Edge columnist Gyle Konotopetz regularly profiles the top three stock picks of one of Canada’s most accomplished investment pros.)

FEATURED PRO: Danny Deadlock is an independent equity analyst based in Hanna. He publishes an online newsletter known as Microcap.com (www.microcap.com) that features smaller companies on Canadian and U.S. exchanges.

Deadlock’s Perspective: “We haven’t seen a strong speculative run in oil and gas stocks since the mid-’90s and, with mining stocks and tech stocks tagging on incredible gains this past year, we may see a significant shift in capital to the oil and gas sector.

“The North American demand for natural gas remains very strong and several factors will contribute to high oil prices, including recent productions cuts by OPEC, instability in oil-producing regions and reserve writedowns by major oil companies that will
stimulate upstream spending and mergers and acquisitions.

“There is risk in playing this sector because of fluctuating commodity prices and potential reserve adjustments from National Instrument 51-101 (which sets new standards in assessing reserves for oil and gas companies).”



First Star
* Ranchgate Energy (ROG/TSX)
* Recent Price: $1.14.
* 52-Week Range: $0.75-$1.25.
* Snapshot: Ranchgate is an oil and gas exploration and production company in east-central Alberta and west-central Saskatchewan.
* CEO: Kelly Ogle
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 28.7; Revenue (last 12 mos), $13.9 million; 5-Yr Revenue Growth, 130.8 per cent; Earnings (last 12 mos), $1.8 million; Market Cap, $30.08 million; Shares Outstanding, 26.39 million; Production (for quarter ending Sept. 30/03), approx. 1,500 boe/pd (barrels of oil equivalent per day).
* Deadlock’s View: “We have been very successful valuing oil/gas stocks on a cash-flow basis and right now, anything trading near three times annual cash flow is very attractive, if debt is within industry norm and there are no reserve problems.
“We’re hoping Ranchgate’s production is in the range of 2,300 boe/pd by this summer, as that would generate approximately $14 million in annual cash flow or 45 cents per share. Under such a scenario, the stock should be worth approximately $1.80.”
* Deadlock’s Risk Rating: Medium.
* Web watch: www.ranchgate.com



Second Star
* Oiltec Resources (OLT/TSX)
* Recent Price: $1.20.
* 52-Week Range: $1.05-$1.69.
* Snapshot: Oiltec is an oil and gas exploration and production company with its principal properties in central Alberta (Redwater), northern B.C. and southeastern Saskatchewan. The company recently retained Peters & Co. as an adviser as the company explores options aimed at maximizing shareholder value.
* CEO: Richard Schuster.
* Head Office: Calgary.
* Vital Stats: Current Price/Earnings Ratio, 23.6; Revenue (last 12 mos), $17.6 million; 5-Yr Revenue Growth, 6.7 per cent; Earnings (last 12 mos), $1.7 million; Market Cap, $37.75 million; Shares Outstanding, 31.46 million; Production (for quarter ending Sept. 30/03), approx. 1,300 boe/pd.
* Deadlock’s View: “This company has property, plant and equipment worth $62 million ($1.95/share) and debt of $15 million (0.47/share). It is currently trading below the net asset value.
“Based on the news (of retaining Peters & Co. to explore options), I believe a takeover is inevitable. Considering reserve life, recent drilling success and future drilling prospects, I can’t see why they wouldn’t squeeze out at least $1.75 (in a buyout) while oil and gas prices are strong.”
* Deadlock’s Risk Rating: Medium.
* Web watch: www.oiltec.ca




Third Star
* Connacher Oil & Gas (CLL/TSX)
* Recent Price: $1.34.
* 52-Week Range: $0.35-$1.75.
* Snapshot: Connacher is an exploration and production company with principal assets in southwestern Saskatchewan and east-central Alberta.
* CEO: Richard Gusella.
* Head Office: Calgary.
* Vital Stats: Revenue (last 12 mos), $8.5 million; Earnings (last 12 mos), $4 million; Market Cap, $47.48 million; Shares Outstanding, 35.43 million; Average Production (for quarter ending Sept. 30/03), approx. 1,000 boe/pd.
* Deadlock’s View: “Southwest Saskatchewan is a hotbed of natural gas drilling activity and CLL has a tremendous acreage position there. This is a fast-growing company, thanks to a very strong exploration and exploitation team. It is reasonable to expect that sometime this year, production from CLL could hit 3,000 boe/pd with heavy weighting to natural gas. If they hit these production numbers (even within 12 months), a 50-per-cent gain from here is very realistic.”
* Deadlock’s Risk Rating: Medium
* Web watch: www.connacheroil.com

* Deadlock’s Edge Record: +63 per cent. Best Pick: Marimba (MRBA-Nasdaq) +245.5 per cent. Worst Pick: International Utility Structures (IUS-TSX) -53.3 per cent.
* Disclosure: Deadlock says he owns small positions in the featured stocks.