oil prices

PETRO-CANADA $53 (Toronto symbol PCA; Conservative Growth Portfolio, Resources sector; SI Rating: Average) has suspended production at its Terra Nova offshore oil platform near Newfoundland due to mechanical problems with a generator. Petro-Canada owns 34% of Terra Nova, and operates it. The company had already planned to shut down Terra Nova for about five weeks this summer for maintenance. But this latest setback will delay the rig’s restart until the fall. Terra Nova accounted for 8% of Petro-Canada’s daily production in 2005. However, rising oil prices should cushion the impact of the lost production....

CANADIAN UTILITIES LTD. $38 will pay a special dividend of $0.25 a share in September 2006. It has also increased its regular quarterly dividend 1.8%, from $0.285 a share to $0.29. The new annual rate of $1.16 yields 3.1%. Buy. PENGROWTH ENERGY TRUST $24 earned $0.41 a unit in the first quarter of 2006, up 10.8% from $0.37 a year earlier, while cash flow per unit rose 7.3%, to $0.88 from $0.82. Although oil prices rose 22%, Pengrowth’s total production remained unchanged, as acquisitions of new properties offset maintenance slowdowns and asset sales. Excluding acquisitions, Pengrowth’s average daily production in 2006 should grow to around 56,500 barrels per day, up 3% from its earlier forecast. Buy. FORTIS INC. $21 earned $0.35 a share (total $36.6 million) in its first quarter, down 12.5% from $0.40 a share ($39.2 million) a year earlier. If you disregard a one-time gain of $7.9 million in the year-earlier quarter, Fortis’s earnings would have grown 17%, thanks to higher power rates in Western Canada. Revenue grew 2.4%, to $390.8 million from $381.8 million. Buy.

ENCANA CORP. $55 (Toronto symbol ECA; SI Rating: Average) has sold most of its conventional natural gas properties in the past few years to concentrate on what it calls “unconventional resource plays” in North America, including early-stage gas fields. These properties, typically located in remote, mountainous areas, increase EnCana’s drilling and development costs. However, the company feels that the longer production potential of these fields will more than offset any up-front costs. Another part of EnCana’s strategy is to expand in the Alberta oil sands region. It has two projects in operation there, and is developing a third. Oil sands now account for just over half of EnCana’s oil output, or roughly 10% of its entire 2005 production....

In evaluating investments, many investors focus on what we’d call ‘investment outputs’, such as earnings, dividends, cash flow, return on equity, sales growth and so on. These are all important, of course, but you shouldn’t focus on them to the exclusion of what you might call ‘investment inputs’, such as the factors we use in assigning our Successful Investor quality ratings. Investment inputs are harder to work with than investment outputs, since it takes a judgment call to determine their risk or value. To give you a better idea of what we mean, here’s a list of a dozen investment inputs that we look at before recommending an income trust:...

Investors often ask how long they should hang on to a disappointing stock. There is no single answer, but you should never base any investment decision solely on a rise or fall in the price of a stock. Stock price changes usually depend on a variety of factors, including economic, industry and company-specific issues. Also remember that the stock market anticipates things, and no trend lasts forever. For instance, some industrial manufacturers have suffered due to rising oil prices. But oil will eventually come down. If a company remains profitable despite a sharp rise in a key input, think how much better it will do when the price of that input subsides....

BRAZIL FUND $62 (New York symbol BZF) (CWA Rating: Aggressive) will not convert into an open-ended fund, as proposed by its managers. Shareholders rejected the plan at a special meeting. Brazil Fund now trades at a 6% discount to its net asset value. Brazil is the most populous country in South America, and it has the biggest economy. Brazil Fund is up over 24% already his year, and continues to hit record highs. It’s up 68% since March, 2005. The gains are largely on the strength of the Brazilian economy, which grew 4.9% in 2004, but slowed to 2.3% in 2005....

PETRO-CANADA $49 (Toronto symbol PCA; SI Rating: Average) is Canada’s second-largest oil company, with major production areas in Western Canada and off the coast of Newfoundland. It also sells gasoline through over 1,400 retail stations. In the third quarter of 2005, the company’s production fell 3% from a year earlier due to shutdowns for maintenance and lower output at it older properties. However, higher oil prices offset the lower production. Petro-Canada should start to realize the benefits of several major projects in the next few years. Production should rise between 4% and 7% by 2008 thanks to higher production at Syncrude (Petro- Canada has a 12% interest) and the start-up of the new White Rose offshore oil platform near Newfoundland....

Oil prices have more than doubled in the past couple of years, due to various factors like growing Chinese demand, the Iraq war and a particularly vicious hurricane season this past year. Oil prices could keep rising and we continue to advise you to hold some oil and gas investments. However, energy prices are inherently volatile. After a rise like this, it’s a good idea to focus on well-established oil and gas stocks that can withstand the inevitable price setbacks. Here is our updated analysis of three of our long-time favourites. IMPERIAL OIL LTD. $119 (Toronto symbol IMO; SI Rating: Average) is Canada’s biggest producer of oil and natural gas. It also operates a nationwide chain of retail gasoline stations under the “Esso” banner. U.S.-based ExxonMobil Corp. owns 69.9% of Imperial. Production at many of Imperial’s mature properties in Western Canada is dropping, so it’s investing heavily in new sources of oil. It owns 25% of the massive Syncrude oil sands joint venture in Northern Alberta. Syncrude is now expanding and it’s hard to predict costs in complex projects like this. For instance, Syncrude’s latest upgrades will cost twice their original forecast....

ARCHER DANIEL MIDLAND CO. $25 (New York symbol ADM; WSSF Rating: Above average) has gained over 40% in the past six months as higher oil prices have spurred new interest in ethanol, a gasoline additive made from corn that improves fuel efficiency and cuts harmful emissions. ADM is the world’s largest supplier of ethanol, and is now building more plants to meet the rising demand. Right now, only about 30% of U.S. fuels contain ethanol, so there’s plenty of room for growth. Most new car engines can also handle fuels with up to 85% ethanol, compared to the 10% blend that major gas stations now offer. High oil prices have also prompted ADM to build a new plant that will make plastic resins from corn and other crops instead of oil. Companies can use these corn-based plastics in food and pharmaceutical packaging and industrial products. It will take a year or two before the plant begins production....

In the 1980s and 1990s, Alcan qualified as what you might call a cyclical growth stock. It was cyclical because demand for and prices of aluminum and aluminum parts generally rise and fall with the economy. But it had a growth element because aluminum’s strength and light weight make it ideal for use in car parts, to cut fuel consumption. In the first half of this decade, however, Alcan and aluminum went through a slump. Alcan faced regulatory hurdles and the need to integrate major acquisitions. Aluminum demand and prices suffered due to weak car sales, and weak oil prices (which relieved some of the pressure to improve fuel economy). Aluminum prices shot up by more than a third since last summer, thanks partly to rising oil prices, which spurred interest in improving gas mileage. Alcan is beginning to benefit. It is sure to remain volatile, but it is a highly attractive choice for the Resource & Commodities sector of your portfolio....