It’s hard to tell from the volatility of sector stocks. But third quarter earnings season is going well for best in class energy companies up and down the value chain.
A lot of oil and gas in North America is still bottlenecked by transportation constraints. That’s hampering producers in many places, notably the booming Permian Basin. Canada, meanwhile, is in a virtual depression with Western Canada Select recently fetching less than $20 a barrel and natural gas at the AECO hub going for just 48 cents per million BTU.
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.
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.
Endangered Dividends List companies are vulnerable for different reasons like cash flow, elevated debt levels, revenue pressure etc. This edition of the EDL table is expanded by five names since the previous issue of EIA.
Since the end of 2011, the average weekly closing price for front-month US natural gas futures is roughly $3.15/MMBtu, in-line with the current price of $3.12/MMBtu. In the short term, US gas storage levels are at the lowest levels in 15 years, supply growth is constrained and demand remains robust. That could lead to a spike in NYMEX gas futures to $4/MMBtu or higher this winter.
Elliott and Roger on Oct. 29, 2018
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