Top holding - America 03/11/11

Bilibala Finance’s 5 Top Holding by Region:
(with net present value in 1 year)
American
1. Manulife Financial (MFC) CA$31.4 STRONG BUY
2. Google Inc. (GOOG) US$745.1 => US$754.6 BUY
3. Wells Fargo Financial (WFC) US$43.8 STRONG BUY
4. General Electric (GE) US$23.5 HOLD
5. TD Bank (TD) CA$92.3 HOLD
6. American Express (AXP) US$48.6 HOLD (pending to update)
7. Suncor Energy (SU) CA$50.0 BUY (pending to update)
· Mar 11 major transactions: switch to Suncor Energy (SU) CA$41.34; add Berkshire Hathaway (BRK.B) US $85.0; add American Express (AXP) US$43.2
· Why Bilibala buy Suncor? Bilibala sold Petro Canada in 2008 at $37.0 when it announced it will merge with Suncor. At that time Suncor’s debt to equity ratio was high at 54%. Given the uncertainty of whether the “marriage” will be a success or disaster, I sold it and bought Imperial Oil, lower debt, better management & technology support by Exxon Mobil (XOM), by given up the potential growth opportunity of what Suncor & Petro Canada have. In 2 years, I can see the huge improvement in Suncor by lowering its debt to equity ratio to 34% with a promise by management they will lower it further before 30% in 2011. While Imperial Oil has already ran above my expectation & fulfill its mission, I will now switch to Suncor. The reason why Suncor fall short while oil price up is cuz it has investment in Libya and have higher uncertainty of potential losses & damage. I think the political issue can go on for a long period, but who ever gain power will not destroy the energy business
· Why Bilibala add Berkshire Hathaway? I’ve reviewed the whole 2010 annual report. Looks great as usual!! Add back cuz I found out Todd Comb (the one I don’t like or do not impress) only replace Liu in GEICO who manage a portfolio of $3-4B. Looking forward, its investment income growth may slow down, given the fact General Electric & Goldman Sech will most likely buy back the preferred shares on a 10% redemption fees this year. By that time, Berkshires Hathaway will have lower before tax dividend/interest income by $0.8B, which is a lot of $$.

# Bilibala personally uses fair value @ 2016 to do all investment, however, I think for most small investors, net present value @ 2011 (fair value multiply by discount factor), would be more relevant.
· STRONG BUY with NPV over MV above 30%
· BUY btw 15% to 30%
· HOLD btw (15%) to 15%
· RE-RE-RECONSIDER below (15%)

Top holding Asia/Europe 03/11/10

Bilibala Finance’s 5 Top Holding by Region:
(with net present value in 1 year)
Asia / Europe
1. China Mobile (0941/CHL) HK$96.4 STRONG BUY
2. China Life (2628/LFC) HK$43.3 STRONG BUY
3. China Construction Bank (0939) HK$9.0 BUY
4. Total SA (TOT) US$61.6 HOLD
5. Siu On Land (0272) HK$6.7 STRONG BUY
6. HSBC Holding (0005/HBC) US$67.3 BUY (pending to update)
7. IFSE A50 China Fund (2823) HK$22.4 STRONG BUY
· Mar 11 major transactions: n/a
· Japan huge magnitude 8.9 earthquake & 33 feet high Tsunami. Boats, cars and trucks were tossed around like toys in the water after a small tsunami hit the town.
· Pray that the government can save as many survivors as possible promptly.
· Geopolitical risk & concerns in Middle East and North Africa are still heating up, can u imagine few strong, powerful governor (for years) fell down at the same time within just 2-3 months?
· No one can tell what will happen next and who will rule those countries. Some think about the movie 2012 or Jesus’ 2nd coming…..
· to me, I think of one scripture: “And in the days of those kings, the God of heaven will put up a kingdom which will never come to destruction, and its power will never be given into the hands of another people, and all these kingdoms will be broken and overcome by it, but it will keep its place for ever.” (Daniel 2:44)
· All the kings are full of power, and all those can gone in a second, who is the real ruler in history?
· If our LORD is the true ruler in all time, should we set aside a time with Him, do a prior to 2010 performance review and set our post 2011 objectives for Him??
· If our LORD is the true ruler in all time, who should we afraid of? Our boss? The government? Recession?
· Lol, I know it is easy to say than do….
· Lots of financial release will be on late March or early April, I will comment more by that time.

# Bilibala personally uses fair value @ 2016 to do all investment, however, I think for most small investors, net present value @ 2011 (fair value multiply by discount factor), would be more relevant.
· STRONG BUY with NPV over MV above 30%
· BUY btw 15% to 30%
· HOLD btw (15%) to 15%RE-RE-RECONSIDER below (15%)

Top holding in Canada 12/10/10

1. Manulife Financial (MFC) CA$31.38 STRONG BUY
2. TD Bank (TD) CA$82.2 HOLD
3. Imperial Oil (IMO) CA$45.2 => CA$47.82 BUY
4. Shoppers Drug Mart (SC) CA$ 42.7 HOLD
5. TransCanada (TRP) CA$41.10 HOLD

I finally completed my analysis on Imperial Oil. Based on its estimated 2011 oil & gas proven reserve & 2011-2015 average oil price of US$95 per bbl with a production cost of US$45, I’ve readjusted my NPV to CA$47.82. Oil price dropped from US$146 in 2008 down to US$36 in 2009 and slowly claim back to US$88, consistent with Bilabial’s estimation. Let’s see whether it will which the magic equilibrium point in US$100 in 2011.

Top holding in Asia/Europe 11/16/10

1. China Mobile (0941/CHL)
2. China Life (2628/LFC)
3. China Construction Bank (0939)
4. Total SA (TOT)
5. Shiu On Land (0272)

Market Fall: global stock market fall because of the following worries:

• Slow economy growth (every once a while, such worry came back)
• Inflation risk (will it come? No & Yes!! No, cuz consumer product index keep at around 2.0% and even in China, it is only 4.9%; Yes, commodity price rise like crazy. So it came and it will come, but in a non-tradition format – not in consumer product)
• Interest rate will rise (in China) (in order to balance between money supply, consumer product price and keep the borrowing / assets ratio low to prevent a potential bubble, I think a reasonable rise in interest is healthy to the economy. Under this interest rate rising expectation, China Life should be the biggest gainer cuz it will lower its insurance reserve liabilities.
• Default risk of the European PIIGS bonds
• To me, those worry are understandable but I think the true reason is a reasonable stock market adjustment. We should see the market stabilized at this point where S&P 500 at around 1170 and Hang Seng at around 23,000.

I’ve switched Exxon Mobil to Total SA, a France based integrated oil & gas company, cuz I want to increase my investment in Euro zone to have a more diversify portfolio while I think Total SA’s value is being more understated compare to Exxon Mobil.

Top holding in USA 11/01/10

1. Google Inc. (GOOG)
2. Wells Fargo Financial (WFC)
3. Exxon Mobil (XOM)
4. General Electric (GE)
5. American Express (AXP)

• Exxon Mobil net income up 55% mainly thx to oil price rise (bad for all drivers) and refinery margin increased, oil supply & demand kind of reach an equilibrium point, on the other hand, as USA, UK & Japan’s QE2.0 (print more $$) project, oil price should rise back to US$100 per bbl as what I predict 2 years ago. If so, Exxon Mobil should have room to rise back to US$75.
• General Electric net income up 29% while revenue down 5% mainly on energy infrastructure segment (that’s why stock price down cuz ppl focus on their revenue). Revenue down reflect the global capital expenditures on corporate infrastructure down during and after financial crisis, but as one will notice, GE’s profit margin continue to rise means, GE’s products & services are more profitable in a dollar to dollar basis and this trend has continue for the past two 2 years. I still need to complete the trend analysis.

Imperial Oil 3q09 press release

“Net income for the third quarter was $547 million, down 61 percent from the third quarter of 2008, but up 162 percent from the second quarter of 2009. Earnings in the third quarter were down from the same quarter in 2008 primarily due to lower Upstream crude oil and natural gas commodity prices as a result of the global economic downturn. Downstream earnings in the third quarter of 2009 were impacted by reduced demand for products, resulting in lower overall downstream margins.

Net income for the first nine months of 2009 was $1,045 million or $1.22 a share, versus $3,218 million or $3.60 a share for the first nine months of 2008.

Continued lower commodity prices and tight downstream margins resulted in challenging business conditions for the quarter compared to the same period last year. Imperial continues to weather this economic downturn well, with earnings supporting our investments in company growth projects through the down cycle. Our proven approach of focusing on those elements of the business within our control, combined with prudent financial management and disciplined capital investment, will continue to reward our shareholders in these uncertain times. (Oil price down from last year peak at a level above US$140/bbl to only US$70-80/bbl in 3q09.)

Imperial Oil continued its long-term focus and disciplined approach to capital investment. In the third quarter, capital and exploration expenditures increased to $575 million, up 60 percent from the same period last year. For the first nine months of 2009, capital and exploration expenditures were $1,604 million, an increase of 72 percent over the first nine months of 2008. The company continues to develop its outstanding portfolio of company growth projects, delivering new energy supplies which are vital to economic growth. (Bilibala thinks the Oil price will stay at US$80/bbl on average. Once the unemployment rate reach the peak early next year and the economy start to pick up in a more stable manner, oil price should reach US$100/bbl.)

During the first nine months of 2009, the company distributed $747 million cash to shareholders through dividends of $257 million and share repurchases of $490 million."

Third quarter items of interest
􀂃 Net income was $547 million, versus $1,389 million for the third quarter of 2008, and $209 million for the second quarter of 2009.
􀂃 Net income per common share was $0.64, versus $1.57 for the third quarter of 2008.
􀂃 Cash flow from operating activities was $698 million, compared with $1,635 million in the same period last year.
􀂃 Capital and exploration expenditures were $575 million, versus $360 million for the third quarter of 2008.
􀂃 Gross oil-equivalent barrels of production averaged 304,000 barrels a day, compared with 310,000 barrels a day in the same period last year.

Project updates
􀂃 Kearl oil sands project update
Following board approval of the first phase of Kearl in May, the project has been proceeding with
detailed design, procurement and construction activities with a current workforce of about 3,000
employees and contractors. Kearl will be developed in three phases and could ultimately produce
more than 300,000 barrels of bitumen a day before royalties. The first phase of the project is
expected to start up in late 2012. Imperial holds a 71-percent interest in the project and is the
operator in this joint venture with ExxonMobil Canada.

􀂃 Cold Lake surpasses one billion barrels of production
The company's Cold Lake heavy oil operation in northeastern Alberta has surpassed one billion
barrels of cumulative production. Only three other fields in Canada have achieved this milestone, and it is the only in-situ operation to have done so. During four decades of operation at Cold Lake, technological advancements have tripled recovery rates while reducing fresh water use and surface land disturbance.

􀂃 Cold Lake expansion
In September, Imperial filed amendment applications for the previously approved Cold Lake Nabiye project (2004). The proposed changes to the project will result in improved energy efficiency, reduced greenhouse gas and sulphur dioxide emissions, and reduced surface footprint. The Nabiye expansion is continuing to be advanced, and if sanctioned, will add about 30,000 barrels a day of production from a new plant. The expansion will access 250 million barrels of previously undeveloped resource at the Cold Lake heavy oil operation.

(Our world need more and more energy, and Bilibala don't think anyone nor any source can replace oil & gas in the coming 10 years. Imperial Oil has a rich oil sand portfolio to meet continue growth need and the global demand)

Third quarter 2009 vs. third quarter 2008
Upstream net income in the third quarter was $439 million versus $999 million in the same period of 2008.

Earnings decreased primarily due to lower crude oil and natural gas commodity prices of about $950 million as a result of the global economic downturn. Lower realizations were partially offset by lower royalty costs due to lower commodity prices of about $200 million, the impact of a lower Canadian dollar of about $115 million and lower energy costs of about $95 million.

The average price of Brent crude oil in U.S. dollars, a common benchmark for world oil markets, was $68.29 a barrel in the third quarter, down about 41 percent from the corresponding period last year. The company's realizations on sales of Canadian conventional crude oil mirrored the same trend as world prices, decreasing about 43 percent in the third quarter, compared to the same period last year.

The company’s average realizations for Cold Lake heavy oil also declined about 40 percent in the third quarter of 2009, compared to the corresponding period last year. The decline was less than that of lighter crude oil, due to the narrowing price spread between light crude oil and Cold Lake heavy oil.

The company's average realizations for natural gas averaged $2.90 a thousand cubic feet in the third quarter, down from $9.20 in the same quarter last year.

Gross production of Cold Lake heavy oil averaged 145 thousand barrels a day during the third quarter, versus 143 thousand barrels in the same quarter last year. The cyclic nature of production at Cold Lake and lower maintenance activities contributed primarily to the increase in production in the third quarter of 2009.

The company's share of Syncrude's gross production in the third quarter was 78 thousand barrels a day, versus 79 thousand barrels in the third quarter of 2008. Gross production of conventional crude oil averaged 25 thousand barrels a day in the third quarter, essentially the same as the corresponding period of 2008. Gross production of natural gas during the third quarter of 2009 decreased to 291 million cubic feet a day from 309 million cubic feet in the same period last year. The lower production volume was primarily a result of natural reservoir decline.

Net income from Downstream was $62 million in the third quarter of 2009, compared with $270 million in the same period a year ago. When compared to the same period in 2008, earnings in the third quarter of 2009 were negatively impacted by reduced demand for products, resulting in lower overall downstream margins of about $160 million. North American refining margins in the third quarter of 2008 were significantly higher as a result of Hurricane Gustav in the Gulf of Mexico. Also impacting third quarter 2009 earnings were lower sales volumes due to the slowdown in the economy.

Chemical net income was $19 million in the third quarter, compared with $38 million in the same quarter last year. Earnings were lower in the quarter primarily due to lower margins for polyethylene products.

Net income effects from Corporate and other were $27 million in the third quarter, compared with $82 million in the same period of 2008. The decrease in earnings effects in the third quarter reflected changes in share-based compensation charges.

Cash flow from operations was used to fund growth projects such as Kearl. The company will continue to evaluate its share-purchase program in the context of its overall capital activities.
In the third quarter of 2009, the company built $68 million of cash while funding its higher capital program requirements from operating cash flow.

First nine months 2009 vs. first nine months 2008
Net income for the first nine months of 2009 was $1,045 million or $1.22 a share on a diluted basis, versus $3,218 million or $3.60 a share for the first nine months of 2008.

First nine months highlights
􀂃 Net income was $1,045 million, down from $3,218 million in the first nine months of 2008.
􀂃 Net income per common share decreased to $1.22 compared to $3.60 in the same period of 2008.
􀂃 Cash flow from operations was $664 million, versus $3,351 million in the same period of 2008.
􀂃 Capital and exploration expenditures were $1,604 million, up 72 percent.
􀂃 Gross oil-equivalent barrels of production averaged 292 thousands of barrels per day, compared to 309 thousands of barrels per day in the first nine months of 2008.
􀂃 Imperial distributed a total of $747 million cash to shareholders in 2009 through dividends and share repurchases, compared with $2,048 million in 2008.
􀂃 Per-share dividends declared in the first three quarters of 2009 totaled $0.30, up from $0.28 in the same period of 2008.

Canada 2010 Outlook

加拿大一度是港人外移的「天堂」，可是，当回归后香港表面一切如常寻且经济活力又动起来之后，港人便生落叶归根之念，纷纷卖掉或租出加国物业，重投香港怀抱；这种做法是否正确，因人亦即因环境、背景不同而异，不能一概而论。

大体而言，和香港比较，加拿大经济有如一潭死水，但现在似乎已有一些变化；自从「金融海啸」之后，加拿大的保守财金政策（包括裁削预算开支及严管金融活动等）成效渐彰，加上近年她采取了「一篮子减税」政策，降低最高税率、提高免税额、增加资本性投资税务豁免，效益已见；在金融机构相继倒闭或需政府注资的新闻日有所闻的情形下，加拿大银行基本上都能安度危机，成为西方银行界的奇葩。

「金融海啸」来袭，美企业的加拿大分厂无法不受波及，而美国消费市场衰退则打击加拿大对美国的直接出口，令加拿大失业率一路攀升。然而，近来加拿大失业率开始下降，当地经济学家（如Scotia Economics）认为这是经济开始健康回升而非偶生事件，八月份的失业率百分之八点七应为最高点，九月微顺至百分之八点四（净就业增三万一千多个职位）。这种转变并非因为美国市场复苏，而是对本地市场比较敏感进而能够作出弹性适应的小企业（僱员百名以下）已走出衰退的阴影。小企业僱员占全加私营企业总就业人数百分之六十七，但对失业率的「贡献」只有百分之四十三；反观五百僱员以上的大厂，僱员占总就业人数百分之十三，惟构成百分之三十五的失业率。非常明显，大厂中有不少是美企分厂或产品以美国市场为主，因而受创较重。

和失业率一样，加拿大的物业市场亦有转好之象，九月份的平均销售量已较去年同期增百分之一点五，而平均单位售价同期升百分之十四。这些数字特别是和香港市场比较，真是微不足道，但在西方物业市道仍处下降轨的现在，已属难能可贵。值得注意的还有，据Scotia Economics的分析，楼价上扬并非「投机者（过去是港台如今是内地豪客）入市」，而是供应量严重不足（serious housing shortage）。加拿大独有（？）的「登记—卖出比率」（Listing-to-Sales ratio）去月是一点五一，为二○○四年同月以来最低（显示供求平衡的基准比率为二）！
由于加拿大非「金融海啸」重灾区，居民所受财政创伤不重，等于基础较稳，回升（复苏）便较为有力。美国家庭今年第二季的净总资产值较○七年年底跌百分之十七，加拿大的同类数字只减百分之五；同一来源估计加拿大家庭九月底可动用的净资产值在六千三百五十亿至一万亿美元之间，「机会」一旦来临，加拿大经济将有不错的表现。

对于与加拿大银行往来的香港人来说，由于加银行业无资不抵债的难题，因此银行存款远较安全，Scotia的资料显示二十国集团的政府平均负债为ＧＤＰ的百分之八，加拿大的只在百分之三至四之间；在经合组织（ＯＥＣＤ）中，加拿大银行最稳健；标准的一级资本负债比率为百分之七，但加拿大六大银行达百分之八点五……。在投机活动热火朝天的时候，加拿大银行的业绩表现肯定「滞后」，但在比较淡静的市场情况下，加拿大银行显然较为可取！

比较健康的经济表现，充分反映在加元滙价上，昨天加元兑零点九三美元（三月底只兑零点七七美元），这种趋势令「顺藤摸瓜」式论者指出美元加元平兑快现，对此笔者不敢表态，笔者知道的只是比起美国政府，加拿大政府更乐见其滙价趋强。加拿大物产丰富，人所共知，加元因而是所谓「商品货币」（commodity currency），天然资源特别是能源有价，加上经济表现不俗，加元滙价（相对美元及陪葬的港元）上扬，情理中事；虽然加国央行行长加尼（M. Carney）去周表示，近期加元滙价上升可能抵销了经济及金融市场改善带来的好处，但他同时认为加拿大经济已有力在中止刺激经济方案后仍增长。在当前的经济环境，加拿大央行步澳洲央行加息后尘的可能性大大存在。

投读者所好，亦谈谈加拿大股票。由于油价在经济增长似有若无之下依然上升，令人进一步看好油价；万一经济复苏较明显的增长，油价无法不大幅弹升，不少分析者因而看淡货车及空运业，以不断上升的能源开支会使它们的利润增长有限。这种形势令人看好铁道股。加拿大地大路长，铁道纵横，铁道股占相当比重，但哪种铁道股值得投资？笔者是门外汉，惟看「股圣」毕非德的公司持有大量加拿大贝灵顿北方（股市编号ＢＮＩ）的股票，大家不妨加以留意。截至六月底，巴郡持有该公司七千六百八十多万股（为其股票发行量百分之二十二点六），当时值五十六亿美元；据巴郡年报，其购入价在七十二至八十四美元之间，现价在七十六至七十七美元升沉，其价偏软皆因该公司刚公布去年业绩大倒退……。毕非德无宝不落，巴郡「揸重货」的原因是看好铁路运输而ＢＮＩ是佼佼者。笔者并非建议入货，但有余资者不妨和投资顾问商量并评估毕非德的正误。（林行止 文）

Imperial Oil Sees $200 Billion Oil-Sands Investment

By Sonja Franklin
Oct. 15 (Bloomberg) -- Imperial Oil Ltd. Chief Executive Officer Bruce March said he sees $200 billion invested in oil sands in the next 10 years.

March made the comments in a written copy of a speech he’s set to give to the Calgary Chamber of Commerce today. Oil-sands production is expected to be more than 4 million barrels a day in the next 20 years, he said.

=> Bilibala see great investment potential in tar sand too.

Calgary-based Imperial Oil produced the equivalent of 270,000 barrels oil a day in the second quarter from such projects as Cold Lake in Alberta, conventional natural-gas wells in western Canada and oil-sands miner Syncrude Canada Ltd.

Imperial is Canada’s largest refiner with the capacity to process about 500,000 barrels of oil a day at four plants in Alberta, Ontario and Nova Scotia. It also operates about 1,900 Esso-brand service stations across the country.

March, who took the helm of Imperial in 2008 when Tim Hearn retired as CEO, also said the company’s Kearl project may cut greenhouse-gas emissions by almost half a million tons a year.
Imperial Oil is 70 percent owned by Irving, Texas-based Exxon Mobil.

To contact the reporter on this story: Sonja Franklin in Calgary at sfranklin6@bloomberg.net

Imperial Oil Raises Edmonton Par Crude By C$11 Cu. Meter

CALGARY (Dow Jones)--Imperial Oil Ltd. (IMO) raised its purchase price for benchmark 40-degree gravity light crude oil at Edmonton by C$11 a cubic meter to C$468 a cubic meter, effective Tuesday.

In terms of barrels, the company is now offering C$74.42 a barrel, up from C$72.67. The new purchase price indicates an export price delivered to Chicago of about US$70.96 a barrel after considering transportation and import charges and foreign exchange rates.

Actual export prices are confidential but are believed to be closely related to the posted levels.
Imperial Oil is an integrated oil and gas company.

-By Tara Zachariah, Dow Jones Newswires; 416-306-2100; tara.zachariah@dowjones.com

Bilibala comments
Imperial Oil is the largest oil & gas refiner in Canada. That's the reason why it need to purchase addition oil on top of the its own production.

Rise price means the corporation expect the oil price will rise or at least stable at a higher ground.

Conoco Phillips 2q09 results

(AGI) - Houston, 29 Jul. - The US petrol giant ConocoPhillips marked net profits down 76pct during the second quarter, at 1.3 billion euro - equal to 87 cents per share. The company had expected shares worth 86 cents. Conoco's daily production, excluding its 20pct participation in Russian Lukoil, topped off at 1.87 million barrels, above the 1.86 million estimated by the company last July 7.

Bilibala cooments:
I haven't read the 2q09 press release yet, will do later today.

Opinion - can u be a copy cat to beat the original

By Matt Phillips
Can you beat Warren Buffett at his own game?

The Journal’s Brett Arends writes that despite the recent equities rally, some of Buffett’s favorite issues look pretty affordable at the moment:

Mr. Buffett liked oil giant ConocoPhillips (COP) enough to invest $7 billion in the stock through the end of last year, at an average price of $82.55, according to the Berkshire Hathaway annual report. Anyone buying today can get it for about $41.

Mr. Buffett has conceded an “unforced error” in buying this oil stock when oil prices were booming. But that doesn’t mean he has given up on it. In his last comments on the subject a few months ago, he reiterated his belief that demand for energy would remain strong. At current prices ConocoPhillips is about 13 times this year’s forecast earnings, but analysts predict that will drop to a cheap 7 times in 2010. That’s because they believe oil and gas prices will rebound.

He bought Johnson & Johnson at about $62 a share: It’s now about $55, or 12 times likely earnings, yielding 3.5%. He had also invested about $4.3 billion in food company Kraft, at around $33 a share. It’s now around $25, 13 times likely earnings and boosting a hefty 4.7% yield. He had also invested $2.3 billion in US Bancorp at an average price of about $31. Today’s it’s $17.

(Mr. Buffett has added to his positions in both Johnson & Johnson and U.S. Bancorp since.)

Bilibala's comments
In theory, an individual can copy Buffett or copy the best mutual fund managers to build up a portfolio. According to one study, if an individual follow the "what would Buffett do?" approach to purchase and sold exactly what Buffett did in the past 40 years. The rate of return will still be close to 20%, a way higher than the return of the S&P 500 or the average mutual fund.

On the other hand, everyone should do their own study to make sure you are confident enough to hold those stocks in long run. If you are too scare or too greedy in the wrong moment, become a copy cat will make you loss more than earn.

Petro-Canada & Suncor Merger

Issue Date: CSP Daily News, June 8, 2009,

Petro-Canada, Suncor Shareholders Approve Merger
Deal is subject to regulatory approvals, Competition Board review

CALGARY, Alberta -- At their respective annual meetings, Petro-Canada and Suncor Energy Inc. shareholders approved plans that will result in the merger of the two Canadian companies and certain of their subsidiaries: 96% of the Petro-Canada shareholders present voted for the merger; 98.07% of the Suncor shareholders at the meeting voted in favor of the merger.

The deal, first announced in March, is subject to all regulatory approvals and review by the Canadian Competition Bureau. The merged company will keep the Suncor name and will retain the Petro-Canada retail brand. (Click here for previous CSP Daily News coverage.)

"Shareholders recognized that the merger between Petro-Canada and Suncor would create Canada's premier integrated energy company with the assets, cost structure and financial strength to compete globally," said Ron Brenneman, Petro-Canada's president and CEO.

"This is a great vote of confidence from our shareholders," said Rick George, president and CEO of Suncor, who will assume the same role in the merged company. "Creating a made-in-Canada company that can compete on a global scale is good for shareholders and good for Canada. We anticipate that our two companies will be able to realize efficiencies and opportunities neither of us could have realized on our own. With an integrated business model we expect to have a global leadership position in the oil sands industry, a strong Canadian downstream brand, an attractive portfolio of domestic and international oil and natural gas assets, and numerous growth opportunities through the combined inventory of Suncor and Petro-Canada's potential development projects."

Click here for addition leadership changes.

At Petro-Canada, shareholders approved a new stock option plan by more than 52% of the votes cast, which will bring together the plans of Suncor and Petro-Canada and be used to attract and retain highly qualified directors, officers and employees. At Suncor, 57.67% of the votes cast were in favor of the new stock option plan.

Both companies elected 11 board members, including 10 independent directors until the earlier of either the completion of the merger or the next annual general meeting. These individuals are also proposed board members for the new merged company.

Petro-Canada also appointed Deloitte & Touche LLP as its auditors; Suncor appointed PricewaterhouseCoopers LLP.

Calgary, Alberta-based Petro-Canada is one of Canada's largest oil and gas companies, operating in both the upstream and the downstream sectors of the industry in Canada and internationally.

Suncor is an integrated energy company also headquartered in Calgary. Along with its upstream operations, it operates a refining and marketing business in Ontario with retail distribution under the Sunoco brand. U.S. downstream assets include pipeline and refining operations in Colorado and Wyoming and retail sales in the Denver area under the Phillips 66 brand. Suncor Energy (U.S.A.) Inc. is an authorized licensee of the Phillips 66 brand and marks in the state of Colorado. Sunoco in Canada is separate and unrelated to Sunoco in the United States, which is owned by Sunoco Inc., Philadelphia.

Bilibala's comments:
Once it got approved by the regulator, the merged company will become the largest intergated oil & gas company in Canada. To me, this deal is more in favour to Suncor than to Petro Canada. Both company stock price go up a lot after the annoucement of the merge. I will stay away from them until I review the 1st two merged financial statements.

Oil price analysis

上周六的投資講座, 有不少人問我三個問題:

1. 大市點睇?
2. 買什么投資最好?
3. 油價會唔會好? 買油股好唔好?

Bilibala 在等侯第二季的經濟數據和業績. 現在第二季未完, 雖然消費者信心指數重返50以上, 但屋價同銷售不算太好, 失業依然高企, 加上 S&P 500由低位升了 38%, 重返合理的衰退水平. 所以, 非常大機會在未來 3 個月玩上落市. 要入市就不用太心急, 跌 10%入, 又或者月供也可以.
( 3月4月要急入, all in 也可以, 但現在你見人賺錢才追貨就只有抱長線 buy & hold, 總之不用太心急).

買什么投資最好通常取決於個人喜好同立場. 好難一概而論.

加拿大股市沒有什么多元化的行業, 只有金融, 能源和礦產類. 所以, 許多人才問我買油股好唔好? 要了解油價, 先參考 Bilibala 上年的一個分享 - 加油! 由得我. 加價? 油不得我

何解 Bilibala 在去年 7月就認為油價會直插但會再升至 US$100?
直 插跌破 US$40, 單是美金升 25%, 就足以令油價跌20-30%, oil demand 預測由 +2%跌到 -1%又會再跌多 20-30%, 再加上之前上升的炒作, 現在 US$65 油價其實合理(略為偏低). 再計上下跌炒作和悲觀的oil demand 預測, 所以之前跌破 US$40.

現在美金下跌, 相信會再跌多一點, 假如經濟開始復蘇, oil demand 回升至 +1%, 而 oil supply 不上升, 再加未來的通脹壓力, 即使沒有上升的炒作, 兩年內升上 US$100其實是個非常保守的估計.

但即使成功預測油價, 也不代表買油股會有高回報.

首先要明白在新聞每日報告的國際原油價格主要有兩個: 一個是美國 WTI 的 light sweet crude, 另一個是英國的 North Sea Brent Crude.
Light sweet crude是開採成本最低的原油. 在沙地, 開採成本只需要 US$1-2, 其他地方開採提煉成本由 US$8-20不等.

加拿大是全球石油藏量第二高的國家, 也是美國第一石油進口國, 但加拿大石油主要是油砂. 油砂的 Sulfur和酸度比 light sweet crude 和 North Sea Brent Crude高得多, 開採提煉成本要 US$45-55.

這就解釋到為何加拿大油公司在去年油價下插時, 股價跌 6-8成, 而美國只跌 3-5成的原因. 因為加拿大油公司要承受的油價波動風險遠比美國的高.
也解釋到在 3-4月轉勢時, 為何加拿大油公司反彈較強勁的原因.
就公司業績而言, 加拿大油公司以目前的油價, 只能 breakeven, 或賺少少, 但美國油公司會賺多點.

另外, 油公司分上遊(鑽探/開採), 下遊(提煉/運輸/零售/化工)和設備提供三大類.
油價上升會受惠上遊公司, 而對下遊公司帶來不利因素.
至於設備提供, 通常要看整個石油行業長期發展.

當然, 每間油公司石油蘊藏量, 當中分佈, Sulfur和酸度的評級, 管理層, 現金流/負債率, 品牌價值等等.


所以, 計算油公司價值是遠比油價複雜和難於計算.
Bilibala 認為因為加拿大油公司升了不少, 未來會升上 US$100, 但要等經濟確認復蘇才會開始實現. 美國油公司回報應該較好, 風險亦會較低.
保守一點, Bilibala 只會買全方位(有上遊又有下遊)的油公司, 既然不清楚短期升跌, 所有會揀提煉業務多一點而不單單只有油砂資產的公司. 這樣, 不管油升油跌, 公司都會為我這樣的小股東賺取盈利. 我亦可以安心持有.

跟據上述的簡單分析, 加拿大油公司之中, Petro Canada, Imperial Oil, Husky Oil 同 Encana 會比 Suncor, Talisman 同 Oil Sand 穩陣得多.

Petro Canada 最好, 最 diversify, cash又多, 但有「不被收購」的 28%下跌風險, 而 Husky Oil 屬於超人(一個超級成功但不照顧小股東的勁人), Encana, Bilibala 讀不明它的煉油業又有分拆風險. 所以, Bilibala 在沽出 Petro Canada 賺了 42%之後轉入而且不斷入 Imperial Oil, 但由於是Exxon Mobil的子公司, 所以管理好, 但未來增長會局限在加拿大.

美國幾間大的, Exxon Mobil, Chevron Corp 同 Conoco Phillips 都好. Conoco Phillips就提煉業務比重最高, 股價最平. Exxon Mobil管理各方面都好, 就是貴一點.

中國石油公司三間都有壟斷優勢, 但同時有較重的政治風險. 既然有美加選擇, 投資中國的石油公司 opportunity cost 就太高, 所以在現階段, Bilibala 沒有買.

Petro Canada & Suncor's merge

News from CNN
Suncor Energy Inc, Canada' No. 2 oil company, agreed to buy rival Petro-Canada for about $18.43 billion Canadian ($14.86 billion U.S.) to expand its oil sand reserves and create the country's biggest energy group.

The deal comes after a period of missed earnings targets and project delay at Petro-Canada, and is expected to be completed in the third quarter of 2009.

The all-share offer represents a premium of about 28% to the $29.65 Canadian closing price of Petro-Canada shares on Friday as assuming 484.4 million Petro-Canada shares outstanding as of Dec. 31, 2008.

On completion of the proposed deal, Suncor's existing shareholders will own about 60% and Petro-Canada shareholders will own about 40% of the merged company, the companies said.
Petro-Canada (PCZ) shareholders will receive 1.28 common shares of the merged company for each Petro-Canada share, while Suncor shareholders will get one common share of the merged company for each Suncor (SU) share.

The companies expect to achieve annual operating expenditure reductions of $300 million.
They also expect to achieve annual capital efficiencies of about $1 billion through elimination of redundant spending and targeting capital budgets to high-return, near term projects.

The deal would combine Petro-Canada's extensive retail gasoline and refining business and its international operations with Suncor's extensive operations in the oil sands, where it is the No. 2 producer behind Syncrude Canada Ltd.Petro-Canada delayed its Fort Hills oil sands project last year because of rising costs.

Petro-Canada has also faced pressure to boost the value of its shares, which have lagged rivals because the company's management has failed to boost production and the firm's repeated failures to meet earnings targets.

Its shares have dropped 31% over the past 12 months while Suncor stock is down 35%.

The news confirms a report in the Wall Street Journal which said the two companies were in advanced talks

Bilibala's comments
This is a great time to make some short term profit. I've sold Petro Canada at CA$37.5 today, since the acquisition price is about $38.0.
(I will not blindly keep the "buy & hold" strategy just for "buy & hold". When I see an opportunity to realize 41.5% gains in 1 month. Why not?)

Also, Sunco and Petro Canada still need to wait for approval from federal government, if government rejects their plan, the stock price will drop back. Even it gets approval, the deal is $38.0 and it will have limited room to rise any higher than $38 until the deal has been settled.

In long run, merge is a good way to expand, to save cost and to strengthen ones cash position in a financial crisis environment.
On the other hand, a successful merge must add the strength of the 2 companies and reduce the weakness. Fail to do this, may lead to slow growth in very long term.

Conoco Phillips 2008 results

It is the 3rd largest integrated oil & gas company in USA

• Bad - 4Q08 revenue down 17.3% due to lower oil price, EPS down from $2.75 to ($21.37);
• Good - Excluded E&P goodwill & impairment write down, 4q08 EPS is in fact $0.49 or down 82% instead of a deep loss;
• Good - 2008 revenue up 27.7% due to higher oil price, EPS down from $7.32 to ($11.16), but excluded the one time adjustments, 08 EPS is in fact $10.7 or up 46%, meet my expectation.

Oil price down a lot since July 15/08 from US$146/bbl peak to +/-US$35/bbl, analysts are waiting for OPEC to announce # of output cut in order to evaluate what is the reasonable price should be in 09 & 10.

Petro Canada 3q08 results

Profit up 73%, EPS up 76% mainly due to oil price rise trigger a huge return in its upstream business (even it makes downstream business fall). Its Edmonton's refinery plant will start up in 4q08, but cost expenditure may rise more than expect, also, its Fort Hill oil sand project will cost a lot more than expect, therefore, Petro Canada has decided to fall back and re-visit the growing plan.
Once again,CA$60 is my target value and i did not plan to change.