oil prices

RUSSEL METALS, $30.09, symbol RUS on Toronto, rose over 9% this week after it reported higher revenue and earnings. In the three months ended June 30, 2008, its profits nearly tripled to $78.8 million or $1.25 a share from $29.3 million or $0.47 a share a year earlier. Earnings exceeded consensus expectations of $1.16 a share. Revenues rose 31.2%, to $856.3 million from $652.8 million. In the latest quarter, higher steel prices and improved same-store volumes boosted sales at its metals service centers by 34%. The metals service centers account for 58% of Russel’s revenues and 60% of its profits. Strong U.S. energy operations and growing Alberta oil sands business helped sales of energy tubular products (28% of total sales), which rose 41%. The company will pay a special dividend of $0.05 a share on September 15, 2008. That’s in addition to its regular $0.45 quarterly dividend, which implies an annual yield of 6.0%....

STATE STREET CORP. $72 (New York symbol STT; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 431.3 million; Market cap: $31.1 billion; WSSF Rating: Average) earned $570 million in the second quarter of 2008, up 55.7% from $366 million a year earlier. Most of that gain was due to State Street’s acquisition of Investors Financial Services Corp. in July 2007 for $4.2 billion in stock. Due to more shares outstanding, earnings per share in the quarter grew just 30.8%, to $1.40 from $1.07. Revenue rose 42.1%, to $2.7 billion from $1.9 billion. The company’s fee income varies with the value of the assets it manages. Despite the recent stock market downturn, assets under management fell just 2.1%, to $1.89 trillion at June 30, 2008 from $1.93 trillion a year earlier, due to its larger client base. State Street is a buy....

Despite the bear market underway in the U.S., the resources boom continues here in Canada. Some investors think it will keep on rising indefinitely, due to slower but continuing growth in India and China. Resources prices may be headed much higher in years and decades to come, but they remain cyclical. That means you’ll see periodic collapses along the way. We see signs that high oil prices are having the predictable effect of cutting into demand....

ARC ENERGY TRUST $32.88 (Toronto symbol AET.UN; SI Rating: Speculative) produces oil and gas in western Canada. In the three months ended March 31, 2008, ARC’s revenue rose 32.5%, to $407.9 million from $307.8 million. Cash flow per unit rose 18.1%, to $0.98 from $0.83. The rise in cash flow came largely from higher oil prices. ARC’s average daily production of 66,976 barrels of oil per day equivalent is weighted 49% toward oil and 51% natural gas. In the latest quarter, its average realized price for oil was $89.72 U.S., up 47.6% from $60.79 a year earlier. Natural gas was $7.80 U.S., up slightly from $7.75....

GENERAL MILLS INC. $61 (New York symbol GIS) has raised its quarterly dividend 9.6%, from $0.3925 a share to $0.43. The new annual rate of $1.72 yields 2.8%. Buy. TUPPERWARE BRANDS CORP. $36 (New York symbol TUP) uses resin from oil to make its plastic food containers. So far, the company’s low-cost direct marketing force has helped it offset rising oil prices. As well, strong demand for beauty products continues to fuel earnings. However, Tupperware’s large overseas operations (85% of sales) make it vulnerable to any rise in the U.S. dollar. Hold. CANON INC. ADRs $51 (New York symbol CAJ) earned $0.85 per ADR in the three months ended March 31, 2008, down 15% from $1.00 a year earlier. Most of the drop was due to a change in accounting policy, unfavorable foreign currency rates and higher raw material costs. However, demand for Canon’s core products such as digital cameras and printers is still strong. Buy.

APACHE CORP. $133 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 333.6 million; Market cap: $44.4 billion; WSSF Rating: Average) explores for and produces oil and natural gas, mainly in North America. The company avoids long-term supply or hedging contracts, so it can sell its oil at rising current prices. In the three months ended March 31, 2008, earnings per share jumped to $2.99 from $1.48 a year earlier. These figures exclude unusual items. Cash flow per share rose 53.6%, to $5.53 from $3.60. Revenue grew 60.0%, to $3.2 billion from $2.0 billion. However, Apache relies on acquisitions to replenish its reserves. Higher oil prices could make future acquisitions more expensive....

CHEVRON CORP. $99 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.1 billion; Market cap: $207.9 billion; WSSF Rating: Above average) is the second-largest integrated oil company in the United States after ExxonMobil. Exploration and production supply just 25% of Chevron’s revenue, but nearly 80% of its profits. Asia accounts for about 40% of its production, followed by the U.S. (30%), Africa (15%) and other countries (15%). Chevron’s production is about 65% oil, and 35% natural gas. The company has proved reserves of 10.8 billion barrels of oil equivalent. The remaining 75% of Chevron’s revenue comes mainly from its 10 refineries, petrochemical plants and 25,100 retail gas stations, which operate under the Chevron, Texaco and Caltex brands....

We generally prefer large, integrated oil companies such as Chevron to regular oil producers like Apache, particularly in light of the steep jump in oil prices in the past few months. That’s because its diverse sources of cash flow, from refineries, gas stations and other operations give Chevron greater stability and cut its risk. As well, these assets will help Chevron stay profitable if oil prices fall. CHEVRON CORP. $99 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.1 billion; Market cap: $207.9 billion; WSSF Rating: Above average) is the second-largest integrated oil company in the United States after ExxonMobil....

OILEXCO INC., $17.94, symbol OIL on Toronto, rose as much as 11% last Friday after it discovered significant oil and natural gas bearing zones at its Moth project in Britain’s central North Sea. Drilling at the Moth well went to a depth of 14,616 feet. The well intersected a 605-foot-thick oil and gas-bearing reservoir and a second, deeper 219-foot reservoir. Test operations on the primary 605-foot target will begin immediately. Oilexco is the operator of the Moth project and holds a 50% interest. Its partners on the project are BG Group, Hess Oil and British Petroleum. The Moth discovery is Oilexco’s second major discovery in 2008. In February, it struck a new oil bearing zone at its 40%-owned Huntington field in Britain’s central North Sea. With strong oil prices for its rising Brenda/Nicol production in the North Sea, Oilexco’s outlook is positive. The company also continues to explore aggressively at its other projects in the North Sea, in addition to the Huntington and Moth fields....

CRESCENT POINT ENERGY TRUST $36.75 (Toronto symbol CPG.UN; SI Rating: Speculative) produces oil and gas in western Canada. In the three months ended March 31, 2008, Crescent Point’s revenue rose 114.1%, to $276 million from $128.9 million. Cash flow per unit rose 52.4%, to $1.28 from $0.84. The rise in revenue and cash flow came largely from increased production and higher oil prices....