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Elliott Gue knows energy. Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams.

Elliott Gue’s knowledge of the energy sector and prescient investment calls prompted the official program of the 2008 G-8 Summit in Tokyo to call him “the world’s leading energy strategist.”

He has also appeared on CNBC and Bloomberg TV and has been quoted in a number of major publications, including Barron’s, Forbes and the Washington Post. Elliott Gue’s expertise and track record of success have also made him a sought-after speaker at MoneyShows and events hosted by the Association of Individual Investors.

Elliott Gue also contributed chapters on developments in global energy markets to two books published by the FT Press, The Silk Road to Riches: How You Can Profit by Investing in Asia’s Newfound Prosperity and Rise of the State: Profitable Investing and Geopolitics in the 21st Century.

Prior to founding the Capitalist Times, Elliott Gue shared his expertise and stock-picking abilities with individual investors in two highly regarded research publications, MLP Profits and The Energy Strategist, as well as long-running financial advisory Personal Finance.

In October 2012, Elliott Gue launched the Energy & Income Advisor, a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.

The masthead may have changed, but subscribers can expect Elliott Gue to deliver the same high-quality analysis and rational assessment of investment opportunities in the energy patch.

Articles

Midstream MLPs: Second-Quarter Earnings in Review

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.

Key Takeaways from Second-Quarter Earnings

After Halliburton (NYSE: HAL) and Schlumberger (NYSE: SLB) reported earnings in late July, the financial media published innumerable articles screaming that the oil-field services giants had called a bottom for the recent down-cycle.

The headlines contain a kernel of truth. Halliburton’s management team indicated that the second quarter would mark the trough for some of its core businesses in the North American onshore market—namely pressure pumping and other service and product line related to hydraulic fracturing.

Schlumberger’s management team was less sanguine about the prospects for the North American market, but indicated that the company should be able to claw back some pricing concessions and improve profitability by bundling service offerings and introducing higher-margin technologies.

We agree with Halliburton and Schlumberger’s assessment. However, calling the cycle’s bottom misses the point. At this juncture, investors should be more concerned about the likely speed and slope of the recovery after the trough.

Many oil-field service stocks—especially Helmerich & Payne (NYSE: HP) and other onshore contract drillers—have priced in a rapid rebound in profit margins and earnings. However, the recovery more than likely will prove to be W- or bathtub-shaped instead of V-shaped.

Positioning for the Future

The Alerian MLP Index suffered a Minsky moment last fall and winter, when plummeting oil prices sparked a wave of indiscriminate selling that was intensified by forced liquidations at funds hit with redemption requests.

But this basket of 50 prominent master limited partnerships (MLP) has rallied by almost 60 percent since the price of West Texas Intermediate (WTI) crude oil bottomed on Feb. 11, 2011, making the group the top performer on a year-to-date basis among the upstream, downstream and services indexes that we track in Energy & Income Advisor.

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 revisit some of the headwinds buffeting midstream operators, including volumetric declines in some basins, the general lull in demand for incremental takeaway after the recent construction boom and the debt hangover from this period of rapid growth.

But we also highlight a handful of growth themes for MLP investors to consider as they position their portfolios for the next few years.

Subscribe today to receive a sample issue of EIA
  • Live Chat with

    Elliott and Roger on Aug. 30, 2016

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.

    Experts

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Peter Staas

      Managing Editor: Capitalist Times and Energy & Income Advisor