pengrowth

PENGROWTH ENERGY CORP. $11.31 (Toronto symbol PGF; Shares outstanding: 329.3 million; Market cap: $3.7 billion; TSINetwork Rating: Average; Dividend yield: 7.4%; www.pengrowth.com) produces oil and natural gas from properties in Alberta, B.C. and Saskatchewan. It also owns 8.4% of the Sable Offshore Energy Project, which extracts natural gas from several fields south of Nova Scotia.

Pengrowth produced an average of 74,568 barrels of oil equivalent per day (including natural gas) in the three months ended September 30, 2011. That’s up 2.6% from 72,704 barrels a year earlier. Production was weighted 51% to oil and 49% to natural gas.

Cash flow rose 0.7%, to $150.4 million from $149.3 million. Cash flow per share fell 8.0%, to $0.46 from $0.50, on more shares outstanding.

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GENNUM CORP., $13.48, Toronto symbol GND, jumped 119.2% this week after it accepted a $13.55-a-share takeover offer from U.S.-based Semtech Corp. (Nasdaq symbol SMTC). Gennum designs electronic equipment and computer chips that let television broadcasters store, edit and transfer video signals without losing picture quality. It also designs chips that make computer networks faster. The company’s shares are now trading just below Semtech’s offer. This indicates that investors do not expect a higher price. Regulators and Gennum shareholders must still approve the deal, but it should close in April 2012....

In next week’s Successful Investor Hotline, we’ll reveal our #1 stock pick for 2012. Don’t miss this unique opportunity to profit. CANADIAN PACIFIC RAILWAY LTD., $69.08, Toronto symbol CP, rose 4% this week on media reports that Pershing Square Capital Management, L.P. is pressuring the company to replace its current chief executive officer with Hunter Harrison, the retired CEO of rival Canadian National Railway Co. (Toronto symbol CNR). Pershing Square is an activist investment firm that is now CP’s largest shareholder. CP’s shares have gained 8.3% since October 28, 2011 when Pershing Square said that it had bought 12.2% of the company on. Pershing Square now owns 14.2% of CP....

ARC RESOURCES $25.52 (Toronto symbol ARX; Shares outstanding: 287.6 million; Market cap: $7.3 billion; TSINetwork Rating: Speculative; Dividend yield: 4.7%; www.arcresources.com) produces oil and gas in western Canada. Its average daily production of 85,178 barrels of oil equivalent is weighted 67% to gas and 33% to oil. In the three months ended September 30, 2011, ARC’s cash flow per share rose 17.5%, to $0.74 from $0.63. That’s because the company raised its production. It also benefited from higher oil prices. ARC converted from a trust to a corporation on January 1, 2011, in response to Ottawa’s income-trust tax. However, ARC has $2.2 billion of tax pools that are letting it offset the tax and maintain its $0.10 monthly payout (it now yields 4.7%)....

PENGROWTH ENERGY CORP. $10 (Toronto symbol PGF; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 330.1 million; Market cap: $3.3 billion; Price-to sales ratio: 2.4; Dividend yield: 8.4%; TSINetwork Rating: Average; www.pengrowth.com) produced an average of 74,568 barrels of oil equivalent per day (including natural gas) in the third quarter of 2011. That’s up 2.6% from 72,704 barrels a year earlier. Production was weighted 51% to oil and 49% to natural gas. Cash flow rose 0.7%, to $150.4 million from $149.3 million. However, cash flow per share fell 8.0%, to $0.46 from $0.50, on more shares outstanding. Pengrowth is drilling more wells on its properties in Alberta. As a result, it now expects to spend $610 million on capital projects in 2011. That’s $60 million more than its earlier forecast. The company will fund this expansion by selling $300 million of new shares. That will increase the total outstanding by about 9%....

PENGROWTH ENERGY CORP. $9.21 (Toronto symbol PGF; Shares outstanding: 303.2 million; Market cap: $3.0 billion; TSINetwork Rating: Average; Dividend yield : 9.1 %; www.pengrowth.com) produces oil and natural gas in western Canada and off the Nova Scotia coast. Its production is weighted 50% to oil and 50% to gas. Even with higher oil prices, Pengrowth’s cash flow per share fell 23.3% in the three months ended June 30, 2011, to $0.46 from $0.60 a year earlier. However, that was mainly because wet weather, pipeline outages and forest fires in northern Alberta cut its average daily production by 4.3%, to 72,288 barrels of oil equivalent (including natural gas) from 75,572 barrels. Pengrowth is using some of the cash from its conventional properties to expand into more risky areas, such as oil sands and shale gas. Still, these projects have strong long-term potential, and their cash flows will help Pengrowth maintain its high 9.1% dividend yield....

Pengrowth quickly became Canada’s largest oil and gas income trust after it was formed in 1989. As a trust, it paid out most of its cash flow to its unitholders. That left it with little to invest in exploration or growth projects. At the start of 2011, Pengrowth converted to a corporation in response to the federal government’s new tax on income-trust distributions, which came into effect on January 1 of this year. Unitholders received one common share for each unit they held. Now that it is a corporation, Pengrowth is using some of the cash from its conventional properties to expand into more risky areas, such as oil sands and shale gas. However, these projects have strong long-term potential, and their cash flows will help Pengrowth maintain its high dividend yield....

PENGROWTH ENERGY $12.47 (Toronto symbol PGF; Shares outstanding: 303.2 million; Market cap: $4.0 billion; TSINetwork Rating: Average; Dividend yield: 6.7%; www.pengrowth.com) gets most of its oil from conventional sources with large reserves and predictable production rates. The company is also developing heavy-oil projects, particularly oil sands. Its biggest oil sands project is its Lindbergh property near Cold Lake, Alberta. Pengrowth estimates that Lindbergh’s reserves could equal 40% of the company’s current proven and probable reserves. Pengrowth expects to begin production in late 2013. Pengrowth is also developing its Bodo heavy-oil properties along the Alberta/Saskatchewan border. These wells could begin operating in late 2011....

PLEASE NOTE: Our next Hotline will go out on Friday, July 8, 2011. SNC-LAVALIN GROUP INC., $58.88, Toronto symbol SNC, rose 9% this week in response to its purchase of certain assets of Atomic Energy of Canada Ltd. from the federal government. The purchase mainly consists of Atomic Energy’s Candu nuclear-reactor division. All of Canada’s reactors use the Candu design and technology. The division has also sold reactors to Argentina, Romania, India, South Korea and China....

TRANSCONTINENTAL INC., $14.65, Toronto symbol TCL.A, is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. It also publishes newspapers and magazines, and has over 300 web sites. The stock rose 3% after the company reported better-than-expected earnings this week. Transcontinental also raised its dividend for the second time in the past six months. In its 2011 second quarter, which ended April 30, 2011, Transcontinental’s revenue rose 0.9%, to $514.7 million from $510.0 a year earlier. Excluding unusual items, earnings rose 17.6%, to $40.1 million from $34.1 million a year earlier. Earnings per share rose 16.7%, to $0.49 from $0.42, on more shares outstanding. That beat the consensus estimate of $0.44 a share....