CEQP

2022 Oil & Gas Market Update: “The Outlook for Crude Oil Prices Remains Quite Bullish”

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Transcript Hello, this is Callum Turcan, Associate Director of Research at Valuentum Securities. WTI and Brent have pulled back moderately from recent highs, though near-term futures remain just above $100 per barrel which is well above levels seen last year. As of early July, both WTI and Brent are in backwardation, meaning spot prices are trading at a higher price than later dated future contracts. In other words, the trajectory of future crude oil prices is expected to have a downward slope. Please note that backwardation does not mean that things are going to rapidly deteriorate for the global energy complex, as this dynamic is due to global oil inventories steadily declining over the past two years or so. Backwardation … Read more

Dividend Increases/Decreases for the Week April 15

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Below we provide a list of firms that raised their dividends during the week ending April 15. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week      Agree Realty (ADC): now $0.234 per share monthly dividend, was $0.227. Aon (AON): now $0.56 per share quarterly dividend, was $0.51. Artesian Resources (ARTNA): now $0.2729 per share quarterly dividend, was $0.2675. BrasilAgro – Brazilian Agricultural Real Estate (LND): now $0.404 per share dividend, was $0.2030. Costco (COST): now $0.90 per share quarterly dividend, was $0.79. Crestwood Equity (CEQP): now $0.655 per share quarterly dividend, was … Read more

Energy Transfer’s Dividend Cut Not Enough, Needs to Slash It More

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  We expect another distribution cut from Energy Transfer in the not-too-distant future. Its traditional free cash flow generation is still too meager to cover its now-reduced distribution level, and the energy markets are simply not cooperating. The energy sector has been among the worst-performing equity sectors for some time now, and investor appetite for new equity and debt issuance is waning as return expectations are ratcheted down in a troubled energy resource environment. We expect more pain to come for Energy Transfer’s stock. Our fair value estimate stands at $4 per share. By Brian Nelson, CFA On October 26, Energy Transfer (ET) put an axe to its distribution, cutting the payout in half to $0.1525/unit on a quarterly basis, … Read more

Chesapeake Energy’s Pain Indicates Nothing “Safe” About Energy MLP Distributions

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Summary There is nothing “safe” in the stock market, and given the track record of the distributions of pipeline MLPs, there is nothing “safe” about pipeline MLP distributions. The MLP business model continues to be phased out, a trend that we anticipated when we made our bearish call on the group in June 2015. Chesapeake Energy’s pain is a yet another reminder of the pipeline MLP group’s exposure to energy resource pricing through the health (or rather ill-health) of its customer base. We continue to encourage pipeline operators to disclose free cash flow (cash flow from operations less all gross capital spending) prominently in press releases, alongside other industry-specific metrics. Investors of Chesapeake could get completely wiped out in a … Read more

Tallgrass Energy’s Growth Runway Shorter Than Expected

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Image Source: Tallgrass Energy LP – IR Presentation By Callum Turcan Valuentum’s High Yield Dividend Newsletter portfolio parted ways with Tallgrass Energy LP (TGE) on August 1, as we wanted to reduce our exposure to the midstream space. We don’t like TGE as much as we once did and think it’s best to move on to better opportunities. Please note Blackstone Group Inc (BX), through affiliates of Blackstone Infrastructure Partners, closed its purchase of Tallgrass’ general partner in March 2019 which included those parties acquiring a 44% economic interest in Tallgrass. In 2018, Tallgrass reorganized as a C-Corp which we were very supportive of. Additionally, the midstream company has been very free cash flow positive historically (when defined as net … Read more

S&P Global: “Enterprise’s shift on cash flow reflects ‘metamorphosis’ of US pipeline firms”

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S&P Global: “While several major U.S. energy pipeline companies spent 2018 shedding cash-leaking habits and forging a more conventional financial structure as stocks languished, adopting reporting practices that are more accessible to the investing public could be a gradual process for the industry, if it takes flight at all.” S&P Global: “Enterprise’s shift on cash flow reflects ‘metamorphosis’ of US pipeline firms” Click here to read the article. Tickerized for holdings in the Alerian MLP ETF (AMLP). Pipelines – Oil & Gas: BPL, DCP, ENB, EPD, ET, GMLP, HEP, KMI, MMP, NS, PAA, WES —– Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not … Read more

Hi-Crush and EnLink Join Growing List of MLP Simplifications

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Image Source: EnLink transaction presentation A number of master limited partnerships continue to transition to more simplified structures as they attempt to become increasingly nimble organizations. By Kris Rosemann The ongoing trend of master limited partnership simplification transactions continued October 22 as proppant and logistics solutions provider Hi-Crush Partners (HCLP) acquired its general partner and slash its quarterly distribution to $0.225 per unit from $0.75 per unit. The now C-Corp used 11 million newly issued units to acquire Hi-Crush Proppants LLC for a total consideration of $96.25 million and eliminated its incentive distribution rights in doing so. Rationale cited for making the change is very similar to other similar transactions, including a lower cost of capital, wider appeal to a range … Read more

Understanding the Phenomenon of “Price Risk” in High Yield

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  Image Source: Julien Carnot We want you to learn about a unique risk innate to the high yield space like the back of your hand. We’ll explain the “information contained in prices” and talk about what you should be on the lookout for, the “avalanche effect.” Order the High Yield Dividend Newsletter here. — By Brian Nelson, CFA — I received a question from a dear member of ours, and I think it may be helpful that I share the response. The question had to do with why we may be ultra-cautious on high-yielding stocks that are facing considerable price declines. The risk described below makes the high yield space uniquely different than other equity strategies, in our view, … Read more

MLP Speak: A Critique of Distributable Cash Flow

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–> Handout 1: Pitfalls of Distribution Yield Analysis (pdf) –> Handout 2: Linking P/DCF to Enterprise Free Cash Flow Valuation (pdf) Let’s talk about a controversial metric that is used in master limited partnership (MLP) reporting. Just how useful is it, and should it be allowed? By Brian Nelson, CFA It’s been a few years since the fallout in the prices of most master limited partnerships (AMLP), but to me, it still feels like yesterday. We continue to have many concerns about the longevity of the business models of MLPs, and we maintain our view that the operating structure will be challenged over the long haul. New equity and debt funding (issuance) continues to, in part, fuel the distributions of most MLPs, … Read more

Taxes and the Distressed MLP Investor

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Image show above: Performance of the Alerian MLP ETF. “Perhaps the worst thing about MLPs is that investors can spend more time doing and thinking about tax-related items than actually evaluating the businesses of the underlying entities. This could result in poor investment decisions.” – Brian Nelson, CFA By Brian Nelson, CFA What a sensitive topic for many… Our team presented at the Chicago chapter of the American Association of Individual Investors (AAII) last weekend. It is always an honor and a privilege to have the opportunity to present to such wonderful people! They ask so many great questions. (By the way, I’m working on my schedule for 2017, so if you’d like our team to speak on a topic … Read more