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TD warns production outlook may darken for energy firms Add to ...

Investors in energy firms operating in flood-ravaged areas of Western Canada could be in store for a nasty surprise as second-quarter results start pouring in this week, warns TD Newcrest analyst Roger Serin.

Drilling for oil and gas is made much more difficult when producers' leases are covered with several feet of water. Mr. Serin believes the impact of the adverse conditions will extend into the third quarter, putting full-year production guidance at risk for some firms.

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"Third-quarter 2011 drilling will likely be deferred until at least August, with production additions unlikely until September (the end of the third quarter)," he wrote. "Second-quarter flooding is now a third-quarter production problem in the region."

"The weather and delayed operating activity will likely result in a handful of producers reporting weak second-quarter 2011 production results and this could potentially lead to them revising down full-year or exit-rate production guidance."

Those companies he believes most at risk for downward revisions in guidance include PetroBakken Energy Ltd. , Crescent Point Energy and Penn West Petroleum Ltd. .

He points out that most producers that are drilling in Western Canada -- PetroBakken is an exception -- have not experienced materially weaker-than-average share price performance of late.

"We do not believe the market is pricing in downward revisions to 2011 production guidance," he said.

Downside: Mr. Serin rates PetroBakken as a "hold" with a $15 price target; Crescent Point is rated as a "buy" with a $50 target; and Penn West is rated as a "buy" with a $27 price target.

Google Inc. , which reported blow-out quarterly results last week, made the right decision to aggressively hire new employees so that it can capitalize "on the numerous lucrative opportunities" ahead of the company, commented Odlum Brown analyst Felix Narhi. "Google's excellent growth profile, defendable business model, solid balance sheet and modest valuation are the central pillars to our bullish view of the stock," Mr. Narhi said as he reiterated his "buy" rating.

Upside: Mr. Narhi has a $730 (U.S.) price target on Google.

First Uranium Corp. faces significant operational and financing uncertainties at its Ezulwini project in South Africa, and the market is "waiting for clear signs of delivery before it starts paying up for the story," said RBC Dominion Securities analyst Leon Esterhuizen. The company plans to ramp up production at the underground mine this year, and if successful, its net asset value could more than double to $1.20 (U.S.) per share.

Downside: Citing both the associated risks and an increase in cost estimates for Ezulwini, Mr. Esterhuizen slashed his price target to 50 cents from $1.20.

Corus Entertainment Inc.'s saw impressive revenue gains at its television operations in the third quarter and this positive momentum should continue, said RBC Dominion Securities analyst Drew McReynolds. Oprah Winfrey has been doing her part; ratings for the OWN channel were up almost 50 per cent in the key 25-54 women's demographic from a year earlier, when it was operated as the predecessor channel VIVA.

Upside: Mr. McReynolds rates Corus as a "top pick," and is maintaining a price target of $21.

Paladin Labs Inc. has made an equity investment in COLD-FX marketer Afexa Life Sciences , and now owns nearly 15 per cent of its shares. Versant Partners analyst Douglas Loe said the investment could be mildly positive to future earnings since Afexa looks attractively valued and Paladin has hinted it could grow its interest in the company.

Upside: Mr. Loe rates the stock as a "buy" with a one-year price target of $47.50.

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