Here's their report from yesterday. I really like their upside scenario. GLTA

Donnycreek Energy Inc.

Steppin' Out

Outperform

Speculative Risk

Price: 2.78

Shares O/S (MM): 44.7

Dividend: 0.00

NAVPS: 1.51

Price Target: 3.50

Implied All-In Return: 26%

Market Cap (MM): 124

Yield: 0.0%

P/NAVPS: 1.8x

Strategic Ownership: Treherne Resources 12.28% (private-company, controlled by Mr.

Clayton Riddell).

Priced at market close January 30, 2013 ET.

Event

Donnycreek provided an operational update that highlighted a farm-in deal that

extends its exploration thrust southward.

Investment Highlights

Steppin' Out. We believe the farm-in provides Donnycreek with low-cost

exploration of the south central portion of its 16.75 section (50% w.i.) Kakwa

block. As shown in exhibit 2, the farm-in location represents a step-out from

the company's existing 5 gross well development, which targets the Middle

Montney formation. In our view, positive results from the farm-in well,

especially if drilled into the Upper Montney, would further derisk the

company's unbooked 64 net well inventory.

Condensate Yield. The company's first Kakwa Montney well (13-17) achieved

a condensate yield of 150 bbl/mmcf in January after producing at 200 bbl/mmcf

over its first 7 days on production in December. Though the 13-17 well is

tracking above our type curve assumptions (IP-30 of 750 boe/d with a 75

bbl/mmcf), long-term condensate productivity remains key to the well

economics, which are provided in exhibit 3 for reference, and our risked

valuation of $1.71/share for Kakwa.

Activity Update. Operationally, the Kakwa drilling program is proceeding

slightly ahead of our anticipated pace with the third well on-track to be

completed in March. Due to the high liquids rates encountered thus far, we

expect on-time to remain somewhat choppy until the construction of 12-15

mmcf/d of processing capacity around mid-year. The move to knock out

condensate at the wellhead and truck to sales should alleviate some the current

downstream processing constraints.

Valuation. At current levels, Donnycreek is trading at a 2013E EV/DACF

multiple of 13.5x (vs peers at 7.9x) and at a P/NAV of 1.8x (vs. peers at 1.2x)

at RBC's price deck. As shown in exhibit 3, Donnycreek currently offers the

highest Montney leverage on a Net Acres/EV basis.

Recommendation. We maintain our Outperform, Speculative Risk rating and

12-month price target of $3.50 per share. Our price target is driven by our base

case expectations of profitable early-stage growth from Kakwa development, a

debt-free balance sheet, and the optionality from Donnycreek’s prospective

Montney land position.

Target/Upside/Downside Scenarios

Base Case: $3.50

Our base case and current $3.50 price target are based on Donnycreek’s profitable early-stage growth from its 64 net well Kakwa development with an assumed condensate yield of 75 bbl/mmcf, a debt-free balance sheet, and the exploration optionality from its over-sized , 160 net section Montney position.

Upside Scenario: $7.50

Our upside valuation of $7.50 reflects type curve outperformance with condensate yields consistently above 100 bbl/mmcf, successful derisking of the Upper Montney zone at Kakwa, and positive exploration results at Wapiti, which could lead to consolidation in the emerging liquids-rich Montney fairway.

Downside Scenario: $1.25

Our downside valuation of $1.25 reflects inconsistent well results with condensate yields below 50 bbl/mmcf, cost-overruns or delays at Kakwa, and mixed exploration results at Wapiti, that in aggregate lower the company’s growth trajectory and create funding uncertainty.