Painted Pony Pete Ltd PDPYF

ppy.a

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Painted Pony Petroleum Ltd. | Arthur Grayfer, CFA, 1.403.508.3884  
PPY.A : TSX-V : C$7.00 | C$308.9M | Buy , Target C$9.00  
• Loaded with optionality; initiating coverage with a BUY rating and C$9.00 
target price 
This Daily Letter is a summary of our full discussion titled “Loaded with optionality” also 
published today in the report Torque: why you need to own junior oil and gas. 
Event 
We are initiating coverage of Painted Pony with a BUY recommendation and a 12-month 
target price of C$9.00 per share. Our target price is based on our after-tax contingent net 
asset value estimate of $8.86 per share. 
Painted Pony operates in two of the hottest resource plays in the WCSB: the Bakken in 
southeast Saskatchewan and the Montney in northeast BC. The company’s business plan 
consists of using technical expertise to identify early-stage resource opportunities, being an 
early entrant into those areas and then allowing larger industry players de-risk the 
resource potential near its lands.  
Valuation 
Painted Pony trades at 7.9 times 2010E EV/DACF, compared with our junior E&P coverage 
universe which trades at 6.1 times 2010E EV/DACF. We believe a premium valuation for 
Painted Pony is warranted given its light oil weighting, very strong balance sheet and 
strong growth profile. Painted Pony trades at a 21% discount to our after-tax contingent net 
asset value estimate of $8.86 per share.