Delphi Energy Corp. (DEE.TO)

This had not been a good Call by him. The price of gas is actually held up well. This company, like all the other companies, has just been thrown out. Thinks the market is overreacting to energy stocks, but with the gas stocks, the underlying cash flows haven’t changed that much because gas is still above $4. Because the stocks are down and this is tax loss season, there are going to be more people selling the stocks, up to Jan 1st. At the same time, our coldest temperatures of the year will come in Jan, Feb and March. These 2 things will put you in a better position. He expects that you will get a better price in January then you will get right now.

The stock took off at the beginning of 2013, but then broke its uptrend and support this year. It is possible it could bounce off where it is right now, but it is a little early to make a bold prediction that this is the bottom.

A Montney gas producer, about 70% weighted. About 12,000 BOE's a day. They have been innovators, especially among the junior group, with slick water fracs, which has really improved productivity, deliverability and recoveries. The main issue with this is their leverage. There is always an expectation that their cash flow will grow to make the balance sheet look better, and it just seems to be one quarter away every single time. They should have raised money when markets were rocking and rolling. Fundamentally a great asset base, but the fundamentals are working against it.

Bright future. It is on his radar. There is more success to come. A winter of good operating results will turn everybody’s heads. They have always been good hedgers. He is looking to see more results.

(Market Call Minute.) Small but has done a good job of growing their production.

Oil/gas. They are using technology to dramatically improve production. They typically use water fracing, but are now using slick water fracing, which claims 5X more water and 2X more sand into the same size hole. That creates larger cracks giving 3X the amount of production. Payback is less than a year. Trades at a premium of 41% this year and 27% next year. However, looking at what analysts are forecasting for their growth, it is 77% growth in cash flow this year, 4X faster than a typical oil/gas company and 2X faster in 2015.

(Market Call Minute) Small cap name and he doesn’t see returns to the small cap names.

These people are real, real implementers. They have a lot of room to go. The Canadian energy business got a little ahead of itself. The softness we have seen in the last month has allowed him to re-enter some of his favourite names. Visibility with regards to production growth is extraordinary. They have a lot of approved undeveloped locations.

Not the top 1, 2 or 3 in natural gas names, but if you own he thinks you will do fine. They put out an operations update with one really good well. Also, had another that was crappy in terms of liquids yield. He is focusing more on the crummy well because of the variability in geology. Have been deleveraging given the ramp in their cash flows. Part of that was contingent on high natural gas prices, and as gas has sold off, he thinks this thesis is somewhat challenged. Have an offer for their Wapiti asset which would serve to deleverage the balance sheet. There are names he likes better, but sentiment has overshot to the negative.

Still likes it tremendously. You won’t see 100% return like in the past, but you have room for it to go higher over the next 12 months. The big spike was an increase in market multiple and the multiple expansion in all Natural Gas Stocks. They may sell a non-core asset and raise cash to buy a new higher speed drill rig.

Delphi (DEE-T) or Tourmaline (TOU-T)? Have done a very good job on their Big Stone assets. They are into some bigger, more prolific wells. He can’t compare the 2 because Tourmaline is the benchmark in the industry. He would prefer Tourmaline because it has more exposure to the play that he really likes, the Montney in Northeast BC and North-Western Alberta.

We get a period of second seasonal strength. There is support at $3.62. A lot of the indicators indicate it is quite oversold. You could buy it, but use a stop $3.62-$3.72.

This has been a home run. They have been having tremendous success with the drill bit. Increasing production much faster than the street has anticipated. Even though it has gone up a lot, it is still not crazy expensive.

This is a better stock than Badger Daylighting (BAD-T). The top analyst on the stock is outstanding, and he still loves this name. This is not just a short-term story. There is a 3-5 year story on this one. Could be a $20 stock in 5 years time.

Uses technology in the oil/gas patch. They use slick water fracing to end up injecting 5X the amount of water and 2X more sand than conventional, into the same size horizontal well. They do this under tremendous pressure, and because of this additional material, it cracks the well much further and wider, so production ends up being 3 times that of conventional fracing, and the wells pay off their cost of drilling in less than a year. Analysts have increased their earnings estimates by 23% in the past 60 days. Forecast cash flows are supposed to be 4.9X and 1.9X greater than that of the typical oil and gas company for 2014-2015.