In this issue:

With Texas overtaking major Mideast producers thanks to the surge of crude from the Permian and the Eagle Ford, midstream opportunities abound in the state. This week we review the major infrastructure builders in the Eagle Ford, including several that have already notched big gains in our portfolios.

Those portfolios continue to outperform the energy sector and the broader market by impressive margins, as we’re happy to report that many of our recent picks are leading the way. Yet energy has lagged badly over the course of this five-year bull market, and could continue to play catch up barring a major correction in oil or gas prices.

Our latest recommendation is a small but fast-growing Appalachian driller that may have just picked the pockets of an oil major. It’s a reminder that opportunities pay off only for those willing to grasp them. With many of our best-performing picks still fetching modest cash flow multiples in an increasingly expensive market, we’re hopeful the best is yet to come. Happy Labor Day.

Portfolio Action Summary

• Rex Energy (NASDAQ: REXX) added to Aggressive Portfolio; buy below $18

Commodity Update

Crude oil prices have weakened further since our last issue, with the price of  West Texas Intermediate (WTI) dipping toward $90 per barrel (bbl) and the price of Brent crude dropping below $100/bbl for the first time in over a year. On Tuesday, Aug 26 WTI was trading at $93.54, a decline of $3.54 in the last two weeks. Brent crude bounced back after closing below $100/bbl, and traded on Tuesday at $102.58, which is actually $0.15/bbl higher from two weeks ago. But the relative weakness in WTI has increased the Brent-WTI spread to $8.89/bbl, a bullish trend for refiners, which often see profits rise as the price of domestic crude drops relative to the Brent global benchmark.

Natural gas prices continue to hover around the $4 per million British thermal units (MMBtu) mark, trading on Tuesday at $3.94/MMBtu, a decline of $0.03/MMBtu from our previous report. The current price is $0.39/MMBtu higher than the price a year ago, and natural gas inventories remain 17% below the five-year average for this time of year. The Energy Information Administration (EIA) recently projected that natural gas inventories will be about 10% below normal at the beginning of injection season in early November, meaning another cold winter could send natural gas prices soaring again.

In Other News

• Enbridge (NYSE: ENB) has found a way to increase the volume of crude shipped to the US from Canada without getting bogged down in a US State Department review such as the one that has kept the Keystone XL pipeline in limbo for the past four years.

• Nearly $200 billion of natural gas projects in Australia are nearing completion, with seven companies set to begin exporting liquefied natural gas (LNG) between 2014 and 2017. But Chevron (NYSE: CVX) is struggling to lock in 20-year sales contracts for its $54 billion Gorgon LNG project as buyers hold out for better prices in anticipation of US LNG exports starting up late next year.

• Russia’s benchmark Urals oil fell to $98 a barrel, now well below the $114-per-barrel price assumed in Russia’s annual budget.  

• A new report by the Atlantic Council predicts that Mexico’s recently enacted energy reforms will lead to “an energy renaissance” for the country.

• Consol Energy (NYSE: CNX) and joint venture partner Noble Energy (NYSE: NBL) filed paperwork with the SEC for a Marcellus midstream MLP IPO that will be called Cone Midstream Partners.  

• Alaskans voted against reinstating higher taxes on oil companies that former governor Sarah Palin had put in place in 2007.