Last night, following the second round of feasting, I took a minute to flip open my phone to see how the OPEC meeting went. Looking at the price of oil, I hit a sudden case of indigestion. That was when I knew how bad today would be.

And it hasn’t disappointed. My entire book is down 10% right now. I’m down almost 15% for the year. The energy & gas sectors are solely responsible for this slaughter, taking me from +25% to -15% in a quarter.

Jim Cramer wins, folks. This is brutal. But I’m going to hold fast through it.

I can’t believe that Saudi Arabia is actually waging a price war against the USA. Why the hell would they? We don’t even export, and don’t use barely any of their oil.

If I were Russia or Venezuela or an Iran puppet nation, I’d be looking at the Saudi’s with crazed, lunatic fringe conspiracies ringing in my ears. I don’t know who Saudi Arabia is trying to kill off, exactly. But the most prescient answer may just be “tomorrow’s oil and gas projects”.

The projects that are online now are set for a few years. Hedging has been erected to support them. None of my positions have seen any change in business – that’s the only thing keeping me sane and focused right now. I want to panic, but I just can’t yet.

Check out this report on oil in the Permian Basin (page 14). Average cost per barrel has declined to $55 per barrel. The $80-90 number only applies to new projects.

The average cost per barrel of the Bakken, Eagle Ford, and Permian formations together is estimated at $60 per barrel.

Business Insider posted this graphic awhile back (by Morgan Stanley) that breaks down the extraction cost per barrel (presumably as of 2013-2014, BI is notoriously horrible about leaving off critical information). You can see the first victims of the oil price decline are Arctic drilling and oil sands (read Canada).

You will also notice that North American shale is not so different from so much oil and gas production elsewhere in the world. Yes, the “average” cost of production is higher. But look at the band; it is contained inside the same maximum range as so much else of the world’s oil and gas production. After Arctic and oil sands plays get cut in half, the next round of production cuts will presumably fall fairly even handed, across the highest cost developments, globally. That hardly spells the end times of the USA fracking boom.

Here’s a supporting set of data from Business Insider, provided by Citi. This post is more interesting, because there is a second graphic that shows the cost of every international oil and gas project, by location.

All this trouble for what really isn’t even a problem in the first place. The EIA short term outlook for crude consumption vs. production shows what can hardly be called an issue – a million barrel a day surplus in historical context. The largest gains in the oil supply surplus came from the first two quarters of 2014. You can hardly call those unprecedented; we experienced a much worse supply shock back in the first half of 2012.

Also look at the historic unplanned crude shortages from the Middle Eastern countries (page 15). In the past year alone, half a million barrels a day came back online after having been unexpectedly dropped off. You can see the effect of two separate war times breaking out in Libya. Saudi Arabia is suddenly popping up. Add another country to the mix, or an expansion in lost production from one of those already on this list, and pretty quickly the million barrel global surplus is absorbed.

But the best blessing of all may just be the effects of low oil prices themselves. Globally growth has been terrible and Europe has been our poster child. But with the euro so low and cheap energy prices coming, we may just finally see old mother Europe do something…anything.

This is going to hurt very badly. I was too quick to add back to positions and far to willing to take on margin. But I’m going to stay calm, and wait to see what comes up next.

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Over the past week or so, I raised cash to 25%. This was good fortune, as HCLP, my mantelpiece position, has dropped 8% since I let up.

Today, I repurchased half of those shares, which I sold at $64.19 each, for $59.39.

It seems like good enough of a bet to me. HCLP is growing so fast… it’s trading at just over 17x Q3 2014 earnings estimates. I have no good way to guess what HCLP’s earning’s potential is over time; but 17x doesn’t seem unreasonable, particularly with a steady announcement of 5 year supply agreements being announced and 200% revenue growth last year. When you’ve managed to get in on the ground floor of such a high flying position, it just makes sense to hold long a core stake, and ride the waves.

This 8% drop is just another opportunity to make extra money, until such time as that logic is challenged. For the moment, HCLP just managed to touch its 20 day moving average for the first time since early June.

Next earnings announcement is in August. So tell me, who wants to stand in the way of this thing?

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HCLP just blew through $60, as analysts raise targets in response to the HAL announcement.

BAS is back above $27. I guess I could have held onto all of those shares, but I have no regrets. Retaining a 15% position in BAS is more than reasonable.

SLW is pushing its way to $26.

My only position that is down noticeably today is UEC. And that remains my smallest position at 5% of assets.

Fracking investments remain the place to be. Oil names are doing well by extension (and a high price per barrel). I’m telling you, coal will be the next thing to run.

Have a wonderful afternoon.

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I made a large series of sales in BAS for $26.23 on average. These shares were sold for an average gain of 116% from my initial purchase price a few years ago.

This sale brings BAS back in line to a 15% position in my portfolio. It had been almost 25%. The 10% cash raise will sit on my books for now.

I ran some numbers, and from their last report, I’m thinking BAS was probably worth about $8 a share. This massive move higher has been from the company managing to stop the losses they were taking every quarter. However, the next major risk to the shares will be execution; can the company turn a profit?

I think I can see how the company could make $1.60 a year in earnings pretty easily. That puts an 11 year break even point, which is about the top end of my acceptable range. At this junction, the shares are a fair price, in my book.

But I love the company, so I’ll be keeping the 15% position I have in them. I think they don’t just turn $1.60. I think they surprise us all and make $2.50-3 per share annually, sending the shares into the $30-40 range.

I cannot justify keeping the massive ~25% of my portfolio in BAS though. That’s too much, and I do have a lot of money sitting on the table here. I’m only willing to take regular risks that Basic Energy Services makes the next step successfully, even though I’m confident they will.

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Although my 40% cash position may create the illusion that I am missing out, such a view would be misplaced. Careful allocation and selection on my part is gifting me full participation in today’s excess in spite of recent reservation.

BAS is up 7.29% at the time of this writing, as the natural gas cycle makes full leaps and bounds forward. As I told you it would transpire, this is where your money must be at for the next 10 years. Companies and partnerships like BAS and HCLP will grow at unprecedented rates, facilitating the United States of America back to Her rightful status as Greatest Country and Loan Superpower on planet Earth.

HCLP is also up 2% and taken altogether, my portfolio is up .9%.

As for the excitement about Yellen, I don’t fully understand the sentiment. If you go back and read or listen to anything from Yellen, it’s pretty clear she has been consistently more in favor of Federal Reserve supporting markets and the economy than Bernanke was.

Despite that, there is good reason to believe a deep pullback may come soon enough (first half of 2014). We can’t all be millionaires.

UPDATE If you followed my initial purchase of BAS on 8/16/2012, you are presently up 65% on the position. If you’ve been trading along with me inside The PPT, you are up far more.

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I usually am a little skeptical about the usefulness of guidance. Executive guidance can be some of the worst – people who are intimately wrapped up in a business tend to have a hard time knowing when to say “yeah, this ship is going down.” In fact, business school strictly forbids it.

But the most recent guidance from BAS, for whatever it’s worth, beat expectations. December was supposed to be a heinous month. Instead, it was merely a horrid month. Take that with a grain of salt.

Well rig service hours were unchanged, at about 61%. My long term thesis involves that number catapulting back to 80%+ eventually, which is why I own the name.

Fluid service truck count is up to 1,003 units. Fluid service truck hours are up 8% this year.

The company saw surprise strength in December (which is really just less flaccid weakness, pretending). Instead of the forecasted 7-8% drop in revenues that were expected, they anticipate they only saw a 6-7% drop.

This is all good and well and hearsay. What caught my eye was that they are also reporting their customers are reporting increases in 2014 spending. Now that’s useful to me.

The natural gas/well servicing industry was more or less crushed in 2011 thanks to generally bad dealings by one Aubrey McClendon. That and a half dozen other idiotic moves saddled CHK investors with 60% equity losses, taking the company to par with the lows set in 2009 (which is saying something).

This left most small well servicing firms in quite a predicament. You see, as a group they were pretty much a “no cash on hand” industry. There were only a few, like BAS, that had adequate financing to weather the storm.

A sea of mergers and acquisitions later (not to mention a few major bankruptcies; looking your way PSN.TO) and we may be ready to get back to fair weather. The natural gas spot price has largely recovered. And now BAS is reporting that client spending is looking up.

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