• Energy and Income Advisor
  • Conrads Utility Investor
  • Capitalist Times
  • Twitter
  • Seeking Alpha
  • Roger S. Conrad

Investing Topics: Marcellus Shale

Focus Up

Our Focus List has continued to outperform the S&P 500 Energy Index over equivalent holding periods. Note that we have dropped MPLX LP (NYSE: MPLX) from the Focus List after the stock gained more than 25 percent since early December and traded above our value-based buy target for more than a month.

Focus List Update And Noteworthy Portfolio Developments

Since its reinstatement in early December 2016, the Energy & Income Advisor Focus List has generated an average total return of 9.6 percent, outperforming the S&P 500 Energy Index’s average loss of 4.5 percent over an equivalent holding period. We dig into fourth-quarter results from companies on our Focus List and in our Model Portfolios.

 

Upstream Takeover Targets

Some of the biggest winners from mergers and acquisitions activity in the US upstream space have been the acquirers. Deal flow will continue to focus on assets and private-equity outfits monetizing their investments. We prefer names with solid balance sheets and exposure to franchise assets with low production costs; these names will continue to take market share, outperform their and grow their inventories of potential drilling locations.

Naturally Volatile

Much of the recent upside in natural-gas prices reflects the unusually hot summer weather, expectations for a cold winter and modest supply growth, as oil and gas producers have curbed their drilling and completion activity in prolific US shale plays. However, our intermediate- to long-term outlooks for gas supply and demand remain unchanged–nor has our investment strategy.

We prefer to buy shares of high-quality producers that have strong balance sheets and high-quality acreage in leading basins–names that will take market share over the long term.

However, timing is a critical component of our strategy.

Investors should buy when gas prices inevitably tumble because of excess production and an unusually warm winter–a confluence of events that has occurred on several occasions over the past decade. You might also consider taking smaller positions in some higher-beta names that we wouldn’t regard as the best long-term holdings.

It’s equally important to take some profits off the table when natural-gas prices rip higher. The time for such a move is imminent.

Investors should also maintain exposure to well-positioned midstream operators that stand to benefit from accelerating production growth in low-cost basins. With natural-gas demand expect to climb in coming years and the US boasting a world-class resource base, the potential volumetric growth is truly impressive.

Natural Gas: Impressive Rally, But Wait for the Production Response

Much of the recent upside in natural-gas prices reflects the unusually hot summer weather, expectations for a cold winter and modest supply growth, as oil and gas producers have curbed their drilling and completion activity in prolific US shale plays. However, our intermediate- to long-term outlooks for gas supply and demand remain unchanged: Expect the price of the thermal fuel to continue two fluctuate primarily with winter demand. And don’t bet on a sustainable breakout unless a new Ice Age (not another installment of the children’s movie franchise) cometh.

Three Growth Themes for MLP Investors

We highlight some of the key growth themes investors should keep in mind as they position for the next few years and highlight the MLP Portfolio holdings that stand to benefit from these opportunities.

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

    Elliott and Roger on Jul. 27, 2017

  • 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

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Peter Staas

      Managing Editor: Capitalist Times and Energy & Income Advisor