The pullback in energy-related stocks continues today. The high for the Philadelphia Oil Services Index was attained on January 30 at 157.63. Based on today’s low, the index has now corrected about 13.5 percent. Using a similar calculation, the October correction in the group was 16.2 percent as was the spring 2005 pullback.

These back-of-the-envelope calculations suggest that there could still be room for more downside. However, it’s also important to note that each of these corrections, while scary each time, eventually proved to be outstanding buying opportunities; I expect that will be the case this time around as well. But that big opportunity is still some time away.

It’s also a key tell that, despite some relatively hawkish news out of Iran and a violent East Coast storm that produced record snowfall in New York City, the oil market simply hasn’t been able find a low. When markets don’t respond to what should be bullish news, I certainly can’t rule out more downside. As I’ve stated in The Energy Strategist before, I see $50 to $55 as the likely floor for any selloff in oil.

In light of this move and the release of several earnings reports during the past few days, it’s high time I offered an update on several key Energy Strategist recommendations. In addition, I’ll outline one way to play further selloffs in oil. Here’s a rundown:

Cooper Cameron (NYSE: CAM): The company reported earnings in late January and there’s been no big news out of Cooper since then. This morning, the stock opened lower with the rest of the oil space and then rallied to within $0.25 of yesterday’s close.

Some quote services are showing a low under $39 while others are showing a low well above $41. I suspect the quote of $38.79 is a bad quote and that Cooper never traded there.

However, if the stock did trade to that level, you would have been stopped out for an approximate breakeven on the stock. Either way, my view on Cooper Cameron remains unchanged as I outlined in the last issue of The Energy Strategist. Keep buying Cooper Cameron. If you did get stopped out, e-mail me at energystrategist@kci-com.com as I’d like to determine if this were simply a bad quote or an actual trade.

My favorite coal MLP Penn-Virginia (NYSE: PVR) has been hit hard in recent days. The MLP is now back to the approximate level at which it started the year. The company reported earnings on February 8 and saw strength in both its coal and natural gas processing businesses—the stock actually rallied on the news. The problem came after Arch Coal (NYSE: ACI), a coal mining firm reported weak results on the February 9.

Arch Coal’s difficulties stemmed not from weakened demand for coal but from rising expenses. As I outlined in depth in the January 11 issue “Playing it Safe,” coal mining costs have been rising rapidly for months—labor, steel and transport costs are all on the rise. The fastest cost inflation is coming from Eastern US underground mining operations.

At any rate, Penn-Virginia has operations in the eastern US and Arch Coal leases out some of its properties. However, Penn-Virginia isn’t exposed to these cost increases directly because it doesn’t actually do any mining—it simply leases its land out to miners and collects a royalty check. I don’t see a huge impact on Penn-Virginia’s earnings potential.

The other factor at play for Penn-Virginia is that the company trades an average of 46,000 shares per day, a relatively thin market. That means that any selling tends to get magnified. In this case, it appears that the Arch news was enough to prompt many investors to dump Penn-Virginia. The outsized reaction was due to the thin trading in the stock. I regard this as a good buying opportunity for Penn-Virginia.

On a related note, Peabody Energy (NYSE: BTU) has been falling sharply, in sympathy with Arch. In the How They Rate table, I have sell recommendations on several coal firms; my main fear has been that their earnings would be hit by higher cost inflation.

The only two stocks I’ve had buy recommendations on are Peabody and Arch. Peabody has long been my favorite and the only coal miner in the Wildcatter Portfolio.

Arch appears to have more exposure to the cost problem than I realized. That said, the other mining firms covered in the table are even more vulnerable than Arch—I’m reiterating my sell recommendations on Alpha Natural Resources (NYSE: ANR), Consol Energy (NYSE: CNX), International Coal (NYSE: ICO), and Massey Energy (NYSE: MEE). Arch’s problems are a final wake-up call to get out of these names.

Peabody has large operations in the Powder River Basin (PRB) in the western US. These operations involve mainly strip mining—to date Peabody has been much better able to control costs. Peabody remains my top coal recommendation despite the recent slide.

Today’s earnings call from Transocean (NYSE: RIG) wasn’t bullish by any means. The company isn’t seeing a drop-off in demand for its deepwater rigs, rather higher operating and maintenance costs. Some of these costs are due to continued Katrina-related repairs while others are simply the result of delays in getting shipyard space.

At any rate, these delays will mean that some of Transocean’s most valuable rigs will be sitting in dry-dock during the next few months and not going out on new contracts. Transocean hasn’t been able to hire out all of its rigs on current sky-high day-rates as quickly as management had previously expected. It would seem that this weakness will persist through at least the second quarter of the year.

Transocean is still up smartly from my original recommendation and the basic deepwater rig story is intact. However, these heightened costs could weigh on the name for some time to come. I’m cutting Transocean to a hold and recommend maintaining a stop at $70. I’ll offer a more complete update in the next issue of TES, due out next week.

Our other recommended driller is Wildcatter Rowan (NYSE: RDC). This stock continues to benefit from sky-high day-rates in the Gulf; however, as I pointed out in last week’s issue, I don’t see a catalyst for huge upside from current levels.

I recommended selling off half your position last week—today Rowan reached our recommended stop for a solid 24 percent gain. Take that gain with Rowan and stand aside for now; we’ll now track the stock in How They Rate as a hold.

BJ Services (NYSE: BJS) has also stopped us out for a small gain overall. While business hasn’t deteriorated here yet, lower natural gas prices might crimp the company’s ability to keep raising prices. I’ll track BJ in How They Rate as a hold; stand aside for now.

The recommended railroads also continue to perform very well. Today’s earnings release from recommended regional rail Genesee & Wyoming (NYSE: GWR) blew away estimates; the stock is up nearly 15 percent on the news and we’re up nearly 27 percent overall in this recommendation.

In light of the recent run, I’m cutting Genesee & Wyoming to a hold recommendation for now; raise your stops to 37.50 to lock in a small gain.

Finally, for those interested in a way to play the selloff in oil prices, consider the airlines. I recommended US Airways Group last year, ultimately closing the trade out for a near 70 percent gain early in 2006.

The US airline industry is fundamentally unsound and has been for some time—these companies (with a few notable exceptions) consistently lose money. But lately they’ve been losing even more than normal because fuel costs have really hit the group’s margins. In fact, energy prices were the nail in the coffin that drove Delta and Northwest into bankruptcy.

While there will be some longer-term pain in the airlines, in the short run a drop in crude prices will trigger a sharp rally. This has happened on many occasions. And because the group is heavily shorted, short covering can lead to some very dramatic spikes to the upside.

US Airways is my favorite fundamentally but the stock reports earnings in a few weeks, adding to risk. I am adding Continental Airlines (NYSE: CAL) to How They Rate as a trade recommendation. Buy Continental Airlines under 24 with a stop at 19.45.

Keep in mind that this airline trade should be considered a pure speculation only; if you want to play it be sure to use a smaller-than-normal position size and be prepared for volatility. I’ll continue to track it in How They Rate and in future flash alerts.