In this issue:

Worrying that energy stocks have run too far too fast is a high quality problem. It certainly beats worrying about whether and how the industry will survive, as the market had for months, until just a couple of months ago.

We worry, though, that energy investors continue to overestimate the long-term profitability of many oil producers, which is why we’re currently recommending only a handful of the largest and most secure.

We have no such qualms about natural gas or the best producers of this still slumping commodity. As Robert notes in our lead story, energy investors likely won’t get another chance to buy into the oil patch with crude at recent lows of $25 a barrel.

But there’s still an opportunity to ride natural gas, which given its historical volatility remains quite near its own longtime lows. Our favorite names in the sector are up around 30% year-to-date and challenging the buy limits we set back in January. But the underlying commodity hasn’t really rallied yet, and when it does the extent of its rise could surprise, based on historical precedents.

So we’re raising the bar for the upstream recommendations with the most to gain from that revival.

Cabot’s most recent results are noted in Igor’s earnings roundup, which also features Schlumberger (NYSE: SLB) and Chevron (NYSE: CVX). If those stocks as well as many much more speculative oily names can trade where they are with crude where it’s at, then Cabot, EQT and Peyto can and will go much higher in the future.                        

Portfolio Update

• Peyto Exploration & Development  (OTC: PEYUF; TSE: PEY) upgraded to a Buy below $30 in Conservative Portfolio

• Cabot Oil & Gas (NYSE: COG) Buy limit raised to $30 in Growth Portfolio

• EQT (NYSE: EQT) Buy limit raised to $80 in Growth Portfolio

Commodity Update

Oil prices continue to rise. Since our previous issue West Texas Intermediate (WTI) rose $4.09 to $45.15/bbl, while Brent crude added $2.34 to reach $46.37/bbl. Natural gas prices rose a penny to $2.10/MMBtu.  

In Other News

• Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI) have abandoned their $34-billion merger after the Justice Department filed suit to block it

• Statoil (NYSE: STO) suspended oil production at its Gullfaks B oil platform and grounded part of its helicopter fleet after a crash in the North Sea killed all 13 people being ferried from the platform

• Results of a three-year investigation by the University of Cincinnati revealed zero impact from hydraulic fracturing on local water supplies

• Venezuela has instituted a two-day workweek in an effort to cope with severe energy shortages   

• Saudi Deputy Crown Prince Mohammed bin Salman announced plans for an IPO of 5% of Saudi Aramco as part of his “Vision 2030” for the kingdom

• The EIA reports that oil companies lost a total of $67 billion last year.