Posted by Brett Harris on May 29, 2009

In 1959, Manley Natland, an American paleontologist working for the California-based Richfield Oil company, came up with a unique (and scary) plan for tapping the vast energy reserves in Alberta’s oil sands. Natland suggested burying a nine-kiloton nuclear device deep within the oil sands and detonating it. The idea was that the "bomb" would literally cook the oil out of the sands, making it easy to recover. That may sound crazy, but not only did Richfield win approval from Ottawa for the plan, it actually bought the nuclear device. Fortunately "Project Oil Sands" never came to fruition. But it makes for an interesting read. The story is chronicled in William Marsden’s book "Stupid to the Last Drop."

Well, the oil sands have come a long way since 1959. Today, even the traditional method of mining iusing giant shovels and trucks seems outdated, primarily because of the excessive costs associated with strip-mining and the increasingly unacceptable environmental impacts. The newest method for mining the oil sands entails injecting steam into the ground to loosen the tarry bitumen from the sand and then pumping it to the surface using horizontal drilling technology. The process is called Steam Assisted Gravity Drainage or SAGD. But because of the vast amounts of natural gas and water needed to create the steam, even SAGD has become a target for environmental groups.

There are literally dozens of other new technologies on the drawing board right now that aim to make oil sands not only greener, but cheaper to tap. Most are either in the high-concept or early development stage, but one new technology stands out as a potential game changer. At its Whitesands project near Conklin, Alta., Petrobank Energy is in the final stages of testing a new technology called THAI (Toe to Heel Air Injection). Although not as draconian as Natland’s nuclear idea, THAI sounds a bit like something out of a science fiction novel. It involves drilling a hole into the oil sands, injecting oxygen and igniting a continuous underground burn or "fireflood." Over the course of several months, that fireflood slowly works its way through the oil sands reservoir, heating up the bitumen so it drains into a horizontal collector well. No digging. No huge mining equipment. Just a few pipes, some wellheads and a modest processing facility.

THAI is still considered experimental by the oil sands industry, but Petrobank is so confident that it works, it’s forging ahead with two commercial-scale projects using THAI.

To watch prior episodes, for synopses and related interviews click HERE.

 
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Posted by Andrew Bell on May 28, 2009

CIBC is the only big bank stock to fall today, dropping nearly 5 percent to trade at $54.54 at around 2:15 ET, amid disappointment over its Q2 results.
 
BMO analyst Ian de Verteuil says the bank continues to take more charges than he had expected to deal with investments that it's winding down, including commercial mortgage backed securities.
 
He also says "the 'operating' earnings of $1.44 came from very weak retail and very strong wholesale, which are seldom well received by investors. On the retail front, loan losses in the credit card book were worse than expected and spreads were weak." 
 
De Verteuil calls CIBC a "market perform" with a target price of $60. 
 
There's also been a lukewarm reception for Scotia's results, with the stock edging up less than 1 percent to $38.08. BMO's de Verteuil is sticking with his call that Scotiabank stock will underperform the other banks' shares.  His target is just $35.

The analyst says Scotia's profit of 82 cents a share in its latest quarter, including 10 cents of writedowns, provisions and other items, "was slightly ahead of our expectations... [but] despite the solid result, Scotiabank appears to be facing more credit headwinds than its peers."

Scotia's impaired loan formation hit $1 billion this quarter and provisions were $489 million. "This was higher than we expected and is somewhat different from the quarterly trend seen at other banks," he said.

RBC's Andre-Philippe Hardy, who calls Scotia a hold, is also worried about the loan book. "Gross impaired loan formations were higher than in in both Q1/09 and Q2/08," Hardy says. "Most other Canadian banks had lower net formations on a sequential basis."

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Posted by Brett Harris on May 28, 2009

When Alberta took its oil sands show to Washington, D.C. three years ago, it got a lot of attention. Some of it unwanted.

As part of the Smithsonian Institute’s annual Folklife Festival, Alberta shipped some of the giant equipment used in the oil sands to Washington and put it on display at the city’s National Mall. The idea was to educate Americans about the vast oil sands resource that sits relatively untapped up here in Canada.

That’s where the folks at the Natural Resources Defense Council first learned how big and how potentially damaging to the environment the oil sands are. Ever since then, the NRDC and dozens of other global environmental groups have taken up the fight against the oil sands. Not quite what the industry or the Alberta government was hoping to achieve at the Smithsonian Festival.

Those environmental groups have proven to be so effective at fighting so-called dirty oil, they’re winning support from U.S. politicians. Congress is now looking at sweeping energy and climate change legislation that could have serious repercussions for the oil sands industry. One piece of legislation passed last year (section 526 of the U.S. Energy Independence and Security Act) bars federal departments, like the military and postal service, from buying bulk fuel derived from high-carbon sources like coal or the oil sands. Another bill currently being debated (the American Clean Energy and Security Act) would create a cap and trade system for energy products that would put a ceiling on allowable CO2 limits.

Why is this so crucial to the oil sands industry? Because the U.S. is our biggest -- and only -- oil customer. And, if oil sands production doubles, triples or even quadruples over the next twenty years (as expected), Canada will need to find a market for that oil. And while shipping it to Asia or other international markets is an option, it’s an expensive and risky one. The U.S. is still our best potential customer. And that’s why the Canadian energy industry and Canadian politicians are ramping up the lobby effort, to ensure that Canada’s largest energy resource isn’t hamstrung by future U.S. energy policy.

 

To watch prior episodes, for synopses and related interviews click HERE.

 
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Posted by Scott Peterson on May 27, 2009

Ronald Sears thought he was doing the right thing back in 2005 when he bought $257,000 worth of General Motors bonds.

Then he says he received two death sentences.

One when he was diagnosed with leukemia two years ago, and again when he was told by GM that he had to accept pennies on the dollar for the bonds he held.

"I just wanted to take care of my wife," he said. "We’re not wealthy individuals. We’re scared little kids scrambling for a safe haven. GM stood the test of time as far as an investment went. We didn’t know where else to go."

Mr. Sears isn’t alone. He’s part of an ad hoc committee called GM Bondholders Unite. The website of the same name wants to connect with up to 100,000 individuals they say invested in GM bonds over the last few years. The website urges investors not to take "nickels for dollars."

"Maybe they should sell everything, and all the parts, and pay us off," he said. "We don’t want to break up GM. We just want what is fair."
 
But defining what is fair isn’t easy.

Unlike the institutional bondholders left holding the bag with Chrysler, GM bondholders have a high percentage of retail investors. And they aren't prepared to accept automaker’s 10% equity offer, GM confirmed this morning, meaning a Chapter 11 filing is almost inevitable.

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Posted by Brett Harris on May 27, 2009

For nearly three decades, Redwater, Alberta was a quiet rural town. It hadn’t seen a new neighborhood built in three decades. Then came the oil sands rush. Redwater, as it turns out, is centrally located in Alberta’s new Upgrader Alley, just north of Edmonton, or at least what was supposed to be Upgrader Alley.

Redwater and handful of other nearby communities are currently surrounded by a major petrochemical complex, which makes the area perfect for new oil sands upgraders. A lot of the infrastructure and industrial zoning already exists. There’s a huge, skilled labour force in Edmonton. And costs are a lot cheaper than they are in the Fort McMurray area.

When the oil sands boom was at its peak a couple of years ago, no fewer than eight major upgraders were being planned for Upgrader Alley. At peak construction, those upgraders would have created 22,000 temporary and 12,000 full time jobs over 15 years. That sparked a major land rush in the area, including Redwater, which soon had two new residential subdivisions under construction.

Today those subdivisions are sitting empty, with few buyers waiting in the wings. When the oil sands boom went bust last fall, seven out of the eight proposed upgraders were put on hold. One project was halted midstream. After sinking half a billion dollars into it, the company behind it-- BA Energy -- filed for bankruptcy protection.

That’s left the people of Redwater and surrounding communities wondering if Upgrader Alley was just a pipe dream. Local officials are still optimistic that at least a few projects will go ahead. But even if the oil sands eventually boom again, there are no guarantees Upgrader Alley will see anywhere near the level of investment that was being planned just a few short months ago.

 

To watch prior episodes, for synopses and related interviews click HERE.

 
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Posted by Brett Harris on May 26, 2009

The oil sands boom is dead. Long live the next boom.

Few analysts who cover the oil sands think the industry will remain depressed for long. After all, the Fort McMurray area contains the world’s second-largest pool of recoverable oil (after Saudi Arabia) and the world isn’t likely to stop using petroleum products any time soon. But how long will it take for the recovery to come? That’s a crucial question for investors. Oil sands stocks look cheap today, but if it takes years for the oil sands to start growing again, those stocks could be dead money for some time to come.

According to the Canadian Energy Research Institute, there were $400 billion worth of oil sands projects in the works just a couple of years ago. Today, CERI estimates that’s been whittled down to about half or roughly $200 billion worth of projects which are still in active planning.

CERI also estimates that it will take sustained oil prices of more than $70 US a barrel to get some of that investment money back on that table again. Now, $70 oil may not be that far away, judging from recent trading activity, but that doesn’t mean we’ll see the boom return any time soon. From the time oil sands producers decide to green light a new project, it can take years before construction begins and years more before the project starts producing oil. The bottom line is: CERI believes oil sands development will remain stagnant for several years to come, with real growth returning no sooner than 2015.

 

To watch prior episodes, for synopses and related interviews click HERE.

 

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Posted by Brett Harris on May 22, 2009

I first visited Fort McMurray 18 years ago to do a feature report on the giant oil sands tailings ponds at Syncrude and Suncor.  At the time, they were the only major oil sands companies in the business and few Canadians knew much about them. Certainly no one cared much about the environmental impact of the oil sands then.

When I next visited Fort McMurray more than two years ago, the industry was in the midst of a boom. By then, the oil sands had become a major driver of the Canadian economy. And environmental groups were just ramping up their war on so-called "dirty oil."

When I returned to Fort McMurray this May, I was surprised at just how much growth had occurred in the oil sands over the last couple of years. I was also surprised by how quickly the fortunes of the industry had turned.

In the course of shooting a five-part series on the sector, we came across multibillion-dollar projects that had been halted dead in their tracks. At Suncor's new Voyageur upgrader project, looming towers of steel and concrete stood like monuments in a graveyard, flanked by idle cranes and stacks and stacks of unused equipment – not a single construction worker in sight.

In short order, billions of dollars in new oil sands projects have been shelved indefinitely because of falling oil prices and the global recession.

Now, you'd think that would be like a death sentence for the city of Fort McMurray, because it is the epicentre of the oil sands. But surprisingly, it hasn't been.

At the peak of the boom, Fort McMurray's infrastructure was heavily strained by all the demands of the oil sands frenzy. Today, the city's economy is still being supported by production from existing plants like Syncrude, Suncor, Nexen's Long Lake project and Canadian Natural Resources' Horizon project.

But with little new construction going on, Fort McMurray is finally catching up, building new roads, bridges and neighbourhoods to accommodate the next onslaught of oil sands growth.

That's not to say the oil sands crash hasn't claimed victims. They are the more than 20,000 mobile construction workers who spent years flying in and out of Fort McMurray to help build the latest generation of oil sands projects. Some are from overseas, but many come from places like Placentia and the Burin Peninsula in Newfoundland.

For more than two years, the oil sands were literally one of the largest employers in Newfoundland. Today, all but a few of those workers have been indefinitely laid off and with few job prospects in Newfoundland, many are on unemployment, hoping for the oil sands boom to return.

To watch prior episodes, for synopses and related interviews click HERE.  

 

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Posted by Niall McGee on May 21, 2009

GM has reached a tentative labour deal with the UAW. But don’t expect the announcement to save the company from filing for bankruptcy.

Efraim Levy, analyst with Standard and Poor’s told BNN he still expects GM to file for Chapter 11. He points out the real key to saving GM is reaching an agreement with bondholders.

So far bondholders have refused to acquiesce to GM’s request that they exchange $27B US in debt for equity. And Levy says they are unlikely to budge before the May 26th deadline.

Dennis DesRosiers, auto consultant with DesRosiers Automotive told me over the phone: "Why would bondholders accept 50 cents on the dollar if they can cash in their credit default swaps (insurance against bond defaults) and get 100 cents back?"

And guess who’s on the hook for a huge chunk of those default swap payments? AIG, now majority owned by the U.S. government.

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Posted by Frances Horodelski on May 20, 2009

We spend a lot of energy looking at the market, what it's doing, where it's going.  But from a portfolio perspective, the first steps of creating a portfolio really have nothing to do with the markets themselves. Much simpler questions need to be answered.

_____________________________________________

Click here to watch the latest Stock $ense segment

______________________________________________________________

The first question to ask is what number of companies should be in a diversified portfolio.  We know that putting all our eggs in one basket isn't prudent.  But if 10 is good, is 200 better?  Modern Portfolio Theory (MPT) mathematically shows that by adding additional companies to a portfolio, overall risk of a portfolio is reduced. 

However, this risk reduction is only significant to a point.  After about 20 stocks, the additional risk reduction benefits are minimal.  So the answer to the first question, according to MPT, is that about 20 stocks is optimum for a diversified portfolio.  

And realistically, how many companies can an individual investor watch?  What with annual and quarterly reports, news releases, industry news that needs to be reviewed, 20 seems just about enough.

The second question is how to allocate the 20 stocks amongst the various sectors to get a diversified portfolio by sector.

Balancing across sectors in Canada is difficult since 75% of the weight of the S&P/TSX is represented by just three sectors (financials, energy and materials) leaving only 25% for industrials, utilities, telecom, consumer, technology and healthcare, with the latter virtually non-existent.

The S&P 500 is somewhat more balanced with six of the top weighted sectors representing about 80% of the index.

A diversified portfolio using a balance of sectors between Canada and the U.S. would look something like this (number of stocks per sector in brackets):  financials (4), energy/materials (5-6), utilities/telecom (2-3), consumer (3-4), industrial/technology (3-4) and healthcare (2).

Now the fun begins, investigating the companies by sector that you think will provide the best return.  Hopefully, BNN and our many guests can help you do that.

 

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Posted by Scott Peterson on May 14, 2009

Clients of Weizhen Tang are finally talking. And they’re not saying flattering things about the man at the centre of what the Ontario Securities Commission is alleging could be the largest Ponzi scheme in Canadian history. (Watch Scott's report, featuring exclusive interviews with Tang investors)

"I think he’s a horrible person," one investor said. She told BNN that Mr. Tang lost $50,000 of her family’s money. "He even told us he paid off another investor with our money," she said.

On Monday night ten clients told BNN about their troubles with Mr. Tang. Despite many of them going to the Toronto Police, and also to the OSC, they would only speak to us on the condition of anonymity.

They said if Mr. Tang, or any of the other investors identified them, they feared they would have no chance of getting any of the money Mr. Tang says he still has.

They also said there is a still a large segment of clients who want the accounts of Mr. Tang to be unfrozen by the OSC so he can trade again and recoup their losses.

The clients that met with BNN were not so sure.

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Posted by Michael Kane on May 13, 2009

Further to my previous blog about the changing landscape of the automotive industry, Statistics Canada surprised many of us by announcing that more than 122,000 Canadians bought a new car or truck in March.

That's something to discuss over dinner.

Here’s the link:

http://www.statcan.gc.ca/daily-quotidien/090513/dq090513b-eng.htm

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Posted by Michael Kane on May 12, 2009

Just a short blog to point out an interesting factoid from Statistics Canada’s International Merchandise Trade Report.

In a sign of how the auto industry is adjusting in this changing economic environment, exports of passenger cars built in Canada rose in March for the second month in a row.

The increase in demand for Canadian cars came as the number of vehicles on dealer lots thinned out following plant shutdowns in January and February.

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Posted by Niall McGee on May 5, 2009

Nobody wants shrinkage. Not George Costanza and not Loblaw.

But both the Seinfeld neurotic and Canada’s biggest grocery chain have been felled by shrinkage in the past.

In retailing, shrinkage is spoiled or lost merchandise due to poor inventory management and/or employee theft. 

Loblaw says it reduced shrinkage in Q1. That helped the company boost its gross margins by 1.2% to 24%.

Rick Wolfe, president of PostStone Corporation, says while shrinkage is an industry-wide challenge Loblaw has faced nagging issues in that department over the past 5 years or so. 

Wolfe says it's very interesting and encouraging that Loblaw is reducing shrinkage.

RBC Investment Management also reacted favourably to the results. The brokerage reaffirmed its outperform rating on the stock and boosted its target from $35 to $38.

The stock rallied up 7.6% on the day and closed at $35.31.

(BTW: If you don’t know the Seinfeld reference, Google it or better yet YouTube it.)

 

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Posted by KIm Parlee on May 1, 2009

I interviewed Colin Robertson (career diplomat and Distinguished Senior Fellow at the Norman Paterson School of International Affairs, Carleton University) on a paper he released this week with his take on Obama’s first hundred days.

Here are a few excerpts on what is a fascinating read:

"When Barack Obama looks out the window from the White House chances are he sees the swing and play set for Malia and Sasha, just one of the changes with new residents at 1600 Pennsylvania Avenue. But will he realize that the tubing on the playset is made in Winkler, Manitoba?  Or that the Blackberry, that he can’t live without, is a product of Waterloo, Ontario? Or that ‘The Beast’ – the black armoured plated limousine that takes him everywhere, also has parts manufactured in Canada?  Probably not."

An eloquent start to an interesting paper.  Here are a few issues Colin highlighted.

On border security:
"The 9-11 myth and Canadian complicity is apparently embedded in the American psyche. Like Elm Street’s Freddy Krueger, it keeps coming back to haunt us. Such is the legacy of Ahmed Ressam, the ‘Millennium Bomber’. That he was stopped by vigilant action on both sides of the border and convicted with evidence from Canadian authorities is forgotten. Nor do we get much credit for the arrest of the Toronto 18 and the recent conviction of Momin Khawaja, under Canada’s Anti-Terrorism legislation.   Despite the optimism of the Obama visit, on homeland and national security, a change of Administration has made no difference."

And on trade:
"More pernicious is the clause, inserted at the behest of Gary, Indiana congressman Pete Visclosky, requiring only American-produced iron and steel and manufactured goods in products purchased as part of the stimulus package. As most of the $100 billion in infrastructure improvements will take place through state and local agencies,‘buy America’ is back with a bite."

Lots more said on clean energy, trade issues and just overall chumminess with our own prime minister.

To watch Colin Robertson on The Close click HERE.

 

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Posted by Frances Horodelski on May 1, 2009

It used to be in the good old days, before systemic risk and global financial collapse, investors would look to companies that were increasing their dividends for a fix on the future of those companies specifically and the industry or economy in general.

While there may still be many concerns for the global economy, some companies are providing their view on the future.  And it ain’t bad.  

Below, we highlight 14 companies that have raised their dividends within the past six months.  During one of the worst financial crises in our history, when a company stands up and says it's going to pay you more this year than last year, that strikes a nice chord.

Some firms, such as Fortis, increased their dividend at a slower rate than last year (+4% versus +26%), providing perhaps a less positive view of the future.  On the other hand, companies as diverse as SNC-Lavalin, Jean Coutu and Enbridge raised their dividends handsomely providing at least one indication that the world isn’t ending. 

Certainly, dividend hikes aren’t the only reason to invest in a company, but reviewing a list of companies that are doing so (or those that have the potential to do so such as Power Corp., Power Financial, Shaw Communications) is a good place to start to find companies that will likely thrive in the future.

 

Company----Dividend----%Change----**Yield

*BCE (BCE)----$0.385----5.48%----6.04%

CN Rail (CNR)----$0.253----9.78%----2.09%

Cdn. Natural Resources (CNQ)----$0.105----5.00%----0.76%

Enbridge (ENB)----$0.370----12.12%----4.02%

Fortis (FTS)----$0.260----4.00%----4.70%

ING Canada (IIC)----$0.320----3.23%----3.70%

*Jean Coutu (PJC.A)----$0.045----12.50%----1.97%

Rogers (RCI.B)----$0.290----16.00%----3.96%

SNC-Lavalin (SNC)----$0.150----25.00%----1.73%

Telus (T)----$0.475----5.56%----6.52%

Thomson Reuters (TRI)----$0.280----3.70%----3.94%

Tim Hortons (THI)----$0.100----11.11%----1.38%

TransAlta Corp. (TA)----$0.290----7.41%----5.65%

TransCanada Pipe (TRP)----$0.380----5.56%----5.10%

Watch today's version of StockSense

Click here for past segments

(*owned by Frances Horodelski or her family)

(yields as of Thursday's closing price)

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