A whole new parameter - lithium production.

America wanted to make a deal with Ukraine for basically 5 critical elements in exchange for a half trillion US dollars.The five elements are titanium,lithium,graphite,nickel and cobalt.One of these 5 was the increasingly in demand element, lithium.Lithium,according to this blog will be more,not less,in demand at least until 2030.The increase in demand will chiefly come from electric vehicles but also from cell phones and renewable energy transmission.Most analysts and most studies show that U.S.A. has quite low reserves of lithium.Several analysts peg the total reserves at only 750,000 tons.Although it is true that some esoteric studies have shown American deposits of several million tons.It has not been substantiated.

Estimates are that the annual American requirements of lithium are about 500,000 tons  for electric vehicles alone.This blog believes that another 100,00-200,000 tons could be required for these other uses.

Imports of lithium

At the present time U.S.A. has to satisfy it's lithium needs by imports from primarily 3 exporters.The 3 exporters are Chile,Argentina and Australia.Canada exports a meagre $194 million, mostly to the growing American market.However Chile,the second biggest exporter exported much more.Although information on Chile exports are hard to get  some estimates are that Chile exported from $10 to $14 billion of lithium to the American market.However Chile  is in the process of nationalizing the lithium industry and this complication may create a chance to increase Canada's share.As often nationalized companies are difficult to deal with and may be very sticky with their prices. And because of it's closeness to American market, Canada may well be able to increase it''s market share at the expense of the other 3(Chile, Argentina and Australia) who export to the American market from a considerable distance.        

Status of Canadian producers

The Canadian lithium industry is presently quite fragmented.12 to 18 months ago there were only 3 lithium mines in Quebec.Now there are 12 to 18 mines in Quebec of various sizes and the largest of these  (North American Lithium)exported  the entire $120-$140 million of total Canadian exports in 2024. Much of it went to France.But recently NAL has discovered 3 other mines near their main NAL mine.This complex is now called the Abitibi hub and there is the potential to increase production significantly.                                                                     There are also 3 or 4 mines in Manitoba but they produce very little and mostly to meet local demand for lithium.However as has been written in my blog on January 11 in Wordpress (Econothon) there has been a new 100 million ton mine discovered in Yellowknife (NWT).But at present it is still being developped as  there is no production yet from this mine  north and east of the Manitoba mines.This blog sees that lithium could be trucked down the Demeter highway in convoys to the American market relatively cheap.But there is no doubt that the present owner LYFT Power. needs outside investment Someone like Brookfield Resources or more likely another miner such as Tech Resources or Hudson Bay Minerals would be beneficial to both parties.There would be a substantial cost in order to start production but at the time of writing lithium sells for $21800 USD per metric ton and up to $65,000 per metric ton for battery grade metal  and it has been higher.

The NAL mine in Quebec is owned by a company called Sayona Mining and it could become a nice acquisition for one of the large gold miners in Quebec.

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 Dale  Mcintyre (M.A. (Economics) is a freelance writer that writes for several financial brokers including Zacks and Yahoo Finance

Changing the Parameters

 For several years now I have been writing blogs on 8 websites,4 on Wordpress,2 on Google Blogger,1 on Linkedin,and 1 on Tumblr.They all had a business slant to them.But in fact most of the blogs have focussed on some change in the environment that has not been factored into the valuation of a company or in some cases several companies.My blogs rarely just gave a different business forecast for the same factors or situation as other analysts.An example of this is seen in the price of Canadian oil companies.I made several blogs discussing the fact that the size of oil reservoirs has been overestimated.Oil pools increase in viscosity as you go deeper in the reservoir.And in fact at the bottom of the reservoir is a layer of tar or asphalt.Slightly above the bottom layer is one or more layers that are difficult to pump to the surface and to refine.Once this fact is realized and discounted, the estimate of total oil supply will be reduced. And since the demand is constant or slightly increasing, the price of oil will inevitably rise over time.So it is likely that all Canadian oil companies is now or soon will be a bargain.

   The above analysis is only an example of the kind of situations that I described in my past blogs.There are other examples such as the size of the gold deposit in the Australian mine called the Fosterville mine in the state of Victoria in Australia.But it is increasingly difficult to find situations where the value of resources has not been factored into the market price of the resource and of course the underlying stock.So for this reason and other difficulties I have decided to increase the scope of all 8 blogs.I,especially realize,that I have not utilized as much as I should have from  my Tumblr website which I usually make smaller blogs on.

    The kind of thing that I  will focus on are changes in trends or in the environment that will change (at first gradually) the valuation of a company and eventually the price of it's shares.It is rare to find large and clear changes.But I cannot make blogs continuously on large changes.I am content to find small changes on very valuable resources.This can still lead to fairly large changes in the value of a company and it's share price.In the past I looked almost exclusively on the change (especially the increase) in the share price of a stock.But the new blogs will look at other changes also;not only whether a share price will move up and by how much.                                                                                                                   An example of this is the discovery that the long awaited Trans Mountain pipeline is open and transporting oil to the B.C.coast.This allows Canadian oil to be exported to Asian countries like Japan and South Korea.Here the price is the Brent price rather than the W.T.I. index and as a result the Canadian index(C.W.S.) has been rising faster than the W.T.I. which it is tied  together with.The result is that the differential between the American index (W.T.I.) and the Canadian Crude index(C.W.S.) is narrowing.This will benefit all Canadian oil production,not just oil exported to U.S.A. As the percentage of oil exported to Asia increases the differential between the W.T.I.  and the C.W.S.will dissipate.          

It is examples of changes in the environmental parameters like the ones above that this blog is searching for. It will not be able to tell always which  company or stock will  have the biggest gains but it will likely point out which stocks will  gain from this change in the environment.The hard part will be noticing  whether the environmental change is large or small and whether it will be temporary or long lasting.That is the new focus of this blog.

Dale Mcintyre (M.A.Econ) has made all the contributions to Workathon Blogger.Dale Mcintyre is a freelance writer that writes primarily for Yahoo Finance and Zacks Research.

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Exchange Income Fund (EIF) was a high flyer for the Last 4 months

December 18,2024 

 

Exchange Income Fund (EIF) has an unusual name that doesn't give shareholders much of an idea what the company actually does.But shareholders and investors realize that 6 months ago it traded at $45/share and now at $57/share (for a 28% increase until Dec.1).This has garnered more interest by investors in what EIF does.EIF is a small aerospace and manufacturing company with a market cap of  $2.75 billion..It is an acquisition oriented operation and has been in business for more than 20years. It  has continuously grown and diversisifed tremenduously.In October 2023 it acquired Dry Air Manufacturing.In addition,on November 13,2024 it closed the acquisition of a Florida based company called Spartan Mats.It was a cash and stock deal wort$120 million.EIF management expects the deal to be immediately accretive to earnings.

Q3 Report

Exchange Income Fund had a very good Q3.For instance it achieved record revenues  of $710 million,adjusted EBITDA of $193 million and adjusted net earnings went from $1.19 per share in Q3 2023 to $1.29 per share in 2024.They also secured a contract for fixed wing aircraft in Newfoundland.EIF management has been very busy in Q3. 

                                    
                                 

                   Q4 and Beyond

    EIF is involved in aviation,aerospace and manufacturing.But about 3 quarters of the revenues come from aviation and aerospace.That's because it owns 6 or 7 small airlines such as Calm Air and Perimeter Air.These airlines serve passenger and cargo traffic largely in western Canada and the north.Traffic should be considered steady rather than liable to have large seasonal increases in revenues.Yet EIF management is working hard on getting contracts to increase the profitability of the aviation side.For example,their new fixed-wing contract in Newfoundland. will be served by their existing business.This would seem to be a good fit.As this blog believes that there is unused capacity in all of their airlines.And there is the possibility of new business in areas such as Nunavut, Labrador and Newfoundland. In effect,the aviation side has been and will be fuelling the growth in the manufacturing branch.However over the last 3 years it is the manufacturing arm that is increasing due to acquisitions.This blog believes that there is still the possibility of one or two small tuck in acquisitions or 1 medium -sized  acquisition on the manufacturing side of business.But it is clear that the steady increases in revenues and earnings will come from the 6 or 7 airlines it owns.

        A Target Price

     First it must be said that EIF should think about changing it's name to a one more connected to what it does.For example,Industrial Development Co. or Northern Innovation Co.Secondly it needs to spend more on marketing it's air passenger and cargo business so as to increase the capacity of it's airlines.Having said that,this blog believes that there will be increases in revenues and earnings from it's recent acquisitions as it works to enhance synergies.Consequently this blog is expecting Q4 net  adjusted earnings of $1.15-$1.35.On an annual basis this would be $3.40 -$3.65 per share.At today's share price the P/E ratio would be about 15 times.With perhaps a forward P/E  of  13 to 14 times.This is a solid and conservative P/E ratio.This blog believes that the P/E ratio could eventually move to the 15-16 times range as investors see the possibilty for growth here.However ,as stated in the title, EIF has moved up from $45 since August.So  investors have already "baked in" some of the impact of the new acquisitions.This blog believes that there still is some price appreciation left.So the target price will be in the $56-$62 area until Q1 2025.As  Q4 has already been accounted for.

Dale Mcintyre is a consulting economist that writes blogs primarily for Yahoo Finance and Marketbeat.     

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Paramount Resources increases dividend 20%.Another Kay Bob Duvernay winner

Paramount (POU) had a good first quarter producing on average 101,000 barrels a day which was only slightly lower than Q4.At the same time it showed an increase of 22,000 barrels/day from it's multi-pad wells in the Kay Bob region.Kay Bob is the new shale oil discovery that is showing superior oil and natural gas production.This area was explored before with below average results because of the low porosity of shale.But with the advent of new technology in horizontal drilling, production has become much more successful.In fact,the Kay Bob area is condidered the most productive in the Duvernay.In 2023,4 out of the top 5 producing wells, in Alberta were from the Kay Bob region.But these wells deliver oil,liquids and natural gas.It is not a pure oil play.

   POU has increased it's capital expenditures to$214 million in Q1.And it is drilling 15 new wells.9 of these wells are in the Grande Prairie Duvernay region and 4 in the Kay Bob area.This leaves Paramount with about 200,000 acres of unexplored land in the Duvernay region.                                         

   Financially Speaking

   Paramount is unlike most oil companies in the oil patch as it has almost no debt and $570 million in investments including 31.5 million shares of Nuvista Energy (NVA).Recently it sold 6 million shares of NVA for $75 million.This will largely be used to finance it's capital construction program.In addition, it's Q1 operating results were good enough for POU to increase it's dividend by 20% to $.15 per share.It had operating income of $201 million and adjusted funds flow of $226 million but negative free cash flow of $10 million.The latter fas been caused by accounting adjustments.

   Paramount sold some non-core assets for $47 million in 2023 and this reduced total production to 97,000 boe/day.But additional production from newly drilled Kay Bob wells brought Q1 production to 101,000 boe/day.Guidance for the rest of 2024 remains about the same as for Q1.This blog sees increases in the average price of oil and natural gas for the rest of 2024 (above the Q1 average price).This could easily create a positive free cash flow and operating income of $225-$240 million by Q3.If so then POU should be trading around $35-$37 per share by Q3.                          https://www.zacks.com/            

Dale Mcintyre is a freelance writer writing for Marketbeat.com And Zacks.

Innergex Renewable is the smallest,but yet a quality utility in the Index

Innergex Renewable Energy (INE) is considered the smallest utility on the TSX index.It and Boralex are both fairly new entrants to the TSX Index and both are headquartered in QuebecAlso both have a portfolio of all noin-renewable assets..INE only generates non-renewable energy, that is, energy from hydro,solar and wind power.It has a market capitalization of about $1.5 billion.This compares to utilities such as  Fortis or Emera which have market caps of $27 billion and $13 billion respectively.And both INE and BLX are adding new facilities to increase their total energy outage.INE has installed capacity of 4266 MW.It has 85 operating facilities with 13 projects under development.It has in a few years more than tripled it's power generating capacity.Most of it's projects are in Quebec with a few in Chile.And a significant percentage comes from hydro power.

     Performance in 2023

   2023 was not a great year for North American utilities.Even those with substantial inreases in performance did not get substantial increases in share price.As interest rates were high and investors did not want to bid up share prices of utilities with relatively high yields.Instead investors ploughed money into high grade bonds.While in 2023 INE added to it's stable of non renewable assets.For example, it completed an acquisition of a 60 MW facility in Ontario and built it's first storage facility in Chile.It also adbvanced on the construction of it's 330 MW facility in Boswell Springs in Wyoming.And it started delivering power on it's 7.5 MW Innavik hydro project in nortern Quebec.As hydro is a significant part of the INE portfolio of non renewable assets.
                                                               

             Growth versus Earnings

   Innergex  has grown rapidly in the past 5 years.Still it's market capitalization is about half of the next biggest utility on the TSX index which is Boralex, another Quebec based utility.And INE has made a concerted growth effort in 2023.In addition, it has made a partnership with a French financier called Credit Agricole Assurances.But it has not done as well with improving it's  earnings.It has showed negative earnings since 2019.Each year it has large and growing interest expense.Also it has a large debt/equity ratio.It is not likely to show substantial share price increases until it's debt has been pared down and there are decreases in interest expense.As increases in revenues have ben matched by increases in interst expense.This blog sees INE moving in a tight range around it's present share price in 2024.
                                             https://www.zacks.com/             

 Dale Mcintyre M.S.Sc.(econ) is a freelance writer that writes primarily  for Zacks Researchy.

New kid on the Block -Duvernay Energy

 As of January1,2024 Duvernay Energy will become a newly formed Canadian oil company.It will be formed by the combination of  Cenovus (CVE) and Athabasca Oil(ATH).CVE will own 70% and ATH will own 30%.It will own 200,000 gross acres,most of it in the Montney and Duvernay region.It will inherit Kaybob acreage from Athabasca Oil and Cenovus Energy.Athabasca has 3 Duvernay pads in the Kabob region.Duvernay will own a pipeline network  connected to Pembina Pipeline and Keyera Ppipeline.On January1,2024 Duvernay Energy will start off with production of 2000 boe/day.And the board will give guidance at the end of Q1 2024.

           Cenovus Contribution

   The new Duvernay Energy board will have a 4 man board with one member from CVE.And Duvernay will get $18 million of it's $40 million seed capital from CVE.Also Cenovus will contribute some of it's profitable  Kaybob acreage to Duvernay Energy.In total, Cenovus will earn 30% of  Duvernay's net income and own 30% of it's assets.

   The opening production in Q1 2024 will be 2000 boe/day.A further 2 well pad will be producing in Q2 2024.Athabasca plans to have production of 6000 boe/day in 2025.This blog finds this to be a low forecast.However this could produce from $100 million to $125 million of revenue for Duvernay Energy in 2024.And Athabasca plans to have no debt on it's books for 2024.The average netback for thermal oil is $35-$39 a barrel.And Duvernay (especially Kaybob Duvernay ) assets have relatively high netbacks and low decline rates.

 

 A Low Risk Investment

  At this point in time it seems like the main way that investors can participate in Duvernay Energy is through Athabasca Oil and Cenovus Energy.However more leverage can be obtained by investing in Athabasca Oil (ATH) as no IPO ( an initial public offering of shares) has been mentionned yet for Duvernay.Although Duvernay is intended to be a separate entity from Athabasca, net income earned by Duvernay will be added to ATH.Capital and financing costs are minimal as there will be no debt and seed capital is added by ATH and CVE.Still this blog sees only moderate profits for Duvernay as it goes through startup costs.On the other hand if the price of oil gradually moves towards $80 a barrel and Duvernay netbacks increase, Athabasca Oil will likely hit $5.00 a share.

                  MarketBeat: Stock Market News and Research Tools     Dale Mcintyre is a freelance writer that submits articles chiefly to Marketbeat.com and Zacks Research.

Cenovus' total Production (upstream and downstream) now Exceeds Imperial Oil Production

 Many investotrs don't realize the improvements that Cenovus has made since taking over Husky Energy about 2 years ago.For example,downstream production was about 100,000 boe/day in Q2 2021 but in Q2 2023 (as written in Econothon dated October 10,2023) downstream production was 650,000 boe/day.However downstream production in Q3 was 664,000 boe/day in comparison to Imperial Oil downstream production of 350,000 boe/dayThis is a tremenduous increase in downstream and total production.Econothon dated October10,2023 also stated that upstream production was 797,000 boe/day which was near the top end of guidance.Counting upstream and downstream production Cenovus is now one of the top 3 producers in the Canadian oil patch.

    It cannot be overstated that Cenovus changed dramatically after it bought Husky Energy.Most analysts(including this blog thought that CVE would sell off one or both of the two refineries that it acquired in the deal.However in 2021 ans 2022 it refurbished the Superior and the Toledo,Ohio refineries.Consequently there was an additional 660,000 boe/day of downstream production in 2023.However in order to improve both refineries CVE had to takea substantial risk and add a lot of new debt.For example,in 2021 CVE had total debt of about $14 billion.But in 2022 and 2023 Cenovus reduced their debt.So that in Q3 2023 debt was reduced by  another $1 billion to remain at $6 billion.And more debt will be eliminated in Q4.

                         Financial Highlights of Q3

   Cenovus showed total operating funds of $2.7 billion and adjusted funds flow of $3.4 billion.While free cash flow was a whopping $2.4 billion.These funds were used to reduce debt by $1 billion to $6 billion in net debt.Net income and net income per share at $1.82 per share were up from Q3 in  2022 at $1.53 per share.

                     The Next Step

  Before acquiring Husky, Cenovus was focused on the Lloydminster oil pool and the Lloydminster upgrader and asphalt plant.In 2021 the capacity of Lloydminstrer was 150,000 barrels per day;output was used solely for producing asphalt.But in guidance, CVE has told shareholders that it intends to spend $920 million in order to create a substantial diesel plant.The Lloydminster oil pool is sizeable and close to the American market.So this blog thinks that down the road an upgrader or a refinery will be added to produce gasoline as well as diesel in Lloydminster.

   A new Cenovus

  Back in 2020 Cenovus was a quite different company than today. At that time CVE owned substantial upstream assets and the Lloydminster upgrader and asphalt plant.Then it acquired Husky Energy and in 2022 spent a lot of money improving the new,bigger company.And in 2024 (September) the new diersel plant is expected to come onstream.But this blog sees CVE making a bigger opportunity out of Lloydminster with it's sizeable heavy oil pool.Down the road Cenovus could be adding another oil upgrader or refinery to handle gasoline.And it doesn't hurt that Lloydminster is closer to the American market than the refineries in Edmonton.

  The future Price of CVE

  With the W.T.I oil price so volatile the price of all oil shares moves with the W.T.I.But CVE will have greater production than Q3 2022 and the average price(over the quarter) will be lower than Q3 2022.Consequently net earnings per share in Q3 shoiuld be in a range of $1.70-$1.90 per share and around $7.00-$7.50 per share on an annual basis.And this will  keep CVE shares in the area around $24-$28 per share.But in 2024 the price may edge upwards as the diesel plant gets closer to being finished in September.

        

Dale Mcintyre    https://www.marketbeat.com/ M.S.Sc.(econ) is a freelance writer that wrires for several brokers.