MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, JANUARY 21, 1998 (4)
FEATURE STORY
STILL MORE ON IMPERIAL OIL
Imperial Oil's Record Profit Streak Could End In 1998, Says CEO
Canadian Press
After a sixth straight year of record profits at Imperial Oil Ltd., Canada's largest integrated oil company warned Wednesday that falling commodity prices will pose a challenge in the new year. Imperial earned record profits of $847 million or $5.50 a share in 1997, compared with $786 million or $4.47 a share in 1996, the company reported in a year-end financial statement.
The recent strong showing by oil and gas producers is suffering as plunging commodity prices take hold - one of the most visible impacts of the Asian currency crisis - and Imperial is not immune, warned company president Bob Peterson.
"Nineteen ninety-seven was a very good year for Imperial Oil and its shareholders," Peterson said in a statement.
"However, commodity prices have weakened substantially at the start of 1998, suggesting a challenging year ahead."
Normally, large integrated oil and gas producers like Imperial are protected from downswings in the price of crude because they often buy more for their refining operations than they sell, said Craig Langpap, an analyst at Peters & Co. in Calgary.
"Looking specifically at Imperial Oil, they do produce a lot of crude oil from Cold Lake, Alta. which at this particular point is obviously very low-value heavy oil," Langpap said.
"They may be finding their margin between their selling price and their operating costs is getting fairly narrow."
Imperial spokesman Richard O'Farrell warned against reading too much into Peterson's concerns about falling oil prices, which have dropped to under $17 US a barrel in recent weeks.
"We've had good years, (and) a record year last year," O'Farrell said. "I think he simply wanted to point out ...that that kind of pricing will make it a challenge to keep up that rate (of growth)."
Imperial shares dipped 80 cents to close at $85.20 on the Toronto Stock Exchange.
Imperial - a unit of the world's biggest oil company, Texas-based Exxon Corp. - isn't the only major Canadian integrated producer feeling the pinch from falling prices.
Petro-Canada's earnings were sharply lower in the last three months of the year, although the Calgary company still produced net earnings of $306 million, its best annual profit ever.
The former federal Crown corporation blamed falling oil prices for the drop, while strong performances across its businesses - from conventional and offshore oil production to refining and gasoline marketing - helped offset the loss.
At Imperial, the company also reported it bought back 9.6 million of its shares for $694 million in 1997, reducing the number outstanding by six per cent. Imperial's board of directors also approved a proposal to split the common stock three-for-one.
The stock split means that for every share a stockholder owns, he will receive two additional shares. The oil company now has about 149 million shares outstanding.
The strong earnings from both Imperial and Petro-Canada continue the trend of robust annual results from Canada's major integrated producers. Calgary based Suncor Energy, which operates an oil sands plant in northern Alberta and owns the Sunoco stations in Ontario, said Monday it earned $223 million in profits last year, a 19 per cent increase.
The fourth major producer, Shell Canada Ltd., will report its earnings next week.
MARKET ACTIVITY
INDEXES
The Toronto Stock Exchange 300 Composite Index edged lower, falling 0.2% or 14.88 to 6494.57.
In comparison, the Oil & Gas Composite Index fell 0.7% or 46.65 to 6175.25. The sub-components were mixed. The Integrated Oils fell 0.7% or 60.29 to 8666.32 and the Oil & Gas Producers fell 0.9% or 47.72 to 5389.46. The Oil & Gas Service's managed to gain 0.1% or 3.83 to 2677.23.
INDEX CHARTS
TSE 300.......... canoe.quote.com
O&G Composite. chart.canada-stockwatch.com
Integrated Oil's.... chart.canada-stockwatch.com
O&G Producers.. chart.canada-stockwatch.com
O&G Services..... chart.canada-stockwatch.com
OIL & GAS PRICE REFERENCES
Charts: oilworld.com
NYMEX Reference quotewatch.com
HOT STOCKS
Shares of Nova Corp. hit a new high yesterday as speculation mounted that TransCanada PipeLines Ltd. is in the final stages of mounting a takeover for Nova, a pipeline and petrochemicals company. Nova's stock (NVA/TSE, ME) was the second-most active trader in Toronto and the most active in Montreal. On the TSE, it closed at $14.75, up 30›, and traded as high as $14.80 - its closing price in Montreal. Volume jumped to 3.3 million shares in Toronto, up from 1.9 million a day earlier.
TCPL is said to be interested in purchasing Nova in advance of the split to take advantage of its own stock's current high price, and to beat other potential suitors. TCPL's shares (TRP/TSE) ended the day at $32, down 90›.
Imperial Oil shares (IMO/TSE) closed at $82.25, down 75›, yesterday. A good earnings report wasn't enough to outweigh the slide in the oil's as a group. Stories follow on the Imperial report.
MOST ACTIVE
Poco Petroleums, Paragon Petroleum, Petro-Canada, Anderson Exploration and Renaissance Energy were among the top 50 most active traded issues on the TSE.
Suncor Energy gained $0.75 to $42.70, Windsor Energy $0.65 to $6.40, Denbury Resosurces $0.60 to $26.00 and Carmanah Resources $0.55 to $5.25.
Percentage gainers included First Calgary Petroleums 20.9% to $1.04, Abacan Resources 14.3% to $2.40, Eurogas Corp. 11.8% to $1.90, Carmanah Resources 11.7% to $5.25, Windsor Energy 11.3% to $6.40, New Cache Pettroleum 7.8% to $5.50, Pan East Petroleum 6.9% to $1.55, Tethys Energy 6.3% to $2.55, Canrise Resources 6.0% to $5.30, Merit Energy 5.9% to $4.50 and Highridge Exploration 5.2% to $4.05.
On the downside, Imperial Oil fell $0.80 to $85.20, Poco Petroleums $0.70 to $11.80, Talisman Energy $0.65 to $39.30, Canadian Natural Resources $0.60 to $28.30 and Chieftain International $0.55 to $27.90.
Percentage losers included petrorep resources 8.3% to $1.10, Beau Canada Exploration 8.1% to $2.60, Westfort Energy 6.5% to $1.00, Post Energy 5.9% to $3.20, Poco Pettroleums 5.6% to $11.80, Kappa Energy 5.6% to $2.55, Pacific Caisiar A 5.5% to $5.20, K2 Energy 5.4% to $1.75, OGY Petroleum 5.4% to $1.40 and Magin Energy 4.7% to $2.05.
No new 52-week highs.
Pendaires Petroleum reached a new 52-week low.
Oil & gas service companies were absent from the top fifty most active traded issues on the TSE.
Enssign Resource Services gained $0.80 to $28.80 and Enerflex Systems $0.70 to $30.65.
Pason Systems gained 5.3% to $7.00.
On the downside, Plains Energy Services fell $0.75 to $8.75 and Computalog $0.50 to $20.00
Percentage losers included Petro Well Energy 10.3% to $1.05, Bromley Marr 8.0% to $1.15 and Plains Energy Services 7.9% to $8.75.
Pason Systems reached a new 52-week high, while Petro Well Energy fell to a 52-week low.
Over on the Alberta Stock Exchange, Colt Energy, Calahoo Petroleum, Red Sea Oil, Bearcat Explorations, Tessex Energy, Cascade Oil & Gas, Cirque Energy, Golden Trend Petroleum, Cubacan Exploration, Golden Star Energy and Stellarton Energy were among the top 30 most active traded issues.
Lodestar Energy gained $0.45 to $2.25, Pason Systems $0.30 to $6.80, Global Link Int'l $0.22 to $1.25, Stellarton Energy $0.20 to $4.95, Canadian Crude Separators $0.15 to $4.50, Master Downhole Canada $0.12 to $1.25 and Palmetto Resources $0.10 to $1.30.
Cascade Oil & Gas climbed 26.7% to $0.38. Lodestar Energy 25.0% to $2.25, Global Link Int'l 21.4% to $1.25, Prize Energy 20.0% to $0.48, Dundee Petroleum 19.4% to $0.37 and ABX Resources 13.6% to $0.25.
On the downside, Capco Resources fell $0.55 to $3.20, Solid Resources $0.50 to $7.00, Red Sea Oil $0.37 to $3.28, GronArtic Resources $0.25 to $0.50, Tier One Energy $0.25 to $1.00, Colony Energy $0.15 to $1.65, Plexus Energy $0.12 to $0.78, Niko Resources $0.10 to $4.50 and Sunburst Oil & Gas $0.10 to $1.00.
Percentage losers included GronArtic Resources 33.3% to $0.50, Tier One Energy 20.0% to $1.00, Capco Resources 14.7% to $3.20, Belair Energy 14.3% to $0.30, Pheasantback 14.3% to $0.30, Plexus Energy 13.3% to $0.78 and Endeavor Resources 11.4% to $0.31.
Esker Resources and Lodestar Energy reached new 52-week highs.
Belair Energy, Canadian Blackhawk, Gopher Oil & Gas, International Hydrocarbons and NTI Resources reached new 52-week lows.
An excellent summary of most actives covering all four of the Canadian Stock Exchanges can be found at quote.yahoo.com
ANALYSTS / RESEARCH
Tony Massie, vice-president of investments at Global Strategy Inc., is bullish about the Canadian equity market and has been taking advantage of the weaker market to buy stocks. Massie's approach to Canadian equities is fairly defensive. He has a relatively low weighting in the resource sector. However, He still likes ATCO LTD. (ACO/TSE) $34.05 ($34.75-$23.55), his selection in Sonita Horavitch's column July 22 at $28.75. "It has a controlling stake in Canadian Utilities Ltd., a major utility company."
In the U.S., Lazard Freres & Co said Wednesday it initiated coverage of KEY ENERGY GROUP INC. with a buy rating on its 5.0 percent convertible notes due 2004 and an accumulate on its common stock.
-- Analysts said in a report Key Energy has established itself as the leading domestic onshore well service industry consolidator but the stock has dropped by about 50 percent since early October.
-- Estimate 1998 earnings per share of $1.35 compared with $0.65 earned in 1997, and has a 12 month share price target of $30. The stock was down 1/8 at 19-3/4.
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