Email of the day
Comment of the Day

June 13 2012

Commentary by Eoin Treacy

Email of the day

on Canadian junior natural gas companies:
“Attached two recent research pieces. Mid-cap gas names in BC and Alberta: ARX, BIR, BNP, CLT, POU, PEY, PRQ, TOU. Small Caps; CQE, CMT, DEE, FEL, NVA, PMT, YO. Things are very bleak in the small cap gas names these days especially if you're a broker. Hope all is well!”

Eoin Treacy's view Thank you for these educative reports from Peters & Co (1 & 2) and for your on the ground feedback from Calgary. Natural gas pricing is evolving into a global market for an increasingly indispensable commodity. The reliance of North American producers on US demand is hampering their ability to prosper in the current environment but this is unlikely to remain the case when export facilities are eventually opened. (Also see yesterday's piece on natural gas exports)

In the intervening years the sector is likely to experience considerable consolidation as some of the weaker players are taken over. Companies with resources in Alberta and particularly British Columbia are likely to prove attractive given their proximity to the Pacific coast.

Peyto Exploration & Development, Progress Energy Resources and Tourmaline Oil Corp have all bounced along with the natural gas price and have so far held above their respective lows. If natural gas finds support above $2, it is reasonable to expect that these shares should do the same.

Birchcliff Energy, Bonavista Energy Corp, Celtic Exploration and Paramount Resources continue to trend lower and will need to break their medium-term progressions of lower rally highs to suggest a return to demand dominance beyond the short term.

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