Six months ago, we returned from the 2018 MLP & Energy Infrastructure Conference with a full head of steam. Our most important takeaway: MLPs’ fundamentals and technicals were improving at the same time investor sentiment appeared to have sunk to a new low.
Our conclusion was we had a table pounding buying opportunity on our hands for the best MLPs. We highlighted the specifics in our June 15 roundtable “Picks, Pans and Takeways.”
Since then, MLPs staged a mild summer rally, only to give it all up and more in the autumn selloff following oil prices lower. But the underlying business fundamentals have continued to improve, especially for the sector’s best in class.
Antero Midstream Partners' (NYSE: AM) merger with its general partner is the latest "simplification deal in the MLP sector.
Dominion Energy's (NYSE: D) offer could do a lot to resolve uncertainty surrounding Dominion Midstream Partners LP's (NYSE: DM) future.
Last week, two more members of our Energy and Income Advisor Endangered Dividends List cut distributions. We strongly suspect they won’t be the last to do so before second quarter earnings reporting season is over.
Over the past two weeks the big story in energy markets has been oil price differentials, which was a major theme at this year's MLP and Energy Infrastructure Conference (MEIC) conference. However, scratch beneath the surface and there’s a lot more going on.
You can learn a lot about an industry by listening to earnings conference calls, digging into the quarterly numbers and financial results, but there's no substitute for boots-on-the-ground research.
How have MLPs recommended in Energy and Income Advisor fared year-to-date? Is there any reason to expect a better performance in 2019? The table “EIA Energy MLP Performance” highlights master limited partnerships recommended in three places: Our Actively Managed Portfolio, the Focus List and the “legacy” portfolios that we continue to track on the EIA website.
The latest two EDL members to announce dividend reductions are Bonterra Energy (TSX: BNE, OTC: BNEFF) and Sanchez Midstream Partners (NYSE: SNMP). Canadian oil and gas producer Bonterra is slashing its monthly payout from 10 cents Canadian to just a penny a share. That’s a direct consequence of a decline in its realized selling price for oil to just CAD21.50 per barrel from CAD77.20 since the end of the third quarter.
Are you concerned by the large number of energy company dividend cuts we seem to be seeing this earnings season? - Roger Conrad: Let’s get one thing straight right up front. There’s no such thing as a “good” dividend cut. When a company reduces its payout, investors lose income and share prices typically fall to reflect the lower amount. That’s why we want to avoid stocks at risk of dividend cuts and it’s the reason we have an Endangered Dividends List.
Buckeye Partners (NYSE: BPL) is cutting its quarterly distribution for the first time in its 30-year plus history, from $1.2625 to 75 cents per unit. That’s a -40.6 percent reduction starting with this month’s payment, an amount right in line with our expectation.
Roger Conrad: A month ago, we talked about the super majors as really a breed apart in the energy business, particularly for anything to do with long-term business resiliency. A lot of that has to do with balance sheets. I mean there are plenty of sovereign governments that can’t match the Aaa credit rating ExxonMobil (NYSE: XOM) draws from Moody’s.
Elliott and Roger on Nov. 29, 2018
Balanced portfolios of energy stocks for aggressive and conservative investors.
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
Our assessment of every energy-related master limited partnership.
Roger Conrad’s coverage of more than 70 dividend-paying energy names.