oil prices

WESTJET AIRLINES $32.32 (Toronto symbol WJA; TSINetwork Rating: Extra Risk) (1-877-493-7853; www.westjet.com; Shares outstanding: 127.8 million; Market cap: $4.2 billion; Div. yield: 1.5%) has jumped to new all-time highs over the past month as fuel prices continue to drop along with oil prices. Fuel makes up around a third of an airline’s operating costs. Meanwhile, the company’s load factor rose to 80.5% from 79.7% in November 2013. Load factor is the percentage of available seats occupied by paying passengers. The increase was even more positive considering that the company increased its capacity by 6.9% to meet higher demand. Demand for WestJet’s flights remains high, and the launch of its new Canadian regional airline, WestJet Encore, has also gone well....

BIRCHCLIFF ENERGY $9.05 (Toronto symbol BIR; TSINetwork Rating: Speculative) (403-261-6401; www.birchcliffenergy.com; Shares outstanding: 152.2 million; Market cap: $1.4 billion; No dividends paid) develops, produces and explores for oil and gas, mainly in the Peace River Arch area near the Alberta/B.C. border. About 84% of its output is gas. The remaining 16% is oil. In the three months ended September 30, 2014, Birchcliff’s production rose 38.8%, to 34,235 barrels of oil equivalent a day from 24,662 a year earlier. Cash flow per share jumped 66.7%, to $0.50 from $0.30, on the increased output and higher gas prices. Birchcliff recently completed Phase 4 of its gasplant expansion in Pouce Coupe, Alberta. That raised the facility’s capacity by 20% and will let Birchcliff bring the additional gas it is now producing to market....

TRILOGY ENERGY CORP. $9.24 (Toronto symbol TET; TSINetwork Rating: Speculative) (403-290-2900; www.trilogyenergy.com; Shares outstanding: 105.1 million; Market cap: $1.2 billion; Dividend suspended) owns oil and gas properties in central Alberta’s Kaybob and Grande Prairie areas. About 61% of its production is natural gas. The remaining 39% is oil. Trilogy just announced that it is discontinuing its dividend after the next payment, scheduled for December 15, 2014. It’s making the move to conserve cash as oil prices fall. The company also plans to cut exploration and development spending by 41.9% in 2015, to $250 million from $430 million. This will keep next year’s production at roughly the same level as this year’s, or an average of 35,000 barrels of oil equivalent a day....

The U.S. dollar hit a low below $0.95 Cdn. in October 2011, and has since risen above $1.16 Cdn., a gain of 22.1%. In the same period, the U.S. Standard & Poor’s 500 stock index has gained 88.1%, even after allowing for the setback of the past couple of weeks. Together these two factors mean that if you followed our advice and put around a quarter of your portfolio in high-quality U.S. stocks, you probably have substantial capital gains. If so, you may feel tempted to sell some of your U.S. stocks—“harvest” some of your capital gains, as brokers sometimes say. It’s generally a bad idea to sell high-quality stocks simply because their stock prices have gone up. When you do that, you risk selling your best selections when they are just starting to rise. But it’s a particularly bad idea to sell U.S. stocks right now....

Parex Resources, $6.81, symbol PXT on Toronto (Shares outstanding: 134.4 million; Market cap: $864.3 million; www.parexresources.com), produces, develops and explores for oil in Colombia and the Caribbean, with a focus on Colombia’s Llanos and Middle Magdalena basins. In the three months ended September 30, 2014, the company’s production jumped 55.4%, to an average of 25,175 barrels of oil a day from 16,199. Cash flow rose 28.9%, to $88.7 million from $68.3 million. Cash flow per share gained 11.1%, to $0.70 from $0.63, on more shares outstanding. Parex’s debt of $42.3 million is just 4.9% of its $864.3-million market cap....

Linn Energy LLC, $11.90, symbol LINE on Nasdaq (Units outstanding: 331.9 million; Market cap: $3.3 billion; www.linnenergy.com), acquires and develops oil and gas properties in the U.S. In December 2013, Linn bought Berry Petroleum for $4.3 billion. The move added long-lasting assets and significantly enhanced Linn’s growth prospects. Berry’s reserves were roughly 75% oil. Linn’s shares have dropped lately, along with oil and gas prices. That’s despite the fact that the company’s overall production jumped 51% from a year earlier....

TIM HORTONS INC., $99.00, symbol THI on Toronto, has completed its merger with U.S.-based BURGER KING WORLDWIDE INC., $35.50, symbol BKW on New York.

On Monday, December 15, 2014, the combined company, called Restaurant Brands International Inc., will begin trading on the Toronto and New York exchanges under the QSR symbol.

Restaurant Brands is the world’s third-largest fast-food restaurant operator, after McDonald’s and Yum Brands, with 14,000 Burger King restaurants and 4,590 Tim Hortons outlets in 100 countries. In all, these locations have annual sales of over $23 billion U.S.

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A key part of our three-pronged investing strategy is to downplay stocks in the broker/media limelight (the other two are invest mainly in well-established companies and spread your money across the five main economic sectors). Linamar is a good example of an out-of-the-limelight stock. Few brokers cover it, partly because its cyclical auto and industrial parts are not as exciting as, say, computer technologies. As well, the family of Linamar’s founder own 23.6% of the outstanding shares, which limits the possibility of a takeover. However, the company’s expertise helped it rebound strongly from the 2008 financial crisis and the bankruptcy of GM and Chrysler, two of its biggest clients. Today, it’s winning deals to supply engine parts to other automakers and industrial firms, and growing beyond North America. Linamar also stands to gain as carmakers rely more heavily on suppliers to help them meet tougher emission regulations....

Overall, the drop in oil prices is a favourable development for the universe of stocks we follow and recommend. It will cut into the earnings of our oil stock recommendations, of course. But for all other stocks we follow, and their customers, it will act like a major tax cut. Keep in mind that this oil price drop was widely anticipated, by us and other observers. Oil was bound to fall eventually, due to the rising output from shale oil production and new technological processes. In fact, some members of OPEC may have worked to undermine the oil market, in the hope that a drop in prices would stave off development of new sources of shale oil....

The four companies below sell gear and services to energy-exploration and mining firms. As a result, their shares have fallen with the recent drop in prices for oil, gold and other commodities. However, all four lead their niche industries and should rebound strongly when commodity prices recover. The drop also means they now trade at attractive multiples to their projected earnings. SNC-LAVALIN GROUP INC. $40 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.5 million; Market cap: $6.1 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.4%; TSINetwork Rating: Average; www.snclavalin.com) is narrowing its focus to engineering projects in the oil and gas, mining and water treatment industries....