Palliser Oil & Gas Corp. (PXL-X)

(A Top Pick Jan 2/13. Down 66.2%.) Had originally liked the play in heavy oil because he had believed there would be a compression in the differential. Also using some technology in the field that he felt added reserve value. One of their speed bumps was figuring what to do with all the water that came with the heavy oil so they needed to drill some disposable wells for this. The cash flow compressed a little and they ran out of budget room to execute as quickly as they wanted. Still likes the assets and the heavy oil aspect. Still feels the upside exits.

A long-standing favourite of his due to their heavy oil exposure. Good management and likes the plays they have in both Alberta and Saskatchewan. Have some tremendous assets and intend to do some more PAD drilling. He has recently added to his holdings. Moving through this winter’s drilling season, he expects it will play catch-up. He could see it reaching at least $0.75.

A name he identified earlier in the year as a great investment. Now he likes it at these levels. It is heavy oil. Developed production technology that will serve shareholders well. Management is from much larger corporations. They know their way around heavy oil. Will be twice the size it is today in a year.

(A Top Pick Jan 2/13. Down 38.03%.) One of the best economic plays in the basin. Company will probably do $0.30 a share cash flow. NAV is about $1.40. Thinks it becomes an ideal takeout candidate.

Probably trading at half the price it should be. Have a new way of producing heavy oil that is much more efficient. It means they have an integrated approach with tanks for oil, tanks for water and very specialized well handling personnel that understand and operates the screw pumps that operate at very high levels. Productivity has been remarkable. Operating costs have collapsed in the last couple of quarters. Thinks it is a double from here.

(A Top Pick Jan 2/13. Down 33.8 %.) Pick this for its exposure to the narrowing differential between heavy and light. Since his recommendation, the company has come to market with a small equity issue, which tarnished the buying appetite. Still likes. Could become a takeover target if the stock price stays down here.

(See comment on heavy oil.) Produces oil in the Lloydminster region and ranks 3^rd amongst all plays in the basin in terms of rate of return. Have managed to lower operating costs by 40%. Also, implemented “high volume” lift which typically increases recovery from 5%-10% to 10%-20%. Trades at 3X cash flow. Returns on projects are well in excess of 60%, even in terms of today’s heavy oil price. Currently have about a $30 net back on their production per barrel, even with the current spreads. Target price of $1.25-$1.50 in 12 months.