No wonder RJ was most active dealer on the CLL trading board. As the Scotia Capital yesterday, RJ produced their own energy sector upgrades. This is part of RJ summary.

Enjoy, Jurek.

Spide, it is indoor facility. We installed a new bubble and lights last year. Beautiful.

RJ: We are lowering our 2010E NYMEX gas price forecast to US$5/mcf from
US$5.50/mcf previously; this reflects our view that higher winter gas prices
will inevitably drive supply higher through the summer and bring storage
levels back in line with bearish 2009 levels. We expect this trend to continue
near‐term and have therefore maintained a US$5/mcf forecast through to 2011.

There is no change to our $80/bbl WTI oil forecast for 2010, which is just below
the current strip of US$84.56/bbl; for 2011 we are using US$95/bbl as we expect
that the oil market will get tighter with time through modestly higher demand
and lower non‐OPEC supply.

We are also updating our FX assumption to US$0.95/C$, reflecting the current
market. When combined with our lower NYMEX gas price forecast; our 2010
AECO gas deck is down 15% to C$4.26/mcf; our Canadian par oil forecast is
down 4.3% to C$83.31/bbl.

Relative to the market, we are below the current strip for natural gas
(US$5.92/mcf at Jan‐5) as cold weather in the U.S. northeast has pushed the
2010 complex higher; while renewed perception that storage levels are
tightening could cause gas‐weighted equities to outperform to start the year,
this should provide a good opportunity to take profits ahead of what we
expect will be a weaker price environment later in the year.

On the other hand,
we continue to have a preference for oil‐weighted equities, with the view that
an upward price trend will continue to push valuations higher.

Our favourites among the large‐caps are Cenovus Energy (CVE‐TSX|NYSE,
OUTPERFORM, recent: $27.46) and Canadian Natural Resources (CNQ‐TSX,
OUTPERFORM, recent: $76.60).

In the intermediate space, we like both
Crescent Point (CPG‐TSX, OUTPERFORM, recent: $39.27) and PetroBakken
(PBN‐TSX, OUTPERFORM, recent: $33.15); while we believe both stocks will
outperform amid rising oil prices, our preference long‐term is for Crescent
Point given the company’s land position in the Bakken and its opportunities
outside of the play.

In the trusts, we continue to favour NAL Oil & Gas
(NAE.UN‐TSX, OUTPERFORM, recent: $13.96) given the development
potential in the Cardium and now see higher return potential for Baytex
(BTE.UN‐TSX; OUTPERFORM, recent $29.75).

In the junior space, we like
West (WTL‐TSX, OUTPERFORM, recent: $4.16) among the conventional
producers; Connacher Oil & Gas (CLL‐TSX, STRONG BUY, recent: $1.35) and
Southern Pacific Resources (STP‐TSXV, STRONG BUY, recent: $0.94) among
the oil sands producers.

Oil & Gas Producers
Justin Bouchard, P.Eng, CFA
justin.bouchard@raymondjames.ca
403.509.0523

TARGETS for some Oilsand corporations they cover (no time horizon)

Connacher $2.75

Canadian Oil Sands $39.00

Cenovus Energy $38.00

Ivanhoe Energy $4.00

OPTI $2.25

Petrobank $65.00

Southern Pacific $2.00

Suncor $49.00

UTS $3.00