oil prices

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, but they are unlikely to pass their 2008 highs any time soon. We think oil prices could rise further if the global economy continues to recover, as we expect. As well, oil and natural-gas stocks can provide your portfolio with a good hedge against inflation. Even so, we continue to advise against overindulging in oil and gas stocks. That’s because the Resource sector (including oil and natural gas) is highly volatile, and no one can accurately predict future commodity prices....

ALIMENTATION COUCHE-TARD INC., $19.22, symbol ATD.B on Toronto, will now direct its takeover offer to shareholders of Casey’s General Stores (symbol CASY on Nasdaq). In April, Couche-Tard directed its offer at Casey’s management and board of directors, hoping to win their approval. However, Casey’s rejected Couche-Tard’s all-cash, $36-a-share bid as inadequate. Casey’s is now trading at $35.66, which is just 0.9% below Couche-Tard’s offer. That suggests investors may not be expecting a significantly higher bid. Couche-Tard also plans to nominate nine candidates to replace Casey’s current board of directors....

Storm Exploration, $10.29, symbol SEO on Toronto (Shares outstanding: 45.8 million; Market cap: $471.2 million), produces and explores for oil and natural gas. Its production is weighted 84% to natural gas and 16% to oil. Calgary-based Storm has properties in the Peace River Arch area of northwestern Alberta and northeastern B.C., and the Horn River Basin in northeastern B.C. In the three months ended March 31, 2010, Storm’s cash flow per share was $0.38, up 26.7% from $0.30 a year earlier. Revenue rose 13.2%, to $29.2 million from $25.8 million. The company’s total debt of $99.1 million is a low 21.0% of its market cap....

NEWELL RUBBERMAID INC. $16 (New York symbol NWL; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 278.2 million; Market cap: $4.5 billion; Price-to-sales ratio: 0.8; Dividend yield: 1.3%; WSSF Rating: Average) makes plastic storage bins and other consumer items. Its top brands include Rubbermaid, Sharpie and Levolor. The company went through a deep setback in sales and earnings in 2008. In response, it closed plants, merged warehouses and sold low-margin businesses, particularly those whose products require large amounts of plastic resins. These resins come from oil, so selling these businesses cuts Newell’s sensitivity to volatile oil prices....

QUAKER CHEMICAL CORP. $25 makes lubricants and specialty chemicals that protect mechanical parts from corroding. Oil is its main raw material, so it is gaining from lower oil prices. Rising industrial activity in developing markets such as China, Brazil, India and Russia is also spurring its growth. As a result, Quaker raised its quarterly dividend by 2.2%. It now yields 3.8%. Buy. CEDAR FAIR L.P. $13 recently cancelled a friendly, $11.50-a-unit takeover offer after its investors complained the price was too low. The amusement-park operator now aims to strengthen its balance sheet with a refinancing, including issuing $500 million in long-term notes. However, its total debt of $1.7 billion is still a high 2.4 times its market cap. Hold. BUCKEYE PARTNERS L.P. $56 continues to raise its quarterly distributions. The oil-pipeline operator will pay $0.95 a unit in the second quarter of 2010, up 5.6% from the first quarter. The new annual rate of $3.80 yields 6.8%. Best Buy....

BELLATRIX EXPLORATION $2.86 (Toronto symbol BXE; SI Rating: Speculative) (403-266-8670; www.bellatrixexploration.com; Shares outstanding: 92.5 million; Market cap: $264.1 million; No dividends paid) has established oil and gas production in Canada, one of the world’s safest jurisdictions. Bellatrix produces oil and natural gas in Saskatchewan and west-central Alberta. Gas makes up about 74% of its output. In the three months ended March 31, 2010, Bellatrix’s production fell 27.4%, to 7,248 barrels of oil equivalent per day (including natural gas) from 9,981 barrels a year earlier. That’s mainly because Bellatrix cut its capital spending a year earlier to conserve cash and pay down debt. It also suspended its monthly distribution with the March 2009 payment....

SUNCOR ENERGY INC. $33 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $52.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.2%; SI Rating: Average) became Canada’s largest oil company when it bought Petro-Canada (old symbol PCA) on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor shares for each Petro-Canada share they held. Conventional oil and natural gas account for about 60% of the merged company’s production. The remaining 40% comes from oil sands. That includes its 12% stake in the massive Syncrude oil-sands development. Suncor also operates four refineries and over 1,800 retail gas stations under the Petro-Canada banner. The company wants to expand its oil sands operations until they account for about 70% of its production. To that end, it is selling some conventional and offshore properties that belonged to Petro-Canada. However, Suncor will probably keep Petro-Canada’s projects in Libya and Syria....

Suncor is new to our Conservative Growth Portfolio. We added it last August after it bought Petro-Canada, one of our long-time recommendations. We avoided Suncor before the merger. Its focus on high-cost oil-sands production made it more volatile than other high-quality oil companies, and left it with more to lose if oil prices fell. However, the Petro-Canada takeover diversified Suncor’s operations. As well, cost savings from the merger will help it fund new oil-sands projects and pay down debt. SUNCOR ENERGY INC. $33 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $52.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.2%; SI Rating: Average) became Canada’s largest oil company when it bought Petro-Canada (old symbol PCA) on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor shares for each Petro-Canada share they held....

PRECISION DRILLING TRUST $7.13 (Toronto symbol PD.UN; Aggressive Growth Portfolio, Resource sector; Units outstanding: 275.6 million; Market cap: $2.0 billion; Price-to-sales ratio: 1.5; No dividends paid since February 2009; SI Rating: Extra Risk) provides contract-drilling services to oil and gas producers. Precision owns 351 drilling rigs, including 202 in Canada, 146 in the U.S. and three in Mexico and other countries. Precision operated an average of 193 rigs in the three months ended March 31, 2010, up 15.6% from 167 a year earlier. That’s mainly because improving oil prices have driven up drilling activity. However, the trust negotiated new rates with some of its customers before the winter drilling season started, so it was unable to take full advantage of the higher demand. As a result, its revenue fell 16.8% in the quarter, to $373.1 million from $448.4 million....

MOLSON COORS CANADA INC. $43 is paying $40 million for 51% of a new joint venture with Chinese brewer Hebei Si’hai Beer Company (all amounts except share price in U.S. dollars). This will help Molson Coors make its Coors Light beer more available in China....