Technical analysis shows oilfield services and transportation company Mullen Group is set to rise.Reuters
Inside the Market's roundup of Canadian small caps making news and on the move today. This post will be updated during the trading day.
Argent Energy Trust said its second-quarter 2014 production averaged approximately 6,373 barrels of oil equivalent per day (boe/d), exceeding previously announced second-quarter production guidance of 6,100 to 6,200 boe/d. During the month of July, Argent achieved a new all-time daily production high.
Argent also revised its average annual production guidance for 2014 from approximately 6,000 boe/d to an expected range of 6,200 to 6,300 boe/d, and increased its third-quarter 2014 guidance to an expected range of 6,400 to 6,500 boe/d from previous guidance of 6,100 to 6,200 boe/d. The company has also agreed to a minor asset disposition that modestly improves its balance sheet.
TD Securities analyst Aaron Bilkoski reiterated a "hold" rating and $3.25 (Canadian) price target and commented, "Today's press release indicates to us that the revised business direction is moving forward as planned.... Although we view the latest release as a positive, in our view Argent remains a company in the early stages of a long corporate transition that will likely result in year/year production declines as the company mends its balance sheet."
Investors were impressed by what the company had to say. Units in the trust, which has a nearly 8 per cent dividend yield, rose 11.2 per cent Thursday to $2.96.
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EnerCare Inc. has announced that it will acquire the Ontario home and small commercial services business of Direct Energy Marketing Limited for $550-million. The two companies had previously operated the business jointly, but Direct Energy will sell to Enercare because Ontario no longer makes up a material part of the company's overall business. The deal is expected to close in the fourth quarter of 2014. Trading was halted just before the announcement.
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Wellgreen Platinum Ltd. announced a significantly expanded and upgraded 43-101 mineral resource estimate for its 100 per cent-owned Wellgreen platinum group metals-nickel-copper project in the Yukon.
Measured and indicated mineral Resources increased to 330 million tonnes at 1.67 grams per tonne platinum equivalent.
This new resource estimate, together with the updated metallurgical testing results anticipated to follow in August, will be incorporated into the 2014 Preliminary Economic Assessment for the Wellgreen project, which is expected to be completed in September.
Greg Johnson, Wellgreen Platinum CEO, said, "We are extremely pleased with the results of the new resource estimate as it demonstrates the scale and potential of the Wellgreen deposit which still remains open to further significant expansion down dip and along trend. The results of the drilling programs in 2012 and 2013 have dramatically expanded the previous 2012 Wellgreen project resources with Measured and Indicated resources increasing to more than 330 million tonnes from 14 million tonnes and nearly doubling the Inferred category resources to 846 million tonnes."
Shares in the company are up nearly 8 per cent in afternoon trading at 68 cents, though off their intraday high of 70 cents and well off their 52-week high of $1.10.
According to Thomson Reuters data, two analysts cover the stock, with an average price target of $2.
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Winpak Ltd. met second-quarter estimates, reporting EPS of 30 cents per share. Although revenues were up 12.6 per cent from the previous year, a reduction in profit margins dampened the effects. Revenues were mostly driven by a robust demand for yogurt, condiment and specialty beverage containers, even as rising material costs ate into sales profits.
Shares are up 0.8 per cent since the announcement.
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Ecopetrol S.A. and Pacific Rubiales Energy Corp. said they have decided to end the Synchronized Thermal Additional Recovery pilot project that was developed in the Quifa SW heavy oil field in the Llanos basin of Colombia.
The decision followed the conclusion of a technical analysis. The two companies said they "reiterate their interest in continuing to work together on the analysis and development of these and other initiatives that will help increase recovery factors and hydrocarbon production in joint operated fields to the benefit of both companies and the country."
Pacific Rubiales shares were down nearly 4 per cent in early TSX trading and Ecopetrol was down nearly 1 per cent.
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Oilfield services and transportation company Mullen Group Ltd. reported a second-quarter EPS of 23 cents, missing consensus estimates of 25 cents. Revenues rose slightly to $175.9-million from 173.6-million in 2013 as a result of increased oil drilling, but operating income fell 7.1 per cent to $52-million from $56-million. The company has struggled this quarter due to decreasing income from heavy haul freight train and construction services, in addition to losses in the sale of property, plant and equipment. Shares have gained 7 per cent year-to-date.
TD Securities analyst Scott Treadwell reiterated a "hold" rating and $32 (Canadian) price target after reviewing the earnings. "Mullen's Q2 results came in below our expectations, driven by revenue headwinds (weather and competitive pricing) as well as cost pressures (operating supplies, fuel and contractors' costs). However, we view Mullen's franchise as well positioned to benefit from incremental WCSB (Western Canadian Sedimentary Basin) activity and, in time, extract incremental pricing, resulting in cash flow growth," Mr. Treadwell commented.
Elsewhere, National Bank Financial downgraded the stock to "sector perform" from "outperform" and cut its price target to $30 (Canadian) from $31.
Shares are down 4.5 per cent in late TSX trading.
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The first good piece of news for the company in a while, Armtec Infrastructure Inc. has secured a $70-million deal to install barriers and fencing for a rail infrastructure project in central Ontario. The company has battled heavy debt for the past three years, having replaced its CEO and restructured the company into two distinct divisions in the process. The new project is set to start in 2014 and expected to bring in revenue through to 2015.
Raymond James analyst Frederic Bastien maintained a "market perform" rating in the wake of the announcement, commenting, "Although this development is clearly a positive for the firm, it is not enough to change our neutral stance on the stock. Continuing to weigh on our concerns is the company's weak start to 2014 and elevated debt levels - which have compelled management to turn to Brookfield for help (again)."
"Armtec's net debt stood at $320-million as of the end of March, and we believe it is now even higher. As the company is currentlyin the thick of its busy season, when working capital requirements are highest, we expect thatdebt levels will remain a concern throughout 3Q14 (at least)," he added.
Armtec shares have lost over 95 per cent since early 2011 and 49 per cent year-to-date. They are up 7 per cent in late afternoon trading at 70 cents, after spiking to 82 cents earlier today.
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Northern Graphite Corp. said it is unaware of any undisclosed material change or corporate development that would account for the recent spike in its share price. The stock is up 17 per cent today and over the last five days, has gained nearly 38 per cent.
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Euro Pacific Canada analysts have added Espial Group Inc. to their list of top stock picks for 2014. "We feel the 243 per cent year-to-date gains while impressive, leave aggressive upside ahead with our fundamentally based bullish thesis bolstered by the significant milestones achieved over the past six to eight months," said Euro Pacific analyst Rob Goff. He raised his price target by 50 cents to $4.60 (Canadian). The closed closed trading on the TSX Wednesday at $3.01.
Espial, a developer of software solutions that enable the delivery of Internet protocol television, released better-than-expected quarterly results this week. Shares have risen 12 per cent in just the last five days.
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Industrial Alliance Securities initiated coverage on Aecon Group Inc. with a "buy" rating and $22 (Canadian) price target. "ARE should play a pivotal role in large infrastructure opportunities across Canada. Management is committed to expanding its margins and strengthening its balance sheet, which should support the stock's appreciation potential. Considering its strong market position, improved operating execution, higher-margin embedded in the backlog, and an expected sale of the Quito Airport concession, the current valuation of 5.3x EV/EBITDA presents an attractive entry point following the stock's about 10 per cent decline decline since reporting 1Q14," commented analyst Ben Jekic.
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BMO Nesbitt Burns analyst Stephen MacLeod raised his price target on Altus Group Ltd. to $27 (Canadian) from $24 and maintained an "outperform" rating. The action follows Altus Group's plans announced Wednesday to acquire RealNet Canada Inc. He said the acquisition has strengthened the company's position as a provider of information to the commercial and residential real estate industries.
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Romarco Minerals Inc. said the U.S. Army Corps of Engineers has informed the company it will release its Final Environmental Impact Statement for the Haile Gold Mine project either today or Friday. This will be major milestone in the Haile Gold Mine permitting process, it noted.
Desjardins Securities analyst Michael Parkin commented, "Overall, we view this event as positive and believe it greatly helps to derisk the Haile gold mine project. Looking forward, the company will be working to secure a few more key permits: (1) the Record of Decision (ROD) on the 404 Wetlands permit, of which the final EIS is a required component; (2) the state-granted mine operating permit; and (3) the state-granted water permit. We expect these three key permits to come in around the end of 3Q14 or early 4Q14. By our estimates, Romarco could be in a position to start construction before year-end."
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Canfor Pulp Products Inc. late Wednesday reported adjusted profit for the second quarter of 26 cents per share, up from 22 cents a year earlier, but below Street expectations of 38 cents a share.
The company reported operating income of $29.6-million for the second quarter of 2014, a decrease of $6.8-million from operating income of $36.4-million for the first quarter of 2014, as the impact of pulp and paper maintenance outages and higher fibre costs more than offset higher pulp and paper shipments.
Dundee Securities reiterated a $14 (Canadian) price target and a "buy-high risk" rating post earnings.
Shares are down just over 1 per cent in early trading.
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Gale Force Petroleum Inc. said it has agreed to sell an 81 per cent working interest in its properties in Henderson and Anderson counties, Texas as well as its 90 per cent interest in a four-mile natural gas gathering system on the properties, for a total of $5.850-million (U.S.). The company will retain an average 12 per cent working interest plus a 3 per cent overriding royalty interest in its existing four producing wells on the Texas Reef Properties, and an average 9 per cent working interest plus a 5 per cent overriding royalty interest throughout its remaining 3,500 undeveloped net acres.
Gale Force said the the purchaser is an experienced, well-capitalized private E&P operator with operations in several states in the southern United States - but it did not disclose the company's name.
"The company will benefit from the new operator's experience drilling and operating in the area, while participating in the upside with its retained interests," said Gale Force CEO Michael McLellan. "Also, this property divestiture will allow Gale Force to make significant debt repayments and free up capital to make investments in other core properties."
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RDM Corp., a provider of software for electronic payment processing, reported its third-quarter results today, with revenues falling to $5.6-million from $6.l1-million a year earlier. Net income was $535,000, reversing from a loss of $1.5-million a year earlier. Investors aren't thrilled, with shares falling 2.2 per cent at the start of trading.
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Banro Corp. said the metallurgy and grade of ore at its mines in the Democratic Republic Congo are as expected but it is finding the operation challenging because of the "excess volume of fine material in the part of the ore body currently being mined."
Banro will need to adjust its processes due to the large volume of fine material, and that "will cause some delay in reaching peak production," the company said in a statement. It has also hired a metallurgical engineering firm, Kappes Cassiday and Associates, to assess the plant and assist in the evaluation and development of options.
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theScore Inc. said its revenue for the three months ended May 31, 2014 was $2.0-million compared to $1.4-million for the same period the previous year, an increase of 44 per cent. Its EBITDA loss for the three months ended fell to $2.1-million from $2.4-million a year earlier.
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GuestLogix Inc., a global provider of onboard retail and payment technology solutions to airlines, rail operators and the passenger travel industry, announced it has been issued a second U.S. patent that further protects the company's onboard retail and payment technology.
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Comtek Advanced Structures Ltd., a subsidiary of Aircraft construction company Avcorp Industries Inc, has announced that it has attained AS9110, Revision B certification, which adheres the airplane-repair facility's quality management system to global industry standards. Avcorp shares are up 5.2 per cent so far in July.
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Emerita Resources Corp. has received official notice from the Andalusian Government that Emerita and one other company have qualified for the final phase of the public tender process for the Aznalcollar Project located in the Iberian Pyrite Belt in Andalusia, Spain. The Aznalcollar Project hosts the past producing Los Frailes zinc deposit.
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Champion Iron Ltd. said it will participate in the Quebec Government's feasibility study for a new rail link between the Port of Sept-Iles and the Labrador Trough. The rail link is intended to reach ports to service global demand for the region's iron ore and will serve to facilitate and enhance Quebec-based miners' ability to service world markets.
This week, the Secretariat au Plan Nord announced a request for interest to Champion and other mining companies in the region interested in contributing to a feasibility study regarding the new rail link.
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Calian Technologies Ltd. announced that its current health service support contract with the Department of National Defence has been extended by 18 months, with an option to extend further by another six months. The extension will be funded by a combination of existing unused contract funds and by increasing the contract ceiling by $117-million.
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Seafield Resources Ltd. has missed its interest payment of $402,317 under its debt agreement with Australia-based RMB Resources Inc. The company says it will continue to discuss options with RMB for further refinancing and debt restructuring. Shares are down 50 per cent today to a mere penny.
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Hemisphere Energy Corporation has announced that it is in the process of completing five wells in its recently-closed acquisition of petroleum and natural gas leases in southeastern Alberta. Production results are to follow shortly. Shares are up 40 per cent so far this year.
Sonali Verma
Darcy Keith