By Q4 2021, total utilization of the largest oil pipelines in the Permian Basin will drop to 57 percent. That’s according to a recent survey from industry research firm Wood MacKenzie.
Some level of spare capacity is necessary for a functioning midstream system, to accommodate demand spikes and the fact that pipelines and related infrastructure must be periodically sidelined for maintenance. The current level, however, is quite elevated, basically for two reasons.
First, based on announced plans of producers for this year, US crude oil output is expected to drop well below the pre-pandemic level of 13 million or so barrels per day. Second, a sizeable amount of new shipping capacity came on line at the end of the previous decade to accommodate expected increases in shale output. That includes natural gas pipelines built to ship associated natural gas produced from oil wells, much of which historically has been flared.
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 week, the incoming Biden administration filled out much of its prospective energy and environment team with pragmatists,signaling a focus on incremental measures rather than the dramatic and disruptive.
In investing, economics always wins over politics. That’s worth remembering at a time when energy midstream and pipeline companies are unloved by investors, and many advisors and media personalities forecast sector doomsday.
Despite the worst market conditions for US midstream companies in at least a generation, stability and sustainability were the themes of Kinder’s Q3 results and guidance this week.
Over the next few weeks, the energy sector will report Q1 results and management teams will update guidance for 2021 and beyond. At stake is whether individual companies are holding up at this stage of the energy price cycle.
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.
Our recommended stocks’ Q4 numbers and guidance were spread out over a couple months. In contrast, their Q1 results will come in as basically a data deluge.
It’s been almost two years since we published a major feature piece on Canada’s energy sector: A Q&A that focused on Australian companies as well. And over that time, much of our coverage universe in both countries of producers, drillers, midstream service providers and even downstream companies have rated sells.
With the pandemic’s impact on demand still unwinding, it’s no wonder most energy companies have opened 2021 with conservative outlooks and cash management strategies. One thing that’s missing from last year, however, is a wave of dividend cuts to reflect it.
Elliott and Roger on Apr. 28, 2021
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.