In this issue:
 
 It costs a lot to liquefy natural gas, ship it halfway across the planet and then turn that superchilled liquid back into gas for use as fuel. Our review of the economics of this trade suggests there will be plenty of winners, especially among the players who don’t enter the game late.

Two natural gas producers with promising crude sidelines and rock-solid financials are joining the Growth Portfolio with this issue, and we believe these stocks provide a lot of upside with less downside risk than you might expect. Devon and WPX are hardly sexy or speculative names, but both are run by conservative industry veterans with a knack for maximizing the returns for shareholders.

Finally, we’re taking profits on one recent portfolio winner, and getting out of several other positions less attractive than the core holdings we’ve profitably recommended for years. We wouldn’t want these moneymakers to get lost in the shuffle and the noise.  

Portfolio Action Summary

• Adding Devon Energy (NYSE: DVN) to the Growth Portfolio; buy below $67

• Adding WPX Energy (NYSE: WPX) to the Growth Portfolio; buy below $22

• Adding Kinder Morgan (NYSE: KMI) to the Conservative Portfolio, buy below $42

• Selling Kinder Morgan Energy Partners (NYSE: KMP) from the Conservative Portfolio

• Selling US Silica (NYSE: SLCA) from the Aggressive Portfolio

• Selling Pacific Drilling (NYSE: PACD) from the Aggressive Portfolio

• Selling Ensco (NYSE: ESV) from the Growth Portfolio

• Selling World Fuel Services (NYSE: INT) from the Growth Portfolio

• Moving Helmerich & Payne (NYSE: HP) and Whiting Petroleum (NYSE: WLL) from the Conservative Portfolio to the Growth Portfolio

• Removing the Best Buy designation from Cabot Oil & Gas (NYSE: COG) in the Growth Portfolio and adding it for Growth Portfolio holding EQT (NYSE: EQT); buy EQT below the newly raised target of $95.

Commodity Update

Oil prices continued their recent slide, with no apparent short-term catalysts to prop them up. West Texas Intermediate (WTI) dropped to $103.38/bbl, a decline of $3.96 over the past two weeks and $8.83 over the past four weeks. Brent crude was down $2.60/bbl to $108.85. The Brent-WTI differential widened slightly to $5.47 from $4.11 two weeks ago, but it will likely need to climb back above $10/bbl to significantly brighten the outlook for refiners. The front-month contract for natural gas closed Tuesday at $3.51/MMBtu, down 9 cents over the past two weeks.  

In Other News

• After years of delays, Kashagan, the world’s second-largest oil field, has started to produce crude in Kazakhstan   

• Shares of Northern Tier Energy (NYSE: NTI) were down sharply in the wake of a fire that led to lower production guidance for the current quarter

• The EPA published draft regulations for new coal-fired power plants that they will likely be economically impossible to meet

• The Norwegian government abandoned support for a project that was supposed to demonstrate carbon capture and storage on commercial scale

• German Chancellor Angela Merkel received a vote of confidence for her plans to wean Germany off nuclear power and fossil fuels when her party fell just shy of an absolute parliamentary majority