M&A activity is heating up in Canada’s oil patch with three separate acquisitions announced on Monday alone. Daylight Resources Trust (DAYYF.PK) agreed to buy Highpine Oil & Gas Ltd. (HPNOF.PK), Crescent Point Energy Corp. (CPGCF.PK) said it is taking over private Saskatchewan producer Wave Energy Ltd., and Crescent Point also announced the acquisition of a suite of Saskatchewan assets, likely from Provident Energy Trust.

These deals follow the recently announced spinout of Canadian business units by Petrobank Energy and Resources Ltd. (PBEGF.PK) into a newly formed Bakken producer to be named PetroBakken in conjunction with the acquisition of Tristar Oil & Gas Ltd. (TOGSF.PK), Baytex Energy Trust’s (BTE) purchase of True Energy Trust’s southwest Saskatchewan assets, Insignia Energy Ltd.’s acquisition of Grey Wolf Exploration Inc. (GW), a series of Saskatchewan oil assets by Glamis Resources Ltd., and NuVista Energy Ltd.’s (NUVSF.PK) purchase of Advantage Oil and Gas Ltd.’s assets.

This is part 3 of the Fortune 40 Best Stocks to Retire on (Part 1, Part 2).

We previously looked at the first 20 companies that made up the list in Fortune’s 40 best stocks to retire on. Here we look at the next 10.

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is D.E. Shaw & Co. D.E. was founded in 1988 by David E. Shaw and manages around $33 billion as of December 1st 2008. D.E. Shaw focuses on intertwining technology and finance and is a hedge fund, private equity firm, and technology development shop all in one. It employs mainly quantitative strategies and does a lot of statistical arbitrage.

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Jim Simons' Renaissance Technologies, ranked 4th in Alpha's 2008 hedge fund rankings. Rentec, as they are commonly known, was started by Simons in 1982 and has around $25 billion in assets total. They employ mathematical and statistical methods to execute their investments and trades. Their flagship $7 billion Medallion fund has averaged annual returns around 35%.

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

This week, turning the focus to global macro funds, we'll be checking in on Bruce Kovner's Caxton Associates. Do note that global macro funds are typically not equity focused funds. While they do indeed have equity exposure, the majority of their holdings are in other markets. So, we mainly check in on their sector exposure to see what types of global macro themes they may be investing in.

This is the Third Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F filings here.

The other funds we've already covered include:

Last night, Grey Wolf (GW) announced that the number of its shareholders electing to be paid in cash (rather than Precision Drilling Trust shares) has “substantially exceeded” the amount of cash available for cash elections. Razor’s Edge readers will recall our August 25th, 2008 article (Grey Wolf Shareholders Should Hold Out for Better Offer!) which laid out the case for shareholders to reject the PDS offer based upon valuations. Naturally, the decline in oil and oil infrastructure stocks had already begun in earnest, so it is not unreasonable that management would try to push the deal through despite the fact that there was a better offer earlier from Basic Energy Services (BAS). Interestingly, despite a wild ride up and down over the last several months, the price of GW shares on the merger announcement date of August 25th was $6.61 per share and as of Friday, (before Monday’s collapse of the stock) the price per share was $6.36. With cash payment off the table for a large portion of institutional holders, the alternative of being given Precision Trust shares, which have fallen 60% since the merger announcement was not received well. Shares plunged Monday on the news as these institutions realized that they were getting a lump of coal instead of cash this year. Grey Wolf’s shares fell $3.22, or 50 percent to $3.14 on the American Stock Exchange.

This is a sad development for Grey Wolf as it breathes its last breath as an independent company in the coming days. It had a great opportunity on a shareholder value basis to make it through this painful downturn or to seek a better offer. At this point, however, it appears that it is all over.

This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.

The other funds we've already covered include:

Is there anyone out there who could explain how under normal efficient market conditions a very profitable company could trade at 60% of its tangible book value? And by profitable, I mean very, very profitable. For the first 9 months of 2008, Precision Drilling Trust (PDS) reported net GAAP income of $1.67/trust unit, with last quarter's earnings beating average analyst expectations by more than 8%. Expectations for Q4 are another 64 cents/unit. With PDS trading at $6.33/unit, the price at which I bought them shortly before Thursday's market close, that works out to an estimated 2008 PE of under 2.75!

Amazing, you would think, but that's far from the whole story, of course. And as is most often the case with equities trading at deep discounts to their peers, there are many important facts hiding behind the surface. Why these facts didn't dissuade me from buying PDS is yet another question, which I will attempt to answer here shortly.

This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here. We've already covered:

• Timothy Barakett's Atticus Capital
• Whitney Tilson's T2 Partners
• Peter Thiel's Clarium Capital
• Bill Ackman's Pershing Square
• Bret Barakett's Tremblant Capital
• John Paulson's Paulson & Co
• David Einhorn's Greenlight Capital
• Dan Loeb's Third Point
• Paul Tudor Jones' Tudor Investment Corp.
• Louis Bacon's Moore Capital Management

Next up is Bruce Kovner's Caxton Associates. The $10 billion firm is one of many global macro oriented funds which we cover. This is a switch from some of the more value oriented funds we've been covering, like the 'Tiger Cub' funds including Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, John Griffin's Blue Ridge Capital, and Andreas Halvorsen's Viking Global.

It's 13F filing time again. Institutional money managers who oversee more than $100 million must report their holdings to the SEC each quarter in their 13F report. These reports can be used to analyze the position movements of the best fund managers in the industry. Sometimes they can even be used to figure out the manager’s current strategy, but keep in mind the funds that I am going to review are most likely hedged in some way. Also keep in mind that not every position held is shown in these filings and many of these funds have high turnover; so don’t simply assume you can buy one of their positions and sit tight. 

I decided to look at several firms which I feel are some of the best in the industry, but feel free to comment if you know of any other firms that I should list next quarter.  

Q3 2008 Earnings Call

October 30, 2008 9 a.m. ET

• Fed cuts to 1%. In a unanimous decision, the Fed dropped its key fed funds target to 1% from 1.5%, while the discount rate fell to 1.25% from 1.75%. "The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures," it said. The Fed hinted it may not be done with rate cuts: "... downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability." New in its statement were its reference to "slowing economic activity in many foreign economies" that "is damping the prospects for U.S. exports," and its more dovish stance on inflation, which it now "expects" to moderate.
• Fed moves free cash. Credit markets continued to thaw Thursday after the Fed lowered its target lending rate to 1% and agreed to pump $120B into Brazil, Mexico, Singapore and South Korea through swap agreements. Three-month Libor is expected to drop 20 BPs to 3.22%. Libor has declined for 13 days in a row. "The swap lines are not unlimited but at least they will take a lot of tension out of the credit markets," economist Mark Tan said. "The inclusion of Singapore is an extension to the region because it's the center for Asia's dollar markets." Taiwan, Hong Kong and China all lowered their key lending rates.
• ECB bank loans top $1T. The ECB says it has now loaned an unprecedented $1T (€774B) to banks, not including dollar loans. Still, while credit markets are looser than they were two weeks ago, they're by no means back to normal. "Short-term money markets are responding to the liquidity flood from the ECB and the prospect of lower interest rates, but we are not out of the woods on longer-term lending," ING's Padhraic Garvey said.
• FDIC to help troubled homeowners. The government is preparing to unveil a plan that will guarantee $500B in loans to troubled borrowers, sources say. The program would use $50B from the $700B TARP pot to lower loan interest rates for five years. FDIC will run the program, which could affect 3 million distressed loans. "It will take a massive and quick infusion of funds for refinancings and other foreclosure prevention to turn the tide," researcher David Abromowitz said.
• Poor DB earnings beat expectations. Deutsche Bank (DB) reports Q3 net income fell 73% to €435M from €1.62B the previous year. The results were better than the expected net loss of €251M thanks to new EU accounting rules and a tax benefit. Q3 results included €1.2B in writedowns related to the credit crisis, bringing the bank's total writedowns to €8.5B since the crisis began. Revenue fell 14% to €4.37B from €5.10B. CEO Josef Ackermann cautioned on dividend expectations for 2008, saying the dividend policy will be balance with 'our commitment to conserving capital strength in a highly uncertain environment.'
• High crude helps Shell. Royal Dutch Shell (RDS.A) reports Q3 profit climbed 22% as record high oil prices offset production cuts in Nigeria and the Gulf of Mexico. Net income rose to $8.45B from $6.92B the previous year. Profit was $8.04B with $800M of gains in fair-value adjustments, vs. expectations of $7.22B. With oil prices now down from July's highs and lost production in Nigeria and Russia, Shell plans to mine Canadian oil sands and develop a gas-to-liquids venture in Qatar. Shares -1.6% premarket.
• Investors eye premium on RTP deal. Rio Tinto (RTP) is facing pressure from some institutional investors to start talks with BHP Billiton (BHP) on its $87B hostile takeover bid. Investors have seen Rio's share price battered in recent weeks and are interested in BHP's premium of 3.4 of its shares for each Rio share vs. the current ratio of roughly 2.7 to 1. An inside source said a few small funds are in favor of the deal but Rio is not facing a wave of investor pressure to begin negotiations. Rio CEO Tom Albanese said recent movements in stock or commodity prices have not changed the company's views that BHP's offer undervalues the company's operations and growth projects. Premarket: RTP +6.9%.
• Tysabri suffers another setback. Shares of Irish drugmaker Elan (ELN) plunged as much as 49% in Dublin after a patient taking its multiple sclerosis treatment Tysabri contracted a life-threatening brain illness, the third case since July. Elan's ADRs are -18.4% in U.S. premarket trading. Elan markets the drug together with U.S. firm Biogen Idec (BIIB).
• More work, less oil. As more governments shut out Western oil companies, the pickings get slimmer. Chevron's (CVX) $3B investment in the Frade prospect off Brazil is expected to yield just 270M barrels over the next 18 years, despite CEO Ali Moshiri's best efforts to secure equipment and fast-track the project. He now concedes Frade is mediocre compared with some of the company's previous efforts.
• Bleak outlook for pension plans. Corporate pension plans may be in serious trouble. At the end of last year S&P 500 companies had a combined pension plan surplus of about $60B; through September of this year that figure likely turned into a combined deficit of $75B, which may by now be -$300B or more.
• Japan announces $50B stimulus package. Japan said it will pump ¥5T ($51B) into its economy, including funds for households and local governments. "We're facing a storm that comes once in every 100 years," Prime Minister Taro Aso said. "While Japan's financial system remains relatively sound there will surely be an impact on the real economy." The Bank of Japan is expected to cut interest rates tomorrow after a Nikkei newspaper report raised expectations of a rate cut, causing the yen to slump and stocks to rise. If BoJ holds its rate steady, the yen could appreciate again as the stock market resume its fall.
• Factory orders stronger than expected. Durable goods orders increased by 0.8% ($1.6B) in September to $208B, beating the consensus of -1.1%. Inventories increased by $1.2B to $340B. Shipments were up 0.2% following August's 4.2% drop. Excluding transportation, new durable goods orders fell 1.1%. It's still better than the -1.5% consensus, but clearly transport orders were a large part of the upside surprise.
• EIA's petroleum inventories. Crude +0.49M vs. consensus of +1.55M. Gasoline -1.5M vs. +1.5M. Distillate +2.3M vs. +1.05M. Crude futures are up 0.3% to $67.70.

Earnings: Thursday Before Open

• Apache (APA): Q3 EPS of $3.52 misses by $0.20. Revenue of $3.36B vs. $3.63B. Shares +1.1%. (PR)
• AstraZeneca (AZN): Q3 EPS of $1.32 beats by $0.18. Revenue of $7.8B vs. $7.6B. Shares +5.2%. (PR)
• Avon (AVP): Q3 EPS of $0.52 beats by $0.02. Revenue of $2.64B in-line. Avon believes it will continue to generate strong operating cash flow. Shares -0.6%. (PR)
• BJ Services (BJS): FQ4 EPS of $0.59 beats by $0.03. Revenue of $1.53B (+15%) vs. $1.47B. Sees FQ1 EPS of $0.48-0.51 vs. $0.56. "We expect drilling activity in North America to begin to decline during our first fiscal quarter and anticipate moderate reductions in certain international markets." (PR)
• Brink's (BCO): Q3 EPS of $1.00 beats by $0.11. Revenue of $949M (+16.1%) vs. $921M. Shares +4.5%. (PR)
• CBS (CBS): Q3 EPS of $0.43 beats by $0.03. Revenue of $3.38B (+2.9%) in-line. For the first time in 20 years, CBS TV was #1 in all key categories through the first five weeks of the season. (PR)
• Colgate-Palmolive (CL): Q3 EPS of $0.99 beats by $0.01. Revenue of $3.99B (+13%) in-line. (PR)
• Commercial Metals Company (CMC): FQ4 EPS of $0.55 misses by $0.39. Revenue of $3.1B vs. $3.19B. Shares -2.9%. (PR)
• CVS Caremark (CVS): Q3 EPS of $0.60 in-line. Revenue of $20.86B (+1.8%) vs. $21.06B. (PR)
• Deutsche Bank (DB): Q3 EPS of €0.39 vs. €1.57 consensus. Revenue of €4.37B in-line. Shares +14.5% in Frankfurt. (AP)
• Dominion Resources (D): Q3 EPS of $0.94 beats by $0.04. Revenue of $4.23B (+17.9%) vs. $3.55B. (PR)
• Eastman Kodak (EK): Q3 EPS of $0.33 beats by $0.05. Revenue of $2.4B (-5.1%) vs. $2.53B. (PR)
• Energizer (ENR): Q3 EPS of $1.67 beats by $0.49. Revenue of $1.12B (+28.3%) vs. $1.05B. "Lower advertising and promotion spending, which we previously disclosed, was augmented by strong hurricane battery volumes." Shares +8.7%. (PR)
• ExxonMobil (XOM): Q3 EPS of $2.59 beats by $0.20. Revenue of $137.7B vs. $131.4B. Shares +1.15%. (MW)
• International Paper (IP): Q3 EPS of $0.84 beats by $0.07. Revenue of $6.81B (+22.9%) vs. $7.01B. While Q3 results were solid, International Paper (IP) CEO John Faraci says, higher prices did not offset higher input costs which negatively impacted earnings. "Costs for wood and some key chemicals are still rising. Currently, in aggregate input and transportation costs remain high." Shares +8.9%. (PR)
• Jarden (JAH): Q3 EPS of $0.98 beats by $0.02. Revenue of $1.46B (+10.1%) in-line. (PR)
• Marathon Oil (MRO): Q3 EPS of $2.76 beats by $0.43. Revenue of $22.48B vs. $23.4B. Shares +5.7%. (PR)
• Motorola (MOT): Q3 EPS of $0.05 beats by $0.03. Revenue of $7.48B (-15.1%) vs. $7.82B. Sees Q4 EPS of $0.02-0.04 vs. $0.07. "While our strategic intent to separate the company remains intact, we are no longer targeting the third quarter of 2009, primarily due to the macro-economic environment, stresses in the financial markets and the changes underway in Mobile Devices," co-CEO Sanjay Jha says. (PR)
• Mylan (MYL): Q3 EPS of $0.23 beats by $0.12. Revenue of $1.66B vs. $1.15B. Shares +2.4%. (PR)
• Newell Rubbermaid (NWL): Q3 EPS of $0.36 beats by $0.02. Revenue of $1.76B in-line. Sees Q4 EPS of $0.29-0.34 vs. $0.38. Shares -1.8%. (PR)
• Penske Auto (PAG): Q3 EPS of $0.30 misses by $0.01. Revenue of $3B (-11.4%) vs. $3.12B. "We experienced a rapid decline in consumer interest for new vehicles in both the U.S. and the UK. We believe the challenges in our markets relate mainly to consumer confidence, not credit availability." (PR)
• Shaw Group (SGR): FQ4 EPS of $0.40 misses by $0.05. Revenue of $1.83B vs. $1.94B. (PR)
• Shell (RDS.A): Q3 EPS of $2.62 misses by $0.05. Revenue of $131.57B vs. $123.81B. Shares -1.3%. (PR)
• Taiwan Semi (TSM): Q3 EPS of $0.19 in-line. Revenue of $2.98B (-88.9%) in-line. Sees Q4 revenue of NT$69-71B vs. NT$84.64B. Shares +6.9% in Taiwan. (PR)
• Unilever (UL): Q3 earnings of $0.51 beats by $0.02. Revenue of $13.40B vs. $14.36B. Sees full-year sales growth "well in excess" of its target. Shares +3.4% in London. (PR)
• Waste Management (WMI): Q3 EPS of $0.63 beats by $0.01. Revenue of $3.52B (+3.6%) in-line. "The recycling commodity markets have become very volatile over the last two weeks... We do not expect a year-over-year benefit in the fourth quarter." (PR)
• Wyndham (WYN): Q3 EPS of $0.83 beats by $0.03. Revenue of $1.23B (+0.8%) in-line. 2009 is uncertain "given the disruptions in the global economy and capital markets, and uncertainty about how these will impact employment, consumer spending and other macroeconomic drivers." Shares +0.9%. (PR)

Earnings: Wednesday After Close

• Advance Auto Parts (AAP): Q3 EPS of $0.59 beats by $0.02. Revenue of $1.19B (+2.6%) in-line. Shares -1.2%. (PR)
• Allied Waste (AW): Q3 EPS of $0.28 beats by $0.02. Revenue of $1.61B (+3.2%) in-line. Shares +0.2%. (PR)
• Ameriprise Financial (AMP): Q3 EPS of $0.14 misses by $0.68. Revenue of $2.03B (-6.4%) vs. $1.95B. Shares flat. (PR)
• Amkor Technology (AMKR): Q3 EPS of $0.44 beats by $0.12. Revenue of $720M (+4.4%) vs. $725M. Shares -2.8%. (PR)
• Atmel (ATML): Q3 EPS of $0.09 beats by $0.08. Revenue of $400M (-5%) in-line. Shares +2%. (PR)
• CA Inc. (CA): FQ2 EPS of $0.41 beats by $0.04. Revenue of $1.11B (+3.7%) in-line. Approves $250M share repurchase. Shares +1.8%. (PR)
• Cliffs Natural Resources (CLF): Q3 EPS of $1.61 misses by $0.66. Revenue of $1.19B (+92%) vs. $1.23B. Shares -0.5%. (PR)
• CME Group (CME): Q3 EPS of $4.13 beats by $0.15. Revenue of $681M (+20.5%) vs. $644M. Shares -3.2%. (PR)
• Curtiss-Wright (CW): Q3 EPS of $0.60 in-line. Revenue of $436M (+9.9%) vs. $441M. (PR)
• Grey Wolf (GW): Q3 EPS of $0.12 misses by $0.05. Revenue of $234M (+2.4%) in-line. (PR)
• Hartford Financial (HIG): Q3 EPS of -$8.74 vs. -$1.54 consensus. Says volatile credit and equity markets and the largest catastrophe in the past three years significantly affected results. Shares -1.8%. (PR)
• JDS Uniphase (JDSU): FQ1 EPS of $0.11 beats by $0.02. Revenue of $380M in-line. Shares -1.7%. (PR)
• MetLife (MET): Q3 EPS of $0.88 misses by $0.01. Revenue of $13.38B (+14.6%) vs. $13.26B. Shares +1.3%. (PR)
• Murphy Oil (MUR): Q3 EPS of $3.04 beats by $0.39. Revenue of $8.19B (+71.3%) vs. $6.93B. Sees Q4 EPS of $1.00-1.40 vs. $1.99. Shares -1.1%. (PR)
• Oil States International (OIS): Q3 EPS of $1.66 beats by $0.41. Revenue of $815M (+54.5%) vs. $677M. Sees Q4 EPS of $1.45-1.55 vs. $1.32. Shares +11.5%. (PR)
• O'Reilly Automotive (ORLY): Q3 EPS of $0.40 in-line. Revenue of $1.11B (+67.9%) in-line. (PR)
• Owens-Illinois (OI): Q3 EPS of $0.90 beats by $0.05. Revenue of $2.01B (+4.2%) in-line. Shares +0.5%. (PR)
• Prudential Financial (PRU): Q3 EPS of $0.74 misses by $0.20. Revenue of $6.15B (-9.2%) vs. $6.72B. "Unfavorable financial market conditions are having a substantial negative effect on reported results of our domestic businesses and market values in our investment portfolio." Shares flat. (PR)
• RealNetworks (RNWK): Q3 EPS of -$0.03 in-line. Revenue of $152M in-line. Shares +2.2%. (PR)
• Smith Micro Software (SMSI): Q3 EPS of $0.19 beats by $0.04. Revenue of $26.6M (+30.6%) vs. $26.1M. Shares +8.7%. (PR)
• Standard Pacific (SPF): Q3 EPS of -$0.07 beats by $0.40. Revenue of $400M (-37.8%) vs. $421M. (PR)
• Symantec (SYMC): FQ2 EPS of $0.37 beats by $0.02. Revenue of $1.52B (+7%) in-line. Sees Q3 EPS of $0.30-0.33 vs. $0.36 and revenue of $1.45-1.5B vs. $1.61B. Shares -5.6%. (PR)
• Tesoro (TSO): Q3 EPS of $1.63 beats by $0.15. Revenue of $8.7B (+47.4%) vs. $7.81B. Shares +4.5%. (PR)
• TheStreet.com (TSCM): Q3 EPS of -$0.04 misses by $0.10. Revenue of $16.7M (+3.8%) vs. $19.2M. Names Jim Cramer Chairman, allowing CEO Thomas Clarke to focus "on navigating the company through this difficult economic environment." Shares -0.3%. (PR)
• ValueClick (VCLK): Q3 EPS of $0.15 in-line. Revenue of $153M (-2.5%) in-line. Sees Q4 EPS of $0.15-0.16 vs. $0.19, and revenue of $140-150M vs. $168M. Shares +2.9%. (PR)
• Visa (V): FQ4 EPS of $0.58 beats by $0.02. Revenue of $1.71B (+16.7%) in-line. Sees full-year revenue growth at the lower end of the 11-15% range. Shares -0.4%. (PR)
• Whiting Petroleum (WLL): Q3 EPS of $2.49 beats by $0.16. Revenue of $425M (+106.9%) vs. $358M. (PR)

Today's Markets

• Asia markets had a stellar day. Nikkei +9.96% to 9,030. Hang Seng +12.82% to 14,330. Shanghai +2.55% to 1,764. India closed.
• Europe is notably higher at midday. London +1.8%. Paris +1.5%. Frankfurt, yesterday's laggard, +4.7%.
• U.S. futures indicate a strong open. Dow +3.5%. to 9,160. S&P +3.1% to 956. Nasdaq +3.2%. Crude +1.5% to $68.49. Gold +2.3% to $771.50.

Thursday's Economic Calendar

• 8:30 GDP Q3 Advance
  8:30 Jobless Claims
  10:35 EIA Natural Gas Report
  4:30 PM Money Supply
• Notable earnings before Thursday's open: ABC, ABX, AIZ, ALU, AVP, AZN, BJS, BLL, CAM, CBB, CBS, CI, CL, CLI, CMC, CMS, CVS, D, EK, ENDP, EXPE, FAF, GLBL, IAR, ICE, IGT, IP, IRM, JAH, LEA, LKQX, MOT, MPS, MRO, MYL, NRG, NWL, OCR, PAG, PDE, PNX, PTEN, RDS.A, SCG, SFI, SGR, SPIL, TE, UIS, VC, WMI, WYN, XOM
• Notable earnings after Thursday's close: ACS, AKAM, AMCC, ARNA, BARE, BMC, BVN, CEM, CHK, CPT, CTV, DRC, ERTS, ESRX, FBN, GFIG, JAVA, KLAC, MCRS, MEE, MFE, MNST, O, OII, ONNN, PSYS, PWAV, QSFT, RSG, SBAC, SGMS, SPN, SQNM, SWN, THOR, UNM, VSEA, WRI, WYNN, XL

Seeking Alpha editor Rachael Granby contributed to this post.

It’s no secret that we are staring down the barrel of a global economic recession.  As the world's financial markets go through the painful process of deleveraging, liquidity has become scarce causing difficulties in a broad array of industries.

Perhaps one of the industries most affected by this crisis is the energy sector.  After experiencing oil prices dropping from $150 down to the mid-60’s and natural gas tracing a similar pattern, energy producers are seeing margins crimped ad profitability drying up.  The situation is a far cry from last year when CEOs of major oil and gas producers were dragged before congress to testify about their “windfall profits.”  Even OPEC has become concerned, but an emergency production cut did nothing to slow the decline in oil prices.

While the merger of Precision Drilling Trust (PDS) and Grey Wolf Inc. (GW) is dilutive to Precision earnings, Peters & Co. analyst Todd Garman says the deal is still a good one for the Calgary-based energy services firm.

In a note to clients, Mr. Garman said:

If you're like me, you appreciate a smart acquisition by a publicly-traded company. I like the oil services sector a lot, and I especially like the ones that pay fat dividends to shareholders.

It's just been announced that Precision Drilling Trust (PDS) which provides contract drilling, and completion and production services to oil and natural gas exploration and production companies in Canada and the United States, will acquire Grey Wolf (GW) in a cash and stock deal worth more than $2 billion, apparently ending an extended fight for control of the Houston gas driller.

Sunday brought news that Precision Drilling Trust (PDS) would make another attempt to acquire Grey Wolf, Inc. (GW) for approximately $2 billion. There have been a flurry of rumors and bids for Grey Wolf since it put itself up for sale. Having already rejected three previous bids from Precision Drilling, why would GW shareholders accept this deal which offers only a 4.8% premium to the Aug. 22^nd closing price and is $1 per share lower than the last rejected offer? The terms of the latest offer are $5 per share in cash and .1883 PDS trust unit per share of GW common. PDS trades currently at $20.19. The total value of the offer before Monday’s drop in the value of PDS was $1.12 billion in cash and 42 million PDS trust units worth nearly $900 million. So, the offer equates to $9.02 per GW share before any dilution and the already more than 5% drop in PDS units.

The offer comes on the heels of Grey Wolf’s $1.4 billion offer for Basic Energy Services (BAS) that was rejected by GW shareholders. Interestingly, if PDS’s recent offer does in fact go through, BAS will stand to earn a breakup fee of $30 million.

Bespoke put up an interesting chart today .

It’s a study of total returns by country since March 2003, when the MSCI World Index bottomed out at 550.  That index doubled up to more than 1,100 last summer and has since fallen back about a third, so far making a neat retracement of the recent gains IF it can consolidate along this line. 

• Credit crunch: More to come. Debt markets indicate bankers still have grave concerns, and are avoiding all but the most liquid assets. Last week, the premium banks charge each other for lending short-term cash climbed to 0.77% more than the Fed's anticipated effective target rate over the coming three months; it's up from just 0.24% in January, and looks set to climb to 0.85% by mid-December - when banks have to refinance about $88B in debt. "The suspicion is that banks are still hiding losses. The banking system relies on trust and at the minute there quite simply isn't any," money manager Stuart Thomson says. In June, Fed chief Bernanke said narrowing the spread to 0.25% would be a sign markets had returned to normal.
• Sinopec hit hard on crude costs, government caps. China Petroleum & Chemical Corp [Sinopec] (SNP), Asia's biggest oil refiner, recorded an 87% drop in Q2 profit as government caps on fuel prices prevented Sinopec from passing on record high crude oil costs to consumers. Net income fell to $320M from last year's $2.45B. The company warned that profit in the first three quarters may fall by more than 50%. Analysts expect the second half of the year to be slightly kinder to the oil refiner, as crude oil costs level off, and the Chinese government may allow an increase in fuel prices.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
• Precision Drilling to buy Grey Wolf for $2B. Canadian oil and natural-gas driller Precision Drilling Trust (PDS) will buy U.S. drilling company Grey Wolf (GW) for about $2B in cash and stock. The deal comes several weeks after Grey Wolf shareholders voted against a merger with Basic Energy Services (BAS) and after Precision made a series of unsolicited bids for Grey Wolf. Precision's latest offer, which sources say both company boards have approved, values Grey Wolf at $9.02 per share, a 5% premium over Friday's closing price. The deal is expected to be announced on Monday before the markets open.
• Big Three auto makers ask Washington for more money. Ford (F), General Motors (GM), and Chrysler are set to receive $25B from Washington in government-backed loans. With high gas prices and weakened earnings, the Big Three are now asking for more. The companies themselves have not yet cited specific figures, but various reports put the new total between $40-50B. David Cole, president of the Center of Automotive Research, says, "This is not really a bailout. This is actually more like the government acting like a banker as it begins to look at the major consequences of a major failure in the auto industry." Ok, so what's a bailout?
• Bernanke suggests need for new regulatory approach. Fed Chairman Ben Bernanke suggests that financial supervision should be revamped to take into account how the system as a whole is functioning. "Supervisors often focus on institutions in isolation," Bernanke says, but an alternative, system-wide approach would take into account "consideration of potential systemic risks and weaknesses as well." The suggestion could bring benefits, but might be a difficult concept to execute on a practical level, and broader authority could endanger the Fed's political independence. Any regulatory overhaul is unlikely to take place before the next President is inaugurated in January.
• Lenders stand in line to underwrite IPOs. With the IPO market all but frozen, banks are jostling to underwrite the few that remain. "Ten years ago, the question was who was going to be at the top of the list," one IPO-watcher says. Today even small IPOs can attract as many as four managing underwriters.
• Sickly healthcare ETFs terminated. XShares will close 15 of its 19 healthcare sector ETFs, another sign ETF issuers may have expanded too rapidly. The 15 drew only $50M in assets, leading XShares to conclude the "didn't resonate" with investors. "We believe that dividing health care, which is a $2T sector of American GDP into subsectors still makes sense, and should be attractive investment opportunities for a wide range of investors. Obviously, the market thought otherwise." Morningstar now tracks 726 ETFs with about $593B in assets.
• KDB unlikely to make near-term bid for Lehman. Lehman Brothers' (LEH) share price jumped as much as 16% on Friday on news that Korea Development Bank [KDB] was interested in acquiring the struggling investment bank. A KDB spokesman on Friday had said the state-run bank is "open to all possibilities, which could include [buying] Lehman." However, KDB later back-pedaled and played down the likelihood of any immediate action on Lehman. News that KDB was only exploring its expansion options caused Lehman stock to lose its early gains, closing the day up 5%.
• Union rejects Boeing's wage offer. In ongoing strike-prevention talks with its largest workers' union, Boeing (BA) offered to raise pay 2.5% in the first year and 2% in each of the following two years, and to expand workers' benefits. Union leaders called the offer inadequate and said they were seeking a gain of 9-13% spread out over the term of the contract. The union workers will vote on September 3 whether to accept the new contract or to go on strike. A strike would shut down Boeing's aircraft production lines and could seriously delay the already-late 787 Dreamliner.
• Euro-zone factory orders fall in June. June Euro-zone factory orders fell at the fastest rate since December 2001 and for the second month in a row in the face of steep drops in demand for textiles and transportation equipment. New industrial orders fell 7.4% in June on the previous year, compared to economists' expectations of a 6.7% drop. In a separate announcement, the ECB said exports rose in June, indicating that the euro zone's primary economic weakness is coming from slowing domestic demand.

Earnings: Monday Before Open

• China Netcom (CN): H1 net income fell 5.2% to ¥6.38B ($932M) vs. ¥6.73B a year ago. Analysts expected ¥5.99B. Revenue was ¥41.13B, down 1% from ¥41.54B. [MW]
• China Life Insurance Company (LFC): H1 net profit fell 32% to ¥15.84B ($2.48 billion), beating consensus estimates of ¥10.42B. "In the first half, the deep downturn of the capital market put huge pressure on the company's investment," it said. [Reuters]
• China Unicom (CHU): Q2 net profit of ¥2.4B ($351M) beats ¥2.16B consensus. H1 net profit of ¥4.42B vs. ¥4.18B. H1 revenue rose 4.1% to ¥35.14B. [AP]
• LDK Solar (LDK): Sees 2009 revenue of $2.8-3B vs. consensus of $2.43B. [PR]

Today's Markets

• Asia markets closed higher Monday. Nikkei +1.68% to 12,879. Hang Seng +3.5% to 21,104. Shanghai +0.34% to 2,413. BSE Sensex +0.34% to 14,450.
• In Europe at midday, London is closed. Paris -0.4%. Frankfurt -0.2%.
• U.S. futures are lower. Dow -0.16%. S&P -0.27%. Nasdaq -0.21%. Crude +0.77% to $115.45. Gold -0.58% to $828.70.

Monday's Economic Calendar

• 8:30 The Chicago Fed National Activity Index
  10:00 Existing Home Sales
• Notable earnings before Monday's open: APWR, SNP

Seeking Alpha editor Eli Hoffmann contributed to this post.

Q2 2008 Earnings Call Transcript

August 1, 2008 10:00 am ET