Energy Prospectus

Susan and I were on vacation last week, so I am just getting back up to speed.

The Sweet 16 is down 5.77% in the last two weeks and is now down 7.95% YTD. I know it feels worse. The "gassers" (DVN, GPOR, RRC, SM and SWN) really took it on the chin last week.

What's interesting (and encouraging) is that the First Call price targets have actually inched a bit higher since 3rd quarter actuals came out. For all but a few of the Sweet 16, my valuations are very close to the First Call price targets.

An updated Sweet 16 spreadsheet with all of my valuations and First Call's price targets will be posted to the EPG website on Sunday.

Dan, I know you believe what you say and what you write, but anyone who has listened or read what you have been saying and writing for the last 18 months
have lost a lot of money. I think you mis -read the "tea leaves" on oil, gas and the producers which has led to massive losses for those of us who once believed
in you.
JP

Considering the fact that the price of oil is down more than 60% and natural gas is down more than 40%, the Sweet 16 is doing quite well (down less than 8% YTD).

Here are a few things to keep in mind:
1. EPG has a very narrow focus, oil & gas.
2. Members are 100% responsible for their own investments. I just provide fundamental analysis and helpful tools, like the individual company forecast models.
3. It is NEVER a good idea to have too much of your portfolio invested in one sector. I only have about 20% of my own money in oil & gas stocks.
4. Commodity prices do run in cycles. Fundamentals do win out in the end because the price of any commodity cannot stay below finding & development costs for long. For example, if the price of corn stays below the costs of planting and harvesting for long the supply will dry up.
5. Today's oil price is unsustainable. 2/3s of the OPEC countries are already broke and they are all bleeding money, including Saudi Arabia. OPEC can reverse oil prices very quickly with just a minor adjustment in their production.

This world runs on oil & gas: Eventually, this price cycles will come to an end. Oil & gas production is falling and demand keeps going up. That is a recipe for higher prices. Historically, oil price cycles last two years. We are currently in month #17 of this one.

The strong U.S. dollar has been a major problem this cycle. If nothing else had happened, the price of oil would have come down $30/bbl because of the spike in the dollar. Take a look at the U.S. dollar index and you will see what I mean: http://www.marketwatch.com/investing/index/dxy/charts

Take a hard look at the chart above and you will see that the recent move in the dollar is directly responsible for most of the latest dip in the oil price. Your guess is as good as mine as to when the dollar pulls back.

I am not the only analyst that sees the fundamentals of oil improving. Raymond James has a world class team based here in Houston. Please take a few minutes to read what they have to say at this link: https://www.energyprospectus.com/forum/ ... f=4&t=7260

The last oil cycle was 2008-2009. In 2010 the Sweet 16 gained 54% and many of the small-caps gained over 500%.

http://finance.yahoo.com/news/rsp-permi ... 58351.html

Several of the Sweet 16 are mentioned in this article. RSPP is in our Small-Cap Growth Portfolio.

RSPP, LPI, MTDR and CRZO are all much smaller companies than outfits like CLR and EOG. The small-caps that can continue to grow production and their proven reserve base have the most potential when commodity prices move higher.