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  • Roger S. Conrad

The Earnings Issue

By Roger S. Conrad on Feb. 20, 2022

The highest inflation rate in 40 years, increasingly hawkish global central banks, US/Russian “saber rattling” in Eastern Europe, lingering coronavirus uncertainty, approaching elections: All of these and more have contributed to a shaky opening for stocks this year, with the S&P 500 underwater by -8.6 percent.

The S&P Energy Sector Index, however, has continued to advance since our previous EIA issue and is now up nearly 23 percent for 2022. And while midstream continues to generally lag producers, refiners and other energy stocks, the Alerian MLP Index is still ahead by about 13 percent.

Bottom line is energy’s outperformance in 2021 is so far powerfully carrying over to 2022. And the simple explanation is the sector has decidedly entered a cyclical uptrend—one that based on what we’re seeing so far could be as explosive as any that have preceded it to date.

Oil and gas producers are currently seeing most of the benefits now. What’s become almost a two-year uptrend in prices for crude oil, natural gas and NGLs has swelled their cash flow to record levels.

Last year, portfolio super oil ExxonMobil Corp (NYSE: XOM) reported its biggest profit since 2014, including more than $31 billion in free cash flow after all CAPEX and debt service. That covered the company’s dividend by over a 2-to-1 margin, enabling management to pay off $20 billion in debt and launch a $10 billion share buyback.

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    • 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