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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

The Revolution is (Almost) Over

Change in the US energy industry has been dramatic over the past decade.

Sentiment has shifted from a culture of energy scarcity to one of abundance and the US overtook Russia and Saudi Arabia as the world’s largest oil producer.

And, not long ago, you would have been laughed out of a room for predicting that the US would ever export meaningful quantities of oil. Soon however, the nation looks on track to overtake Saudi Arabia as the world’s largest exporter of crude oil on a full-year basis.

We’d argue the shale revolution has also been one of the most important positive developments for the US economy in recent years, helping to reduce dependence on energy imports from politically unstable countries, revitalizing vast swathes of the US manufacturing industry and giving us all a break in the form of lower gasoline prices.

The end of the shale revolution does NOT mean that all of these positive changes and economic trends will reverse, nor does it mean that US energy production will fall again. It does mean that the industry is maturing and that has profound implications for investors.

Gone are the days of growth for growth’s sake, access to seemingly unlimited pools of capital at ultra-low prices and boom-or-bust shale drilling cycles. The winners in the next phase of the shale boom will be disciplined producers that can generate reliable free cash flow with moderate oil and gas prices and services and equipment firms that focus on driving efficiency rather than simple providing basic, commodity services to their customers.

Roundtable Part Three: Key Takeaways and Forecasts

Change in the US energy industry has been dramatic over the past decade. Sentiment has shifted from a culture of energy scarcity to one of abundance and the US overtook Russia and Saudi Arabia as the world’s largest oil producer. And, not long ago, you would have been laughed out of a room for predicting that the US would ever export meaningful quantities of oil.

Where the Rubber Meets the Road

Earnings reporting and guidance call season often provoke investor confusion, angst and unfortunately all too often some very bad decisions. But they’re also where the rubber meets the road in this business.

Basically, companies have to own up to what’s going on with their operations, how strong their balance sheets really are and what challenges they face that could possibly derail their fortunes.

Earnings reporting seasons have more often than not been unhappy times for energy investors since oil prices first cut under $100 a barrel back in mid-2014. But for at least a year, we’ve noticed a decided change for the better, at least for the sector’s best in class companies. Basically, companies have gotten their acts together when they could, or else fallen of the map entirely.

The result is our Energy and Income Advisor coverage universes of producers, services companies, midstream/master limited partnerships and international companies have been winnowed down considerably. The vast majority is either decidedly back on track, or else are virtual zombies awaiting oblivion.

We’ve yet to see any real investor excitement flow back into the survivors. But there is certainly a lot to get pumped about when it comes to US companies, with surging energy exports and expanding output of oil and gas. Even in Canada there’s reason for optimism, as new transport capacity has cut the price differential between Western Canada Select and West Texas Intermediate Cushing to only around $10 a barrel.

There are multiple explanations why investors’ money hasn’t flowed back into energy stocks yet, starting with anxiety about energy prices and the global economy. But it always has when energy companies have continued to drive down costs and boost revenue on a sustained basis. And our bet is it’s only a matter of time at this point.

Energy 2019: Auspicious Beginnings

The energy sector rally that began in the last days of 2018 has continued into early January. The long-suffering Alerian MLP Index is 15 percent higher than its post-Christmas Day low. The S&P 500 Energy Index is better by almost 14 percent, as is North American oil benchmark WTI Cushing.

Natural gas by the Henry Hub benchmark is flat after plunging more than one-third last month. But by and large, buyers are pushing up prices of energy stocks, including many of the higher yielding fare that took the biggest hits in late 2018.

Is this a rally with legs? Or will it prove to be just a bounce in a continuing decline?

That’s the big picture question we address in this issue’s Roundtable discussion. As the headline of our previous Energy and Income Advisor indicates, this is not 2014. And there are several encouraging signs that the energy sector has not only bottomed, but will be a strong outperformer in the New Year.

Certainly not every sector stock will prosper. For example, since our last EIA issue, two Endangered Dividends List members have eliminated distributions. And a company third is set to do the same later this month.

With North American oil and gas drilling activity expected to wane in the first half of the year, the door to accessing capital markets on economic terms remains slammed shut in the faces of all but the largest and strongest energy companies. That’s forcing companies up and down the energy value chain to self-fund virtually all capital spending, and in many cases debt refinancing as well.

The good news is four and a half years after oil cracked under $100 a barrel, the survivors of this battered industry are doing the job. Shale focused producers will adjust output with price swings. But the big capital investments continue to move forward, driving sector earnings and dividend paying power.

The only question is when a critical mass of investor dollars will flood back to the energy sector. We believe what we’ve seen so far presages a solid 2019.

Energy 2019 Roundtable

Q: Why will the energy sector outperform in 2019? Will it matter if the overall market has a bad year?

Roger Conrad (RC): In my experience, no sector can wholly withstand an overall market meltdown, particularly if it brings a recession with it. And as if we needed a reminder, the last four plus years have shown quite clearly that energy is a cyclical business.

That said, the economy’s still growing by any useful measuring stick. This remains one of the slowest tightening cycles for the Federal Reserve I know of.

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  • Live Chat with

    Elliott and Roger on May. 30, 2019

  • 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

    • Elliott H. Gue

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

    • Roger S. Conrad

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