oil prices

APACHE CORP. $67 (New York symbol APA; Aggressive Growth Portfolio; Resources sector; WSSF Rating: Average) explores for and produces oil and natural gas in North America, the UK, Argentina, Australia and Egypt. Its reserves are roughly half oil and half natural gas. The company hedges just 10% of its production, which we feel is wise in today’s volatile energy environment. Not locking-in selling prices gives Apache more flexibility to adjust production to maximize profit. Apache likes to use acquisitions to expand its business and reserves. It recently acquired BP’s offshore operations in the Gulf of Mexico for $845 million. That’s down from an earlier price of $1.3 billion, since some investors exercised their options to purchase some of these fields....

SNC-LAVALIN GROUP INC. $32 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) is one of the world’s leading design and engineering companies, with operations in over 100 countries. It specializes in large public works projects like bridges and water treatment systems. The company is also a leading builder of electrical power plants and transmission systems. The recent rise in energy prices is good news for SNC, since many utilities are now looking for ways to cut consumption of oil and natural gas. High oil prices have also spurred interest in nuclear power plants. Another way SNC should benefit from high oil is from more public transit. SNC has designed and built mass transit systems in some of the world’s biggest cities....

SHAWCOR LTD. $25 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) makes sealants that protect oil and natural gas pipelines from rust and other forms of corrosion. The company also inspects and repairs pipelines, and makes specialty cables and wires. In the three months ended September 30, 2006, ShawCor’s earnings from continuing operations fell 52.2%, to $0.22 a share (total $16.6 million) from $0.46 a share ($34.7 million) a year earlier. However, the drop was entirely due to one-time items. The latest quarter included a $5.4 million charge related to ShawCor’s decision to scale down its operations in Nigeria due to political instability. The year-earlier earnings included an unusual $18.4 million tax gain. Revenue grew just 2.6%, to $245.3 million from $239.2 million, due to the timing of several major contracts. The recent rise in oil prices has spurred strong demand for ShawCor’s products and services, and the start-up of new contracts should increase its fourth quarter revenues....

Last year’s big run up in oil prices increased the operating costs of most industrial companies. But those that supply equipment and services to exploration firms have been among the biggest gainers in the past few months. Here are three industrial stocks that should continue to profit from high oil prices. However, only two are buys right now. SHAWCOR LTD. $25 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) makes sealants that protect oil and natural gas pipelines from rust and other forms of corrosion. The company also inspects and repairs pipelines, and makes specialty cables and wires....

PETRO-CANADA $50 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) operates major oil and natural gas projects in Western Canada and Newfoundland. Canada accounts for 75% of its total production. Petro-Canada has expanded its international presence in the past few years, and now gets 25% of its production from the North Sea, Algeria and Libya. Oil accounts for roughly two-thirds of total production, and natural gas accounts for the remaining third. It also operates refineries, and a nationwide chain of over 1,300 retail gas stations. In the third quarter of 2006, earnings before unusual items fell 8.1%, to $1.13 a share (total $564 million) from $1.23 a share ($638 million) a year earlier. The company had to shut down its Terra Nova offshore oil platform near Newfoundland for repairs, and production in the latest quarter fell 6%. (Petro-Canada owns 34% of Terra Nova and operates it.) However, higher oil prices raised cash flow per share 12.4%, to $2.17 from $1.93. Revenue grew 10.6%, to $5.2 billion from $4.7 billion....

Oil prices rose to close to $80 U.S. a barrel last summer, mainly due to tensions in the Mideast. But the price has dropped to below $60, as the slowdown in the United States economy cut demand and raised inventories. We’ve probably hit a new high plateau for oil prices, between $40 and $80. We feel conservative investors should have only modest commitments in oil and gas stocks. They should focus on well-established companies, such as these three. Their large reserves and diversified operations will let them profit from higher prices, and help shield them from the inevitable downturns. IMPERIAL OIL LTD. $42 (Toronto symbol IMO; Conservative Growth Portfolio, Resources sector; SI Rating: Average) is Canada’s largest oil company, with major operations in Alberta and the Northwest Territories. Oil accounts for over 70% of its production, while natural gas supplies the other 30%. Imperial also refines crude oil into gasoline and other petrochemicals, and operates over 2,000 gas stations under the “Esso” banner. ExxonMobil Corp. owns 69.6% of the stock....

PETRO-CANADA $45 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) has delayed a final decision on its proposed 55%-owned Fort Hills oil sands project until mid-2008. The company now feels it will cost $2.0 billion to convert its refinery in Edmonton to handle the tar-like output, up 25% from a earlier estimate of $1.6 billion. To put that in context, the company earned $526 million or $1.02 a share from continuing operations in the first half of 2006. We feel this is a prudent move, since it will give Petro-Canada a better idea of the final cost. Lower oil prices could also slow down other oil sands developments, and cut the cost of steel and labour....

SHAWCOR LTD. $19 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) has dropped its plan to acquire Garneau, Inc. due to regulatory concerns that the deal would give ShawCor too much control over Alberta’s pipeline coating industry. Garneau would have only accounted for a small portion of ShawCor’s assets, so scrapping the takeover will let the company focus on other ways to expand. The stock got as high as $22 in May 2006, but has moved down as investors worry that lower oil prices will cut demand for ShawCor’s services. But oil prices will likely stay above historical levels indefinitely, and ShawCor’s strong reputation should help it win more pipecoating contracts. ShawCor is a buy for aggressive investors.

CHEVRON CORP. $64 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; WSSF Rating: Above average) is one of the world’s largest integrated oil companies. It explores for and produces oil and natural gas in over 35 countries, and operates refineries that convert crude oil into gasoline and petrochemical products. It also owns over 26,000 retail gas stations. The company gets roughly 60% of its revenue from oil and natural gas sales. Refined products supply the other 40%. The United States accounts for half of Chevron’s revenue, and a third of its profit....

QUAKER CHEMICAL CORP. $20 (New York symbol KWR; Income Portfolio, Manufacturing & Industry sector; WSSF Rating: Average) makes lubricants and specialty chemicals that protect industrial machinery from rust and other forms of corrosion. Major customers include steel producers, automotive companies and appliance makers. The company needs crude oil to make its products. Although it passes along most of its higher costs to its customers, the steady rise in oil prices over the past few months has squeezed its profit margins. Quaker hedges some of its oil needs, but these contracts typically last for less than one year. Quaker is now starting to see some of the benefits from its 2005 restructuring plan. In the second quarter of 2006, it earned $0.30 a share (total $3.0 million), up 66.7% from $0.18 a share ($1.8 million) a year earlier. Revenue grew 10.9%, to $118.7 million from $107.0 million....