Once again, fear has the energy sector in its talons. Benchmark WTI Cushing oil has yet to break its mid-June low. But the S&P 500 Energy Index has already dropped by nearly 9 percent this month alone.
The Alerian MLP Infrastructure Index is down more than 11 percent. Worst hit of all have been mid-sized independent producers and the midstream companies and MLPs that serve them.
For example, Antero Midstream Corp (NYSE: AM) and Antero Resources (NYSE: AR) are off by 14.5 percent and 19 percent so far this month, respectively. Oasis Petroleum (NYSE: OAS) and Oasis Midstream Partners (NYSE: OMP) are lower by 49 percent and 22.6 percent, respectively.
Eagle Ford, Texas-based midstream company Sanchez Midstream Partners (NYSE: SNMP) eliminated its quarterly distributions this week after the bankruptcy filing of its largest customer and general partner, Sanchez Energy Corp (OTC: SNECQ). The important question for most energy sector investors now is where the hammer will fall next.
Kinder Morgan Inc (NYSE: KMI) kicks off earnings reporting season for the US energy midstream sector with no real surprises.
In an industry where time equals money, permits for new US oil and especially natural gas pipelines were once basically a formality. But the Federal Energy Regulatory Commission's lack of quorum in early 2017 led to delays that allowed record fundraising by pipeline opponents and legal challenges to projects on an unprecedented scale.
Fair value is always in the eye of the beholder. But it’s clear big money is now seeking value in energy, despite fluctuating oil prices.
There have been no dividend cuts in our Energy and Income Advisor coverage universe in the brief time since the previous issue went to post. Rather, the majority of EDL members have elected to maintain the same payout rates for at least another quarter.
Midstream: The Strong Get Stronger
Chances are you’ve seen the disqualifier “past performance may not be predictive of future results.” But while that’s perfectly apropos for financial products and services, the opposite is increasingly true for midstream energy companies and MLPs.
Since I began covering the energy industry in depth some two decades ago, one of the quarterly events I look forward to most is Schlumberger’s earnings release. There have now been three different CEOs since I began covering this company and market conditions for the company have changed dramatically over the years.
There have been no distribution cuts since the previous issue of Energy and Income Advisor. EQM Midstream Partners (NYSE: EQM), its 58.49 percent owner and general partner Equitrans Midstream Corp (NYSE: ETRN), GasLog Partners (NYSE: GLOP), Martin Midstream Partners (NSDQ: MMLP) and Vermilion Energy (TSX: VET, NYSE: VET) have all reported second quarter results and issued guidance.
Q: Oil and gas prices in Canada remain deeply depressed relative to US prices. What’s the timetable on closing that gap? How critical is that to the prospects of Canadian oil and gas companies?
A: Discounted Canadian prices for oil and natural gas are generally the result of insufficient takeaway capacity, which is most effectively dealt with by building new pipeline capacity.
Elliott and Roger on Jul. 31, 2019
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