Painted Pony Energy (PONY.TO)

They have the 4^th largest Nat gas reserves of publicly traded companies. It is a junior company with a senior asset. They can increase production from 16k to 40k units. Natural gas might have a run this winter.

Chart shows a long downward run from June, leveling off in December. It is now going up, but you are going to have to have tight Stops on it in order to control your risks.

Up until the end of 2016, they sell a lot of their natural gas through an area called Station 2. This is a hub where there has been a huge increase in gas production, so there are times when Station 2 was below $1. That has recovered somewhat, but is still weak. Fortunately they have 43% hedged next year at $3. Has a deal with Altagas (ALA-T), where Altagas now owns 75%. They are helping to fund the plant that will increase take away capacity. In his mind this could be a $4-$5 stock next year. Not a long-term trade in his mind.

(Top Pick Dec 11/14, Down 66.91%) The 7^th largest natural gas reserves. They just aren’t making the list. They will increase production several fold next year. It is just a matter of time for the production to ramp up.

Gas producer. Gas has been under pressure since ’09. They will continue to be under pressure. Canada may miss its opportunity in LNG. It will be a great market in 3 years.

Natural gas has to go to the West Coast. Prefers Tourmaline (TOU-T) because of cost, efficiency, etc. This is a great company; it’s just that there are other companies that look slightly better.

A very well-managed company, but 90% natural gas. Their balance sheet is not too bad. Thinks they will be a survivor. He would be tempted to buy some at these levels, because it is a higher risk/reward, but wouldn’t put all his eggs in this basket.

Has a great sensitivity to natural gas. The operating cost structure is in good shape. There have been some excellent processing plants that have been joint ventured with Altagas (ALA-T) that allow them to get this gas on stream. There will be a big change on his valuation and perception, it we go ahead on an LNG project on the West Coast. He likes the company. Has been hit by heavy, relentless foreign selling, but has heard that the Shorts are finished and some of them are covering.

Oil and gas is a great sector to invest in as a contrarian, if you can find the right ponies to play. Thinks this has lost money 3 years in a row. Their share count has just about doubled in the past number of years. They have a number of problems they have to deal with in terms of oil/gas prices. Thinks it has a lot of upside, but at this point in time it is premature to invest.

There is a lot of short covering. Prices of the products they are producing are going higher too. We are at the 200 day and this is critical. Until we can exceed this, we don’t know which way it will go. A longer term trend line is still in effect. If you think the US dollar is going to rise, then you want to stay away from this one because all their inputs are in US dollars. It is not in the period of seasonal strength. He would not pursue it here.

He partially sold when it rallied some months ago. They are delivering on their promise. The question is what is going to happen with the LNG in BC. One of those projects is bound to go and they are positioned to deliver Nat gas to those projects. He very much likes the stock at today’s prices.

He likes the company. The stock is more expensive relative to others. Between now and 2016 you are left to the sentiment about Nat Gas and LNG. He sees significant headwinds. He does not know if first nations will buy into their project so it can go ahead. He would start picking away on a 10% pull back. Hold if you have it.

(A Top Pick July 16/14. Down 35.05%.) Altagas (ALA-T) made an investment in the Company, which gave them access to a gas plant that will be built in 2016. This will take their production from 16,000 BOE to 40,000 BOE in the next 18 months to 2 years. That is a huge lift. With Altagas, they don’t need the LNG play to move their gas to market. They make about a 15% return at $2.40 of MCF.

Overall a decent company. Have some good properties, particularly in northeast British Columbia. At some point it is potentially a takeover target, but at this point it is truly a Hold. He doesn’t see any obvious catalysts for this name in the short run.

This will eventually be taken over when someone actually builds an LNG project, which might be 7 years from now. If you have a five-year horizon, you will probably make money, but in the meantime, you are just going to go sideways until there is a movement in energy. Be prepared to hold it for 6-8 months and you might get a nice rally. Not a bad entry point.