oil prices

A weak economy is prompting more consumers to choose cheaper generic brands over brand names. That’s dampened the profits of these four leading consumer-products firms. However, they are doing a good job of cutting their costs. This gives them the ability to lower their prices without hurting their profit margins. PROCTER & GAMBLE CO. $57 (New York symbol PG; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 2.9 billion; Market cap: $165.3 billion; Price-to-sales ratio: 2.1; WSSF Rating: Above Average) is one of the world’s largest makers of household and personal-care products. Some of its top brands are Tide detergent, Head & Shoulders shampoo, Pampers diapers and Crest toothpaste. Procter is selling some of its slower-growing businesses and shifting its focus to those with better long-term prospects. In November 2008, it sold its Folgers coffee business for a $2-billion gain. Last August, it agreed to sell its prescription-drug division for $3.1 billion. The sale should close later this year....

ENCANA CORP. $58 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.1 million; Market cap: $43.6 billion; Price-to-sales ratio: 1.7; WSSF Rating: Average) will split itself into two separate companies. One will keep the EnCana name, and will focus on unconventional natural gas. The other will operate as Cenovus Energy Inc., and will specialize in oil-sands projects, oil refineries and conventional natural gas. The new EnCana will account for about two-thirds of the company’s current production and reserves. Cenovus will account for the remaining third. EnCana had hoped to complete the split in early 2009, but the stock-market decline and tight credit markets would have made it difficult for the two new, smaller companies to raise capital to fund new projects. Now that conditions have improved, EnCana has decided to go ahead with the split. In September, Cenovus sold $3.5 billion in new long-term notes....

ADOBE SYSTEMS INC., $32.95, Nasdaq symbol ADBE, will buy Omniture Inc. (Nasdaq symbol OMTR), which makes software that measures and analyzes web-site traffic. The deal will close later this year. Omniture’s software tracks the pages that site visitors view, as well as the links they click. Omniture’s 5,000 clients use this information to improve their sites, and to help determine how much to charge advertisers. Adobe makes web-design software, which it plans to modify to take advantage of Omniture’s online-marketing expertise. This should help Adobe’s customers increase their ad revenues....

SUNCOR ENERGY INC., $38.59, Toronto symbol SU, announced this week that it is planning to sell some of its natural-gas operations. Most of these properties belonged to Petro-Canada, which Suncor bought on August 1. Natural-gas prices fell to around $2.50 U.S. per thousand cubic feet in early September, but have since rebounded to $3.78 U.S. That’s still well below their peak of $12 U.S., which they hit in July 2008. Suncor hopes to sell all of its natural-gas properties by the end of 2010, but will wait to see if gas prices keep rising before it finalizes any deals. The company is planning to invest the proceeds in its oil-sands operations, which will make up 70% of its business after it sells the natural-gas assets. Suncor’s other oil properties, as well as its refineries and gas stations, will account for the remaining 30%....

CIMAREX ENERGY $43.10 (New York symbol XEC; SI Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 83.4 million; Market cap: $3.6 billion) is an oil and gas explorer and producer that mainly operates in the U.S. Natural gas makes up 70% of its production. Cimarex has properties in western Oklahoma; Kansas; the upper Gulf Coast regions of Texas and southern Louisiana; the Permian Basin area of western Texas; and the Gulf of Mexico. In the three months ended June 30, 2009, the company produced an average of 453.9 million cubic feet of natural gas per day. That’s down 7% from a year earlier. Cimarex slowed drilling and production to await higher gas prices....

Natural-gas prices are up 48.3%, to $3.56 U.S. per thousand cubic feet, after falling to a low of $2.40 in early September. Producers have cut back on drilling in response to lower prices. This has lowered inventories. As well, an improving economy is lifting demand. Gas-weighted Cimarex and Devon trade at reasonable multiples to their forecast cash flows, based on today’s prices. Both have low debt and steady development spending. This puts them in a good position to prosper, even if natural-gas prices falter. CIMAREX ENERGY $43.10 (New York symbol XEC; SI Rating: Extra Risk) (303-295-3995; www.cimarex.com; Shares outstanding: 83.4 million; Market cap: $3.6 billion) is an oil and gas explorer and producer that mainly operates in the U.S. Natural gas makes up 70% of its production....

ENCANA CORP., $63.52, Toronto symbol ECA, rose 7% on Friday after the company announced that it will split itself into two separate companies. One will keep the EnCana name, and will focus on unconventional natural gas. The other will operate as Cenovus Energy Inc., and will specialize in oil-sands projects, oil refineries and conventional natural gas. The new EnCana will account for about two-thirds of the company’s current production and reserves. Cenovus will account for the remaining third. EnCana had hoped to complete the split in early 2009, but the stock-market decline and tight credit markets would have made it difficult for the two new, smaller companies to raise capital to fund new projects. Now that conditions have improved, EnCana has decided to go ahead with the split....

SNC-LAVALIN GROUP INC. $49 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151 million; Market cap: $7.4 billion; Price-to-sales ratio: 1.0; SI Rating: Average) hopes to win a $255 million U.S. contract to install gas turbines in three Iraqi electrical-power plants....

An economic recovery will increase CP Rail’s shipments of forest products, coal, potash, grain, cars and auto parts. This, in turn, will lift its revenue and profits. Meanwhile, CP has aggressively cut its costs. This should further add to profits when shipments rebound. CANADIAN PACIFIC RAILWAY LTD. $49.78 (Toronto symbol CP; Shares outstanding: 168.1 million; Market cap: $8.4 billion; SI Rating: Above Average) ships freight over a rail network between Montreal and Vancouver. In the United States, CP subsidiaries connect its Canadian lines to major hubs in the midwest and northeast. In the three months ended June 30, 2009, CP Rail’s revenue fell 16.2%, to $1.02 billion from $1.22 billion. Earnings rose 1.7%, to $157.3 million from $154.7 million. Earnings per share fell 7.0%, to $0.93 from $1.00, on more outstanding shares....

The price of natural gas has fallen to around $2.50 U.S. per thousand cubic feet, a seven-year low. The price decline has been driven by lower industry demand during the recession. As well, consumers have cut their air-conditioner use because of cooler-than-normal summer weather in central Canada and the northeastern U.S. Another major factor is a buildup in gas inventories, to the point that the North American industry is running out of storage. According to the U.S. Energy Information Administration (EIA), natural-gas inventories are at 3.204 trillion cubic feet. That’s 21.3% higher than a year ago....