Making a judgment call on where we are in the oil and gas cycle will help define what type of company to invest in. A junior energy company generally starts by using one

or more of three basic strategies:

• Buy a producing property in the trough of a commodity

cycle and hope for a recovery;

• Buy a producing property and exploit it better than the

previous owner; and

• Buy land and drill for it.

At these historically high oil and natural gas prices, a company has to have the technical ability to go and find a new supply. A company is referred to as “prospect rich” if

they are able to detail their drilling plans for at least the next 12-24 months. In other industries, increased scale is an advantage. However, an efficient small company is probably the best way to manage a smaller oil and gas property.