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Energy efficient
Guinness fund likes Conoco, Devon, Canadian Natural

By Luisa Beltran, CBS.MarketWatch.com

Last Update: 12:01 AM ET Aug. 26, 2004

NEW YORK (CBS.MW) - Tim Guinness drills for innovative energy stocks that can benefit from the high price of oil.

The manager of the Guinness Atkinson Global Energy fund (GAGEX: news, chart, profile) said he aims for a mix of companies engaged in exploration and production of energy, including pioneering areas such as Canadian oil sands.

What are oil sands? The term refers to tar sands, which when processed, yield crude oil.

Earlier this month, oil prices hovered near $50 a barrel before sliding back. Oil sands companies and exploration/production firms, Guinness said, are the "most direct way to play high oil prices."

The two largest tar sands are found in Canada and Venezuela. Using a highly expensive procedure, Canada produces 800,000 barrels of oil a day from tar sands, which could jump to 3 million barrels over the next five to 10 years, Guinness said.

If oil is at $25 a barrel, companies that invest in oil sands make a "decent return." But if oil is at $35 a barrel, then oil sands "are an absolute bonanza," Guinness said.

The fund is new, and performance has been flat since its June 30 launch. But the portfolio is essentially a clone of the Investec Global Energy fund, which Guinness has managed for six years and is available only to non-U.S. investors.

ConocoPhillips (COP: news, chart, profile), the nation's third largest integrated oil and gas company, is Guinness's top recommendation.

Conoco's business is similar to rival ExxonMobil's, but its stock is more attractively valued, Guinness said. Conoco has a price-to-earnings multiple of 8.5 times 2004 estimates, he added, while Exxon's P/E is about 14. Said Guinness: "Conoco stands to be rerated on the fact that oil prices will stay high."

Shares of Conoco lost 29 cents to close at $72.06 on Wednesday.


Devon Energy (DVN: news, chart, profile) is also on the manager's list.

The traditional oil and gas company has developed a solid business over three decades, Guinness said. "They've got management I respect," he added.

Devon will be a "classic beneficiary of a rerating of this industry," Guinness said.

On Wednesday, shares of Devon shed 9 cents to finish at $64.45.


Canadian Natural Resources (CNQ: news, chart, profile) is another favorite.

The company has oil and natural gas holdings in Canada, as well as the North Sea and West Africa.



One promising venture is its Horizon oil sands project in Alberta, the oil-rich Canadian province. Horizon is expected to come online in 2008 and is capable of producing up to six billion barrels of oil over about 40 years, the company says.

"The U.S. is running out of gas and is looking increasingly to Canada," Guinness said.

Shares of Canadian Natural Resources added 2 cents to $31.51 on Wednesday

Production, prices drive Devon gains

By Lisa Sanders, CBS.MarketWatch.com

Last Update: 4:16 PM ET Aug. 5, 2004


DALLAS (CBS.MW) -- Devon Energy's second-quarter earnings rose 41 percent on higher oil and gas production and prices, the company said Thursday.

Devon (DVN: news, chart, profile) said it made $502 million, or $2.02 a share, up from $356 million, or $1.62 a share, earned in the second quarter of 2003.

Analysts had expected Oklahoma City-based Devon to earn $2.01 a share, on average, according to Thomson First Call.

Sales rose 25 percent to $1.8 billion in the quarter. Analysts had been looking for revenue of $2 billion.

"In addition to strong oil and gas production, the second quarter reflects better-than-expected operating costs and significantly lower general and administrative expenses," said Chairman Larry Nichols in a written statement.

Oil-equivalent production climbed 11 percent in the second quarter to 684,000 barrels per day, boosted by the company's merger with Ocean Energy. This compared to production of 615,000 oil-equivalent barrels in the second quarter of 2003.

Assuming the two companies had been merged during both years' quarters, daily production was up 4 percent over the 2003 quarter, the company said.

"Over the past 12 months, Devon has successfully integrated Ocean's properties and continued to strengthen its balance sheet," analysts at Raymond James & Associates wrote in a new research report. "However, a key objective for the company is demonstrating that it can grow organically, without relying on further acquisitions."

Raymond James' "market perform" rating on Devon, reflects concerns about long-term internal growth prospects. The rating also takes into account Devon's progress on the financial and operational fronts, the firm said.

Devon realized a 13 percent increase in natural-gas prices of $5.29 per thousand cubic feet in the second quarter, while oil prices rose by 10 percent to $28.04 a barrel. Natural-gas liquids prices were up 17 percent to $20.89 a barrel, Devon said.

Operating margins from marketing and gathering and processing activities increased 34 percent to $78 million in the 2004 quarter, due to the stronger gas prices. Revenue growth of 12 percent offset an 8 percent hike in expenses.

Devon also said it paid down $760 million of debt during the second quarter and had $1.1 billion of cash on hand at the end of June.

Shares closed at $66.60, down $2.01, amid a general slide among the company's peers.

Olá,
A DVN está com tendências de longo prazo e médio prazo muito saudáveis, nos últimos meses tem negociado dentro de um canal ascendente, e está agora na base desse canal, sendo potencialmente um bom trade longo.

O único senão para mim, é o facto de os mercados já estarem avançados no swing up, e este trade arriscar a ser feito parcialmente em contra-ciclo.

Eu estou longo desde os 63.70 com esperança de fechar nos 71 com uma ordem de limit sell.
red