For those who might have been away last week, I thought I’d post a recap of events over the past week:

1) The price of Natural Gas was up strongly off its recent low. And more importantly, unlike last week when it bounced on Thursday and then immediately fell back again, this week, after its biggest gain in almost 17 years on Thursday, it was actually up more on Friday. And as Bloomberg said in a report last week: short positions are falling, rigs are being idled at a near record rate, and a survey of analysts predicted the NG price will rise to $7 by the beginning of next year. If we get a $1 premium over a $7 NYMEX price, this could be the equivalent of $10 Canadian after the exchange.

2) Gaz Métropolitain announced that they want to increase their source of supply as they expect the demand for natural gas will grow strongly in the next decade. The Utica shale deposit, which could be one of Canada's largest gas fields according to preliminary estimates, "is right in the middle of the territory already served by our network," chief executive Sophie Brochu said at their annual meeting this week. While the utility is not in the exploration business, it's definitely in the pipeline business and is already looking at what can be done to support natural gas production in Quebec, he said.

It’s good news that Gaz Metro is interested in helping NG explorers in the St. Lawrence Valley. The Utica shale deposit is located right in the middle of Gaz Metro's distribution network. And Gaz Metro is willing to invest in pipeline infrastructure.

3) Now I think THIS IS HUGE. The Quebec Government announced in their budget on Thursday that there would be a five-year tax royalty holiday for natural gas wells put into production by the end of 2010. In the budget’s own words:

"Quebec intends to pursue hydrocarbon development on its territory in a responsible and respectful manner. To encourage gas companies to continue to invest, the Minister announced a program to enhance knowledge of Quebec's hydrocarbon potential, particularly in the Gaspésie and Bas-Saint-Laurent regions. The Minister also announced a five-year tax royalty holiday for natural gas wells put into production by the end of 2010".

Not only will it make the commercialization of the Utica Shales much more economical, and profitable, but it will also encourage Talisman and Forest Oil to speed up their plans and put more wells into production before the end of 2010. QEC’s IR Department should be pushing this big time once the budget passes.

4) Our beloved CEO, Michael Binnion, was on BNN’s Commodities show on March 18 with the usual good news: Quebec is still in the development phase; it’s one of largest shale plays in North America, its next to an existing pipeline, and with low royalties; the typical shale gas starts strong for 2-3 years, pays off capital investment, and then has up to 50 years flows at profit; Saskatchewan operations improving production and generating positive cash flow; QEC has strong analyst support with 9 Buy recommendations; current testing will produce drill results throughout 2009; pilot production in 2010; and full field production in 2011. Also they have sufficient cash on hand to look after capex for both 2009 and 2010.

5) Our share price and the TSX. After an 8 day rally, the TSX was finally lower on Friday. On the plus side this was a very nice rally with most sectors participating and led by the financials for a change. Hopefully Friday is just the pause that refreshes and we head higher yet still. QEC’s SP was up for the third week in a row – nice to see. Only a 4 cent gain, but any gain is a good gain.

So a stronger NG price, support from Gaz Metro, a Quebec Gov’t that wants this to proceed sooner and better TSX action. All we need now is some good drilling news. Something like Cabot Oil & Gas Corp. which just completed its second and third horizontal wells in the Marcellus play in eastern Pennsylvania. The Black 1H well recorded a 24-hour into-sales-line production rate of 8.8 MMcfd of natural gas from a seven-stage frac. The Black 2H well’s production rate for the same period was 8.3 MMcfd into the sales line from a four-stage frac. Now these are numbers we should be producing……..

Overall, a very good week. I’m looking forward to a few more like this and some stronger volume to push our SP higher.

If you were away, welcome back and start buying…….. lol.

Trade wizely.

TW.