Energy Prospectus

Our Sweet 16 Growth Portfolio was down 8.65% last week after being up more than 4% the week before. This roller coaster is likely to continue until oil prices stabilize.

The Sweet 16 spreadsheet which shows my valuations and the current First Call price targets for each company will be on the website this afternoon.

The only stock that held its ground was Laredo Petroleum (LPI). The fact that 100% of their oil production for this year is hedged at very good prices may have played a part.

First Call's price targets barely moved. In fact, they went up for CXO, XEC and OAS.

I will be making a few changes to the Sweet 16 after I go through all of my notes from the Enercom conference. I was there for all four days and after listening to four days of presentations it all starts blending together. I was very impressed by RRC, SN, SWN, PQ, CLR, CPE, XEC, GST, PDC, NOG, SM, XEC, Surge Energy and Blueknight Energy Partners (a small midstream MLP).

Enencom has two presentations going on at the same time, so it is impossible to see them all. So, don't think because I didn't list one of your favorite companies above that they weren't impressive.

I will have more impressions from the Enercom conference in Monday's edition of The View From Houston.

Do you have an opinion on whether or not we should do any buying during this correction, or wait till it stablizes? Also, what is your current expectation for oil and gas prices on Jan 1, 2016 (I realize I am just asking for a best guess)?

Trying to pick a bottom is difficult. When and what you buy is up to you. I will say that unless you think oil prices are going to stay down for a very long time, these stocks are oversold. However, they won't go up until commodity prices at least stabilize.

Building positions in rock solid companies like the Elite Eight (CXO, XEC, CLR, DVN, EOG, NFX, RRC, SM) while they are trading at these depressed prices should work out to be a wise move.

I believe we are in the middle of the 3rd and final test of the low for oil during this cycle. U.S. oil production is declining and demand for refined products is increasing. Market forces are balancing the oil market as they have always done.

Oil cycles normally take two years. We are now in the 2nd half of this cycle. Once oil prices stabilize, I believe they will march back to the long-term trend line (adjusted for the U.S. dollar index) within twelve months ($75 is the new $100). The road back is never in a straight line. I believe oil will eventually move back to the $65-$75 range.

Keep in mind that all Saudi Arabia has to do to get oil prices to move higher is announce a small production cut.

I will have more on this in the newsletter.