Extract from yesterday's edition.

On election day when we don’t want to talk politics, we

check in with Keith Schaefer, editor of the Oil and Gas Investments

Bulletin to hear what has his interest in the junior oil

patch. He says investors should pay attention to last week’s

announcement by Renegade that they’re changing focus.

There’s a lesson there for the retail crowd.

“Last week Renegade Petroleum announced they were buying

oil production, will start paying a dividend and become a mostly

income-oriented company. I think the market missed the significance

of the Renegade Petroleum transaction last week. This is

a heavily oil weighted junior that attracted a lot of research.

They threw up the white flag on growth last week, and transformed

into an income vehicle—and saved their shareholders in

the process. Even though they had to dilute—and didn’t improve

per share production or cash flow much at all—they did

the right thing here.

History is telling us that very few management teams in the

junior oil patch have the fiscal discipline to make resource

plays work for shareholders, and Renegade is only the latest

example.

They’re developing a Viking play in western Canada, which is

small cost wells for small production wells. Their Souris play in

Saskatchewan is similar. Debt levels are OK.

But the stock couldn’t get any love. The market saw their

new play in Slave Point as the growth engine for 2013. But then

look at the two leading juniors in that play—Pinecrest Energy and

Border Petroleum. Pinecrest is one of the top market darlings in

the entire junior sector—if it can’t get love off this play—

considered to be one of the best in Canada—the market didn’t

see Renegade getting any either.

And so despite what on paper looked like strong assets—on

a heavily oil weighted company, and a bit of a market darling—

no love. (You don’t read this stuff in analyst reports by the way,

so buyer beware…)

Why is that? I think a couple reasons. One is the market—

institutional funds flow is still neutral to negative, and there are

a lot of companies in which they can invest. New plays are popping

up all the time and management has to show they are very

efficient at using capital—they have to bring up a lot of oil real

cheap. The competition for capital is intense.

And my impression was the market thought Renegade

was doing an OK job.

But for a stock without high appeal, you

need to be ultra-efficient to attract capital. In the Viking

where Renegade was, only Raging River has the growth

and cost control the market wants. And the market is willing

to give those stocks big premiums—and the other

ones trade at permanent discounts.

Even when you do have a high appeal play it’s

tough. Aside from Slave Point play, the Beaverhill Lake

(BHL) play northwest of Edmonton was also a market darling

play in 2011. Arcan Resources is the leading junior

there and hit wells like 1700 boe/d at 92% oil.

But they have one of the worst stock charts in the sector,

losing 90% of their value from top to bottom in just

eight months, as they used a lot more money to get the oil

out of the ground than the market thought they should.

All these juniors are trying to maximize growth. They

spend more than their cash flow and try to time the market

to bridge the gap with equity dilution; issuing new

shares. Right now the junior market is screaming that

only a very few teams can do that.

Grow grow grow, raise equity, max out debt lines—do

what has been done for years--is in many cases NOT a

SUSTAINABLE model over time. Few teams have shown

they can do it over the past 3-4 years in Canada.

So Renegade CEO Mike Erickson did the right thing. He

changed focus before it was too late, transformed into an

income vehicle and saved his shareholders a lot of pain.”