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by Stockwatch Business Reporter

West Texas Intermediate crude for October delivery lost $3.08 to $92.88 on the New York Merc, while Brent for October lost $2.85 to $100.34 (all figures in this para U.S.). Western Canadian Select traded at a discount of $16.35 to WTI ($76.53), up from a discount of $16.75. Natural gas for October lost 17.5 cents to $3.89. The TSX energy index lost 6.01 points to close at 319.36.

Paul Colborne's Surge Energy Inc. (SGY) lost 41 cents to $8.27 on 3.97 million shares. The company got a bearish mention in a Globe and Mail interview with portfolio manager Eric Nuttall of Sprott Asset Management, who urged investors to be more selective when buying dividend-paying oil and gas companies. He recommended avoiding Surge because it has been increasing its production through acquisitions, acting more like a "financial entity" than a proper explorer and producer. "They have yet to show they're confident drillers," said Mr. Nuttall. "... But eventually every oil and gas company has to go drill." Mr. Nuttall may be disappointed with how the timing of his investment in Surge worked out. In June of last year, Surge, led by newly appointed president and chief executive officer Colborne, announced the $240-million acquisition of Saskatchewan assets from Cenovus Energy Inc. (CVE: $34.08), along with a dividend of 3.33 cents a month. Mr. Nuttall liked these moves; about a week after that announcement, he called Surge one of his three "top stock picks." He had bought at $5.05 to $5.10 after Mr. Colborne was appointed in May. The Cenovus deal began a string of acquisitions -- including, most recently, Longview Oil Corp. -- usually accompanied by a dividend increase. The current rate of five cents a month yields 7.2 per cent. Mr. Nuttall liked the rising dividend, but he did not like the Longview buy. On April 8 of this year, he said he no longer owned the stock and implied that he sold shortly after the Longview deal was announced on March 31. From March 31 to April 8, Surge's stock traded from $5.98 to $6.54, well below today's close of $8.27. Some of the rise over the last few months has to do with what Mr. Nuttall might call "confident drilling." He did not mention this in today's interview, but on April 8, Surge announced a new discovery on the assets it acquired from Cenovus. A discovery well in the Upper Shaunavon formation flowed at around 300 barrels a day. Two recent step-out wells are each flowing around 325 barrels a day, and Surge plans to drill six more Upper Shaunavon wells by year-end. Mr. Colborne said at a conference in Denver two weeks ago that the discovery could provide enough free cash flow to double the dividend.

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