Painted Pony Energy (PONY.TO)

We have these lows from 2011 to 2014 and the peaks, but it ends in a catastrophic drop and that says there is something going wrong in this company. Don’t bottom fish.

Very well-run with very modest financial leverage. They are Northeast BC Montney gas with access to pipelines. The well performance they have exhibited in the last couple of years has gotten better and better. He would put this on a short list of gas companies to own if you are going to be constructive on gas, which he is not.

They are highly dependent on Nat. gas prices. They just went ahead and financed so they can affect their growth and reduced their CapX until there is a turnaround in Nat. gas prices. They have good partners to fulfill the infrastructure they need.

It has been bouncing along its book value. It is here for the third time in the last year. It is cheap and may bounce. Up until this time there were earnings and market value but that has disappeared. The driver for this company is not there anymore. If this price level does not hold then get out.

(A Top Pick Feb 12/14. Up 17.36%) Have an excellent asset base in the Montney, right in the middle of everything. If a bigger enterprise wants to come in and get a big asset base, this company is probably a great selection. Their results are spectacular. Getting way better results on their drilling activity than they had even budgeted. Have a monster land base. Still likes the stock.

It shows lows at around $6 and he doesn’t think they are going to be violated. He wouldn’t add to this, but would continue to Hold.

Mostly natural gas. The upside will be coming from leverage to natural gas exports. This has been long rumoured to be a take over candidate for anybody who needs gas supply in Northeast BC, which is entirely possible. Well-managed. Has a really good asset base, but because of that it is trading at pretty high multiples. Whether you buy this or not depends on your outlook for Canadian natural gas.

(A Top Pick Dec 27/13. Up 45.81%.) Thought this was the best pure play. Very levered in the future to LNG, which at the time he thought was going to gain some steam, but he is not so sure about that, so exited the position. Prefers others now.

Probably a very aggressive play. A great balance sheet. They increased production. Great management. You really need to know that this is a very aggressive play and perhaps you should be more defensive in this area. As long as you are aware it is very aggressive.

Fastest growing rate of growth in the sector. They are 90% natural gas. Zero debt. There is a bit of a takeover premium because of the selloff.

One of many he has on his radar list of those he thinks would be attractive. Wants to see things settle out in the energy sector. From a natural gas standpoint, this is one of the names he would be looking at to add to. Have continued to increase production with fairly good production costs. With the real estate they own, there is a lot of area for them to drill and increase production. Any take out would probably happen on an LNG announcement.

(Market Call Minute.) Positioned in the Montne play and should do well.

They have amassed a significant resource in North-Eastern BC, which is right in the fairway where all the pipelines go. It can go north, south, west and east. They have enormous reserves. Getting those reserves out of the ground is going to require that an LNG facility is going to be built. They have signed an agreement with AltaGas (ALA-T) to do some processing. He doesn’t know if investors are going to have much patience waiting for an LNG facility to get built. This won’t happen until at least 2020. A much more sensible place to build an LNG facility is not in BC, but in Oregon which has a better port facility.

Entered into an arrangement with Alta Gas. Alta Gas is building a facility that will ramp up PPY-T’s production like mad, but they are going to charge a toll and he does not know what that is. This arrangement frees up $300 Million of Cap-X that PPY-T would have had to spend. Through new fracking, they are increasing productivity by 50% with no incremental cost. You are paying a premium multiple so he would prefer other names unless you are willing to look out 3 years.

(Market Call Minute.) Trading at a premium multiple. They divested their oil assets to step on the accelerator in their Montney results, which are getting better and better. Prefers others.