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Feature Article

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.

Endangered Dividends

There have been no additional dividend cuts in our three coverage universes since the previous EIA issue. That’s largely a function of timing, as companies are winding up the calendar first quarter and won’t be declaring their next distributions until next month.

However, calendar fourth quarter reporting requires considerably more legal filings. That means it typically takes several weeks longer for many companies to compete filings than it does other times of the year. And the good news is several later reporters did come in with encouraging news and guidance.

Endangered Dividends List

Summit Midstream Partners LP (NYSE: SMLP) is cutting its quarterly payout in half from 57.5 cents to 28.75 cents. Management called the move a “repositioning” to “fund attractive growth opportunities and maintain a prudent capital structure.” The partnership also swapped its general partner’s IDRs for 8.75 million new common units, boosting outstanding shares by roughly 12 percent.

Endangered Dividends List

No companies on either the Endangered Dividends List or within our energy stock coverage universes have announced dividend cuts since the previous issue. That includes Sanchez Midstream Partners (NYSE: SNMP), which maintained its payout this month despite the apparent slide toward bankruptcy of its parent and leading customer Sanchez Energy Corp (NYSE: SN).

High Yield Values

Where there’s smoke there’s fire is the old saying. And in light of the rash of dividend cuts and severe selloff of higher yielding energy companies in the second half of 2018, it’s easy to conclude as many investors have that the entire sector is finished as an income source.

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.

Endangered Dividends List

American Midstream Partners (NYSE: AMID) will eliminate its distribution this month. That follows a 75 percent cut announced in July, which was preceded by a more modest 12.7 percent trimming two years earlier.

The immediate catalyst is a restated credit agreement, which based on expected fourth quarter financials would preclude management’s ability to pay a distribution.

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

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    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