energy

[selkirk]

today Canadian Hunter was taken over, of coarse this was rumoured for quite some time. The stock went from $31cdn.$32 (late september) to now $53cdn. The deal is for $2.1 billion US. Burlington is taking it over in a all cash deal.

Cdn. Energy stocks are cheap Anderson was just taken over, Westcoast (pipeline) and now Canadian Hunter. I am leaving out other mid cap and small cap stocks that have also been taken over.

months back listed a few energy stocks that I follow, list is getting smaller. Burlington paid a rich price if you use current natural gas prices but it will not look so bad if Natural gas prices trade over $3.50US in coming years.

bought some Candian Hunter for just over $37 but it was a small position. if the merger did not go through the stock would have fell to the low $30s a price that I would have added to the position and felt more comfortable (less downside risk).

the stocks could fall in the coming weeks (hoping) with the slowing economy, and weather. still one should watch this sector as their may be some good bargains appear in the 4th quarter.

updated and lowered earnings per share and cash flow per share, these are estimates based on $25US oil, and $2.60US natural gas.

estimates in Cdn. $, $1.54=$1US
by the way those these estimates should be close many things can screw these numbers up, drilling success or lack of, price of commodities, etc.

2001 2002 earnings 2001 2002cashflow

PanCanadian (PCP) $5.20 $2.40 $10 $6.50
Nexen NXY $2.95 $2.25 $10.50$10.40
Alberta EnergyAEC/Aog $5.31 $3.10 $13.40$12.50
Canadian Natural (CNQ) $5.15 $3 $14.30 $12
Tailsman (TLM) $5.15 $6 $18.40 $18.60
note: 10% of Tailsman cashflow comes from the Sudan, civil war, so extra risk.

takeover Canadian hunter projections just for comparison

Canadian Hunter $5 $3.10 $9.90 $8.25


Junior
Compton CMT $.30 .15 $1 .85
hopefully drift lower, I own a small position, average cost $3.20. good land position.

Compton is up .42cents to $3.83. I would wait after the merger news dies down it may fall back to low $3 range, a good buy.

Alberta Energy I suggested as a buy around $65cdn. went over $72cdn. then fell all the way down to $50cdn. now stands at $58cdn. a good energy company there is some downside risk but in general a well run company with decent earnings and cash flow.

will provide more updates in this thread in the coming weeks, months.

do not buy aggressivly if the stock is falling. I sometimes build up a position but if the stock is free falling I will more likely sell all or reduce a position, never buy a stock that is falling and coming under presure.
dollar cost averaging on a stock that has never shown you a profit and is trading down on a weekly/ daily basis is a good way to lose money.

thanks
selkirk



[This message has been edited by selkirk (edited 10-09-2001).]

 

[selkirk]

last week the energy sector had a good run, thanks to the takeover of Cdn. Hunter.
Compton closed at $4.10
CNQ is at $43.70

I would sell positions (stops) in Compton at $4, and $3.90. half of the position.
Compton is a good company but may in time drift towards and below $3.50 cdn. if the merger news dies down and natural gas prices stay low.

CNQ is worth looking at below $40cdn. the stock has traded below $40 and then rallied to over $45cdn.

thanks
selkirk

 

[selkirk]

Cdn. energy stocks are starting to fall back after the takeover of Cdn. Hunter, they should fall further 5-10%. I like the sector but will wait before picking up more positions. the stocks are not bad value now, but should get better in fact they may have a red tag sale in the coming months.
$1.57cdn.=$1US
prices in cdn.
AEC $58.60 was over $63 last week CNQ=$40 broke over $44, SU= $45.25 Pce $41.50

Alberta Energy reported earnings this week for the quarter.
2001 3q 2000 3rd q
Earnings $1.13/190.1 million $1.57/240.8
cashflow $2.66/$436.1m $3.75/565.6m
Alberta Energy Canada largerst natural gas producer sold natural gas at $3.37mcf compared to $5.33 last year.

their production comes mostly from Canada, also the US and Ecuador.

Alberta Energy has 22 billion cubic feet in storage and will increase this to 28 billion cubic feet if the price does not recover in the coming months.

also they are shutting in roughly 50million cubic feet per day, until prices improve.

this a good idea, when natural gas prices recover they will be able to quickly increase production and sell what is in storage.

at this point natural gas, and oil prices are weak. recovery will come when the economy show more strength and a colder winter would help also.

I own Alberta Energy but would not add to the position at this time, it is a great company but it may trade down to $50cdn. so you may be able to get it cheaper it will take time to go on a run.

also if "anything" happens in the middle east, that effect oil, domestic energy companies will benefit.

well run company, like the stock but it may drift lower from here, so a hold.

note: will have a write up on CNQ and PCE in the coming weeks.
thanks
selkirk

 

[Way out West]

Hey Selkirk,

Informative posts, just wanted to let you know that this information isn't going unnoticed. Do you usually accumulate for longterm or trade short term? IMO, the energy sector is a great area to stay focused on right now with oil prices dropping and potential Canadian companies as takeover targets.

 

[redsfann]

 

[selkirk]

thanks Redsfann and Way out West for your comments and checking out the write ups.
Way out West I agree the energy sector is a good place to look for stocks, most of these stocks are still profitable even with the lower natural gas prices and oil. good reserves and cash flow, also if natural gas prices increase over $3 then it should be even better.

I think that the merger news may wear off if there is no other merger news in the next month or two. just waiting as I believe some of these stocks could go down further.

follow around 40-60 stocks, many have a range and sometimes I will trade around it.

short term, long term trader, my goal is to make 20%+ every year (sometimes better sometimes worse) still thats the goal.
often the stocks I follow have options, and will write covered calls against them in some cases, if the price is fair/good.

sometimes trade a stock after only a few weeks, but ussually a hold is in months/years, with options being written against it. NOT a Day trader. 75-90% day traders lose money, the other 10% do well. I would be in the group that losses money.

also will very seldom average down on a stock (almost never).

thanks
selkirk

 

[selkirk]

Alberta Energy sold its 13.75% interest in Alberta Oil Sands pipeline. Sold it to Pembina Pipelines for $225 million Cdn. $75 million over book value.

Alberta Energy will use the money to pay down debt, it was a non core asset.

The pipeline generated $18 million cdn. and $5.5 million cdn. of earnings. this will increase as Syncrude will increase production.

Pembina Pipelines is an income trust trades on the TSE (yield roughly 10%). (collection of income trusts would easily outperform Canada Saving bonds (1.8%) of coarse so does inflation)

good transaction for both companies Alberta Energy has projects where it can generate a higher return, Pembina is an income trust and needs stable generating projects (pipelines).

next write up on CNQ Canadian Natural Resources.

Alberta Energy is trading around $60 cdn. I thought it was a buy around $65cdn, since then moved over $73 and then down to $50.

Energy sector may suffer on economic weakness and if there is a mild winter, still like the long term propects, on weakness would add to the holdings in the sector.

Will have write up on Canadian Natural Resources soon.

thank
selkirk

 

[selkirk]

before CNQ small writeup on Nexen NXY

Nexen (NXY-tse)(NXY-amex) $1US=$1.60cdn.
book value $15.60est. cdn.
earnings per share $4.52cdn. $2.95US 2000
2001 $3.40/$3.75cdn. 2002 $2.70/$3.00 cdn.

cashflow/share $12.01cdn $7.85 2000 11.60/$12cdn 2001 $10.70/$11.10cdn 2002

div .20US .30Cdn.
Nexen production should increase from 3Q to 4Q (around 2-3%), daily production 280,000 barrels a day.

Production is 80%oil 20% natural gas
roughly 120,000 barrels (and growing ) come from Mexico, Nigeria, Indonesia, and Yemen.
also large interest in Western Canada, and own 7.23%of Syncrude (great project).

Nexen used to be called Cdn. Occidental it changed its name when the parent US company tried to take it over Occidental Petroleum.

Nexen is cheap but there are some risks, the biggest one is Yemen. Yemen is in the middle east and has great potential and low costs for the company. They have been there for over 15 years.

Last year the USS Cole was bombed while in port, killing 18 American sailors, (the US launched a cruise missle attack on Afganistan (mainly for show and politics not hitting much), and put Bin Laden and Al-Queda officals on a bigger wanted poster) Al Quada may have business connections in the country.

the President of Yemen has denounced the attack and is willing to help the US. there are some very large US companies involved in the country US Hunt oil (Ray Hunt is a Bush Fundraiser) and Occidental Petroleum). So it is likely Iraq will be the next target, followed by maybe Sudan. Yemen government is considered an (ally) by the west.

Nexen is a cheap company trading around 3X cashflow with good management and projects. Do not currently have a position in the stock.

there is a small risk, but there is always a risk, the Yemen production.

Will have write ups on two companies that have production more from North America.

thanks
selkirk

 

[selkirk]

note: Do not want to suggest Yemen is a terrorist state, it is not, Al-Queda probably has connections throughout the middle east (world) , especially Saudi Arabia
.
thanks
selkirk

 

[selkirk]

Canadian Natural Resources (CNQ/TSE CED/NYSE)
$1cdn=$1.59us
book value $31.25cdn.

CNQ reported earnings earlier this month at $1.08 3rd quarter.

capital spending budget for 2002 will be roughly $1.5 billion (final number depends on prices for oil and gas and as a result cashflow). will be spent in projects in Western Canada and North Sea, and West Africa. this year 2001 it will be $1.9-$2 billion

debt stands at 2.6 billion Cdn.
production was over 360,000 boe/d (43% gas)

gas production will be increased and is up 4% from last quarter, and 9% from a year ago.

26% of 2002 production comes from heavy oil.

in Cdn. $
earnings per share 2000/$6.40 2001/$5.40e 2002e/$3.10$3.30

div .40cdn .26 US

Cashflow/share 2000 $15.54 2001 $15.20e 2002 $12.50/$13.00e

CNQ is trading at $38.59cdn. note have a position I bought some CNQ at $37.50, oil stocks had a terrible last week, especially thursday.

The stock has good properites and mangement and at a little over 3X cashflow is cheap.

warning if oil fall to $15US then CNQ and the rest of these stocks get even cheaper.

average price for oil this year should average $20 or higher.

CNQ is a good stock and should be considered if you want to increase your energy holdings.

thanks
selkirk



[This message has been edited by selkirk (edited 11-21-2001).]

 

[selkirk]

just a brief update

just a brief update

the Cdn. oil stocks have had a good few months.
oil is looking strong, if the economy can recover then will will increase demand.

also opec would like prices 10% higher from current prices and are not talking about increasing supply.

negative.

Russia will not cut production, they will produce as much as they can as long as oil is over $16US.

Natural gas prices will remain weak, long term natural gas prices will increase, but for the next 3-5 months expect stable to weaker prices.


CNQ Canadian Natural Resources which I purchased at $37.50 is now at $47.83. stop loss $45. also wrote some CNQ puts at $40 which look like they will expire, should have just bought more of the stock but trade worked out well.

Nexen was just under $30 when I last posted but is now at $37.42. bought some average price $32. stop loss $35. oil stock with prodution in Yemen.

Tailsman which mentioned in other thread was around $55-$58. TLM is now at $63.45 my average price is $57. stop loss $61. 10% cashflow from Sudan which has been in a civil war, also most people do not buy it for ethical reasons, will explain this later. small positon.

Alberta Energy recommended it around $65cdn. went to over $72 then to $50 (not fun) now at $68.39 cdn. not the cheapest energy stock however merger with PanCanadian will create a large over $20 billion and powerful company, with great poperities. good exposure to oil and gas, if gas prices move higher Alberta Energy (Encana) will do just fine.

will have more info on these stocks and some more energy stocks. note: do not own Rio Alto (RAX) and beleive there are better companies than this one, some people believe it will be taken over. underperformer.

note: would not be overweight oil/gas stocks, and have stops in place.


thanks
selkirk