Two of the biggest challenges facing energy investors so far this year have been extreme volatility in oil prices and the historic disconnect between the path of oil prices and the performance of energy stocks.
In this issue we take a closer look at both issues.
In particular, we’ll review some of the fundamental factors and narratives that have catalyzed major speculative inflows and outflows in the oil market so far in 2019 and our latest assessment of the outlook for oil in the second half of this year.
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.
The conventional wisdom is the MLP sector is dead money. That’s a mistake for several reasons.
We still smell investor panic in the air. But the trading action of the past couple days is nonetheless encouraging, as the stock market has reversed big intra-day selloffs to finish higher.
Antero Midstream Partners' (NYSE: AM) merger with its general partner is the latest "simplification deal in the MLP sector.
There have been no distribution cuts since the previous issue of Energy and Income Advisor. Unfortunately, we continue to see elevated risk for a number of companies, and particularly for the 13 currently on our Endangered Dividends List.
Over the past 12 months, West Texas Intermediate (WTI) oil prices have jumped as high as $76.41/bbl and plummeted as low as $42.53/bbl as sentiment in the commodity futures market lurched from bullish to bearish extremes.
Talking Point #1: Over the past 18 months we’ve seen basis differentials rise quite sharply. Those regional pricing differences for crude oil and natural gas are up at least in part to insufficient pipeline infrastructure, including what serves key shale fields like the Permian Basin.
The next round of distribution declarations in our Energy and Income Advisor coverage universe isn’t for another month. But Sanchez Midstream Partners LP (NYSE: SNMP) is at elevated risk to announce a cut sooner, now that its parent and largest customer Sanchez Energy (OTC: SNEC) is for all practical purposes bankrupt.
Unfortunately, we continue to see elevated risk for a number of companies, and particularly for the 13 currently on our Endangered Dividends List. For more on where the risk lies at individual midstream energy companies and MLPs, see the comments column in our now updated MLP Ratings table, including analysis of first quarter results, distribution coverage and debt-to-EBITDA figures and prospects for potential roll-up mergers. It’s posted on the Energy and Income Advisor website under the “Portfolios” tab.
Elliott and Roger on Jul. 1, 2019
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