oil prices

CANADIAN PACIFIC RAILWAY LTD., $169.77, Toronto symbol CP, has revised its takeover offer for U.S.-based railway Norfolk Southern Corp. (New York symbol NSC). The combined firm would be North America’s largest railway, with more than 56,000 kilometres of track. Buying Norfolk would also give CP greater access to ports on the U.S. Gulf Coast and Atlantic Ocean. Under the new deal, Norfolk shareholders would receive more stock and less cash: $32.86 U.S. a share in cash plus 0.451 of a CP share for each Norfolk share held. That would give them 47% of the combined company, compared to 41% under the original offer....

Lower prices for oil and other commodities are weighing on Encana and Finning (see box). However, both firms are aggressively cutting costs, which puts them in a better position to grow when prices recover. ENCANA CORP. $9.14 (Toronto symbol ECA; Con- servative Growth Portfolio, Resources sector; Shares outstanding: 845.7 million; Market cap: $7.7 billion; Price-to-sales ratio: 1.4; Dividend yield: 4.2%; TSINetwork Rating: Average; www.encana.com) raised $2.7 billion in 2015 by selling less important properties (all amounts except share price and market cap in U.S. dollars). These sales are part of the company’s plan to focus on four key projects: Montney (B.C.), Duvernay (Alberta) and Eagle Ford and Permian (both in Texas). These fields produce large amounts of oil and natural gas liquids, such as propane and butane, which cuts Encana’s reliance on natural gas. They’re also efficient, which helps the company cope with low oil and gas prices....

ENCANA CORP. $9.14 (Toronto symbol ECA; Con- servative Growth Portfolio, Resources sector; Shares outstanding: 845.7 million; Market cap: $7.7 billion; Price-to-sales ratio: 1.4; Dividend yield: 4.2%; TSINetwork Rating: Average; www.encana.com) raised $2.7 billion in 2015 by selling less important properties (all amounts except share price and market cap in U.S. dollars). These sales are part of the company’s plan to focus on four key projects: Montney (B.C.), Duvernay (Alberta) and Eagle Ford and Permian (both in Texas). These fields produce large amounts of oil and natural gas liquids, such as propane and butane, which cuts Encana’s reliance on natural gas. They’re also efficient, which helps the company cope with low oil and gas prices. Because of these asset sales, Encana’s production fell 15.4% in the three months ended September 30, 2015, to 398,300 barrels a day (65% gas and 35% oil and natural gas liquids) from 470,600 a year earlier....

Many investors are reading the news intently these days, in hopes of spotting a sign that the drop in oil prices has ended. They assume that if they get in at just the right moment, they’ll be able to take advantage of another of the violent upswings that the oil market has put on in the past, after a downturn like the one now underway. One investor wrote: “When oil dropped, I waited but not long enough. I bought $50,000 of Chevron and $40,000 of Imperial. Imperial is down about $4,000 and I have a $2,000 profit on Chevron. I’m thinking about selling the Chevron and maybe wait to see if it drops more later. I have to ride out the Imperial Oil.” This is a bad way to invest, but especially in a volatile, worldwide market like oil, and all the more so today. It’s easy to look at a long-term history of oil prices and detect what you feel is a clear, recurring pattern. However, these patterns occur in response to supply and demand in the market, and both are constantly changing....

Surge Energy, $2.01, symbol SGY on Toronto (Shares outstanding: 220.9 million; Market cap: $446.4 million; www.surgeenergy.ca), produces oil and gas in central and northwestern Alberta and southwestern Saskatchewan. Its output is 83% oil and 17% gas. In response to lower oil prices, and to pay down its debt, the company sold 5,300 barrels of oil equivalent of daily production in two transactions for $465 million earlier this year. It also unwound its crude oil hedging contracts for 2015 and realized a gain of over $35 million. Surge’s long-term debt now stands at $131.0 million, or a reasonable 24% of its market cap, down from $564.3 million at the end of 2014....

ALIMENTATION COUCHE-TARD, $62.68, symbol ATD.B on Toronto, has agreed to buy Ireland’s Topaz chain for an undisclosed amount. Topaz is the country’s leading operator of gas stations and convenience store stations, with a 35% share of the market. The chain consists of 464 locations across Ireland, including its recently acquired Esso network. Topaz owns 162 of these outlets, while dealers own the remaining 302. The agreement also includes a commercial-fuels operation with more than 30 depots and two terminals. Growth by acquisition can be risky, especially with a deal this big. But Couche-Tard has a long record of successfully integrating acquisitions, including Norway’s Statoil Fuel & Retail gas station chain, which it bought for $2.7 billion in June 2012. It also paid $1.7 billion for the Pantry, which has more than 1,500 convenience stores in 13 southern U.S. states, in March 2015....

We think conservative investors could hold up to 10% of their portfolios in foreign stocks. One way to do that is to buy carefully chosen exchange traded funds (ETFs) that have an overseas focus. The best ETFs offer very low management fees and well-diversified, tax-efficient portfolios of highquality stocks....

ENBRIDGE INC. $47.24 (Toronto symbol ENB; Shares outstanding: 860.1 million; Market cap: $40.5 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.enbridge.com) has paid $200 million U.S. for 100% of the New Creek Wind Project in West Virginia. This development consists of 49 wind turbines that can generate a total of 103 megawatts. It should start up in December 2016. The company has long-term contracts to sell this power at fixed rates, which cuts the risk of this investment. Including this purchase, Enbridge has invested $5 billion (Canadian) in renewable power projects with a total capacity of 2,000 megawatts....

Peak Oil theory believers thought we were in danger of running out of oil

Our take on Nordic American Tanker, an energy stock that has had surprisingly good results despite the low price of oil.