Oil Stocks: John Stephenson (II)

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

CANETIC RESOURCES (TSE:CNE.UN): middle of the pack, maybe slightly better..predict royalty trust base will be gone in four years..why you want to hold these names is you get a good yield..well-compensated to hold royalty trusts..issue becomes how you are going to be taxed in four years time and covert to effectively a corporation, how to go about that when you are an acquisition-oriented business model and only allowed to double over four-year time..facing situation where for most these royalty trusts, primarily gas oriented, 27% decline average in North America so you have an obligation to invest capital back in the ground but you can only issue so many units because of restriction..relatively decent trust, very lower reserve-life index, more of a need to go out and replace assets in the ground and you have deadline coming up..avoid companies that are over-distributing, short reserve lives, and gas-oriented

SOUND ENERGY (TSE:SND.UN): very small, gas-weighted, all the problems..not a name to buy, consider selling if you hold it

OCCIDENT PETROLEUM (NYSE:OXY): pretty decent name, done reasonably well, more weighting to heavy oil..by and large getting its act together..name that you can comfortably enter..$45 reasonable entry point

CRESCENT POINT ENERGY (TSE:CPG.UN): MISSION was a name that I really liked because of its light oil focuses..CRESCENT POINT is another top pick..stable balance sheet, lots of drilling prospects, reasonable reserve life..one of the ones you can hold, get decent yield for, hold as it converts to corporation in the future

CYRIES ENERGY (TSE:CYS): would move money into TALISMAN ENERGY (NYSE:TLM TSE:TLM), great name, underperforming for some time, really cheap in terms of forward multiple..2007 multiple trading 3.2X, group broadly at about 5X..CYRIES as you mentioned management very admired..one of big issues for juniors as general comment is what is exit strategy?

DUKE ENERGY (NYSE:DUK): US utility based in the Carolinas..what ended happening this week is split into two parts..regulated utility kept in DUKE..DUKE INCOME FUND (TSE:DET.UN) turned into SPECTRA INCOME FUND (TSE:SP.UN)..I think maybe a buy on DUKE ENERGY the corporation..discount before because of conglomerate..certainly keep if you have it..one of the best reputations in terms of management, asset quality..market broadly for energy transmission is liberalizing again in US..have potential for merchant power

PAST PICK PETRO-CANADA (NYSE:PCZ TSE:PCA): absolutely I would hold onto it..still dirt cheap on valuation basis..disappointed with production..there are other names with more visible production but certainly name I still hold

VERMILION ENERGY (TSE:VET.UN): Vermilion did well last year..this is a name that has a very distinctive strategy in that it is international: France, Netherlands, Australia..pays tax somewhere else..because of diversity and unique strategy, name that you can hold and still get yield..

PARAMOUNT RESOURCES (TSE:POU): I do not think it is $5 model price..did hit 52-week low..all the issues of gas..good operator, probably worse behind us..having said that, am not enthusiastic..

PROGRESS ENERGY (TSE:PGX.UN): okay name, middle of the pack, doing better last quarter on production..caught in the middle, not benchmark name ARC ENERGY (AET.UN), CANADIAN OIL SANDS (TSE:COS.UN), VERMILION ENERGY..nothing extremely distressing about them..just a hold..