– Canadian and U.S. Comments for Monday June 7, 2010 3
This publication is a general market commentary and does not constitute a research report. Any reference to a research reportor a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. Thiscommentary is for informational purposes only and does not contain investment advice. This publication may be wholly orpartially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
CANADIAN EQUITIES OF INTEREST
Listed Alphabetically by Symbol
Like to have your feet on solid ground?
Canaccord Genuity Oil & Gas Analyst John Tasdemir points out that onshore servicestocks have been outperforming and appear poised to continue to move higher in the near term. As of Thursday’s close, the OilService Index (OSX) has had a 27% correction since this year's high, set on April 23. The broad offshore bucket of stocks thatCanaccord Genuity tracks is down 30% since its high, while the onshore bucket is down 15%. Tasdemir thinks growth inonshore drilling in U.S. and Canada focused on horizontal completions in oil and liquid-rich natural gas plays and dry gas shalewill remain intact. Therefore, he believes that, unlike past corrections, manyonshore focused stocks have been oversold and"thrown out with the bathwater," even with the relative outperformance vs. the offshore group. He also highlights that withoutquestion, E&P costs in the Gulf of Mexico (GoM) are going up. Just how much costs are going up will take longer to answer.Insurance, regulation, equipment redundancies, etc., will all be part of the economic equation. He thinks many GoM producersare not only revaluating spending plans for the next six months due to the deep water moratorium, but are also consideringlonger-term plans. Looking at the offshore producers and considering their other resource opportunities, Tasdemir expects moredollars will be focused onshore. Not only that, the oil spill news flow and timeline for GoM recovery creates near-termoverhang. He thinks news flow from the GoM will continue to paint a negative light on the sector at least until the oil spill isstopped, which could take until August. Continuing to linger, however, will be environmental and removal impacts. Finally, henotes that he thinks the cumulative market value for offshore-related stocks is approximately $80 billion ($221 billion includingdiversifieds), which compares to the onshore group at about $32 billion. He believes small capital moves away from theoffshore into the onshore stocks are a major needle mover for the purer-play onshore group. Tasdemir’s favourite onshorestocks are the ones that are driven primarily by the horizontal trend. This includes:
PhoenixTechnology Income Fund (PHX.UN)
Superior Well Services (SWSI)
Complete Product Services (CPX)
Key Energy Services (KEG)
. We also like select land drillers including
Helmerich & Payne (HP)
Transdigm Group (TDG)
. He is also warming up to
Precision Drilling (PD)
, as its trust conversion has takenplace.
2012 = Critical Mass in Canada.
Automakers said Friday that fully-electric vehicles should be widely available to Canadianconsumers within two years, with offerings in the pipeline from Nissan,
Ford Motor (F)
, Mitsubishi and others.Speaking at a conference on green vehicle technology in Toronto, Toyota Canada's managing director, Stephen Beatty stated, "Ithink what you're hearing across the board is that 2012 is the time when you're going to have critical mass and a huge number of (electric) products coming forward from every manufacturer." The Canadian Press reported that Nissan is poised to be the firstmajor carmaker to introduce a purely electric consumer vehicle into the Canadian market, with its Leaf set to be in showroomsby late 2011 (the Leaf is already on sale in the U.S.). Additionally, Ford said it plans to launch its Transit Connect battery-electric van and an electric version of the Focus sedan by late 2011. Rounding out the late 2011 launches, Mitsubishi said ithopes to begin selling its zero-emission iMiev in Canada by late 2011. Toyota intends to launch an all-electric commuter car by2012. Toyota's Beatty predicts that there will be 8-12 fully-electric vehicles on the market in Canada by 2012.
Alamos Gold (AGI : TSX : $14.94), Net Change: -0.02, % Change: -0.13%, Volume: 334,259
Alamos Gold eked out a gain on a drilling update from its Mexican and Turkish projects. At San Carlos on its100%-owned Mulatos project in Mexico, the company completed 9,920 m of drilling in 48 holes. The San Carlos area is locatedat the north-east end of the Mulatos trend and about 2.5 km from the Estrella open pit where current mining is proceeding.Notable results: 9.90 m grading 14.71 g/t, 21.34 m grading 1.27 g/t Au, 16.75 m grading 6.41 g/t Au. Drilling continues to focuson a high grade structurally and stratabound controlled zone of mineralization identified over a 270 m strike length. At Puertodel Aire extension, also in Mexico, 10,425 m in 32 holes have been completed. Drilling is focused on expanding the mineralizedzone to the northeast and infilling the high-grade zone. Notable new assays include: 13.3 m grading 4.08 g/t Au and 10.7 mgrading at 4.69 g/t Au. This suggests the existence of possible lateral and southern extensions to the high-grade zone. In Turkey,at its Agi Dagi Au asset purchased in January 2010 from
Fronteer Gold (FRG)
Teck Resources (TCK.B)
,4,500 m in 27drill holes have been completed. The company indicated that most holes are confirming grade expectations and are providing