• Twitter
  • Roger S. Conrad

Feature Article

Our Deep-Dive Outlook for Oil

Since the end of September, WTI and Brent oil prices have experienced one of the most violent and rapid sell-offs in history.

Over the short term, energy stocks typically follow commodity prices particularly on the downside. Thus, the S&P 500 Energy Index is off 19.6% this quarter, the Alerian MLP Index is down about 12.8%, the SPDR Oil & Gas ETF (NYSE: XOP) is down 34.8% and the Philadelphia Oil Services Index (OSX) has plummeted over 40% led on the downside by the deepwater and onshore contract drillers.

Endangered Dividends List

Altagas Ltd (TSX: ALA, OTC: ATGFF) cut its monthly dividend to 8 cents Canadian from the previous 18.25 cents, starting with the January 15 payment. We highlight the move as part of a strategic reset by management in the December 13 Alert “Altagas Resets for a Hostile Capital Market.” Kinder Morgan Canada (TSX: KML, OTC: KMLGF) announced its 2019 financial projections, which reflect the now closed sale of the Trans Mountain pipeline system to the Canadian government.

Focus on MLPs: Questions and Answers

How have MLPs recommended in Energy and Income Advisor fared year-to-date? Is there any reason to expect a better performance in 2019?

The table “EIA Energy MLP Performance” highlights master limited partnerships recommended in three places: Our Actively Managed Portfolio, the Focus List and the “legacy” portfolios that we continue to track on the EIA website.

Endangered Dividends List

The latest two EDL members to announce dividend reductions are Bonterra Energy (TSX: BNE, OTC: BNEFF) and Sanchez Midstream Partners (NYSE: SNMP).

Canadian oil and gas producer Bonterra is slashing its monthly payout from 10 cents Canadian to just a penny a share. That’s a direct consequence of a decline in its realized selling price for oil to just CAD21.50 per barrel from CAD77.20 since the end of the third quarter.

Round Table: Our Take on Q3 Earnings So Far

Are you concerned by the large number of energy company dividend cuts we seem to be seeing this earnings season? – Roger Conrad: Let’s get one thing straight right up front. There’s no such thing as a “good” dividend cut. When a company reduces its payout, investors lose income and share prices typically fall to reflect the lower amount. That’s why we want to avoid stocks at risk of dividend cuts and it’s the reason we have an Endangered Dividends List.

Roundtable: Energy and the Stock Market

Roger Conrad: A month ago, we talked about the super majors as really a breed apart in the energy business, particularly for anything to do with long-term business resiliency. A lot of that has to do with balance sheets.

I mean there are plenty of sovereign governments that can’t match the Aaa credit rating ExxonMobil (NYSE: XOM) draws from Moody’s.

The Outlook for Gas

Since the end of 2011, the average weekly closing price for front-month US natural gas futures is roughly $3.15/MMBtu, in-line with the current price of $3.12/MMBtu. In the short term, US gas storage levels are at the lowest levels in 15 years, supply growth is constrained and demand remains robust. That could lead to a spike in NYMEX gas futures to $4/MMBtu or higher this winter.

Subscribe today to receive a sample issue of EIA
  • Live Chat with

    Elliott and Roger on Feb. 26, 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