Merger and acquisition activity involving oil and gas companies has declined by about 19 percent from year-ago levels, based on the total value of the deals announced thus far in 2016.
North America remains the most active market, with about 61 percent of the targets and 69 percent of the buyers calling the region home.
With all the upheaval in the global energy patch, many oil and gas industries are ripe for consolidation, especially the hardest-hit portions of the value chain.
However, our long-standing rule of thumb when playing potential takeover targets is to focus on names that offer exposure to a compelling upside story; even if a deal never materializes, our position should appreciate in value.
Master limited partnerships issued significant amounts of debt and equity to build pipelines and other infrastructure needed to support the shale oil and gas revolution. The midstream construction boom has started to wind down, ushering in a period of consolidation when management teams focus on strengthening their balance sheets.
Weak demand, a wave of contract expirations and excessive leverage are all reasons to remain bearish on offshore contract drillers. Investors should continue to avoid these value traps.
Overall equity issued by energy-focused master limited partnerships (MLP) declined by 58 percent last year; we expect this trend to continue in 2016.
Our near-term outlook for crude-oil and natural-gas prices hasn't changed, though investors should consider taking profits on demand-oriented names that tend to thrive when oil prices dive.
US oil production appears to be bottoming, but investors seeking to profit in an environment where prices will likely range between $40 and $60 per barrel must pay attention to basin-specific trends as well as companies' balance sheets and acreage quality.
We delve into some the recent trends in mergers and acquisitions involving master limited partnerships and other midstream operators.
Second-quarter earnings season is done and dusted for midstream master limited partners (MLP) that own pipelines, processing and fractionation capacity.
The Master Limited Partnership (MLP) Association hosted its annual investor conference in Orlando last week and, as always, the Energy & Income Advisor team was on the ground to talk to management teams and fellow investors. Here are some of our bigger-picture takeaways from the event.
After plunging almost 50 percent from early May 2015 to mid-February 2016, the Alerian MLP Index has defied the critics and torched slow-to-react short sellers by surging 45 percent since its nadir. But the easy money has been made: Investors must now focus on which names are best-positioned to grow in an environment where energy prices remain lower for longer.
Elliott and Roger on Oct. 20, 2016
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