Feature Article

In our May 15, 2020 roundtable discussion “Q1 Earnings and Guidance: Here’s What’s Critical” we flagged US independent refiners as a well-positioned group at this stage of the cycle. In this issue, we’re adding Valero Energy (NYSE: VLO) to the Actively Managed Portfolio as a new buy recommendation.

Shortly after the previous issue of EIA went to post, contract renewable energy company Northland Power Inc (TSX: NPI, OTC: NPIFF) concluded Q1 earnings reporting season for Model Portfolio companies with its own solid results. Highlights included a 34 percent lift in revenue, with asset expansion the primary driver of growth. EBITDA advanced 43 percent, net income 35 percent and free cash flow per share by 39 percent from a year ago.

Results and guidance updates are now in across the energy industry, from drillers and producers to pipelines and refiners. We discuss our most important takeaways, and how they’re informing our strategy going forward of accumulating positions in sector survivors to ride the eventual recovery.

Q1 earnings and guidance updates for the Model Portfolio and High Yield Energy List are now all in. The exception is contract renewable energy company Northland Power Inc (TSX: NPI, OTC: NPIFF), which has recently affirmed guidance.

Apart from a handful of short-lived weather-driven spikes flagged by Energy & Income Advisor in recent years, we’ve been consistently bearish on US natural gas prices and have favored oil-levered producers over those with significant exposure to natural gas. That bearish view has largely proved correct.

Since the previous issue of EIA, distribution cutting activity has accelerated, with 19 companies cutting their payouts. We highlighted Schlumberger Ltd in the previous section. Below we review the rest of the cutters.

To date, a trio of Portfolio and High Yield Energy list stocks have reported Q1 results and updated 2020 guidance. We highlighted Kinder Morgan Inc (NYSE: KMI) in the April 23 Energy Commentary “Kinder’s Dividend Decision: Prudence, Not Weakness.”

Its now just days before the start of Q1 earnings releases and guidance updates for energy companies. And the only thing that’s clear is the numbers will be considerably worse than what we saw in Q4.