The energy sector has enjoyed quite a snapback rally since the price of West Texas Intermediate (WTI) crude oil bottomed in February, with the Alerian MLP Index and the Bloomberg North American Independent E&P Index turning in particularly strong performances.
Meanwhile, shares of US refiners have underperformed massively, thanks to the uptick in oil prices and seasonally elevated gasoline inventories that have weighed on the industry’s profit margins. Check out this graph of regional 3-2-1 crack spreads, which measure the profitability of refining three barrels of WTI into two barrels of gasoline and one barrel of diesel.
Our decision to eliminate our exposure to the US refining industry has continued to pay off.
As for the oil-field service industry, we remain skeptical about the bullish argument for Helmerich & Payne (NYSE: HP) and other US onshore contract drillers. At this juncture, Schlumberger (NYSE: SLB) remains the sole representative from the oil-field service industry in our Model Portfolio.
The next issue of Energy & Income Advisor will delve into second-quarter results and commentary from Schlumberger and the other major oil-field service firms. Given the scope of Schlumberger’s operations and the timing of its conference call, insights from CEO Paal Kibsgaard and his management team can prove invaluable for energy investors.
Your complete guide to energy investing, from growth stocks to high-yielders.
In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Aug. 31, 2020
Balanced portfolios of energy stocks for aggressive and conservative investors.
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
Our assessment of every energy-related master limited partnership.
Roger Conrad’s coverage of more than 70 dividend-paying energy names.