65, symbol EGU on Toronto, has attracted a number of investments from Qatar Holdings LLC, a division of Qatar’s sovereign wealth fund, to develop its mines. Qatar Holdings has given European Goldfields a seven-year, $600 million U.S. loan. In addition, Qatar Holdings is buying a 9.9% stake in European Goldfields from Greek building firm Aktor Construction, and has an option to buy another 5.3%. European Goldfields will also issue 40.4 million warrants to Qatar Holdings at an exercise price of $9.08 a share. If Qatar Holdings exercises the warrants, it could increase its stake in European Goldfields to about 29%. It would also give European Goldfields an additional $366.8 million in development funding....

PENGROWTH ENERGY CORP. $9.21 (Toronto symbol PGF; Shares outstanding: 303.2 million; Market cap: $3.0 billion; TSINetwork Rating: Average; Dividend yield : 9.1 %; www.pengrowth.com) produces oil and natural gas in western Canada and off the Nova Scotia coast. Its production is weighted 50% to oil and 50% to gas. Even with higher oil prices, Pengrowth’s cash flow per share fell 23.3% in the three months ended June 30, 2011, to $0.46 from $0.60 a year earlier. However, that was mainly because wet weather, pipeline outages and forest fires in northern Alberta cut its average daily production by 4.3%, to 72,288 barrels of oil equivalent (including natural gas) from 75,572 barrels. Pengrowth is using some of the cash from its conventional properties to expand into more risky areas, such as oil sands and shale gas. Still, these projects have strong long-term potential, and their cash flows will help Pengrowth maintain its high 9.1% dividend yield....

We still think investors will profit most — and with the least risk — by buying shares of well-established, dividend-paying stocks with strong business prospects. These are companies that have strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace. Stocks like these give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of low p/e’s (the ratio of a stock’s price to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects....

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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BELLATRIX EXPLORATION $4.29 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266-8670; www.bellatrixexploration.com; Shares outstanding: 114.2 million; Market cap: $448.9 million; No dividends paid) produces oil and natural gas in Alberta, B.C. and Saskatchewan. Gas makes up about 62% of its output; the remaining 38% is oil. In the three months ended June 30, 2011, Bellatrix’s production rose 51.8%, to 11,643 barrels of oil equivalent per day (including natural gas) from 7,671 barrels. The company’s drilling success continues to add to its production: in the first half of 2011, it drilled 23 wells with a 100% success rate. Cash flow per share doubled in the latest quarter, to $0.22 from $0.11. The increased production and higher oil prices were the main reasons for the gains. The company’s long-term debt is $93.0 million, or a low 20.7% of its market cap....

A long-time reader and portfolio-management client recently asked a question that other investors may wonder about in today’s turbulent markets. He wrote, “You constantly remind members to have a balanced portfolio and strategy for long-term success when investing. But when do you take profits? You have mentioned a couple of times to sell, such as when a stock makes up too much of your total portfolio, or if a company shows questionable management or business decisions. My main question is why don’t we sell when stocks move up and there are profits to be had?” I often asked myself that question in my first decade or two in the investment business. In hindsight, it always seems easy to spot market tops and market bottoms. But trying to spot those tops and bottoms as they occur is harder. I investigated all sorts of market theories and signals that purport to tell you how to do it. They all seem to have “worked,” at least some of the time. But none worked consistently....

SUNCOR ENERGY INC. $30 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $48.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.5%; TSINetwork Rating: Average; www.suncor.com) became Canada’s largest integrated oil company in 2009, when it merged with Petro-Canada. Suncor gets 60% of its production from its oil sands projects in Alberta. The remaining 40% comes from conventional oil and natural gas properties. It also operates four refineries and 1,500 gas stations under the Petro-Canada banner. ...