AMLP

Berkshire Hathaway Expands Its Bet on North American Natural Gas

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Image Shown: A look at the Cove Point LNG export facility in Maryland, one of half a dozen that are currently operational in the US. Image Source: Dominion Energy Inc – February/March 2018 Fixed Income Investor Meetings Presentation By Callum Turcan On July 5, Berkshire Hathaway Energy, a majority-owned subsidiary of Berkshire Hathaway Inc (BRK.A) (BRK.B), announced it was acquiring natural gas pipeline and storage assets along with an equity stake in a liquified natural gas (‘LNG’) export facility in Maryland from Dominion Energy Inc (D). This deal is valued at $9.7 billion by enterprise value and is expected to close by the fourth quarter of 2020. We continue to like Berkshire Hathaway in the Best Ideas Newsletter portfolio. Berkshire … Read more

Interview with Valuentum’s Callum Turcan

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Callum Turcan helps head up Valuentum’s research product and is co-editor of the company’s newsletters. We sat down with Callum to get his thoughts on new developments in the market and economy. Let’s kick things off with his thoughts on the recent Berkshire/Dominion deal. Callum: Interesting deal with Dominion (D) and one that likely fits in with Berkshire Hathaway’s (BRK.A/BRK.B) long-term utility/infrastructure strategy in North America. Berkshire has steadily grown its wind power generation business over the past decade, but until battery storage technology progresses further (with an eye towards the need for serious cost reductions), natural gas will continue to be used to meet electricity demand when wind turbines are operating at reduced capacity (and in general, as new … Read more

Exxon Mobil Puts on a Brave Face

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Image Source: Exxon Mobil Corporation – November 2019 Guyana IR Presentation By Callum Turcan Near-term oil prices and most importantly, the oil price futures curve, have improved materially since just a couple of months ago when it looked like the sky was falling. For the first time ever, WTI turned negative in April 2020 for physical deliveries due May 2020 of light sweet oil to Cushing, Oklahoma, as storage options were limited (and arguably, many speculators had jumped into the market not fully aware of the risks they were taking on). Exxon Mobil Corporation (XOM) has seen its share price recover considerably since the drop, though we caution that management’s commitment to the dividend will prove a hard task if … Read more

5 Years Later – #ThrowbackThursday on MLPs

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Image: Since Valuentum warned against the significant risks of the MLP business model June 11, 2015, on a price basis, the Alerian MLP ETF (AMLP) has fallen by more than 65%, while the S&P 500 has surged nearly 50%. There have been dozens and dozens of explicit (or phantom) MLP distribution cuts since we released our thesis 5 years ago to this day, and many MLPs have subsequently simplified their business models, rolling up into C-corps, as we predicted. By Brian Nelson, CFA 5 years ago, on June 11, 2015, Valuentum released its bearish case on Kinder Morgan (KMI) and the MLPs, a view that was highlighted on Barron’s.com and debated for months thereafter on various social media and website … Read more

Our Reports on Stocks in the Oil & Gas Pipeline Industry

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Image Shown: Valuentum’s thesis on MLPs prior to their collapse in mid-2015. Valuentum’s breakthrough work when it comes to MLPs has revolutionized how many value these entities. Cash, the source of value, is cash regardless of the business model/structure in which it is generated, and therefore valuation approaches should not change between various business models/structures. We continue to work toward helping investment professionals understand this vitally-important connection. See Pitfalls of Distribution Yield Analysis: https://valuentum.com/downloads/20170312_1/download See: Linking P/DCF to Enterprise Free Cash Flow Valuation: https://valuentum.com/downloads/20170312/download Structure of the Oil & Gas Pipeline Industry Firms in the oil and gas pipeline industry own or operate thousands of miles of pipelines and terminals—assets that are nearly impossible/uneconomical to replicate. Most companies act as … Read more

Stress in the Oil & Gas Industry Grows as Major Energy Exporters Hunker Down

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Image Shown: WTI is down almost 61% over the past year as raw energy resources prices were decimated by the news that OPEC and non-OPEC members couldn’t reach another production curtailment deal in early-March 2020. By Callum Turcan Raw energy resources pricing has crashed through the floor, so to speak, with WTI (USO) (US oil pricing benchmark), Brent (BNO) (international oil pricing benchmark), Henry Hub (UNG) (US natural gas pricing benchmark), and the LNG Japan/Korea Marker (pricing benchmark for liquefied natural gas [‘LNG’] deliveries to East Asian markets) are all trading at or near multi-decade lows as of this writing. The pricing for natural gas liquids (‘NGLs’), like ethane, propane, and butane, have also come crashing down (seen through Mont … Read more

Oil Markets Get Decimated

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Image Shown: Oil prices have been decimated year-to-date. By Callum Turcan We are following up on our ‘Oil Prices Collapse, Reiterating 2,350-2,750 S&P 500 Target Range; Credit Crunch Looming?’ note (link here) published Sunday, March 8, to provide additional commentary on what’s going on in the shale patch right now. As of this writing, oil prices (BNO, USO) continue to get hammered. Here’s what we had to say in that recent note: The independent upstream producer space (XOP) is careening off a cliff, and that was before the OPEC+ cartel was unable to reach an agreement during their joint meeting (OPEC and non-OPEC members) on March 6. Due to the inability for the oil cartel to reach a deal, largely because Russia … Read more

Oil Prices Collapse, Reiterating 2,350-2,750 S&P 500 Target Range; Credit Crunch Looming?

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Image Source: Value Trap: Theory of Universal Valuation From Value Trap: “The banking sector was not the only sector that faced considerable selling pressure during the Financial Crisis of the late 2000s, of course. Other companies that required funding to maintain their business operations faced severe liquidity risk, or a situation where refinancing, or rolling over debt, might be difficult to do on fair terms, making such financing prohibitive in some cases. Those that faced outsize debt maturities during the most severe months of the credit crunch faced a real threat of Chapter 11 restructuring had the lending environment completely seized. In thinking about share prices as a range of probable fair value outcomes, equity prices tend to face pressure as … Read more

A ~0.1% Probability Since 1896

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Image Source: Wikipedia Commons   By Brian Nelson, CFA It was mid-June 2015, and our team released our case on why the midstream MLP space would collapse. To us, it just made sense. We’ve been practicing enterprise valuation for a long time, and to this day, we’ve updated over 20,000+ discounted cash flow models. I used to head up the methodology and valuation infrastructure of a department of over 100 analysts across several continents and all sectors when I used to work at Morningstar. Baptism by fire as they say. This was about 10 years ago now. Since our call in mid-June 2015 through March 2, 2020, on a price basis, the S&P 500 (SPY) has advanced 46%, while the Alerian MLP … Read more

Covering Oil Markets Ahead of the Upcoming OPEC/OPEC+ Meetings

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Image Source: Exxon Mobil Corporation – 2019 IR Presentation  By Callum Turcan On March 5, the Organization of Petroleum Exporting Countries (‘OPEC’) is holding an “extraordinary” meeting in Vienna, Austria (EWO), which will be followed up by a ministerial meeting between OPEC and non-OPEC members the next day. The group had already agreed to cut oil (USO, BNO) supplies by an additional 0.5 million barrels of per day (‘bpd’) back in December 2019 through an agreement that would last through March 2020 (that was on top of an existing deal to keep 1.2 million bpd off of the market which runs through the end of March 2020 as well). As part of that deal, Saudi Arabia (KSA) offered to “voluntarily” … Read more