oil prices

BIRCHCLIFF ENERGY $13.66 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Units outstanding: 127.7 million; Market cap: $1.7 billion: No dividends paid) develops, produces and explores for oil and natural gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 76% of Birchcliff’s production is natural gas. The remaining 24% is oil. In the three months ended March 31, 2011, Birchcliff’s production jumped 70.5%, to 17,742 barrels of oil equivalent per day (including natural gas) from 10,407 barrels a year earlier. Cash flow per share rose 52.9%, to $0.26 from $0.17.The production increase and higher oil prices were the main reasons why Birchcliff’s cash flow rose....

TRANSCONTINENTAL INC., $14.65, Toronto symbol TCL.A, is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. It also publishes newspapers and magazines, and has over 300 web sites. The stock rose 3% after the company reported better-than-expected earnings this week. Transcontinental also raised its dividend for the second time in the past six months. In its 2011 second quarter, which ended April 30, 2011, Transcontinental’s revenue rose 0.9%, to $514.7 million from $510.0 a year earlier. Excluding unusual items, earnings rose 17.6%, to $40.1 million from $34.1 million a year earlier. Earnings per share rose 16.7%, to $0.49 from $0.42, on more shares outstanding. That beat the consensus estimate of $0.44 a share....

DELPHI ENERGY, $2.56, symbol DEE on Toronto, explores for oil and gas in Alberta and B.C. Natural gas makes up 74% of its daily output; the remaining 26% is oil. In the three months ended March 31, 2011, Delphi’s production rose 8.0%, to an average of 8,259 barrels of oil equivalent (including natural gas) per day from 7,647 barrels a year earlier. Delphi’s cash flow rose 2.0% in the quarter, to $15.1 million from $14.8 million. Higher production and oil prices were the main reason for the gain. The company’s operating costs also fell. Delphi sold 3.2 million shares to raise $9.0 million in the quarter. Due to more shares outstanding, cash flow per share fell 13.3%, to $0.13 a share from $0.15....

In an effort to dampen speculation, the CME Group, which owns the NYMEX futures exchange, recently raised the minimum amount of money traders must invest when buying crude-oil futures contracts. Even so, we feel oil prices will remain volatile in light of ongoing political unrest in the Middle East.

To lower your risk, we continue to advise that you stick with well-established oil producers like Chevron....

We continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. For instance, after rising to $115 U.S. a barrel, oil dropped 16% in the first week of May 2011, to $97 U.S., on fears that the global economic recovery may be stalling. That’s why investors should stick with well-established oil stocks with high-quality reserves and rising production. ...

Three of Canada’s big-five banks, BANK OF NOVA SCOTIA, $58.49, Toronto symbol BNS, CANADIAN IMPERIAL BANK OF COMMERCE, $84.40, Toronto symbol CM, and TORONTO-DOMINION BANK, $84.15, Toronto symbol TD, have joined a new consortium called Maple Group Acquisition Corp. Other members of this group include National Bank and five major pension funds. Maple wants to buy a controlling interest in TMX Group Inc. (Toronto symbol X), which operates the Toronto Stock Exchange, the TSX Venture Exchange and the Montreal Exchange. In February 2011, TMX accepted a takeover offer from the London Stock Exchange Group. Under the terms of that offer, TMX shareholders would own 45% of the combined company, which would be the world’s second-largest stock exchange by market cap....

RUSSEL METALS, $24.55, symbol RUS on Toronto, earned $33 million, or $0.55 a share, in the three months ended March 31, 2011. That’s up sharply from $9.1 million, or $0.15 a share, a year earlier. Revenue rose 24.8% to $657.7 million from $526.8 million. The company benefited from higher sales volumes and metals prices, and improved profit margins. Russel saw revenue gains from all three of its divisions: The steel distribution division’s revenue rose 40%, due to higher flat-rolled steel prices. Metal services revenue rose 30% on higher sales volumes and steel prices. The energy tubular products division, which supplies pipes for oil and gas exploration and development, saw its revenue rise 14% on higher demand for oil and gas rigs....

We continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. For instance, after rising to $115 U.S. a barrel, oil dropped 16% in the first week of May 2011, to $97 U.S., on fears that the global economic recovery may be stalling. That’s why investors should stick with well-established oil producers with high-quality reserves and rising production, such as these three. All three should also benefit from the election of the Conservative majority government, which has promised not to impose onerous new carbon taxes or environmental regulations on oil-sands operators....

This week’s election of a majority Conservative government is a positive development for most of the stocks we recommend. That’s mainly because next year’s cut in the corporate tax rate will proceed as planned. As well, the Conservatives will not impose onerous new carbon taxes or environmental regulations on oil-sands operators such as Suncor (see below). Emera should also benefit, as Ottawa will continue to guarantee loans related to its new power plant in Labrador. SUNCOR ENERGY INC., $40.26, Toronto symbol SU, merged with Petro-Canada in 2009 to become Canada’s largest integrated-oil company. In the three months ended March 31, 2011, Suncor’s earnings rose 32.0%, to $1.0 billion from $779 million a year earlier. Earnings per share rose 30.0%, to $0.65 from $0.50. If you exclude unusual items, such as gains and losses on asset sales, Suncor’s earnings per share jumped 291.7%, to $0.94 from $0.24. On this basis, the latest earnings beat the consensus estimate of $0.80 a share....

ENCANA CORP $31.24 (Toronto symbol ECA; Shares outstanding: 735.4 million; Market cap: $23.0 billion; TSINetwork Rating: Average; Dividend yield: 2.6%; www.encana.com) had cash flow of $1.29 a share in the three months ended March 31, 2011 (all amounts except share price in U.S. dollars). That’s down 17.3% from the company’s year-earlier cash flow per share of $1.56 a share. Revenue fell 53.0%, to $1.7 billion from $3.5 billion. Lower natural gas prices were the main reason for the drop in revenue and cash flow. (Natural gas accounts for 95% of Encana’s production.) The company’s average selling price for gas fell 18.6% during the quarter, to $5.00 per thousand cubic feet from $6.14 a year earlier. The price decline offset a 2.1% rise in the company’s total production....