NEW YEAR "RESOLUTION"

BID RSE @ 4.35
I submit a bid for RSE @4.35 and got filled. This will replace exposures of CUX which I pared yesterday. I believe the valuation remains reasonable (4.3X CFPS05, 42K boe/d) and it is traded at a discount compared to its peers. And RSE has not run with other juniors. I do not see any operation or production issues and its next two quarters should be as expected or better. With its 05 production of 9,500 boe/d, and potential large cash tax, starting in 05, chance of exit to trust is relatively high. I believe it could go up to 5.5-6.0 after Q1/05, provided that crude price does not fall to lower 30s.


REPLACE RER WITH FE
Sold RER and put a bid with FE. I believe RER is fairly valued here. Although there might be another buck up, but that will come from conversion of trust. FE on the other hand, is undervalued compared its peers (3.5XCF05, 33K boe/d). It is traded at discount based on forward production and cash flow figures, and FE would have to deliver its production growth target for FY05, although its tied-in could easily take its production volume to 3,750 boe/d. If FE fails to deliver its production target, it would be rather expensive at current level. Q4/04 production figure would be key. Target at 4.5, at the end of Q1/05. While I do want to add FE, but I really do not want to increase the net exposure in Energy sector, which I am already over-weighting.