In this issue:

This is the age-old curse of energy production: the costly projects that allow it must often be planned many years in advance, while the energy prices meant to cover those costs are as changeable as the weather.

This is especially true of liquefied natural gas, which requires huge engines to effect the necessary cooling and construction outlays of $10 billion or more for some of the larger undertakings.

The recent boom in LNG export development was based on the high crude prices to which LNG is linked, and the subsequent slump threatens to inflict losses on customers locked into long-term fixed-price contracts as well as developers who failed to secured the required offtake and financing commitments in time. This week we look at the fallout for the LNG trade in general and for one U.S. project of particular interest to our subscribers.

And while it’s not time to panic yet, it’s definitely time to consider the potential downside.

On a happier note, we’re recommending two MLPs profiting from surging crude production in the Eagle Ford even at current depressed prices, with more growth to come. The Eagle Ford continues to surprise because the breakeven cost of producing from its best acreage keeps dropping.

Eagle Ford condensate can now be exported after minimal processing, in contrast to the mammoth expense of turning gas into LNG. In the current low-price environment, that matters a great deal.   

Portfolio Update

• NuStar Energy (NYSE: NS) added to Growth Portfolio. Buy below $70

• NuStar GP Holdings (NYSE: NSH) added to Growth Portfolio. Buy below $45

Commodity Update

We have now seen the price of West Texas Intermediate (WTI) make two runs at $40 per barrel (bbl) only to turn back upward before reaching that mark. Saudi air strikes in Yemen have gotten a lot of credit for this resurgence, but in fact crude prices had risen nearly 10% from recent lows prior to news of the attacks. Once the news hit, prices surged another 5%, but the following day gave back those gains. So the Saudi situation really had no effect on the rise of WTI over past two weeks to $48.87 per barrel (bbl), up $4.03/bbl since our previous issue two weeks ago. The price of Brent rose $1.47/bbl to $56.14/bbl. Natural gas prices continue to show weakness, trading down $0.14 per million British thermal units (MMBtu) to $2.59/MMBtu.

In Other News

• Saudi Arabia and allies launched an attack against rebels in Yemen, briefly rattling oil traders concerned that the violence could spread

• Whiting Petroleum (NYSE: WLL) has apparently stopped shopping itself and instead announced big stock and debt offerings, sending shares plummeting 22%

• The International Air Transport Association projects that the airline industry — which generally benefits from lower oil prices — will pull in after-tax profits of $13.2 billion in 2015, up from $11.9 billion in 2014

• The U.S. Supreme Court is set to hear arguments from generators of coal-fired power, which are suing the Environmental Protection Agency on the grounds that its hazardous pollution caps impose costs that are unreasonably high    

• Striking refinery workers at the Royal Dutch Shell (NYSE:RDS.A) refinery in Deer Park, Texas are scheduled to return to work after ending a walkout that lasted nearly two months

• The rig count in North Dakota has dropped below 100 for the first time in more than five years

• Mexico’s PEMEX is awaiting approval from the U.S. Commerce Department to allow it to swap 100,000 barrels per day of heavy crude more suitable for U.S. refineries for a similar amount of lighter U.S. crude.