oil prices

BANK OF MONTREAL, $43.80, Toronto symbol BMO, earned $358 million in its second quarter, which ended April 30, 2009. That’s down 44.2% from $642 million a year earlier. Earnings per share fell 51.2%, to $0.61 from $1.25, on more shares outstanding. If you exclude writedowns of securities it holds and severance costs related to the layoff of 1,100 employees, the bank would have earned $0.91 a share. That beat analysts’ forecasts of $0.90, and the stock gained over 5%. The recession forced Bank of Montreal to set aside $372 million for bad loans in the latest quarter, up 146.4% from $151 million a year earlier. Still, that’s down 13.1% from $428 million in the first quarter. Moreover, the staff cuts, which amount to 3% of the bank’s total workforce, should save at least $118 million a year....

PENGROWTH ENERGY TRUST $8.64 (Toronto symbol PGF.UN) reported that its cash flow for the first quarter of 2009 fell 57.5%, to $0.37 a unit from $0.87 a year earlier. Higher interest expenses, performance bonuses and royalties were the main reasons for the drop. Still, its $1.20 distribution rate seems secure, and yields 13.9%. Buy. IMPERIAL OIL LTD. $41 (Toronto symbol IMO) will make a final decision on whether to proceed with its 70%-owned Kearl Lake oil-sands project by the end of June. (Imperial’s parent, ExxonMobil Corp., owns the other 30%.) Lower oil prices have reduced labour and material costs. If it goes ahead, Kearl’s reserves should last 40 years. Best Buy. MOLSON COORS CANADA INC. $50 (Toronto symbol TPX.B) continues to profit from MillerCoors, last year’s joint venture that merged its U.S. brewing operations with those of SABMiller. Thanks to savings from combining bottling facilities and distribution networks, Molson Coors’ first-quarter earnings rose 75.2%. Best Buy.

Husky Energy, $30.84, symbol HSE on Toronto (Shares outstanding: 849.4 million; Market cap: $26.2 billion), is an integrated oil and gas company. Hong Kong-based billionaire Li Ka-Shing holds 70.6% of the company’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 oil fields. Overseas, Husky produces light oil and natural-gas liquids in the South China Sea and has exploration properties off the coast of Indonesia. These holdings include 100% of the huge Liwan natural-gas discovery, and an offshore field southeast of Hong Kong that could contain as much as six trillion cubic feet of natural gas. Husky also owns part of the Wenchang oil field in the South China Sea and the Madura BD gas development in Indonesia’s Madura Strait....

BP plc, $42.63, symbol BP on New York (Shares outstanding 3.1 billion; Market cap: $133.1 billion), is one of the world’s largest integrated-oil companies. BP’s shares currently yield 7.9%. The company’s chairman recently said that BP plans to continue paying this dividend rate, and at the same time maintain the company’s investments in growing its reserves and production. However, he did say that BP had to strike a balance between dividend payouts, investment in new oil-and-gas projects and maintaining its debt near current manageable levels. To conserve cash, BP has stopped buying back its own shares. BP doesn’t generate enough cash flow to pay for both dividends and investments below an oil price of $60 U.S. per barrel. Oil now trades at just over $50 U.S. a barrel. So, unless oil prices rise, BP will have to borrow money to meet all of its commitments and keep paying dividends....

The slowdown in the automotive industry has hurt the earnings of these four companies, which serve a number of auto-dependent customers. The potential bankruptcy of General Motors and Chrysler is also a risk factor. However, all four are leaders in their niche markets, which gives them special appeal. Their strong balance sheets will also help them weather the recession. We see all four as particularly attractive buys for long-term gains. GENUINE PARTS CO. $34 (New York symbol GPC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 159.4 million; Market cap: $5.4 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) distributes automotive replacement parts to over 4,700 independent outlets in North America. It also owns over 1,100 auto parts stores under the NAPA banner....

Two major U.S. refinery stocks are Tesoro and Valero. There are no purely Canadian refiners that we see as worthwhile investments. Valero Energy, $20.08, symbol VLO on New York (Shares outstanding: 516.3 million; Market cap: $10.4 billion), is the largest petroleum refiner in the United States. Valero owns a combined 16 refineries in the U.S., Canada and Aruba. It also has a network of about 5,800 retail outlets. Valero’s refinery throughput is about 3 million barrels a day. The recession and falling demand for gasoline have lowered Valero’s volumes. This, in turn, has hurt the company’s revenue and profits. However, falling gasoline prices have been offset by falling crude oil prices; by matching its crude oil purchases with its production, Valero has maintained steady profit margins. Moreover, Valero’s plants are among the industry’s most efficient, and demand will eventually improve, likely in 2010. Meanwhile, the shares yield 3.0%....

First Israel Fund, $8.40, symbol ISL on New York (Shares outstanding: 4.3 million; Market cap: $35.9 million), holds the largest capitalization Israeli stocks, such as Teva Pharmaceutical and Bank Hapoalim. Like other economies, the Israeli economy has slowed because of the global recession, although Israeli exports could gain from the Israeli shekel’s drop against the U.S....

LDK Solar Co., $7.29, symbol LDK on New York (Shares outstanding: 113.1 million; Market cap: $824.6 million), makes multicrystalline solar wafers, which are an important component of solar cells. LDK makes these wafers and sells them to solar-cell and solar-module makers around the world. (Solar modules, or a number of solar cells wired together, are commonly referred to as solar panels.) LDK Solar is based in Xinyu City, China. It first sold shares to the public at $27 each, and began trading on New York in May 2007. LDK has 6,200 employees....

GENNUM CORP., $4.80, Toronto symbol GND, fell 9% on Friday after it increased its friendly takeover bid for Ottawa-based Tundra Semiconductor Corp. (Toronto symbol TUN). Like Gennum, Tundra makes chips and components for computer networking hardware, like modems and routers. Gennum’s products also let TV broadcasters store, edit and transfer video signals without losing picture quality. Gennum has increased its bid by 30%, and is now offering $112 million in cash and stock for Tundra. Two-thirds of Tundra’s shareholders must vote in favour of the deal at a special meeting on May 8. If they do, Gennum plans to close the purchase by June 1....

J.P. MORGAN CHASE & CO., $33.26, New York symbol JPM, earned $2.1 billion in the first quarter of this year. That’s down 9.8% from $2.4 billion in the year-earlier quarter. Earnings per share fell 40.3%, to $0.40 from $0.67, on more shares outstanding. Still, the bank’s earnings beat analysts’ forecasts of $0.32 a share. Revenue rose 48.2% during the quarter, to $25 billion from $16.9 billion. Morgan’s purchase of Washington Mutual last September was a big reason for the gain. Because of this, Morgan’s average total deposits rose 62% from the prior year, to $345.8 billion. The number of chequing accounts jumped 126%. As well, Morgan’s investment-banking division posted higher revenue. This was driven in large part by higher fee income from underwriting new bonds, as well as trading gains. The recession continues to weigh on the bank’s loan portfolio. During the quarter, provisions for loan losses rose 94.3%, to $8.6 billion from $4.4 billion a year earlier. (These provisions are not actual loan losses, but accounting rules require banks to estimate their future loan losses and deduct these from their revenue.) Morgan raised its provisions for credit-card and home-equity loans; this was the main reason for the jump....