What’s Going On With Midstream?
Saudi Arabia’s decision last weekend to crank up production was the last straw for oil prices, already depressed by demand concerns resulting from global reaction to the spread of COVID-19.
Our Best Foot Forward in a Shaky Market
When global markets shake, not much does well. That’s certainly been the case the past several weeks, as worries about the potential economic impact of COVID-19 have spread.
Energy stocks were just beginning a recovery earlier this year when Chinese authorities first indicated an elevated threat to public health. What’s happened since is a full-on retreat in major sector indexes, with both the Alerian MLP Index and S&P 500 Energy Sector Index taking out the lows of early 2016.
That’s extraordinary for the fact alone that benchmark oil prices are still more than $20 above their February 2016 low point of $26 per barrel and change. Even North American benchmark natural gas is trading 8 percent higher than its March 2016 nadir of $1.61 per thousand cubic foot.
Six Picks
Some investors may raise an eyebrow at this recommendation, as well as our risk rating of the midstream MLP as “Conservative.” And Energy Transfer hasn’t held up well in the COVID-19-inspired energy sector selloff either, with the share price closing in on its lowest point in four years and the yield a distressed-looking 11 percent plus.
Endangered Dividends List
Not all EIA coverage universe companies have released their Q4 results and updated guidance. That’s largely because of the greater detail required to make annual as opposed to quarterly filings.
Q4 Verdict: Our Midstream Distributions are Safe and Worth Buying
Q4 results have three clear takeaways: The midstream sector stress test is well underway; best-in-class midstream companies have made needed adjustments; and no love from investors has created a major opportunity to lock in extremely high, sustainable yields.
Endangered Dividends List
GasLog Partners (NYSE: GLOP) will pay a Q4 distribution of 56.1 cents per share on February 21. That’s approximately 2 percent higher than the Q3 payment of 55 cents per share. Then in May, the tanker will slash its payout to a rate of just 12.5 cents a share, a cut of 77.7 percent.
In This Selloff Keep Your Eye on Earnings
Q4 earnings reporting season is moving into high gear. And so far, Energy and Income Advisor recommendations are holding their own despite volatile oil and gas prices, reduced industry-wide spending and generally hostile capital markets.
The bad news is with coronavirus fears pressuring global oil prices, the market isn’t paying much attention to the numbers. Nor do investors appear to be giving a lot of credence to management guidance for 2020 that’s considerably more conservative and therefore achievable, as fears of a global economic slide percolate.
Endangered Dividends List
Alliance Resource Partners (NSDQ: ARLP) is cutting its quarterly distribution by roughly -26 percent to 40 cents a unit. That follows management’s release of dismal Q4 results, including declines of -14.8 percent and -28.6 percent in EBITDA, respectively.
Live Chat with
Elliott and Roger on Mar. 25, 2021
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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