StockInterview: How do you feel about the smaller, lesser known gas companies?

Eric Nuttall: Nearly all small-cap natural gas producers have taken it in the teeth this year. The price decreases in their stocks have been absolutely brutal. There are now companies whose stocks are down 40 percent year-to-date. They are still strongly growing production on an adjusted share basis. Yet, they are trading as low as 2.5 time 2007 cash flow. Many stocks have gotten incredibly cheap. Although the market might still be a bit sloppy for a few months, I think there are some great bargains to be had for the patient investor.

StockInterview: How do you sum up the natural gas equities market, right now?

Eric Nuttall: Currently, there are many very cheap natural gas weighted companies. Companies with active drilling programs, who are adequately financed and sitting on highly prospective acreage, are trading under three times 2007 cash flow. If the stock prices dont improve for the juniors, I would expect many seniors and trusts will jump at the opportunity to acquire existing production below what current finding and development costs would require through exploration or development drilling.

StockInterview: Lets review some of the more speculative companies we talked about this past spring, such as Crew Energy, Rockyview Energy and Canadian Spirit. How do you feel about them now?

Eric Nuttall: Crew (TSX: CR) is a very well run natural gas focused company. They are set to grow production per share over 40% this year and next, have a very active drilling program for the second half of the year. Canadian Spirit Resources (TSX: SPI) has been chopped in half from its peak, yet nothing but the price of natural gas has changed. Were still quite bullish on Canadian Spirit. Their play is in early stages, and production and economic risks are still there, but if they can repeat their previous rates, I think they could have a very large and economic project. Rockyview (TSX: RVE) recently cut their drilling capex by 67% taking a bit of momentum out of the story short-term. With a recovery in natural gas, the stock should rebound along with the rest of the group.

StockInterview: What unconventional companies are you following?

Eric Nuttall: We are keenly following the drilling progress of EnCana (NYSE: ECA; Toronto: ECA) in the Columbia River Basin in Washington State. For an investor looking for a lower risk, relatively lower rate of return, EnCana is a great way for an investor to gain exposure to natural gas. They have around 95 percent of their 2007 natural gas hedged at slightly over $7 per mcf, so are protected from todays brutalized spot price. Another is Calfrac (TSX: CFW), which is down 45 percent from its peak, and is now 10X 2007 earnings estimates. They are heavily exposed to CBM, and with a recovery in natural gas prices, the stock should recovery nicely.

StockInterview: And some of the others we talked about, such as Ember, Real Resources and Pacific Asia China Energy. Do you have any updates?

Eric Nuttall: Ember Resources (TSX: EBR) has gotten absolutely crushed. They have an active drilling program for the second half of the year. To fund it, they will likely need to seek further equity financing. This has created an overhang on the stock. Until they are able to execute some form of a financing, the stock might stay weak in the short-term. Real Resources (TSX: RER) has been executing well on their drilling program. Once a pipeline is completed in the next month, production should jump 37 percent to 16,500 Boe/d. The company sits on 450,000 net undeveloped acres, prospective for a variety of targets including Devonian Nisku, 190 Bakken light oil locations, and up to 1.1Tcf of recoverable CBM as assigned by Sproule.

When trading at 3.5X 2007 cashflow, the stock presents a good opportunity. Pacific China Asia Energy (TSX: PCE) recently released data on three core holes revealing pretty good gas contents and seam thicknesses, as expected. The question still remains whether wells will produce at an economic rate, which you only know by drilling test wells. I think thats scheduled for later this year or early next. They sit on what appears to be a very prospective land spread, and simply need the time to drill, and attempt to achieve economic rates across their acreage.