oil prices
CANADIAN PACIFIC RAILWAY LTD., $218.78, Toronto symbol CP, has agreed to form a 50/50 joint venture with DREAM Unlimited Corp., Toronto symbol DRM. This new business—called DREAM Van Horne Properties—will redevelop several of CP’s real estate holdings, including surplus land near its rail lines in Toronto, Montreal, Edmonton and Chicago. This venture should help CP unlock some of these assets’ hidden value. Meanwhile, CP earned $460 million in the quarter ended December 31, 2014, up 36.1% from $338 million a year earlier. Earnings per share jumped 40.3%, to $2.68 from $1.91, on fewer shares outstanding. That beat the consensus estimate of $2.58....
The near-term direction of oil and gas prices remains uncertain, so we think the best way to cut risk is to look for companies with rising production that are trading at reasonable multiples to cash flow. Here are two with sound long-term prospects. DEVON ENERGY CORP. $61.60 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 409.1 million; Market cap: $24.4 billion; Dividend yield: 1.6%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 46% gas and 54% oil. The company narrowed its focus with its July 2014 sale of some of its properties to Linn Energy for $2.3 billion. The deal included Devon’s holdings in the Rockies, the onshore Gulf Coast and the Mid- Continent region (which includes Oklahoma, Kansas and Texas)....
WESTJET AIRLINES $32.05 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.1 billion; Dividend yield: 1.5%) serves 91 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 109 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 14 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers. In the three months ended September 30, 2014, WestJet’s earnings, excluding one-time items, jumped 30.9%, to a third-quarter record of $85.4 million from $65.1 million a year earlier. Earnings per share gained 32.0%, to $0.66 from $0.50, on fewer shares outstanding. This was WestJet’s 38th consecutive quarter of profitability. Revenue rose 9.2%, to $1.0 billion from $924.8 million....
BONAVISTA ENERGY $6.56 (Toronto symbol BNP; Shares outstanding: 203.4 million; Market cap: $1.5 billion; TSINetwork Rating: Extra Risk; Dividend yield: 6.4%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and British Columbia. Its production is 69% gas and 31% oil.
In the three months ended September 30, 2014, Bonavista’s cash flow per share fell 1.6%, to $0.60 from $0.61 a year earlier.
Production rose just 1.5%, to 74,720 barrels of oil equivalent a day from 73,632. However, that’s because Bonavista sold heavy-oil projects, which are less of a focus for the company.
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In the three months ended September 30, 2014, Bonavista’s cash flow per share fell 1.6%, to $0.60 from $0.61 a year earlier.
Production rose just 1.5%, to 74,720 barrels of oil equivalent a day from 73,632. However, that’s because Bonavista sold heavy-oil projects, which are less of a focus for the company.
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PEYTO EXPLORATION & DEVELOPMENT CORP. $30.32 (Toronto symbol PEY; Shares outstanding: 153.7 million; Market cap: $4.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.4%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 77,592 barrels of oil equivalent is 90% gas and 10% oil.
In the quarter ended September 30, 2014, Peyto’s cash flow rose 62.7%, to $1.09 a share from $0.67 a year ago. That’s because it raised its production by 37.7% and realized higher oil and gas prices.
The company is forecast to generate cash flow of $4.80 a share in 2015. That estimate will fall if oil prices stay low for some time, but Peyto’s high weighting in gas will largely offset lower oil prices. Peyto trades at 6.3 times the current forecast, which is reasonable in light of its strong growth prospects.
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In the quarter ended September 30, 2014, Peyto’s cash flow rose 62.7%, to $1.09 a share from $0.67 a year ago. That’s because it raised its production by 37.7% and realized higher oil and gas prices.
The company is forecast to generate cash flow of $4.80 a share in 2015. That estimate will fall if oil prices stay low for some time, but Peyto’s high weighting in gas will largely offset lower oil prices. Peyto trades at 6.3 times the current forecast, which is reasonable in light of its strong growth prospects.
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PENGROWTH ENERGY $3.35 (Toronto symbol PGF; Shares outstanding: 530.1 million; Market cap: $1.8 billion; TSINetwork Rating: Average; Dividend yield: 14.3%; www.pengrowth.com) has started injecting steam into its Lindbergh oil sands project in Alberta to loosen the tar-like bitumen and pump it to the surface.
Pengrowth believes that Lindbergh’s low operating costs will let it generate positive cash flow, even at today’s depressed oil prices.
As well, now that construction on Lindbergh has ended, the company’s 2015 capital spending will fall sharply from the $740 million to $770 million it probably spent in 2014.
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Pengrowth believes that Lindbergh’s low operating costs will let it generate positive cash flow, even at today’s depressed oil prices.
As well, now that construction on Lindbergh has ended, the company’s 2015 capital spending will fall sharply from the $740 million to $770 million it probably spent in 2014.
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PENGROWTH ENERGY $4.01 (Toronto symbol PGF; Shares outstanding: 530.1 million; Market cap: $2.2 billion; TSINetwork Rating: Average; Dividend yield: 6.0%; www.pengrowth.com) has cut its capital spending plans and dividend to conserve cash in the face of falling oil prices.
Capital spending will drop 74.0%, to $200 million from $770 million in 2014. The company is also cutting its monthly dividend by 50.0%, from $0.04 a share to $0.02. The new rate still yields a high 6.0%.
Pengrowth is still a buy.
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Capital spending will drop 74.0%, to $200 million from $770 million in 2014. The company is also cutting its monthly dividend by 50.0%, from $0.04 a share to $0.02. The new rate still yields a high 6.0%.
Pengrowth is still a buy.
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CENOVUS ENERGY $25.04 (Toronto symbol CVE; Shares outstanding: 757.1 million; Market cap: $19.4 billion; TSINetwork Rating: Average; Dividend yield: 4.3%; www.cenovus.com) has cut its capital spending plans for the second time in two months due to lower oil prices.
The company now expects to spend $1.8 billion to $2.0 billion in 2015, down from $2.5 billion to $2.7 billion in its earlier plan (and down from an estimated $3.1 billion in 2014). As part of these cuts, it will suspend drilling for conventional oil in Alberta and Saskatchewan, and defer some oil sands work.
Cenovus now expects its cash flow for the year to fall by roughly half, to $1.4 billion, or $1.85 a share. That could prompt the company to cut its $1.065-a-share dividend, which yields 4.3%. Cenovus’s dividend payments total $800 million a year.
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The company now expects to spend $1.8 billion to $2.0 billion in 2015, down from $2.5 billion to $2.7 billion in its earlier plan (and down from an estimated $3.1 billion in 2014). As part of these cuts, it will suspend drilling for conventional oil in Alberta and Saskatchewan, and defer some oil sands work.
Cenovus now expects its cash flow for the year to fall by roughly half, to $1.4 billion, or $1.85 a share. That could prompt the company to cut its $1.065-a-share dividend, which yields 4.3%. Cenovus’s dividend payments total $800 million a year.
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SUNCOR ENERGY INC. $35 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $52.5 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.2%; TSINetwork Rating: Average; www. suncor.com) gets 40% of its revenue and 65% of its earnings by producing oil and natural gas, mainly at its large Alberta oil sands projects. The remaining 60% of revenue and 35% of earnings come from its four oil refineries and 1,500 Petro-Canada gas stations.
Big merger boosted results
Suncor merged with rival Petro-Canada in 2009, increasing its revenue by 52.2%, from $25.5 billion in 2009 to $38.8 billion in 2011. Lower oil prices cut the company’s revenue to $38.5 billion in 2012. In 2013, Suncor sold most of its Western Canadian natural gas operations for $1 billion. However, higher oil prices offset the lower production, and its revenue rose to $40.3 billion.
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Big merger boosted results
Suncor merged with rival Petro-Canada in 2009, increasing its revenue by 52.2%, from $25.5 billion in 2009 to $38.8 billion in 2011. Lower oil prices cut the company’s revenue to $38.5 billion in 2012. In 2013, Suncor sold most of its Western Canadian natural gas operations for $1 billion. However, higher oil prices offset the lower production, and its revenue rose to $40.3 billion.
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