Resource Stock Report - V15 #6.0 -  Natural Gas, CMT   Mar. 12, 2009

PO Box 1020  Owen Sound, Ontario, Canada   N4K 6H6

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Have the markets bottomed for now? Is the long awaited bear market rally underway?

It is the strangest of times and we cannot be certain, but so many indicators are way oversold in
the short term and in every bear market there are big rallies. Although they are real sucker rallies
if you do not trade carefully, they are also a chance to make big returns.

I believe one sector that would be a big participant and is way oversold is the oil&gas sector. If
we see a market rally, it will because of a belief that the worst is over, we hit bottom. The
economy cannot get any worse and it will start to improve. In a better economy - demand for energy
will also pick up and we will see a rally in energy prices.

Even without a rise in demand, oil&gas production and supply is set to drop off sharply because of
all the cuts in exploration and development by the oil&gas companies. And remember, Nat Gas wells
deplete way faster than oil, in the neighborhood of 25% to 30% per year. If Nat Gas companies don't
keep drilling, supply soon fades away and prices will rise.

         Gas storage chart  - Red line is current, Grey is 5 yr average

Looking at the Nat Gas storage, we are about in the range of the past 5 years. So we have seen
normal depletion of reserves through the winter, even in a deep recession.

The number of drill rigs running in Western Canada has plummeted. Last year during the winter period, January to mid March seen about 550 to 600 rigs drilling, this year it is down to between 300 to 400 rigs, about a 35% drop.

No doubt a big drop in supply is in the cards

http://www.caodc.ca/rigcounts.htm#wkwestdrill

NYMEX Oil chart -  Nearest Future

It looks like the oil price is putting in a bottom. Oil has moved up as the contango has contracted.
Remember how out of whack it was a couple months ago. So it appears the market is coming back to
normal for oil.

                 Henry Hub NYMEX - Natural Gas Chart - Weekly

This is a weekly chart, at $3.95 and today we are lower at $3.50

However, gas prices just keep dropping, but this cannot continue, they have to bottom somewhere and at $3.50, the lowest price since the commodity bottom in 2000 -2002, looks like a good spot for a  bottom.

Nat Gas Long term chart

You can see from this long term chart, the absolute bottom is probably $2.00, so at $3.50, there is
way more upside and downside.

I think the best way to play this is to buy a pure Nat Gas producer that is beat to a pulp with some
stupid debt fears that it might go under and is trading at a 90% discount to book value. Sound
familiar to you - a similar case to Nova Chemicals, but this company's debt issue is not near as bad
as Nova, in fact I don't think it is an issue at all.

I am talking about Compton Petroleum, a stock we owned once before and made money on at much higher
prices. From July of 2008 it has been beaten down from $13 to as low as $0.55 and is now trading in
the low $0.60s.

Compton Petroleum   TSX:CMT  NY:CMZ    Recent Price C$0.62
52 week trading range $0.55 to $13.45

Shares outstanding  130.1 million

Compton has a book value of just over $7 per share, so at $0.63 it is trading at a 91% discount to
book value

Compton earned $59 million in the 3rd qtr. of 2008, but I do expect a significant drop in earnings
as Natural gas prices have plunged. However, the company does have some hedging in place until March
2009 that will be a benefit and their production is low cost.

With the sale of non-core properties (mostly oil) during the third quarter, the company is now
essentially a pure (about 85%) natural gas story focused entirely on three concentrated low-risk
natural gas resource plays.

The core properties have all progressed through to a development stage and the associated, large,
secure land position provides a very significant inventory of low-risk development drilling
opportunities.

The high working interests and operatorship of virtually all the properties permit the company to
manage the pace of its exploitation and development consistent with the capital expenditure
priorities.

Exploitation and development

Compton has four Deep basin natural gas resource plays: the Basal Quartz sands at Hooker in Southern
Alberta, the Gething/Rock Creek sands at Niton and in central Alberta, the shallow Plains Belly
River play in Southern Alberta, plus an emerging overpressured foothills gas play in Southern
Alberta. Three of these plays are now relatively proven low-risk development plays.

Compton has set a 2009 capital program to be financed from funds generated from operations using a
budgeted average natural gas price realization of $6.82/gigajoule. Based upon planned capital
expenditures of $161.5-million, the company is targeting average 2009 production in the range of
25,000 barrels of oil equivalent per day to 26,000 boe/d which approximates 2008 production levels,
excluding production from those properties sold during the year.

Compton has a solid reserve and production base to build upon. Proved plus probable reserves at Aug.
1, 2008, were approximately 1.6 trillion cubic feet equivalent and current production is
approximately 164 million cubic feet equivalent per day (27,300 barrels of oil equivalent per day).

Financial

The debt is term structured with 66 per cent not due until December, 2013. The extendible, revolving
bank credit facility was renewed on July 2, 2008, with an authorized loan amount of $500-million. At
Sept. 30, the company had $260-million available under the facility to assist in managing the
operations and capital programs. The company is fully compliant with all the debt covenants.

 Compton has been the subject of speculation from various sources as to its continuing viability. As
I have commented before - short players have been using debt fears whether warranted or not,
everywhere in the market to make profits. Shorts have done very well with these debt fears with
Compton and now I believe we have an opportunity to make a good profit on the way back up to where
the stock should be.

The company claims, and I agree that the opposite of this debt speculation is in fact the case.
Liquidity is not an issue at Compton. Although the overall debt level may differ from others, it has
been structured consistent with the long-life asset base. The current corporate position, is such
that the Compton is well able to manage its financial affairs through these turbulent times to the
benefit of all shareholders.

The Company has available $260 million of unused credit facility under the recently renewed
syndicated banking agreement. The Company also has the ability to modify the capital expenditure
program when circumstances warrant, to preserve cash.

CMT has $716 million in debt, but $477 million is long term, not due until December 2013 and $240
million is bank debt as part of a authorized senior credit facilities with a syndicate of banks in
the amount of $500 million. This was renewed in the 3rd qtr. 2008 and is up for renewal on July
2009. If it is not renewed then it becomes due in July 2010. Some of the banks representing $90
million have not renewed so this would mean the facility could be reduced to about $410 million in
July 2009.

So instead of $260 million now available that would drop to $170 million, but worst case, that would
not be due until July 2010.

Frankly, I just don't see any pressing debt problem with the company.

Sure their debt to equity ratio sucks because the stock price has plunged, but their debt agreements
are based on cash flow which the company should be able to manage just fine. They have been doing
this for years.

They only show $5 million in cash in the last financials, but they have always operated with a low
cash balance, utilizing their cash flow from operations and their debt facility that is just fine,
working and in place like it always has.

Management

A new CEO has just come on board and I see that as very positive as well going forward, especially
with his experience with asset optimization at Paramount Energy Trust.

Compton Petroleum Corp. has appointed Tim Granger to the positions of president and chief executive
officer, effective Jan. 26, 2009. Mr. Granger will also be appointed to Compounds board of directors
on that date.

Mr. Granger most recently held the offices of vice-president, asset optimization, and chief
operating officer at Paramount Energy Trust. Prior to that, he was managing director of TAQA North
following the acquisition of Primewest Energy by TAQA in January, 2008. Mr. Granger had been the
chief operating officer of Primewest, which he joined in 1999.

Mr. Granger has more than 27 years of extensive experience in exploitation, production operations
and asset management. From 1996 to 1999, Mr. Granger held various managerial positions at Pogo
Canada Ltd. and Petro-Canada, including production engineering and upstream information technology.
Prior to 1996, Mr. Granger held various management positions at Amerada Hess Canada Ltd., and
engineering positions at Dynex Petroleum Ltd., Canterra Energy Ltd. and Dome Petroleum Limited.

Summary

The stock is beaten down to 9% of book value and debt fears are way over done. Shareholders have
sold in panic, as part of the de-leverage process in the past several months, funds have liquidated
a lot of positions. Because the share price has dropped, the stock has also been removed from
various indexes, resulting in more selling from index funds.

Basically it cannot get much worse, this is a real bottom feed opportunity on an established well
know Natural Gas company.

The short position on TSX has been increasing from around 1.4 million near the end of November 2008
to 3.6 million as the end of February report..

In the U.S., naked shorting spiked to a new high of around 800,000 shares in the first half of
December, but the short interest reported in the U.S. is just 313,000 shares.

Any shorts that have not covered will only mean buying support for the stock when they do.

At $0.60 there is a good opportunity to make 10 times our money if the stock only recovers to half
of it's value of last year.

                                                3 Month stock chart

I don't see any real clues from the chart, other than it looks like it has been building a base here
in the range between $0.55 and $0.65

I am going to put a stop/loss at $0.48.

The year end financials will be out in the next 2 or 3 weeks and that is the only thing I see on the
horizon that could move the stock , besides a rally in the markets or Natural Gas prices. I expect
cash flow and profits to be way down, but that is probably already priced in and more.

The only other near term catalyst, like Nova Chemicals could be a buy out offer. A senior company
might easily take advantage of the cheap stock price. But a buy out would likely be at least 2 or 3
times the current price.

I currently own 6,000 shares

Head Office

3400, 425 - 1st Street S.W. Calgary, AB T2P 3L8, Canada

Tel: (403) 237-9400

General Email: cmt@comptonpetroleum.com

http://www.comptonpetroleum.com

http://www.stockhouse.com/comp_info.asp?symbol=CMT&table=LIST

(c) Copyright 2009, Struther's Resource Stock Report

All forecasts and recommendations are based on opinion. Markets change direction with consensus
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