In this issue:

In this last issue of 2016, I’d like to take a moment to thank subscribers, both old and new, who trust us to help guide them through the energy sector. Ever since oil started to fall from the $100/bbl level in mid-2014, the energy markets have been challenging. I have likened it to trying to swim up Niagara Falls.

Still, there have been opportunities. In 2015, refiners shined as oil and gas producers sold off. We anticipated the shift and recommended some big winners from that sector. In 2016, after a rocky start dropped oil and gas to decade-long lows, prices began to recover. Oil and gas producer stocks that sold off the previous two years bounced from their lows, with some of the most beaten-down names notching triple-digit gains.

We notched excellent returns with many portfolio picks, and took a few lumps along with the way. I have said many times that our realistic objective is to score more wins than losses, but we will never manage to entirely avoid the latter. We strive to distinguish between short-term dips and long-term declines predicated on changing fundamentals. Even that doesn’t always guarantee a win, but it tends to stack the odds in our favor.

While few of you are likely investing in all of our recommendations, I’m hopeful that calls like making Energy Transfer Equity (NYSE: ETE) our top Best Buy in April at $10 per share and adding TerraForm Power (NASDAQ: TERP) to the Best Buys list the prior month below $9 have tilted the scales in your favor.

Still, it’s possible that you lost money investing with us. If that’s the case, I hope you will at least take a look at the overall portfolio performance in the next issue and take note that we are regularly outperforming the relevant market indices. Over time, your energy investments should outperform the market as long as we continue to do so.

In upcoming issues, we will be digesting the 2016 annual reports, and highlighting potential winners and losers based in part on write-offs and new proved reserves that have been booked. In addition to conventional energy picks, we will continue to look for underappreciated odd ducks like Enviva Partners (NYSE: EVA), a wood pellet manufacturer I have touted ever since its 2015 IPO, and one that returned 32% for subscribers since we recommended it nine months ago.

My view is that the oil and gas industry has turned the corner, and that its equities will again outperform the broader stock market in 2017. I especially like the MLP sector, which has undeservedly lagged the energy rally this year. I expect it to bounce back in 2017, and we have two MLP picks among the three new recommendations we’re making in this issue. We’ll soon have more for MLP investors as well as those who prefer not to deal with the additional tax issues that can arise from directly owning these advantaged vehicles.

Again, thank you all for joining us this year. I hope you all made money in 2016, and that 2017 turns out even better.

Portfolio Update

• CVR Energy (NYSE: CVI) added to Aggressive Portfolio; buy below $30

• Tesoro Logistics (NYSE: TLLP) added to Growth Portfolio; buy below $60

• Archrock Partners (NASDAQ: APLP) added to Growth Portfolio; buy below $19

Commodity Update

Oil prices continue to creep higher ahead of the pending OPEC production cuts. West Texas Intermediate and Brent crude grades remain above $50 per barrel. Natural gas continues to trade well above $3 per million British thermal units as storage levels have finally fallen below the five-year average (see the image below the commodities table.) Heating oil and propane prices also continue to rebound.   

In Other News

• President Obama has “indefinitely” banned drilling in the Arctic and Atlantic oceans

• EPA released the final report from a multi-year study, “Hydraulic Fracturing for Oil and Gas: Impacts from the Hydraulic Fracturing Water Cycle on Drinking Water Resources”

• The number of U.S. rigs drilling for oil rose by 13 to 523 in the week ended Dec. 23, marking the eighth consecutive increase

• Memorial Production Partners (NASDAQ: MEMP), Forbes Energy Services (OTCMKTS: FESL) and Bonanza Creek Energy (NYSE: BCEI) announced plans to file for Chapter 11 bankruptcy protection over the next few weeks

• The 24 analysts surveyed by Bloomberg predicted an average 2017 oil price of $58/bbl.