April 6, 2020

Pacific Northern Gas Ltd (PNG)

 

Pacific Northern Gas Ltd (PNG) was incorporated in 1965, and went public in 1968.    Unlike some of its competitors, Pacific is a fairly focused company, with the vast majority of its business in the natural gas industry.  They own natural gas pipelines of various sizes throughout Western Canada.  It currently has about 1200 km of pipeline in all.  Pacific Northern (PNG) currently supplies 40,000 residential, industrial, and commercial clients.  They are the main supplier of natural gas throughout all of British Columbia, and have notably large clients such as West Fraser Mills Ltd, Rio Tinto Alcan, and B.C. Hydro.  Together, those three giants accounted for about 30% of the company’s total gas deliveries and six percent of their operating revenues.

 

Pacific Northern Gas Ltd. (PNG) basically started out in 1968 as a single transmission line that ran from a spot north of Prince George at Summit Lake, through Prince Rupert and Kitmat on the coast.  It was mainly a line meant for large commercial companies.  In 1993 PNG saw a major expansion as they bought out Northland Utilities Limited, including their Tumbler Ridge and Dawson Greek Operations.  They expanded their industrial footprint again in 1997 when they acquired three more regional natural gas companies in Fort St. John, the Granisle, and the Peace River Transmission Company.  The company saw a corporate restructuring in 2000 in response to liquidity issues which have now been rectified.  The most recent news for the company is their recent plan to purchase enough shares of Pacific Trail Pipelines (PTP), to connect their system with the Kitmat export terminal which would mean huge dollar is liquefied natural gas business.

 

Pacific Northern Gas (PNG) is a regional natural gas play, and does not have the stability of some of the other large scale energy companies listed on the TSX, although it may have more room for growth.  One of the advantages of being so focused within single industry is that when that industry is doing well, your profit percentages, and rapid growth can be very attractive to potential shareholders.  The entire natural gas sector has been rising for months now and shows no signs of slowing down.  With the USA and Canada investing large sums of money in energy transfer infrastructure, PNC could be the next company to broker a deal that sees them take advantage of the massive American market that lies just to the South of their already established pipeline system.

 

With energy costs skyrocketing around the world, natural gas will likely be profitable in both the short and long terms.  Pacific Northern Gas’ (PNC) stock is currently trading around $26 per share, and this is right in the middle of its trading range over the last couple of years.  It has a relatively small market cap of just under $100 million.  It is paying an annual dividend of $1.20, which gives the stock a dividend yield of 4.6%.  This is a great deal for shareholders in that they get healthy cash flow, while at the same time owning a company that has substantial growth prospects.

 

 

Pacific Northern Gas Ltd (PNG) Dividend Stock Graph:

TSE PNG

Pacific Northern Gas Ltd (PNG) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
PNGPacific Northern Gas Ltd30.13.9960.850.8839.06311.88

Inter Pipeline Fund (IPL-U)

There are various different ways to get portfolio exposure to oil, and the broader energy transportation sector.  You can invest in some of the major companies in the field, or you can invest in the Inter Pipeline Fund (IPL-U).  When you buy into Inter Pipeline your not actually purchasing shares of an incorporated business like you would buy shares of an oil company for example.  Instead, you are actually buying “units” of a publically traded limited partnership.  The fund was started in 1997 and it now has massive holdings in petroleum transportation, and the extraction, transportation, and storage of natural gas.  It is based out of Calgary, Alberta, Canada.  While the fund does have most of its assets in Western Canada, it also has international holdings in the UK, Ireland and Germany.  It represents an excellent way to invest in a revenue-producing investment vehicle that is made up of mature, cash-flow positive, stable, energy producers.  Unlike most dividend-payers, who pay their shareholders quarterly, bi-annually, or annually, the Inter Pipeline Fund (IPL-U) distributes profits monthly.

 

In Western Canada along Inter Pipeline has over six thousand kilometres of petroleum pipelines, and owns 4.8 million barrels of storage capacity.  The system can move almost one million barrels of oil per day (this accounts for about a third of all oil sands production).  The Inter Pipeline Fund (IPL-U) is far from a pure oil play however, it is also one of the biggest natural gas owners in the world.  The fund’s three extraction facilities in Alberta produce about 40% of the total natural gas exported from the provincial leader.  If you have seen the name Simon Storage Limited in the field of oil and chemical storage around the world (capacity of eight million barrels), then you have been exposed to yet another aspect of the fund’s holdings.  Simon is a fully owned international subsidiary of the Inter Pipeline Fund (IPL-U).

 

The most recent news about the fund is that its monthly disbursements will be receiving more beneficial tax treatment in months to come relative to 2010.  This is due to the government recognizing the structural return of capital in the monthly disbursements.  With the world requiring more and more energy-related production and services, the Inter Pipeline Fund is an excellent way to invest in this reality.  It is currently trading at around $16 per-unit (you don’t buy shares of a fund remember).  This gives it a price-to-earnings ratio of about 18, and a dividend yield of 6%.  With such a large market capitalization (well over $4 billion), it is no wonder that most analysts are giving this dividend-producing giant a “buy” rating at the moment.  The fund also has a great Dividend Re-Investment Plan (DRIP) that includes a great 5% discount when you automatically re-invest your dividends.  When you combine this feature with the monthly distributions, it can allow investors to build up a solid position in the fund quite quickly.

 

Inter Pipeline Fund (IPL-U) Dividend Stock Graph:

TSE IPL-U

Inter Pipeline Fund (IPL-U) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
IPL-UInter Pipeline Fund16.395.8699.080.733.946.94

 

Enbride Inc (ENB)

Enbride Inc (ENB) is a global leader is the field of energy transportation.  They are currently operating the longest, and self-proclaimed “most sophisticated” crude oil transportation system in the world.  While maintaining their market share in the oil market, the company is expanding into the transportation of natural gas, and has a developing renewable energy program that includes advances in the fields of wind and solar energy, as well as hybrid fuel cells.  Enbridge’s headquarters are located in Calgary, Alberta, and they employ about 6,000 workers across North America.  They have been recognized as one of the Global 100 Most Sustainable Corporations in the World, and one of the 100 top employers to work for in Canada.  The company’s vision is, “To be the leading energy delivery company in North America.  We deliver energy and we deliver value to shareholders.”  I like the simplicity of that concept.  Any company that keeps its eyes focused on leading in their field and rewarding their shareholders is very attractive to dividend investors.

 

oilThe most recent news about Enbridge is their plans to acquire Tonbridge Power Inc. (TBZ) for 54 cents per share.  This brings the total price tag to about $20 million, and is the first time Enbridge (ENB) has entered into the electricity transmission market.  The project is also noteworthy because the transmission line would run internationally between Canada and the USA.  It would take over what Tonbridge had labelled the, “Montana Alberta Tie Line.”  The line will link Great Falls, Montana with Lethbridge, Alberta, using a 345 km line.  The $20 million acquisition price tag is only the beginning of the company’s projected expenses for the transmission line however.  Enbridge will take over the $50 million in debt on Tonbridge’s balance sheet, and will inject another $250 million into the project in order to bring it to its 600 megawatt full potential.  While this is obviously a substantial investment, Enbridge (ENB) can afford to invest some capital at the moment as their second-quarter profits nearly doubled those of last year.  They recently reported earning $259 million ($.35 cents a share), up from 138 million ($.19 cents a share).  The Alberta Oilsands continue to be the lifeblood of the company, and they show little signs of slowing production.

 

Enbridge is currently trading at around $30 per share.  With people rushing to Canadian oil companies as a safe haven, Enbridge (ENB) is definitely not trading at a discount.  Even with their substantial quarterly earnings, they still have a price-to-earnings ratio of almost 23.  Their annual divided is just under a dollar at 98 cents right now, and consequently the dividend ratio is 3.2%.  With the USA needing the Oilsands more and more, there is probably not a better stable dividend supplier than Enbridge right now.  While you may be able to get better yields else where, this company has solid growth prospects, as well as the maturity needed to pay a substantial dividend.  This combination makes it a leading recommendation among Canadian dividend experts.

 

Enbride Inc (ENB) Dividend Stock Graph:

ENB

Enbride Inc (ENB) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
ENBEnbridge Inc60.543.2467.290.7010.4715.09

 

 

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AlataGas Ltd (ALA)

 AlataGas Ltd (ALA) started as a small power company operating out of Alberta in 1909.  Over the last century they have grown into one of North America’s largest electricity-generating companies.  They have roughly nine billion dollars in assets, and have recorded yearly revenues in the three billion dollar range.  AlataGas is now the largest investor-owned power generator in Canada and was actually the first such Canadian company to be traded on the New York Stock Exchange (NYSE).  AltaGas (ALA) has also made the jump into international operations when they opened power plants in the USA and Austrailia.  Alta has a very diversified set of energy interests, with divisions dedicated to natural gas extraction and transmission, coal-fired and gas-fired power generation, and other energy sources.  Their self-proclaimed business philosophy is, “That the best measures of a business’ long-term viability and value are its net income, cash flow and return on equity.  The importance of these traditional financial measures is driven by sound business fundamentals.”  This is music to the ears of experienced investors across North America.

AltaGas recently reported a decent jump in income through the first quarter of 2011.  Their quarterly statement showed just over $38 million in income before taxes, compared to $31 million in 2010.  David Cornhill, the Chairman and CEO of AltaGas (ALA) explained the rise in profits to the Globe and Mail, stating that, “We saw higher natural gas volumes in areas where producers are capitalizing on liquids-rich and solution gas, the benefit of our growing rate base and colder weather at our utilities and higher power prices and volumes.  Our overall results reflect the strength of the Corporation’s diversified portfolio of energy infrastructure assets.”  Alta also has also continued to grow its renewable energy sector.  In 2011 they continued their Forest Kerr project in British Columbia.  The project is set to go online July 2014 and BC Hydro has already signed a 60-year electricity purchase agreement with the company.  The other main focus of AltaGas (ALA) at the moment is the Gordondale Gas Plant, which the energy giant hopes will be able to capitalize on the quickly escalating natural gas market.

The Globe and Mail also reported that AltaGas has seen its share of insider action lately with multiple directors buying into serious positions within the company.  This is always an encouraging sign for investors.  With the company seeing increased profits, growing revenues in multiple sectors, and having a stable plan for expansion in place, there is no reason to believe that AltaGas (ALA) will quit rewarding its shareholders anytime soon.  Even at the relatively expensive price-to-earnings ratio of 25.27, and the company trading near its 52-week high ($27 per share), Alta is still rated a “buy” for many ratings agencies out there.  No doubt due in part to the company’s healthy 5% dividend yield.

 

AlataGas Ltd (ALA) Dividend Stock Graph:

TSE ALA

 AlataGas Ltd (ALA) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
ALAAltaGas Ltd25.165.2555.680.51-5.13-32.41

 

Canadian Dividend Stocks in Energy


 

 

The Canadian energy sector is dominated by oil and gas companies.  In fact, it is what the TSX is best known for on a worldwide scale.  More oil and gas companies are listed on the Toronto Stock Exchange than on any other stock exchange in the world.  Now you can see why our Canadian economy is so dependent on oil and commodity prices.  There is no question that we benefit greatly from our close geographical proximity to a huge oil consumer in the USA, and from the fact that our oil reserves are estimated to be 2nd in the world only to Saudi Arabia.  The oil and natural gas in Canada is substantially harder to bring to market than in the Middle-East, but we have it nonetheless.

 

Before we get into discussing just which oil and gas stocks to invest in, I should mention that we have seen some start up companies in renewable energy and sustainable energy, but they just aren’t attractive to most investors at the moment.  In a recent interview with the globe and mail Craig Porter (who is a Canadian energy sector specialist) had this to say about renewable energy market:

 

“We do look at a number of renewable energy stocks. Current economics don’t compete with traditional energy sources. The technology seems to take longer to develop, reducing capital costs, than the management teams of these companies typically estimate. We are constantly monitoring government policy with respect to renewable energy. The global economic crisis has put renewable energy projects/government initiatives to the back burner.”

 

So when you talk about investing in the Canadian energy sector, what you’re really speaking of are the major oil and gas companies that dominate the Canadian energy landscape.  Some people will lump utility and petroleum transport giants such as Enbridge and Fortis in with energy, but for the purposes of this overview lets just stick to looking at the fundamental energy options in the Canadian stock market.

 

Investors looking for huge dividend yields and immediate income on their investments would likely be better served in the utility, telecommunications, and especially financial sectors of the Canadian stock market.  Many people who were looking to get immediate income from the oil and gas sector were invested in income trusts, but that industry is in a state of flux thanks to the new regulations that were brought in this year.

 

If you are looking to pick specific stocks from the sector, some industry favorites are Encana (ECA), Suncor Energy Inc. (SU), Canadian Natural Resources Ltd (CNQ), Imperial Oil Ltd (IMO), Talisman Energy Inc (TLM), Nexen Inc (NXY), and Husky Energy Inc. (HUSKF.PK).  We will try to cover all of them and separate them by sub-sector.

 

A more attractive option for most Canadians was the former Canada Oil Sands Trust.  It has since been converted into a corporation and still maintains its spot atop most analysts charts if you want exposure to the huge Canadian energy sector.  Finally, there are a variety of ETFs on the market that track the energy market pretty efficiently as well.  I prefer the iShares CDN Energy Sector Index Fund (XEG) or the The Claymore Oil Sands Sector ETF (TSX:CLO).  Both will allow you to benefit from the world’s thirst for Canadian oil without picking a specific company.

 

Sub-sectors covered so far:

 

Pipelines:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
VSNVeresen Inc13.77.3182.040.961.020.00
PPLPembina Pipeline Corp23.46.67143.330.427.630.00
IPL-UInter Pipeline Fund16.395.8699.080.733.946.94
ALAAltaGas Ltd25.165.2555.680.51-5.13-32.41
TRPTransCanada Corp41.244.0790.380.835.585.19
PNGPacific Northern Gas Ltd30.13.9960.850.8839.06311.88
ENBEnbridge Inc60.543.2467.290.7010.4715.09

Enbridge ENB

Alta Gas ALA

Inter Pipeline Fund IPL-U

Pacific Northern Gas PNG

Pembina Pipeline Corp PPL

Transcanada TRP

Veresen VSN

 

Other Oil & Gas integrated stocks:

ARC Resources Ltd (ARX)

Baytex Energy Corp (BTE)

Bonavista Energy Corp (BNP)

Bonterra Energy Corp (BNE)

Canadian Oil Sands Ltd (COS)

Cenovus Energy Inc (CVE)

Crescent Point Energy Corp (CPG)

Husky Energy Inc (HSE)

Longview Oil Corp (LNV)

Pengrowth Energy Corp (PGF)

 

 

 

 

 

 

Penn West Petroleum Ltd (PWT)

PetroBakken Energy Ltd (PBN)

Peyto Exploration & Development Corp (PEY)

Progress Energy Resources Corp (PRQ)

Provident Energy Ltd (PVE)

Trilogy Energy Corp (TET)

 

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