Painted Pony Energy (PONY.TO)

Thinks they have the single best resource upside per share in the Montney. Even looking at just their PDP plus the land value, you are easily getting $9-$10 a share. Very conservative and haven’t taken on a lot of debt so there is lots of room on the balance sheet to fund growth on a go forward basis. Because of their huge resource, as gas prices start to increase and the LNG theme start to dominate, this has the most upside of any name.

Saskatchewan oil assets are now a small portion of the company compared to the Northeast BC Montney play that they have. Massive land base with much of it surrounded by the Petronas - Progress land base. Has a great chance of doubling the share price in the next 5 years. They are going to use debt for the 1^st time to fund a lot of their production without having to go to the market.

Have very good land positions in Northeast BC that can be developed once LNG terminals get approved. Approval may be late 2014-2015 to have them come in, in 2018. Has a lot of asset value and will be an attractive takeover candidate but, in shorter terms, it is a little stretched. Not for the faint of heart.

Has potential upside and probably not too much downside. This is for people who are a little more risk seeking. Have significant acreage in the Northeast BC area in the Montney play and that is an attractive area. Ultimately, we are moving towards LNG in British Columbia and Alberta. Realistically, this is also a takeout. Takeout and LNG both may take some time.

There have been two large US sellers so the drop is not related to fundamentals. A call on west coast LNG. The overhang on the market is how they fund it. They are going to use their lines of credit this fall, but they are always prudent in the way they use them. He would buy it a little lower or it is okay if you are bullish on Nat Gas.

TSX. Before, the macro environment was making a huge difference and all stocks were moving in the same direction. Over the last 12 months or so, especially the last 6 months, companies that are doing well operationally have been rewarded with higher multiples and those that are not are getting entrenched. It is better now for “stock pickers” like him. He looks at fundamentals of each individual company, looking for growth at a reasonable price. When the market becomes more comfortable overall, it trickles down to the small caps and this has really been shown in the US where the Russell 2000 has really outperformed. In Canada, small caps have underperformed in the last couple of years. As the TSX moves higher, money is going to start to flow to small cap names. Likes Canadian small caps but, on the resource side, you have to be very, very picky because a lot of the companies in the resource sector may run out of money. Make sure that they are low cash cost and have a half decent balance sheet and able to fund themselves.

One of the themes that is running in the sector is, you have to have exposure to the Montney in Northeast BC because that is the source of gas for the LNG projects that are going to unfold. This company fits that parameter. Have some tremendous assets up there. If you believe, as he does, that LNG is going to become a fact, this is a pretty good way to get there.

Surprised that this is down this low. A perennial “going to be taken over by one of the majors” because it has a lot of resources. Has done a pretty good of growing its production over the long haul. Well financed.

(A Top Pick September 19/12. Down 21.03%.) Great acreage in BC. Takeover target. Execution remains fine. Well results have been in line with expectations. Continues to delineate their acreage. Apathy to natural gas has caused many names to sell off. They have the ability to sell into a pipeline that isn’t as impacted by the wide basis differential so are getting a $.50-$.60 premium compared to other natural gas producers. Still likes.

(A Top Pick Sept 19/12. Down 18.07%.) Natural gas producer. The only challenge according to some people is how do they fund it. Have very aggressive growth plans where they are going to quintuple production over the next several years. If gas stays lower than what they have modeled there is probably going to be a funding gap so will be relying on joint ventures. Talisman (TAL-T) and Suncor (SU-T) currently have acreage up for sale which will need joint ventures as well. You’ll have to be patient.

(Market Call Minute.) Extensive lands in Northeast BC/Montney area.

Assets they have in the Montney are attractive but the amount of M&A activity is relatively small so he doesn’t see a large corporate acquisition. Relies heavily on the Montney to provide the growth that the market wants. Fortunately, they are experimenting with some new completion techniques on the long reach horizontals which have been remarkable. Looking for good growth. Has 80% natural gas and a reasonably good balance sheet.

(A Top Pick September 19/12. Down 26.85%.) Still regarded as a potential takeout target for companies that are building very large LNG terminals. The actual requirement of these companies versus what they already have is increasingly coming into question. The market is very much awash in assets for sale. He would rate this company’s assets as quite good.

Very well run company and have always had considerable financial discipline. Have a large contiguous gas asset in Northeast B.C. and have excellent pipeline access. At some point he thinks it is an M&A target but given his outlook on gas, it is not one he is looking at in the short to medium-term.

Assets in the Montney in BC as well as Bakken assets in Saskatchewan. Thinks it is an attractive takeover play. Inexpensive.