Rock Energy Inc. (RE.TO)

The day is gone when they are drilling to try and find a huge 5000 barrel a day well. This is now a manufacturing process. They drill a well and it comes online at 60-80 barrels. After a while it declines down to something like 40-50 barrels a day, and then stays fairly steady. They then try to enhance that production through water, polymer or some kind of enhancement. This company has a polymer flood in Saskatchewan and will be getting a royalty credit. It takes a royalty down from 25% to 2%. Cash flow numbers look great.

Still holds it. It is rock solid. Management keeps guiding and hitting higher numbers. Have lots of drilling locations in inventory. It might have a period of consolidation, but management are doing a fantastic job. There is a strong seasonality to oil and gas.

(Market Call Minute) Transitioning into gas plays. High productivity names. He trades it.

Management just continues to meet and exceed their expectations. Alberta and Saskatchewan area. Light and heavy oil. Great management team. Great things in terms of growing production and low decline rates. Water flood project in Saskatchewan should get them a royalty credit. Cash flow will go up to $2 range. Really good at maximizing their netbacks. Leased their own rail cars a few years ago. Doesn’t think they will be around for long. They will be taken over by a dividend payer.

(A Top Pick Jan 2/13. Up 210.16%.) Liked the heavy oil play. Had adopted a “crude by rail” policy to overcome the pipeline bottlenecking issues. Firing on all cylinders right now. He can see cash flow eclipsing $1-$1.50 a share next year, followed by a higher number the year after.

Continues to love the story. Recently added some light oil to their product mix. Principally a heavy oil producer in the east central Alberta and west central Saskatchewan area. Have a great play in Mantario. Still trading at 3X cash flow. Conservatively financed and a very good balance sheet.

(A Top Pick Jan 2/13. Down 1.63%.)

(A Top Pick Jan 2/13. Down 4.88 %.)

(See comment on heavy oil.) Produces oil in the Lloydminster region. Shipping their crude via rail. Great play dynamics. Low-costs. It limited debt in 2012 and has a reserve NAV of $2.85. Trading at 3X cash flow. Expects to see a double in the stock price.

Was a previous owner, but hasn’t followed this one closely for the last couple of years. Believes this is an oil producer with very high costs. With the price of oil and the fact that costs are fairly high, he would not be a holder.