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Fraser Mackenzie Ltd. analyst Patty Shao jumped into the Utica shale gas play last week, initiating coverage on two of the play’s “first movers,” Gastem Inc. (OTC:GTMIF) and Questerre Energy Corp. (OTCPK:QTEYF). In doing so, Ms. Shao becomes the first analyst in Canada to formally weigh in on the play, but based on the explosion in investor interest over the past month, she probably won’t be the last.

In a report to clients she said:

Among the six juniors that are exposed to the Utica shale gas play in Québec, we believe Gastem and Questerre offer the best upside leverage through their acreage holding in the ‘sweet spot’ of the Utica shales.

Of the two, Questerre has the larger leverage to the play with an estimated 193,863 net prospective acres, including the royalty interest from its farm-in agreement with Talisman Energy Inc. (NYSE:TLM). Ms. Shao told clients she predicts a total unrisked net asset value for the company of C$45 per diluted share.

For Gastem, she estimated an unrisked net asset value of C$31.62 per diluted share based on an estimated 53,921 net prospective acres in Quebec and New York State.

The analyst slapped “buy” ratings on both companies but refrained from setting target prices given “the early stage nature of the play and wide variances in potential outcomes.”

The four other junior explorers with Utica shale exposure that Ms. Shao did not initiate coverage on, include Junex Inc. (OTC:JNEXF), with 54,619 prospective net acres, Epsilon Energy Ltd. (OTCPK:EPSEF), with 3,920 prospective net acres, Altai Resources Inc. (OTC:ARSEF), with 46,019 prospective net acres and Petrolympic Ltd. [PCQRF.PK], with 43,305 prospective net acres.

All six companies Ms. Shao mentioned in her report have seen their share prices more than quaduple since April 1 when Denver-based Forest Oil Corp.’s (NYSE:FST) announced favorable drilling results in the Utica formation. Forest Oil compared its results to the established Barnett Shale play in Texas, saying the economics of Utica could be more attractive because of its shallower depth and close proximity to gas markets.

Source: Gastem and Questerre: Utica Shale Play's First Movers