Editor’s Note: Join Elliott Gue and Roger Conrad at the World MoneyShow Orlando, Feb. 4 – Feb. 7 at the Gaylord Palms Resort. The investment mavens behind Capitalist Times, Conrad’s Utility Investor and Enegry & Income Advisor will share their market outlook and best ideas in these uncertain times. Don’t miss out on this must-attend event. Register for free on the MoneyShow site to reserve your place at the conference.

As a holiday bonus, we’re giving Income Insights readers a glimpse behind the paywall at Energy & Income Advisor, where serious individual and professional investors will find high-quality coverage and analysis of all things energy.

Each month, Elliott Gue and I host an exclusive Live Chat where we tackle any and all questions from subscribers—an invaluable resource in these uncertain times.

December’s Live Chat lasted more than seven hours, a testament to our dedication and the thorny issues on many investors’ minds. Here are some excerpts from the proceedings. (Energy & Income Advisor subscribers can click here to access the entire transcript.)

Questions and Answers

Q: With all the craziness surrounding oil prices, is Shell Midstream Partners LP (NYSE: SHLX) still a buy?

A: Shell Midstream Partners’ growth story involves minimal exposure to energy prices, thanks to Royal Dutch Shell’s (LSE: RDSA, RDSB; NYSE: RDS A, RDS B) extensive North American midstream assets that could be dropped down to the MLP. The stock still trades below our buy target.

Q:  Now that oil has found a temporary stopping point in its fall from grace, do you feel that it eventually will bottom below $50 per barrel?

A: Although it’s tough to be that precise, West Texas Intermediate would probably need to slip to about $40 per barrel at some point next year to force the type of CAPEX reductions that would be needed to balance the market.

The recent uptick looks like year-end short covering and an oversold bounce. It’s too early to try and pick a bottom. We don’t expect a v-shaped recovery in oil, though the price could bounce to $70 per barrel before heading lower.

The good news is that OPEC’s decision to maintain output should accelerate a correction that would have occurred eventually anyway.

Q: If oil drops to $40 per barrel, why not sell the MLP space and buy in at a much lower cost basis?

A: A lot of the midstream names are perceived as safe havens and may not pull back as much. That strategy would make sense for names with more exposure to commodity prices.

Q: We hold mostly midstream MLPs in our portfolio. After their recent pullback, do these names still make compelling investments for patient money? What stocks are your best buys?

A: Midstream MLPs are still worthwhile investments, though the space could return to more of an income-oriented story—after some of the momentum that emerged in recent years exits the space. We continue to like all the names in our MLP Portfolio’s conservative allocation.

Q: Your addition of American Airlines (NSDQ: AAL) as a hedge at the start of 2014 has worked like a charm.  Do you feel that the tanker industry might have a similar boost in profitability? I recently read that a $10 per barrel drop in the price of crude oil translates into $2,400 in daily fuel cost savings for tankers.

A: We considered that possibility, but the tanker industry remains oversupplied. The space might become more interesting in another year or two.

Q: You sound more pessimistic on today’s chat. Has anything changed?

A: We’ve been cautious on oil and natural-gas prices for some time, seeing more downside than upside risk. However, this uncertainty creates opportunities—especially when higher-quality names sell off with the rest of the energy patch. There are plenty of growth stories out there that don’t depend on the direction of crude-oil prices. Investors should take advantage of any near-term bounce in crude-oil prices to exit any marginal services or exploration and production names. Far too many tourists are looking to buy the dip in energy. The time will come, but there’s no need to be a hero and catch a falling knife; wait until they’ve clattered to the ground and pick up the ones that can still cut it.

Q: Do you foresee a scenario where oil prices drop below the cost of production such that upstream operators reduce their output and midstream names lower volumes to transport through their pipelines?

A: The biggest risk will be in the marginal basins such as the Mississippi Lime and Barnett Shale as well as emerging plays such as the South-Central Oklahoma Oil Province (SCOOP) pioneered by Continental Resources (NYSE: CLR). Gathering and processing names will have the most to lose. Producers likely will concentrate their firepower in their best plays. Refracking of older wells would be another option to grow output at a lower cost.

Q: AmeriGas Partners LP (NYSE: APU) appears to be a consistent dividend payer but offers little in the way of capital appreciation. Do you foresee any situation that would change this dynamic?

A: The investment proposition in AmeriGas Partners skews more toward the income side, though the firm has delivered steady distribution growth over the years. Any acceleration would come from a big acquisition; the time could be ripe for that now that the firm has digested Heritage Propane.

Q: Which stocks would you avoid in the current environment?

A: We’d steer clear of most upstream names right now. Even if oil prices are close to a bottom, a lot of producers haven’t revised their guidance for capital expenditures for 2015 and beyond. Once we start to see these adjustments, we’ll be a lot more interested in a handful of higher-quality names. At that point, we’ll have a better understanding of what to expect in terms of returns at lower oil prices. Upstream MLPs will continue to face headwinds; the first distribution cut in this space will take many of these names down a peg. We’d also expect some gathering-and-processing names that have exposure to marginal basins or geographically disadvantaged plays.

Q:  Apache Corp (NYSE: APA) has taken a beating of late. I know it’s not in any of the Model Portfolios, but any comment on this name?

A: We like the recent sale of Apache’s interest in the Kitimat LNG (liquefied natural gas) export project—a divestment that was a long time coming. The stock has been beaten up with most exploration and production names. Management embarked on restructuring later than most of the major independents. We don’t think now is the time to wade into the E&P space. And when the time comes, we prefer EOG Resources (NYSE: EOG) for its high-quality assets, low costs production costs, consistently excellent execution and basin optionality. Occidental Petroleum Corp (NYSE: OXY) is another name that could become interesting down the line. The company has boatloads of cash, low production costs and a disciplined management team.

Q: If the oil market takes time to work its way through the down-cycle, won’t most of the sector take a conservative tack and cut dividends until they have greater clarity? It seems like prudent management teams would be to be more conservative with cash to avoid potentially violating debt covenants.

A: It depends upon which part of the energy patch you’re asking about. Most of the upstream MLPs run tight distribution levels, which makes them more susceptible to the downdraft in oil prices. A lack of liquidity in the futures market will also make it more difficult to hedge liquids. Some of these names likely will cut their payouts to conserve cash and shore up their balance sheets.

Then, of course, there’s SeaDrill (NYSE: SDRL), which we repeatedly warned would cut its dividend. Although the contract driller probably could have maintained its dividend in 2015, management made the right decision—of course, investors who continued to hold the stock for the yield likely wouldn’t agree.

As for high-quality midstream names, the risk of a distribution cut appears limited, though we would expect these MLPs to be more conservative about raising their distributions or making final investment decisions on growth projects.