oil prices
IMPERIAL OIL $53.20 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $43.9 billion; TSINetwork Rating: Average; Div. yield: 1.0%; www.imperialoil.ca) has suspended production at its Kearl oil sands project in northern Alberta due to problems with a machine that separates bitumen (heavy oil) from sand.
Kearl produced 92,000 barrels a day in the third quarter of 2014, or 30% of Imperial’s total daily output of 307,000 barrels. Kearl’s second phase will add another 78,100 barrels per day to Imperial’s output in 2015.
The company expects to complete the repairs at Kearl in the next few weeks. Due to the recent drop in oil prices, the outage will have only a small impact on Imperial’s fourth-quarter earnings.
...
Kearl produced 92,000 barrels a day in the third quarter of 2014, or 30% of Imperial’s total daily output of 307,000 barrels. Kearl’s second phase will add another 78,100 barrels per day to Imperial’s output in 2015.
The company expects to complete the repairs at Kearl in the next few weeks. Due to the recent drop in oil prices, the outage will have only a small impact on Imperial’s fourth-quarter earnings.
...
CRESCENT POINT ENERGY CORP. $29.65 (Toronto symbol CPG; Shares outstanding: 443.3 million; Market cap: $13.2 billion; TSINetwork Rating: Extra Risk; Dividend yield: 9.3%; www.crescentpointenergy.com) produces oil and natural gas in Western Canada, with a focus on its Bakken light oil development in southeastern Saskatchewan. Its output is 91% oil and 9% gas.
In the three months ended September 30, 2014, Crescent Point’s cash flow rose 11.6%, to $618.4 million from $554.1 million a year earlier.
The company raised its daily output by 19.7%, to 141,183 barrels of oil equivalent from 117,963. That, plus higher oil and gas prices, was the main reason for the rising cash flow. Cash flow per share rose at a slower rate of 2.1%, to $1.45 from $1.42, because Crescent Point issued shares to pay for acquisitions.
...
In the three months ended September 30, 2014, Crescent Point’s cash flow rose 11.6%, to $618.4 million from $554.1 million a year earlier.
The company raised its daily output by 19.7%, to 141,183 barrels of oil equivalent from 117,963. That, plus higher oil and gas prices, was the main reason for the rising cash flow. Cash flow per share rose at a slower rate of 2.1%, to $1.45 from $1.42, because Crescent Point issued shares to pay for acquisitions.
...
CANADIAN PACIFIC RAILWAY LTD. $202 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.5 million; Market cap: $34.6 billion; Price-to-sales ratio: 5.6; Dividend yield: 0.7%; TSINetwork Rating: Above Average; www.cpr.ca) is down 18.5% from its recent peak of $248, partly due to the drop in oil prices. Even through cheaper crude will cut CP’s fuel costs, investors fear that producers will defer new projects, which could hurt the company’s crude-by-rail volumes.
Oil accounts for just 7% of the company’s revenue, so any production drop would have little impact on its earnings.
Moreover, CP continues to do a good job of cutting its costs. In the third quarter of 2014, its operating ratio improved to 62.8% from 65.9% a year earlier. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.)
...
Oil accounts for just 7% of the company’s revenue, so any production drop would have little impact on its earnings.
Moreover, CP continues to do a good job of cutting its costs. In the third quarter of 2014, its operating ratio improved to 62.8% from 65.9% a year earlier. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.)
...
PRECISION DRILLING CORP. $6.31 (Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding: 292.8 million; Market cap: $1.8 billion; Price-to-sales ratio: 0.8; Dividend yield: 4.4%; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) provides contract drilling services to land-based oil and gas producers, mainly in North America. It operates 335 rigs.
In the quarter ended September 30, 2014, Precision’s revenue rose 19.7%, to $584.6 million from $488.5 million a year earlier. That’s mainly because producers in Western Canada and the U.S. require more rigs that can reach deeper pockets of oil and gas.
Earnings jumped 79.4% in the quarter, to $52.8 million, or $0.18 a share. A year earlier, Precision earned $29.4 million, or $0.10 a share.
...
In the quarter ended September 30, 2014, Precision’s revenue rose 19.7%, to $584.6 million from $488.5 million a year earlier. That’s mainly because producers in Western Canada and the U.S. require more rigs that can reach deeper pockets of oil and gas.
Earnings jumped 79.4% in the quarter, to $52.8 million, or $0.18 a share. A year earlier, Precision earned $29.4 million, or $0.10 a share.
...
LINAMAR CORP. $66 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.8 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.0; Dividend yield: 0.6%; TSINetwork Rating: Average; www.linamar.com) started up in 1966 with just a single machine shop in Guelph, Ontario.
The company now has 45 plants in North and South America, Europe and Asia that make a variety of automotive parts, including cylinder heads, cylinder blocks, camshafts, crankshafts and connecting rods.
The company gets around 80% of its revenue and 70% of its earnings by making engines, transmissions and other precision-machined parts for automakers. In 2013, General Motors, Ford, Chrysler and Caterpillar accounted for 59.4% of its revenue.
...
The company now has 45 plants in North and South America, Europe and Asia that make a variety of automotive parts, including cylinder heads, cylinder blocks, camshafts, crankshafts and connecting rods.
The company gets around 80% of its revenue and 70% of its earnings by making engines, transmissions and other precision-machined parts for automakers. In 2013, General Motors, Ford, Chrysler and Caterpillar accounted for 59.4% of its revenue.
...
PLEASE NOTE: This is our last Hotline for 2014. Our next Hotline will go out on Friday, January 9, 2015.
ENCANA CORP., $16.41, Toronto symbol ECA, plans to invest more in its shale oil properties in 2015, even though lower oil prices will cut its cash flow.
In 2015, the company’s capital expenditures will be between $2.7 billion and $2.9 billion (all amounts expect share price in U.S. dollars), up from $2.6 billion this year.
...
ENCANA CORP., $16.41, Toronto symbol ECA, plans to invest more in its shale oil properties in 2015, even though lower oil prices will cut its cash flow.
In 2015, the company’s capital expenditures will be between $2.7 billion and $2.9 billion (all amounts expect share price in U.S. dollars), up from $2.6 billion this year.
...
These three companies use oil to maker their products, so they all stand to gain from the 40% drop in crude prices since June 2014. And even when oil rebounds, they will continue to benefit from recent acquisitions and their high market shares. However, not all are buys right now. SHERWIN-WILLIAMS CO. $246 (New York symbol SHW; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 96.0 million; Market cap: $23.6 billion; Price-to-sales ratio: 2.2; Dividend yield: 0.9%; TSINetwork Rating: Above Average; www.sherwin-williams.com) is North America’s largest paint and varnish producer....
General Electric and ABB Ltd. (see box) are refocusing on their industrial operations. That positions them to profit as both developed and emerging nations upgrade their power grids. GENERAL ELECTRIC CO. $24 (New York symbol GE; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 10.0 billion; Market cap: $240.0 billion; Price-to-sales ratio: 1.7; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.ge.com) recently agreed to form a major new alliance with France’s Alstom SA, a leading maker of electrical-transmission equipment and parts for power plants. Under the deal, GE will form three 50/50 joint ventures with Alstom. One will combine the companies’ electrical grid operations, while a second will focus on products for renewable energy projects, like offshore wind farms. The third will hold Alstom’s nuclear-equipment division....
Here’s an excerpt from my email to Inner Circle members. “Overall, the drop in oil prices is a favourable development for the universe of stocks we follow and recommend. It will cut into oilstock earnings but will act like a major tax cut for all other stocks we follow, and their customers.” “The oil market could hit its lows soon. It may then stay weak for the next six months to a year or bounce back more quickly. Obviously that depends on a lot of things, particularly economic growth rates around the world. Meanwhile, well-established companies in the industry can take advantage of the setback. If you have a modest position in wellestablished oil and gas stocks in your portfolio, hold on to them.”...
GOODYEAR TIRE & RUBBER CO. $27.23 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 274.6 million; Market cap: $7.5 billion; Dividend yield: 0.9%) dipped as low as $18.87 in October but has since rebounded. It’s now up 11.5% since we made it our #1 pick for 2014 in our February issue at $24.42. In U.S. dollar terms, the shares have gained 16.9%. In the quarter ended September 30, 2014, Goodyear’s sales fell 6.9%, to $4.7 billion from $5.0 billion a year earlier. The company sold 2% fewer tires worldwide, including a 4% drop in North America as car dealers stocked up on cheaper Chinese-made tires ahead of an expected U.S. tariff. But even with the lower revenue, earnings jumped 39.9%, to $242.0 million, or $0.87 a share. A year earlier, it earned $190.0 million, or $0.68 a share....