In this issue:

It’s not a glaring change, but after urging caution in discussing our last Best Buys list six months ago, we’re more risk-tolerant now that oil prices have crashed and some of the most promising smaller drillers have been discounted like they’re never going to rise again. We’ve hardly thrown caution to the winds, though, starting the list off with two financially conservative yet increasingly prolific shale champions. A handful of midstream services providers round out the list; they’re largely immune from short-term price fluctuations and have been discounted excessively. In fact, a couple of such selections have dramatically outperformed the general slump in energy equities.

As Robert’s predictions preview makes clear the near-term outlook for energy prices must be tempered, if only by the knowledge that bear markets often last longer than many investors expect.

But it’s also highly likely that crude sellers have overshot their mark, with prices low enough to discourage the near-term investment needed to meet medium-term demand. If the market corrects the extent of its correction next year, some recent sellers may yet come to regret booking those tax losses.

• Chesapeake Energy (NYSE: CHK) transferred to Growth Portfolio

• Whiting Petroleum (NYSE: WLL) buy limit reduced to $40 in Growth Portfolio

• The updated Best Buys list is as follows:

1. EOG Resources (NYSE: EOG)

2. Devon Energy (NYSE: DVN)

3. Energy Transfer Equity (NYSE: ETE)

4. EQT (NYSE: EQT)

5. Chesapeake Energy (NYSE: CHK)

6. Whiting Petroleum (NYSE: WLL)

7. Energy Transfer Partners (NYSE: ETP)

8. WPX Energy (NYSE: WPX)

9. Carrizo Oil & Gas (NASDAQ: CRZO)

10. ConocoPhillips (NYSE: COP)

11. Jones Energy (NYSE: JONE)

12. National Oilwell Varco (NYSE: NOV)

13. Targa Resources (NYSE: TRGP)

14. AmeriGas Partners (NYSE: APU)

15. Global Partners (NYSE: GLP)

Commodity Update

The decline in crude oil futures has slowed since our previous report, while natural gas futures suffered a large drop. West Texas Intermediate (WTI) fell to $56.73 a barrel (bbl), down $1.30/bbl since our previous issue. Brent was down $0.66 over the past two weeks to $61.40/bbl. But natural gas is the big story, tumbling since our previous report by $0.64 per million British thermal units (MMBtu) to $3.16/MMBtu. This week’s Weekly Natural Gas Storage Report showed inventories 7.3% below the five-year average, but for the first time in a year they were no longer below their level of a year earlier. This is a significant development, which I will discuss in an article below.

In Other News

• Continental Resources (NYSE: CLR) and Rex Energy (NASDAQ: REXX) became the latest companies to announce reductions in capital budgets for 2015 in response to falling oil prices 

• Occidental Petroleum (NYSE: OXY) is reportedly in talks to acquire drilling rights to 82,000 acres in the Permian Basin from Three Rivers Operating Company

• Following a series of legal setbacks this year related to the Gulf of Mexico oil spill, BP (NYSE: BP) is now arguing for a reduction in its penalty based on the falling price of oil. More on BP below

• Natural gas prices have tumbled as the start of winter has been warmer than normal   

• CNN reports that the price of gasoline has dropped for 89 consecutive days, and is now at a five-year low