Our Views on Q2 Earnings and More
Two months ago, Elliott and Roger shared a round table with Energy and Income Advisor readers, essentially a written transcript of discussions we had following the 2018 MLP & Energy Infrastructure Conference (MEIC). This issue, we return to that format with a wide-ranging discussion of energy sector issues affecting investors.
What follows is a condensed version of our conversations of recent days surrounding three key talking points:
1 | Developments in the Permian Basin, still the world’s hottest shale oil region and increasingly a hotbed for M&A;
2 | The latest on regulatory headwinds, including a referendum in Colorado and a first look at the potential impact of November 2018 elections on the US shale industry;
3 | Key takeaways from Q2 earnings, including the latest word from management teams on potential MLP to corporation conversions.
Roundtable: Our Views on Q2 Earnings, Picking Permian Basin Targets, MLP Corporate Conversion, 2018 Political Risks and More
Talking Point #1: The Permian Basin of West Texas and New Mexico
– Roger Conrad (RC): Elliott, a lot has happened in the energy sector since the Roundtable discussion you and I had following MLP & Energy Infrastructure Conference. But the most striking development to me is how, despite what seems to be an endless legion of skeptics, the action in the Permian Basin just keeps heating up.
Will Rising OPEC-Plus Output End the Energy Rally?
You can learn a lot about an industry by listening to earnings conference calls, digging into the quarterly numbers and financial results, but there’s no substitute for boots-on-the-ground research.
Midstream Takeover Targets
The midstream segment appears ripe for consolidation, as well-heeled utilities seek to leverage their low cost of capital and pull on the demand side to add exposure to gas pipelines.
MLP Equity Issuance: Past and Present
Overall equity issued by energy-focused master limited partnerships (MLP) declined by 58 percent last year; we expect this trend to continue in 2016.
Get out of My Dreams and into My Portfolio
There’s more pain coming for MLPs in the near term, creating a real buying opportunity for investors with a longer time horizon. To help you out, we’ve created a list of Dream Buy Prices for our favorite MLPs in an effort to take advantage of any panic that might ensue if our forecast pans out and oil prices suffer another leg down.
Changes to the MLP Portfolio
We’ve opted to trim some of the fat from our MLP Portfolio, selling names that look like dead money to raise dry powder for the once-in-a-lifetime buying opportunity that should emerge down the road.
MLP Class of 2014, Part 3
Over the past three years, investors seeking differentiated returns have found recent initial public offerings (IPO) in the MLP space to be a fruitful hunting ground.
In 2011, two fledgling MLPs–Golar LNG Partners LP (NYSE: GMLP) and Tesoro Logistics LP (NYSE: TLLP)–cracked the list of that year’s top 10 performers. This number increased to six in 2012 and four in 2013. And thus far in 2014, IPOs that priced within the past 12 months have accounted for four of the top-performing MLPs.
Why do newly listed publicly traded partnerships tend to outperform?
MLPs often grow their distributions at an accelerated rate in their first two years as a publicly traded entity. These rising quarterly payouts, coupled with a raft of positive research reports from Wall Street analysts, tend to attract investors’ attention and drive the stock price higher.
At the same time, brokerage and financial websites often misreport recently listed MLPs’ yield until the firm has paid a full year’s worth of distributions. This quirk gives investors an opportunity to buy these stocks before the herd realizes how much the units yield.
In the past, investing in fledgling publicly traded partnerships has proved to be a winning proposition and an opportunity to find value. However, investors should be forewarned selectivity is critical to this strategy’s success.
MLP IPOs Still Hot, But Selectivity is Key to Outperformance
Investors still flock to initial public offerings of master limited partnerships.
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Live Chat with
Elliott and Roger on Sep. 27, 2018
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
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Elliott H. Gue
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor
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Roger S. Conrad
Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor