Oil Stocks: John Stephenson, First Asset Investment Management (I)

John Stephenson, senior VP and portfolio manager, First Asset Investment Management

On Oil Stocks:

FREEHOLD ROYALTY (TSE:FRU.UN): probably one of the blue-chip names, reason to hold not so much for appreciation..but hold it for distribution at this level relatively secure, decent yield..reason to hold for income

DOMINION RESOURCES (NYSE:D): name previously recommended few years ago..want to consider utilities because of dividend..name that has fair amount of growth..defensive, low-interest rates because of housing disaster..name that I would recommend..$90-92 12-month target

SHININGBANK ENERGY (TSE:SHN.UN): I wish I had better news..gas-weighted trust..not worst name but not best either..very little visibility for commodity in my view until summer or perhaps hurricane season..also hit 52-week low, has not been performing well..there has been distribution cuts in last year..avoid it

WESTERN OIL SANDS (TSE:WTO): along with SUNCOR (NYSE:SU TSE:SU) one of the names I recommend..want to be in operating oil sands..alot of other names yet to be proven..in terms of infrastructure issues I am not aware..oil sands definitely should be in core holdings..see 10% 12-month..not much downside, potential take-out

OPTI CANADA (TSE:OPC): I would be more inclined to put into SUNCOR or WTO..history of oil sands has been cost overruns..

SUPERIOR PLUS (TSE:SPF.UN): it is a hold right now..lots of challenges being a trust..time to exit

SUNCOR (NYSE:SU TSE:SU): $110 or more on the stock, definitely a buyer

CONOCO PHILLIPS (NYSE:COP): hold..disappointing metrics, maybe slowly turning around but no signs yet..

HARVEST ENERGY (NYSE:HTE TSE:HTE.UN): sell, get rid of it..all of the problems with royalty trust

PENN WEST ENERGY (NYSE:PWE TSE:PWT.UN): this is a buy..weak lately but lots of potential..CO2, steel, oil sands projects that it is not getting credit for in the market..this is a buy

PAST PICK + TOP PICK VALERO ENERGY (NYSE:VLO): oil is not reflecting risks out there, think it will..we had such tremendous pullback in price of natural gas..price target $75 in 12 months..increasingly market becoming more selective..pureplay refinery..complicated refineries can process different blends..dirt cheap relative to peers..buy in advance of summer driving season..oil is fundamentally transportation, gasoline..refinery margins through the roof..in 80s, $3.50..last year $22..we are probably $16.50 now, up 4X from before..any kind of issues, risk mispriced in all asset classes..

TOP PICK ENTERGY CORP (NYSE:ETR): want to be in utilities, defensive..one of the things that is attractive is it is growing..utilities that are regulated usually modest growth..this is 10-15%, turning on unregulated nuclear assets, recontracting a much higher rate..management has stated goal of increasing payout

TOP PICK HESS CORP (NYSE:HES) has lagged for little while, addressed short reserve life and leverage..really coming on strong, strong production growth expected in 2007..cheap on multiple basis..turnaround story, international mid-cap oil out of problem areas..this is a name that could go to $60 12-month target