oil prices

Oil prices will likely stay volatile, particularly as slowing Asian economies cut their consumption. We feel the best way for investors to lower their risk is to stick with well-established producers like these two. Both have high-quality reserves that should last decades. CHEVRON CORP. $112 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $224.0 billion; Price-to-sales ratio: 0.9; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.chevron.com) is the second-largest integrated oil company in the U.S. after ExxonMobil. Chevron is still assessing the damage caused by a fire at its oil refinery in Richmond, California. This facility processes 245,000 barrels of crude oil a day and accounts for 10% of the refining capacity on the U.S. west coast. It will likely be several months before it resumes normal operations....

Argent Energy Trust, $10.00, symbol AET.UN on Toronto (Units outstanding: 21.8 million; Market cap: $218.0 million; www.argentenergytrust.ca), aims to acquire and develop oil and natural gas properties, mainly in the U.S. The trust began trading on the Toronto exchange on August 10, 2012, at $10 per unit. Argent’s public offering raised $212.3 million, which was scaled back from its original $325-million proposal. Due to low oil prices, investor interest in the trust’s offering was not as strong as originally anticipated....

PASON SYSTEMS INC., $14.24, symbol PSI on Toronto, saw its revenue jump 29.8% in the three months ended June 30, 2012, to $81.1 million from $62.4 million a year earlier. Cash flow rose 31.5%, to $30.1 million, or $0.37 a share, from $22.9 million, or $0.28 a share. Pason rents equipment for monitoring and managing land-based oil rigs. It also provides communication systems that companies use to remotely collect data from their drilling operations. The company serves oil and natural gas companies and drilling contractors throughout Canada, the U.S., Mexico and Argentina. Even with declining oil prices and continued low gas prices, drilling activity rose 6% in the U.S. and Canada in the latest quarter, with a combined 188,291 active days and a rig count of 2,069, compared to 177,791 days and 1,954 rigs a year earlier. That was the main reason for the higher revenue and cash flow. The company also benefited from stronger activity in all of its international markets, particularly Argentina, Brazil, Australia and Mexico....

These three leading oil producers are aggressively expanding their oil sands operations. These projects are more expensive to develop than conventional deposits, and the recent drop in oil prices could hurt their profitability. However, their reserves should last for decades, and their operating costs tend to fall after they start up. Moreover, these companies’ refineries, which convert oil into gasoline and other fuels, help shield them from volatile oil and gas prices. That’s because refineries pay less for crude when oil prices decline; this enhances their profits. SUNCOR ENERGY INC. $32 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $48.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.6%; TSINetwork Rating: Average; www.suncor.com) became Canada’s largest integrated oil company in 2009, when it merged with Petro- Canada....

Natural gas prices recently dropped below $2 U.S. per thousand cubic feet, a 10-year low. That’s mainly because of new shale gas discoveries. Prices have since moved up to $3.16, but still well below last year’s high of almost $5. Oil prices have weakened, as well. They are now down 18%, from $109 a barrel in February to $89 today. Oil prices will continue to vary, while gas prices will likely recover. Meanwhile. the long-term outlook for both of these stocks is positive. CRESCENT POINT ENERGY CORP. $39.62 (Toronto symbol CPG; Shares outstanding: 329.1 million; Market cap: $13.0 billion; TSINetwork Rating: Extra Risk; Dividend yield: 7.0%; www.crescentpointenergy.com) produces oil and natural gas in western Canada. Its production is weighted 91% toward oil and 9% to gas....

CANADIAN PACIFIC RAILWAY $75.81 (Toronto symbol CP; Shares outstanding: 171.2 million; Market cap: $13.0 billion; TSINetwork Rating: Average; Dividend yield: 1.9%; www.cpr.ca) has appointed Hunter Harrison as a director and its new chief executive officer.

Mr. Harrison is the former CEO of Canadian National Railway Co. (Toronto symbol CNR). He’s also the choice of prominent U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of CP.

The company believes Mr. Harrison will duplicate his success at CN, which included improving efficiency and speeding up deliveries. New trains and the recent drop in oil prices should also boost CP’s profits.

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ENERPLUS CORP. $13.84 (Toronto symbol ERF; Shares outstanding: 196.9 million; Market cap: $2.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 7.8%) produces an average of 79,190 barrels of oil equivalent per day (weighted 52% to natural gas and 48% to oil). Its properties are mainly in Alberta, Saskatchewan, B.C., North Dakota and Montana, as well as the Marcellus Shale, which passes through Pennsylvania, New York, Ohio and West Virginia.

In the three months ended March 31, 2012, Enerplus’s cash flow per share fell 4.4%, to $0.86 from $0.90. That’s mainly due to lower gas prices, which offset gains from a rise in oil prices.

Enerplus has cut its monthly dividend by 50%, to $0.09 a share from $0.18. It now yields 7.8%.

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Natural gas prices recently dropped below $2 U.S. per thousand cubic feet, a 10-year low. That’s mainly because new shale gas discoveries have increased inventories. Prices have since moved up somewhat, to $2.70. The low prices have pushed down shares of producers that rely heavily on natural gas, including ARC Resources and Enerplus. Even so, the long-term outlook for natural gas prices, and for both of these stocks, remains positive. ARC RESOURCES $22.70 (Toronto symbol ARX; Shares outstanding: 290.5 million; Market cap: $6.6 billion; TSINetwork Rating: Speculative; Dividend yield: 5.3%; www.arcresources.com) produces oil and natural gas in western Canada. Its average daily production of 94,970 barrels of oil equivalent is weighted 62% to gas and 38% to oil....

CANADIAN PACIFIC RAILWAY $75.81 (Toronto symbol CP; Shares outstanding: 171.2 million; Market cap: $13.0 billion; TSINetwork Rating: Average; Dividend yield: 1.9%; www.cpr.ca) has appointed Hunter Harrison as a director and its new chief executive officer. Mr. Harrison is the former CEO of Canadian National Railway Co. (Toronto symbol CNR). He’s also the choice of prominent U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of CP. The company believes Mr. Harrison will duplicate his success at CN, which included improving efficiency and speeding up deliveries. New trains and the recent drop in oil prices should also boost CP’s profits....

Sometimes, the market’s reaction to a news item can tell you something about the importance of the news item. It may also tell you something about the market’s underlying direction. For instance, on June 6, the Dow industrials moved up by 125 points after a two-month decline. Many investors assumed the gain was due to some European crisis development they missed that day. I assumed the rise came about because of political news from Wisconsin, and from the second- and third-largest California cities, San Jose and San Diego. I saw it that way because of today’s key investor concern: can governments around the world manage to tame their debts and their budget deficits without raising taxes to economically crippling levels? To do this, governments will have to break out of the stranglehold that pressure groups and entrenched special interests seem to have on them....