The Alerian MLP Index, a capitalization-weighted basket of 50 prominent master limited partnerships (MLP), has delivered a total return of almost 16 percent this year, topping the 6.9 percent gain posted by the Philadelphia Oil Service Sector Index and the 28 percent loss posted by the Bloomberg North American Refining and Marketing Index.
However, MLPs have lagged the Bloomberg North American Independent E&P Index, which has rallied 34.13 percent and includes only a minimal contribution from dividends.
After successive waves of indiscriminate selling and buying, the easy money has been made in the MLP space; going forward, investors must have a firm grasp on underlying fundamentals to achieve differentiated returns.
We scrutinized second-quarter results and earnings calls from every midstream MLP; this issue highlights our key takeaways from this exhaustive (and exhausting process) as well as our updated takes and buy targets for all of these names.
Weak demand, a wave of contract expirations and excessive leverage are all reasons to remain bearish on offshore contract drillers. Investors should continue to avoid these value traps.
Overall equity issued by energy-focused master limited partnerships (MLP) declined by 58 percent last year; we expect this trend to continue in 2016.
Our near-term outlook for crude-oil and natural-gas prices hasn't changed, though investors should consider taking profits on demand-oriented names that tend to thrive when oil prices dive.
The severe downdraft in the prices of crude oil, natural gas and natural gas liquids has pressured producers’ cash flow and outpaced reductions to service costs and capital expenditures. Accordingly, the cash flow shortfalls that predominated in the salad years have continued in the lean years, setting the stage for further spending cuts in 2016.
The Master Limited Partnership (MLP) Association hosted its annual investor conference in Orlando last week and, as always, the Energy & Income Advisor team was on the ground to talk to management teams and fellow investors. Here are some of our bigger-picture takeaways from the event.
After plunging almost 50 percent from early May 2015 to mid-February 2016, the Alerian MLP Index has defied the critics and torched slow-to-react short sellers by surging 45 percent since its nadir. But the easy money has been made: Investors must now focus on which names are best-positioned to grow in an environment where energy prices remain lower for longer.
Activity levels and pricing for oil-field services and equipment will likely remain under pressure in the US onshore market this year, with early 2017 bringing a bit of a recovery on both scores. But a return to the levels witnessed during the boom years appears unlikely, especially if Saudi Arabia opts to tap some of its spare capacity to take market share and keep oil prices in check.
Too many pundits talk about a potential recovery in oil prices without considering the drivers and implications.
The utility sector's implosion in 2002 and 2003 has some important lessons for MLP investors.
Elliott and Roger on Aug. 30, 2016
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.