MLPs: Evolution, Not Extinction
The recent wave of general partners acquiring the master limited partnerships under their auspices doesn’t reflect a fatal flaw in the structure or this relationship.
Take a Walk on the Demand Side
The opportunity in the midstream space has shifted to the demand side.
US Natural-Gas Prices: Lower for Longer, with an Elevated Risk of Near-Term Downside
The US gas market has remained mired in a lower-for-longer price scenario for the past five years, with occasional rallies catalyzed by favorable weather conditions–not improving fundamentals. Nothing on the horizon suggests that US natural-gas prices will escape this trading range, while the near-term risks skew decidedly to the downside.
The Upstream Cash Flow Crunch
The severe downdraft in the prices of crude oil, natural gas and natural gas liquids has pressured producers’ cash flow and outpaced reductions to service costs and capital expenditures. Accordingly, the cash flow shortfalls that predominated in the salad years have continued in the lean years, setting the stage for further spending cuts in 2016.
A Bull Market for Brazen Forecasts
Sensationalist predictions about oil prices have become all the rage over the past two months, but they won’t necessarily help investors make money. We explain our outlook for crude-oil prices and why a buying opportunity may be around the corner.
Getting Ready for a Real Buying Opportunity
Over the past two years, oil and gas producers have accounted for the bulk of the energy sector’s bankruptcies, laid low by excessive leverage, the collapse in commodity prices and inferior assets. Exploration and production companies haven’t emerged from the woods yet—but they’re not all goners. In fact, the buying opportunity that investors have awaited appears to be around the corner.
In a scenario where oil prices remain lower for longer, investors should focus on upstream operators with strong balance sheets, low production costs, a history of solid execution and franchise assets that can deliver output growth in a challenging environment. Names that can expand their output and win market share should outperform, while their cash-strapped peers or those with inferior assets will struggle.
The universe of exploration and production companies that meet our criteria is relatively small; don’t misconstrue this call as open season to buy upstream names indiscriminately. Not every oil and gas producer has the potential to outperform, let alone survive.
In this issue, we highlight a handful of our favorite names to scoop up during the coming buying opportunity. To help with timing, we’ve included dream buy prices for these stocks that reflect trough valuations in previous downturns and our outlook for commodity prices.
Dream Prices from a Nightmare Situation
Although we expect further downside in crude-oil prices to weigh on shares of oil producers and services firms, we have grown incrementally bullish on a select group of names that we would consider buying at previous trough valuations.
MLPs to Avoid
How can you tell which midstream MLPs are worth holding and which positions are worth folding?
The Risks as We See Them
Examining what drove the recent correction in master limited partnerships can help us to identify the pockets of risk and the best-positioned names for when the market returns to its senses and focuses on individual stories.
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.
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Live Chat with
Elliott and Roger on Mar. 31, 2020
Portfolios & Ratings
Model Portfolios
Balanced portfolios of energy stocks for aggressive and conservative investors.
Producers and Drillers
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
MLPs and Midstream
Our assessment of every energy-related master limited partnership.
International Coverage
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