It’s been roughly two weeks since the September 14 attacks on Saudi oilfields took about 5 percent of global oil production temporarily offline. And the North American benchmark price per barrel has already retreated to its long-held mid-50s trading range.
This is the clearest indication yet of how the rise of US shale production has dramatically shifted the global oil market. And it’s why, as we pointed out last issue, energy investors need to rise above the noise of geopolitics.
When it comes to energy prices that means focusing on supply and demand. And it’s why energy companies we own must be able to prosper in the same lower-for-longer price environment that’s existed since mid-decade.
What’s it going to take for Energy Transfer LP (NYSE: ET) to get a little respect?
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.
Since our previous issue of Energy and Income Advisor, there have been no distribution cuts in our various coverage universes. That’s likely to have changed by mid-October, following the next round of dividend declarations by Endangered Dividends List companies.
What are some of the new technologies North American shale producers are using to drive their costs lower? What’s their potential? Most people don’t think of electricity as a cost of operating energy infrastructure.
In addition to Antero Midstream Corp (NYSE: AM) discussed above, we’re also adding Dynagas LNG Partners (NYSE: DLNG) and Summit Midstream Partners (NYSE: SMLP), less than a year after they came off the EDL following deep dividend cuts.
Talking Point #1: What's the risk of recession and a demand led collapse in oil prices over the next 12 months?
EG: I continue to believe fears of recession are overblown in the US. In fact, I’m seeing some tentative signs the US economy is stabilizing and we may see some improvement in data over the next few months.
Talking Point #1: How much should we worry about the possibility of stalling or even falling production growth in North America for producers, drillers, midstream and downstream companies we own?
EG: Ironically, I think falling US production would be a huge positive for most of the upstream (producers) and services companies we recommend.
Elliott and Roger on Sep. 27, 2019
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