Feature: The Rest of the Results
In this issue of EIA, we focus our attention on the Model Portfolio and High Yield Energy List companies reporting Q3 results since our previous issue and that we did not review in the October 30 Alert “Raising Crestwood and ONEOK, Sticking with Energy Transfer.”
Portfolio: An Update on Strategy
Barring a recovery rally of unprecedented magnitude, it seems certain 2020 will go down as one of the worst years ever for oil and gas stocks, up and down the energy value chain.
Fallout from the pandemic temporarily knocked the bottom out of demand for refined products and fuels and turned a strategic retreat by producers into a full-on rout. And wild campaign rhetoric alleging an impending ban on hydraulic fracturing certainly didn’t help investors’ fear factor.
In Energy It’s Economics over Politics
At first glance, this may seem to be the US oil and gas industry’s darkest hour. The S&P 500 Energy Index’ -46.8 percent year to date return is a stark contrast to the broad S&P 500’s 8.7 percent. The first sector companies to report Q3 numbers have delivered a rather somber outlook. And just days before November elections, the presidential candidate ahead in opinion polls appears to have endorsed phasing out the use of fossil fuels.
It probably won’t surprise you that we see things a bit differently at Energy and Income Advisor. Running down our three coverage universes—“MLPs and Midstream,” “E&P and Services” and “Canada and Australia”—it’s hard not to notice prices and yields for stocks that reflect a worst case scenario of many more dividend cuts and even bankruptcies. And the clear takeaway is that investors are expecting the worst.
We’ve pointed out in the past that negative sentiment is usually at its most extreme at market bottoms. But equally, recovery requires the facts behind the gloom to change enough to bring back buyers.
First Thoughts on Q3 Results.
When you’re gearing up to ride a prospective recovery in a battered sector, it’s critical to be sure you’re riding the swiftest and surest horses. And that means keeping an eagle eye on individual company performance. Here are our initial takeaways from the Q3 earnings reports and guidance updates we’ve seen.
Portfolio: What We Learned from the First Q3 Reporters
Calendar Q3 earnings reporting season is now underway. Over the next few weeks, we’ll see how our EIA Portfolio and High Yield Energy List companies are stacking up in the worst operating environment in at least a generation, and how well they’re positioned for the sector recovery we believe is now unfolding. Here’s what’s ahead:
10/29/20 Energy & Income Advisor Live Chat
Elliott Gue and Roger Conrad will host a live chat for Energy & Income Advisor subscribers Thursday, Oct. 29th at 2 PM Eastern time. We hope you’ll join us!
Energy M&A Questions and Answers
After a long hiatus, energy M&A has heated up this year, first with Chevron Corp’s (NYSE: CVX) takeover offer for Noble Energy (NYSE: NBL) and now the proposed merger of equals between Devon Energy (NYSE: DVN) and WPX Energy (NYSE: WPX). Here are our thoughts for long overdue sector consolidation.
9/30/20 Energy & Income Advisor Live Chat
Elliott Gue and Roger Conrad will host a live chat for Energy & Income Advisor subscribers Wednesday, Sept. 30th at 2 PM Eastern time. We hope you’ll join us!
NatGas: Another Winter of Disappointment
Record-setting heat across the western US has sparked a surge in cooling demand and threatened large-scale power blackouts in California for the first time in 20 years.
Meanwhile the US Gulf Coast has been hit by significant hurricane activity this year, interrupting natural gas production from the Gulf of Mexico as well as liquefied natural gas (LNG) exports.
Those forces have helped spark a near-doubling in US natural gas prices from multi-year lows in June, a surge that’s understandably caught many investors’ attention. And, there are some longer-term developments, such as the recent decline in associated gas supply due to an historic decline in drilling activity, that could help finally put a floor under this long-suffering market.
Another Winter of Disappointment for NatGas
US natural gas prices enjoyed quite a run this summer, jumping more than 91% from a 25-year low on June 26th of $1.432/MMBtu to a late-August high of $2.743/MMBtu. While that’s impressive, we’d caution about getting bullish on gas this year as we see little chance for sustained upside in US natural gas prices above the $2.75-$3.00/MMBtu range this winter. We continue to see a retest of this summer’s lows in gas, or even worse, as more likely.
Live Chat with
Elliott and Roger on Oct. 29, 2020
Portfolios & Ratings
Model Portfolios
Balanced portfolios of energy stocks for aggressive and conservative investors.
Producers and Drillers
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
MLPs and Midstream
Our assessment of every energy-related master limited partnership.
International Coverage
Roger Conrad’s coverage of more than 70 dividend-paying energy names.
Experts
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Elliott H. Gue
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor
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Roger S. Conrad
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor