John O'Connell, CFAKelt ExplorationKEL.TOTOP PICKJan 21, 2014

A strong performer in the group. His team is more focused on oil than natural gas. Nat gas is more of a show-me story.

Significant breakout. Highs of 2014 were around $14-15, which is another ~30% upside from current levels. Pushing higher over the last couple of days, though other energy names have felt pressure. Smart $$ is long natural gas; if it does perform, will be an additional tailwind for this gassier exploration name. No dividend.

In the Montney. Very large land base and very good production. Inexpensive. Starting to execute and deliver. Moving from being more exploration-led to development-centric -- so it's more like a manufacturing process than variable (which exploration can be). No dividend.

Great CEO. Doesn't do share buybacks. Two main assets, and timing a sale is very difficult for an investor. A bit small for him. Better names for a potential M&A play.

Has deep assets, which they won't sell for 9-12 months, as they add others. He can't own every midcap, though this is good.

KEL has strong drilling activity and currently no debt.
We have KEL in the growth model portfolio, and we like it for its diversification benefits, being in the oil and gas sector.
It is a strong name with a good balance sheet and healthy profit margins.
It trades at a 1.0X price to book, and a 7.5X forward P/E.
KEL does not pay a dividend.
KEL is a good name for strong consistency, low debt levels, and a strong balance sheet. 
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