oil prices
The oil-price plunge continues to weigh on these two producers, but their recent asset sales will help them weather the downturn. We still prefer Chevron, as cheaper oil enhances its refineries’profits. CHEVRON CORP. $73 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.9 billion; Market cap: $138.7 billion; Price-to-sales ratio: 0.9; Dividend yield: 5.9%; TSINetwork Rating: Above Average; www.chevron.com) has sold $11 billion worth of less important businesses since 2014. It should reach its goal of selling $15 billion of assets by 2017. Even with the sales, the company’s oil output will likely average 3.1 million barrels a day in 2017, up 19.2% from 2.6 million in the second quarter of 2015....
CVR Refining LP, $17.82, symbol CVRR on New York (Shares outstanding: 147.6 million; Market cap: $2.6 billion; www.cvrrefining.com), refines and markets fuels. The company operates a 115,000-barrel-a-day oil refinery in Kansas and another (70,000 barrels a day) in Oklahoma. CVR’s subsidiaries support these refineries with 540 kilometres of pipelines, more than 150 oil-transport trucks, a network of oil-gathering tanks and over six million barrels of owned and leased storage capacity. The company is majority owned and operated by CVR Energy, which itself is majority owned by activist investor Carl Icahn....
ENCANA CORP. $9.45 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 842.5 million; Market cap: $8.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.8%; TSINetwork Rating: Average; www.encana.com) continues to sell less important properties as it narrows its focus on four higher-margin projects: Montney (B.C.), Duvernay (Alberta) and Eagle Ford and Permian (Texas).
These sales cut its daily output by 21.0% in the three months ended June 30, 2015, to 388,700 barrels a day (67% gas, 33% oil and natural gas liquids) from 491,800 a year earlier. As well, the company’s realized gas prices, which include the benefit of hedging contracts, fell 13.7%, while oil prices dropped 37.0%.
As a result, Encana lost $167 million, or $0.20 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, it earned $171 million, or $0.23. Cash flow per share dropped 75.3%, to $0.22 from $0.89, while revenue declined 47.7%, to $830 million from $1.6 billion.
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These sales cut its daily output by 21.0% in the three months ended June 30, 2015, to 388,700 barrels a day (67% gas, 33% oil and natural gas liquids) from 491,800 a year earlier. As well, the company’s realized gas prices, which include the benefit of hedging contracts, fell 13.7%, while oil prices dropped 37.0%.
As a result, Encana lost $167 million, or $0.20 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, it earned $171 million, or $0.23. Cash flow per share dropped 75.3%, to $0.22 from $0.89, while revenue declined 47.7%, to $830 million from $1.6 billion.
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CENOVUS ENERGY INC. $19 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 833.2 million; Market cap: $15.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 3.4%; TSINetwork Rating: Average) gets 35% of its revenue from its Western Canadian oil sands properties and conventional oil and gas wells. Chief among these assets are its 50%-owned Christina Lake and Foster Creek oil sands projects; ConocoPhilips (New York symbol COP) owns the remaining 50%.
Refining supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these operations. Cenovus’s refineries help cut its exposure to falling oil prices, as cheaper crude lowers their operating costs.
Cenovus still plans to spend $1.8 billion to $2.0 billion on expansions and upgrades in 2015, unchanged from its previous estimate. These projects should add 50,000 barrels a day to its production by the end of 2016.
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Refining supplies the remaining 65% of Cenovus’s revenue. The company ships its oil to its 50%-owned refineries in Illinois and Texas. Phillips 66 (New York symbol PSX) owns the other 50% of these operations. Cenovus’s refineries help cut its exposure to falling oil prices, as cheaper crude lowers their operating costs.
Cenovus still plans to spend $1.8 billion to $2.0 billion on expansions and upgrades in 2015, unchanged from its previous estimate. These projects should add 50,000 barrels a day to its production by the end of 2016.
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SUNCOR ENERGY INC. $37 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.4 billion; Market cap: $51.8 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; TSINetwork Rating: Average; www.suncor.com) gets 80% of its crude production from its huge Alberta oil sands projects. The remaining 20% comes from traditional oil and gas wells.
Lower oil and gas prices cut these properties’ contribution to just 39% of Suncor’s revenue and 31% of its earnings in the three months ended June 30, 2015.
However, low oil prices are a plus for Suncor’s four refineries and 1,500 Petro-Canada gas stations. As a result, these businesses supplied 61% of revenue and 69% of earnings.
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Lower oil and gas prices cut these properties’ contribution to just 39% of Suncor’s revenue and 31% of its earnings in the three months ended June 30, 2015.
However, low oil prices are a plus for Suncor’s four refineries and 1,500 Petro-Canada gas stations. As a result, these businesses supplied 61% of revenue and 69% of earnings.
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BONAVISTA ENERGY $4.63 (Toronto symbol BNP; Shares outstanding: 206.6 million; Market cap: $1.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 9.1%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and B.C. Its output is 75% gas and 25% oil.
In the three months ended June 30, 2015, Bonavista’s cash flow per share fell 34.3%, to $0.44 from $0.67 a year earlier.
Most of that drop came from lower oil and natural gas prices; the company’s output fell only slightly, to 73,736 barrels of oil equivalent a day from 74,273 barrels.
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In the three months ended June 30, 2015, Bonavista’s cash flow per share fell 34.3%, to $0.44 from $0.67 a year earlier.
Most of that drop came from lower oil and natural gas prices; the company’s output fell only slightly, to 73,736 barrels of oil equivalent a day from 74,273 barrels.
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SIERRA WIRELESS, $27.31, symbol SW on Toronto, makes modules and software that connect products—including smart electricity meters and vehicles—to the Internet. This is known as machine to machine, or more generally as the Internet of Things. In the three months ended June 30, 2015, the company’s revenue rose 17.0%, to a record $158.0 million from $135.0 million a year earlier (all figures except share price in U.S. dollars). Sierra continues to add new clients. Excluding one-time items, the company earned $8.6 million, or $0.26 a share, compared to just $2.6 million, or $0.08, a year earlier. Sierra sold more high-margin cloud-based services to large customers during the latest quarter. It also cut costs....
WESTJET AIRLINES $24.67 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 125.8 million; Market cap: $3.1 billion; Dividend yield: 2.3%) serves 93 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 107 modern Boeing 737s are 30% more fuel efficient than older jets. In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 22 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers. The Canadian airline market remains highly competitive, especially with Air Canada expanding its Rouge budget airline to serve more leisure destinations in Europe, the Caribbean, Mexico and the U.S. However, WestJet is now taking delivery of its Boeing 767 widebody aircraft. That will let it compete with Air Canada internationally; it could add more cities in Europe, as well as South America or Asia....
Two energy exploration stocks for conservative investors—we give Peyto the edge over Bonavista right now thanks to its more secure dividend.
Oil prices have dropped 50% in the past year, but Imperial Oil’s shares are down just 10%. That’s mainly because cheaper crude cuts its refineries’ input costs and increases their profit margins. New oil sands projects are also adding to its production. In addition to low oil prices, Imperial faces potentially higher royalties and tougher environmental regulations. Still, we feel the company’s high-quality reserves will help it overcome these short-term challenges. Plus, its operating costs per barrel will keep falling as its new projects reach full capacity....