MARKET WRAP FOR DAY ENDING TUESDAY 12/29/98 / With Focus On Canada + Oil & Gas (Part 1 of 2)
Toronto Trading Flat With Slight Gain As New York Benchmarks Surge
Toronto equities eked out a modest gain by the close on Tuesday but significantly lagged New York shares which staged a solid blue chip-led rally.
Stocks in New York posted strong gains Tuesday as the Dow Jones industrial average marked its eighth consecutive positive session -- its longest winning streak in two years.
By the close of trading, the Dow Jones average had gained 94.23 points to 9,320.98. That means the Dow moved within 54 points of its all-time high close, set Nov. 23: 9,374.27.
"They're determined to make a new high," said Fred Ketchen, managing director of equities trading at ScotiaMcLeod in Toronto. "There's been a lot of activity. . . You have a lot of funds that have a fair amount of cash on hand and they want to put it to work."
Traders said Toronto was restrained by a poor outlook for commodity prices and a dearth of buyers in this holiday-thinned week. Toronto markets were shut on Monday for the Boxing Day holiday and will close on Friday for New Year's Day.
"I thought (the market) was lousy in Toronto and wonderful in New York," said Rolie Bradley, institutional salesman at Maison Placements Canada Inc. "Basically, it's lack of buying power and also the expectation of a continuing deterioration in the resource sector."
Share prices in Toronto remained flat for most of the day as losses mounted in the oil and conglomerates sectors. The Toronto Stock Exchange bellwether TSE 300 Composite Index edged up 6.78 points to close near its session peak at 6472.16. Turnover was subdued at 68.2 million shares worth C$1.19 billion. Advancing shares nosed past decliners 485 to 455 with 269 closing steady. 19 issues reached new highs and 35 issues reached new lows.
The TSE 300 has lost four per cent since the beginning of the year. The Dow is up about 18 per cent.
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Chart - TSE 300
canoe.quote.com
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The most active stock was the Toronto 35 Index Participation Fund, which gained 15 cents to $35.40 on 8.1 million shares traded. Paper producer Domtar Inc. was one of Toronto's most briskly traded issues, dipping $0.05 to $8.40 in turnover of nearly 3.1 million shares. Shares of the pulp and paper firm rose slightly then fell in heavy volume, with the majority of trading consisting of a 2.58 million block of shares crossed by Nesbitt Burns Inc.
Other notable stock moves included Northern Telecom, which lost $1.30 to close at 77.90, and Newbridge Networks Corp., off $1.50 at $45.70.
Internet auctioneer Bid.Com International continued to reap the rewards of the Internet stock feeding frenzy, rising C$0.35 to C$4.10 with 2.6 million shares changing hands.
Nine of Toronto's 14 subgroups closed higher.
Rising groups were led by the consumer products group which added 1.8% percent as Seagram Co. Ltd. surged $2.50 to $59.50 and pharmaceutical shares climbed. QLT PhotoTherapeutics Inc. and Biovail Corp. International both posted gains. QLT, which has been rallying solidly recently, hit a new 52-week high of C$38 before pulling back to close $2.95 higher at $36.95 on 320,000 shares traded. The enthusiasm that drove the Vancouver-based drug developer's shares up on Nasdaq on Monday did not continue yesterday. Although the shares rose in Toronto to catch up to Monday's almost $4 (US) rise on Nasdaq, they fell in New York.
Investors have been applauding the firm's widened U.S government approval for its lung cancer-fighting drug Photofrin by bidding the shares up 67% this month. Next in line for approval is a light-activated drug called verteporfin, which the firm claims can treat age-related blindness.
Another pharmaceutical company, Synsorb Biotech Inc. closed down $0.15 to $3.60, on volume of 64,600 shares. The market seemed to disapprove of the pharmaceutical company's arrangement with GATX/MM Venture Finance Partnership whereby Calgary-based Synsorb will receive a $3-million term loan. The company said the loan will be used to fund its clinical trial programs.
The gold and precious metals group added 0.5% as Barrick Gold Corp. rose 55 cents to $30.25 and Placer Dome Inc. added five cents at $17.65.
ITEC-Mineral Inc. jumped $10 to $30 on 5,000 shares traded and Homestake Canada was up $1.20 to $14.75.
Remaining sectors closing on the upside were real estate 0.5%, utilities 0.5%, communications/media 0.4%, merchandising 0.3%, paper/forest products 0.2%, financial services 0.2% and metals/minerals 0.1%.
In the financial services sector, most of the big banks posted slight losses. TD Bank was the exception, gaining $1.40 at $53.65. TD Bank is a leader in the discount brokerage field and many analysts believe its Waterhouse Securities division is poised to make a fortune through online trading.
"With all of this Internet hype that's going on, Toronto Dominion has benefited," said Ketchen.
Some of the big losers in the financial group included Merrill Lynch Canada, down $4.10 at $107.90 and Mackenzie Master Limited Partnership, down $4.40 to $14.50.
The TSE was held back by the conglomerates, which lost 1.3% as Canadian Pacific Ltd. dropped 70 cents to close at $28.95.
Oil and gas stocks dropped 0.8% or 36.78 points to 4487.17. Among the sub-components, the integrated oils fell 1.0% or 73.26 to 6956.88. The oil & gas producers lost 0.8% or 31.47 to 3906.88 while the oil & gas service group gained 0.3% or 3.45 to 1309.04.
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Oil & Gas Charts - TSE 300
Oil & Gas Composite
chart.canada-stockwatch.com
Integrated Oil's
chart.canada-stockwatch.com
Oil & Gas Producers
chart.canada-stockwatch.com
Oil & Gas Srvices
chart.canada-stockwatch.com
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At the New York Mercantile Exchange, February crude oil rose 26 cents to $11.72 a barrel after rising 23 cents Monday and March crude climbed 23 cents to $11.90 a barrel.
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Chart References
NYMEX LIGHT SWEET CRUDE OIL PRICE CHARTS
oilworld.com
IPE BRENT CRUDE OIL PRICE CHARTS
oilworld.com
OIL INDUSTRY COMBINED GRAPH CHARTS
oilworld.com
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NYMEX Hub natural gas futures mostly ended lower Tuesday in an active session, undermined by a late wave of technical selling before January
expired despite firmer physical prices ahead of some colder weather.
January expired 2.3 cents lower at $1.765 per million British thermal units after diving late to another contract low of $1.71. February, which also set a new benchmark of $1.77, settled 0.8 cent lower at $1.781. Other deferreds finished flat to down 2.3 cents.
''We saw some early short covering, but there was good selling in front of the gap (in January at $1.845-1.86). The longs got caught late and just bailed,'' said one Midwest trader, noting Feb held better today ahead of colder weather and prospects for a decent storage draw tomorrow that should reduce the year-on-year surplus.
Withdrawal estimates for Wednesday's AGA storage report range from 105 to 221 bcf. For the same week last year, stocks declined 96 bcf. Total inventories stand 704 bcf, or 31 percent, over year-ago.
WSC expects normal to slightly above normal East Coast temperatures Tuesday and Wednesday to cool to as much as 12 degrees F below normal Thursday, then moderate to just below normal by Saturday. Midwest readings will dive to as much as 15 degrees below normal Wednesday and Thursday, then warm to slightly above normal by Saturday.
In Texas and the West, above to much above seasonal temperatures are expected for the period.
A private six- to 10-day forecast released today calls for below normal temperatures from the upper Midwest and Great Lakes region to the Northeast and Mid-Atlantic. Normal readings are expected for most of the Midwest, Gulf Coast and Southeast. The West Coast and Southwest will stay above normal.
With January now off the board, technical traders pegged minor support in February at today's new contract low of $1.77. Major buying was expected at $1.61, which is the spot continuation low for the year.
Minor Feb resistance was seen in Monday's $1.84-1.86 gap, with psychological selling expected at $2.00. Only a close above key resistance in the $2.14-2.18 gap would turn the chart picture bullish.
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Chart References
NYMEX HENRY-Hub NATURAL GAS PRICE CHARTS
oilworld.com
WEST Tx WAHA-Hub NATURAL GAS PRICE CHARTS
oilworld.com
OIL INDUSTRY COMBINED GRAPH CHARTS
oilworld.com
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Canadian spot natural gas prices were firmer in Alberta on Tuesday as cold, snowy weather continued to cover western Canada, industry sources said.
Day prices at the AECO storage hub in Alberta were up about seven to eight cents at C$2.47-2.48 per gigajoule (GJ), while January gas was seen trading at a slight discount at C$2.43.
''It's a little colder than they had expected. That's kicked up utility load a bit,'' one Calgary-based trader said, adding that sufficient storage supplies would likely temper any significant price rally.
Storage inventories in Canada as of December 18 were at 479.01 billion cubic feet per day (bcfd), or 92 percent full, up from 73.8 percent full a year ago. Specifically in the west, stocks were at 248.02 bcfd, or 89.3 percent of capacity, versus 72.7 percent in 1997.
Meanwhile, linepack on NOVA's system as of Monday evening stood at 13.03 bcfd, just shy of the pipeline's target at 13.2 bcfd.
Also, NOVA said it will be installing a replacement gas generator on Wednesday at its Berland River compressor station.
Prices at Sumas/Huntingdon fell several cents to trade widely at US$1.80-2.00 per mmBtu as demand dwindled in the Northwest following a bitterly cold week.
Trading for next month at Sumas was talked around US$2.70 per mmBtu.
To the east, prices at the Niagara export point were quoted in the low-US$1.90s per mmBtu.
Included among the most active traded issues on the TSE were Gulf Canada Resources -$0.05 to $3.60, Petro-Canada -$0.25 to $16.15, Talisman Energy -$0.55 to $25.75, Fracmaster +$0.91 to $4.20, Canadian Occidental Petroleum -$0.10 to $15.90, Renaissance Energy -$0.15 to $17.00 and Canadian 88 Energy unchanged at $4.70
Among top net gainers, Fracmaster gained $0.91 to $4.20 and Seven Seas Petroleum (u) added $0.55 to $7.65.
Net losers included Enerflex Systems $1.00 to $26.50, Talisman Energy $0.55 to $25.75 and Rio Alto Exploration $0.50 to $14.00.
Percentage winners included Fracmaster, Trican Well Services, Jet Energy, Upton Resources, Ryan Energy Technologies, Tetonka Drilling, Seven Seas Petroleum (u) and Cirque Energy.
Percentage losers included Petromet Resources, Bonus Resource Services, Calahoo Petroleum, Ocelot Energy B, Pursuit Resources, Compton Petroleum and Gulfstream Resources.
The already hard-hit Canadian energy service companies endured another beating yesterday from investors spooked by news coming out of major U.S. players.
Halliburton Co.,g the world's largest services firm, warned on Monday that fourth quarter earnings will fall below analysts' forecasts. Halliburton said its profit (excluding special charges) will range between 19¢ and 21¢ (US) a share, well below the 36¢ (US) average estimate by analysts polled by First Call Corp. A year ago, Halliburtonn earned 58¢ (US) a share in the final quarter.
It is taking a $24-million (US) charge as a result of firing another 2,750 employees. The firm, headquartered in Dallas, blamed low oil prices -- which have fallen almost 40% in the past year -- for the layoffs and poor financial performance.
Capital spending cuts by producers were cited on Monday by Halter Marine Group Inc. as the reason for its fourth quarter earnings warning. The Gulfport, Miss. based maker of drilling rigs and small ships predicts revenue in fiscal 2000 will decline from fiscal 1999, which ends Marchd 31.
Investors reacted to the downward grooming of expectations by punishing Halliburton (HAL/NYSE) and Halter Marine (HLX/AMEX), with the pain spreading to other players on both sides of the border. Halliburton's equity fell $2 3/8 (US)u to $30 9/16 (US), while Halter Marine's stock declined 7/8 to close at $4 3/4 (US).
James Stone, managing director of Schroder &p Co. in New York, said uncertain conditions mean more service companies will disappoint analysts and investors.
And the outlook for the next year is not encouraging, he said. "To expect anything other than tough economic times for these companiest in 1999 is foolish."
In addition to languishing oil prices, Canadian producers are seeing lower than expected natural gas prices because of a generally mild winter and bulging storage inventories.
With debt levels already high andi almost no ability to tap equity markets, cash-constrained producers willl reduce their demand for drilling and ancillary services in 1999.
The combination of punches is pummelling the financial results of service firms and causing investors to flee the sector, analysts said.
Janet Spensley, with FirstEnergy Capital Corp. in Calgary, said sector stocks could fall further if low oil and soft gas prices depress first quarterg drilling activity, traditionally the busiest period. "We're looking for commodity price improvement, otherwise it couldj be an extremely ugly year for some of these firms," she said.
Many firms sported bruises when markets closed yesterday. For example, Precision Drilling Corp. dropped 15¢ to $16.60, Tesco Corp. dipped 10¢ to close at $6.20, and Foremost Industries Ltd. closed at a 52-week low of $2.70, down 45¢.
An exception among the flock was Fracmaster Ltd., which gained 91¢ to close at $4.20. The company, which is searching for a buyer after controlling shareholder Alfred Balm put his 43%g stake on the block in September, recently tumbled to 52-week lows. The depressed price attracted speculators hoping for a higher bid from a United States based rival, one analyst said.
The holiday cold snap has helped warm the spirits of Canadian natural gas producers.
While warm weather in November and early December depressed prices for natural gas across North America, the recent storms in the United States and Canada have renewed optimism in the sector.
"It's certainly something we've been waiting for,'' Chris Peirce, vice-president of strategic planning at the Canadian Association of Petroleum Producers, said Tuesday.
"We need to have winter weather in winter.''
Cold weather helps drive natural gas demand in North America, putting upward pressure on prices for the commodity.
Spot gas prices at the AECO-C hub in southern Alberta climbed into the range of $2.50 per gigajoule last week following the first winter blast in Canada. Prices closed Tuesday at $2.48.
During the first two weeks of December, gas prices hovered below $2.20 per gigajoule - bottoming out at $1.11 early in the month - as mild weather and increasing gas storage levels kept the lid on prices.
Analysts note the buildup of gas in storage remains high and it will take weeks of sub-zero temperatures to melt off the surplus.
"It's all good and desirable, but the front-end of the winter was too long and too warm,'' said Verne Johnson, president of Ziff Energy Group, an energy consulting firm in Calgary.
"We are going to need lots of cold weather, measured in weeks or months."
There has been some movement in gas supplies.
Storage levels in Eastern Canada dipped one per cent for the week ended Dec. 18, while Western Canadian levels also fell slightly. However, the Canadian Gas Association estimated storage facilities were 92-per-cent full.
The American Gas Association reported last week that U.S. storage dropped by 85 billion cubic feet to 2,970 billion during the same period.
The U.S. East Coast received its first major winter snowfall last week, and chilly weather continues to grip the American Midwest.
"If we can get some of the (gas) overhang out of the way, you're definitely going to see higher prices as a colder winter sets in,'' said Greg Kist of Alberta Energy Co. Ltd., one of Canada's largest natural gas producers.
"Clearly weather is the biggest variable."
Many Canadian petroleum producers have already pre-sold gas above the current market rates, attaining prices of up to $3 per thousand cubic feet of gas, Johnson noted.
By hedging some production, prudent companies have locked in high gas prices and ensured sufficient cash flow for capital spending plans and debt-servicing requirements next year, he said.
"For a good part of the second half of the year, prices were very strong and lots of producers took significant hedge positions - just to be sure,'' Johnson said.
Chris Thiel of CIBC Wood Gundy estimated one-third of Canadian natural gas is already pre-sold at an average price of $2.50 per thousand cubic feet.
Companies such as Berkley Petroleum Corp., Northrock Resources Ltd. and Rio Alto Exploration Ltd. have taken significant hedge positions on natural gas, he added.
Further reviewing sectors, in the transportation/environment group, which gave up 0.7%, Laidlaw Inc. was off 20 cents at $15.15.
Canadian National Railway Co. closed down $0.10 to $79.50, on volume of 42,655 shares. Canada's largest railroad appeared on J.P. Morgan's list of "best of sector selections" for 1999. Of the 63 "top pick" companies, this was the only Canadian firm to make the cut. Last week CN was reiterated a "strong buy" by Steven Lewins at Gruntal & Co., with a 12-month target price of about $100.
Other sectors suffering on the downside were pipelines 0.7% and industrial products 0.3%.
The Montreal Stock Exchange's portfolio index increased 0.1% or 1.92 to 3356.98 on slow trading volume of 8.5 million shares valued at $67.0 million. Advancing issues outnumbered declining issues 191 to 150, with another 75 unchanged. Issues reaching new lows totaled 10 while issues reaching new highs numbered 5.
The Montreal oil and gas index fell 0.7% or 13.67 points to 1952.45. Gulf Canada Resources was among the most active traded issues, gaining $0.01 to $3.64. Among net gainers and losers, Fracmaster gained $0.90 to $4.05 while Alberta Energy lost $0.55 to $32.85, Suncor Energy fell $0.40 to $43.85 and Talisman Energy slipped $0.40 to $25.65. Fracmaster was among the leading percetage gainers. Percentage losers included Numac Energy, Ocelot Energy B and Ranger Oil.
The Vancouver Stock Exchange's composite indicator index rose 0.5% or 1.99 to 379.78. The mining indicator index gained 0.9% or 2.53 to 285.65. Exchange volume was moderate with 18.5 million shares exchanging hands worth a value of $10.9 million. 135 issues advanced and 117 declined with another 433 unchanged. New highs were obtained by 4 issues and 26 fell to new lows.
Among the most active traded issues, Ultra Petroleum fell $0.09 to $1.16 and R.I.S. International remained unchanged at $0.67. Leading net gainers included Player Petroleum $0.30 to $2.50, Shamrock Resources $0.12 to $0.25 and Redwood Energy $0.11 to $0.75. Losers included Ultra Petroleum $0.09 to $1.16.
The Alberta Stock Exchange's combined valued index gained a healthy 1.5% or 24.63 points to 1700.82 on volume of 11.7 million shares. Advancing issues outnumbered declining issues by 149 to 119 with another 124 unchanged.
Among the most active traded issues were HEDGO Canada unchanged at $0.52, Red Sea Oil +$0.04 to $1.10, Key West Energy unchanged at $0.70, Anvil Resources +$0.03 to $0.45, Bakrie Minarak Energy +$0.28 to $0.65, Corridor Resources +$0.10 to $0.75 and Scarlet Exploration -$0.03 to $0.37.
Top gainers included Hawk Oil A $0.30 to $1.10, Bakrie Minarak Energy $0.28 to $0.65, Arrival Energy $0.20 to $1.10, Corridor Resources $0.10 to $0.75, Maxwell Oil & Gas $0.10 to $0.95 and Doreal Energy $0.09 to $1.15.
Top losers included Solid Resources $0.55 to $7.05, Serval Integrated $0.50 to $2.50, BW Technologies $0.10 to $3.40, Grace Resources $0.06 to $0.12, International Frontier Resources $0.06 to $0.36, Syner Seis Tech $0.06 to $0.20 and Bearcat Exploration $0.06 to $0.175.
Leading percentage winners included Bakrie Minarak Energy, Barra Resources, Arrival Energy, Corridor Resources and Maxwell Oil & Gas.
Percentage losers included Syner Seis Tech, Serval Integrated, Del Roca Energy, International Frontier Resources, Grey Wolf Exploration, Scimitar Hydrocarbons, Prize Energy, Cigar Oil & Gas and BXL Energy.
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References
Canadian Market Digest
quote.yahoo.com
Canadian Markets/Sectors
quote.yahoo.com
Canadian Most Actives
quote.yahoo.com
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