Painted Pony Energy (PONY.TO)

Feels there is still a ton more upside. Recently sold the genesis of the company, oily assets in Saskatchewan, to focus on the Montney play in Northeast BC. Montney offers some of the best economics in the Western Canadian basin, and this company has a significant land base there to take advantage of it. Originally budgeted about 20-21 wells this year, and they are going to be able to double that with the sale of the Saskatchewan assets. They are in the way of the big guys. Somebody is going to want to own those assets once they develop a little further. If they choose to develop them fully by themselves, they will get the cash flows and production levels that will impress the market.

Recently added more to her holdings. Thinks you will see the stock probably approach $20 in the next 2-3 years.

(Market Call Minute) Prefers other gas names, although they did a good job of improving well results but given the premium they trade at he would avoid it.

Admired the progress they have made over the past few years. Expanded their production considerably. Seem to be very efficient operators and very, very good buyers of assets. He is constantly looking at this and it is one that he could certainly be buying in the near future. Could be a takeout candidate.

Not a balanced production profile. You would be owning it for a contiguous block of Montney with pipeline access. Ultimately if LNG gets up and running this will be a very coveted asset.

Had a huge run off the lows. They might sell an asset to fund a build out. Sees strength continuing for Nat Gas price.

LNG basket. If and when LNG projects start rolling, getting through the barriers, you will find these companies will make sure there is enough production to fill these facilities. You have to have a portfolio approach.

Well liked by the Street, but the correlation between the price performance and the streets love affair has not been that good. He would be concerned about it. Feels the stock is overliked and probably overowned. Natural gas has made a big run, but this one has not kept up with its peers. Doesn’t see any upside and there are probably better places to be.

Delphi Energy (DEE-T) or Painted Pony (PPY-T)? Doesn’t own either. In terms of natural gas names, he is looking at them potentially having weakness so he wants greater liquidity, meaning larger market as opposed to small caps. Both of these are very good companies. On this one, the key difference is the liquids content of the wells, the amount of condensate and fluids that come along with production making better economics.

1000 barrels a day of cash flow. They have a lot of property right over a pipeline so are an obvious takeout target. He would put it in the top 3 or 4 names that are likely to go.

Had some great operating success, but fell from grace because it wasn’t a target. Operations within the company have only gotten better. 48 wells in the Montne oil play. Their acreage is in an interesting spot, the royalty reduced free zone. They get a bigger credit for drilling deep wells than they would further to the south. The inventory on their own land is somewhere in the order of 1800 wells possible. He sees a $14-$15 price with a little bit of further LNG development.

Really liked this company last year. Well managed company with lots of gas exposure. For some reason, late last year, it started to drop like a rock and then reversed and went back up again. Balance sheet is great, growth rate looks good and management is good. He would put this one in the top 5 of names to own in this sector.

(Market Call Minute) Great company and exposure to LNG.

(Market Call Minute.) Doesn’t own only because prospects for natural gas as well as M&A in Northeast BC isn’t as likely as he had thought.

Primarily into natural gas/natural gas liquids in the Montney zone. Have a lot of extra reserves that they found and are having difficulty in getting these moved into the marketplace. Have about 3000 barrels a day trapped waiting to find facilities to process natural gas. Good exposure to natural gas prices. He would prefer other places for natural gas exposure. (See Top Picks.)