So far in 2021, oil and gas stocks are far and away the stock market’s top- performing sector. In fact, capital gains alone for the S&P Energy Sector Index and Alerian MLP Index are more than four times the total return on the S&P 500.
Like the previous two, this issue of Energy and Income Advisor focuses on energy companies’ Q1 results and guidance updates. And what we saw is very much a potential driver for more gains this year in the best in class energy stocks we’ve been recommending.
Not only are companies reporting continuing improvement in industry fundamentals. But their numbers—particularly solid dividend coverage and rising levels of free cash flow after distributions—demonstrate management has adapted business plans and financial strategies to the current stage of the energy cycle.
Too many small owners lacking critical scale and unprecedented roadblocks to new energy pipeline infrastructure: That’s what was at the core of the unprecedented wave of US oil and gas midstream dividend cuts and bankruptcies of the past few years. Now those same forces are spawning something considerably more positive for investors
There may come a day when US transportation is 100 percent electrified and homes are heated with blended hydrogen. But in the here and now, oil and gas pipelines are essential infrastructure. Exhibit A is the havoc wreaked by the successful hack of systems at the Colonial Pipeline this month.
Even without a repeat of the company’s Q1 windfall, the benefits to Kinder Morgan Inc.’s (NYSE: KMI) underlying business and balance sheet are likely to continue flowing throughout the rest of 2021 and beyond.
Shale exploration and production (E&P) giant, Pioneer Natural Resources (NYSE: PXD) announced a deal to acquire privately-held DoublePoint Energy, but the reception on Wall Street has been less than enthusiastic.
Single digit temperatures, record snowfall, millions of utility customers without service, nearly one-third of the state’s power generating capacity shut down and spiking electricity prices: That’s the damage so far from the Great Texas Power Crisis of 2021, which continues wreak havoc across the Lone Star State.
This is the third and final edition of a series of roundtable Q&A discussions focusing on Q1 results and guidance updates from management teams for 2021 and beyond. For more individual company analysis, see this issue’s Portfolio section.
Our outlook remains bullish for energy prices and sector stocks. That means we expect the number of names on the Endangered Dividends List to decrease further in 2021. And we believe odds favor most of the remaining 12 companies still on the EDL will avoid cuts when they declare their next payouts in July and August.
Results from the Portfolio and High Yield Energy List companies are now all in. The most important takeaways are all of our recommended companies are executing on conservative business plans and their dividends are safe and well covered with cash flow. They’re also fully adjusted to the current stage of the energy price cycle, and increasingly well position to capitalize on the recovery we see unfolding the next several years.
This is the second in our series of roundtable Q&A discussions focusing on Q1 results and guidance updates from management teams for 2021 and beyond. For more individual company analysis, see this issue’s Portfolio section.
Our outlook remains bullish for energy prices and sector stocks. That means we still expect to see a declining number of names on the Endangered Dividends List going forward, with Q1 results the next opportunity for companies to drop off.
Elliott and Roger on May. 26, 2021
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