EPD

Nelson’s Quick Thoughts on Midstream Energy MLPs

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Image Source: Roy Luck Nelson’s Take We continue to be quite cautious on the midstream MLP business model (AMLP), including Energy Transfer Partners’ (ETP), given its extreme capital-market dependency (i.e. the continuous need for new equity and debt capital), and we maintain our view that the group is 1) inextricably tied to energy resource pricing, if not directly (5%-10%) than indirectly through the financial health of their upstream customer bases and 2) the credit markets via ongoing project-financing requirements and outsize debt loads. Many in the group continue to be capital-intensive, highly-leveraged entities that have little cash cushions on the books to handle exogenous shocks. Most, if not all, generate traditional free cash flow (CFO less all capex) shortfalls, after … Read more

Nelson: The 16 Most Important Steps To Understand The Stock Market

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A previous version of this article appeared on our website July 21, 2013. Refreshed and updated throughout, as of July 2018. By Brian Nelson, CFA After earning my MBA at the University of Chicago Booth School of Business and training stock and credit analysts from large organizations over the past decade or so, I have heard just about every question (though I admit I am still surprised by many things and remain a very humble student of the markets). I’ve also spent years perfecting the discounted cash flow process for large research organizations such as Morningstar and studied under one of the most famed aggressive growth investors of all time, Richard Driehaus. My knowledge runs the gamut from value through … Read more

MLPs Breaking Out But More Questions

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As we stated when we added exposure to the energy sector October 6 (see here), we’d be fools not to acknowledge the technical breakout in units of master limited partnerships the past few weeks. The group still has a long way to go to get back to “even,” but for the sake of retirees who are “DRIPping” into these equities, we sincerely hope some losses can be recuperated. Our experience tells us, however, that the road won’t be an easy one, but we are hoping chartists will be piling into units in the coming days. Fundamental investors may not be aware of this “technical” catalyst to come, but the breakout could be a big one. MLP investors have lost so … Read more

Historic Oil Deal Reached

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Image Source: Chevron Corporation (CVX) – March 2020 Security Analyst Meeting Presentation By Callum Turcan Over the Easter holiday weekend, members from the Organization of Petroleum Exporting Countries (‘OPEC’), non-OPEC members that are part of the OPEC+ group (countries that in the recent past have joined forces with OPEC to curtail global oil supplies in a formal manner), and non-OPEC members outside of the OPEC+ group such as Brazil (EWZ), Canada (EWC), and the United States (SPY) came to an agreement to cut their collective oil output by north of 10 million barrels per day. Global oil and other raw energy resource prices (USO, BNO) have been simply demolished year-to-date due to a combination of demand destruction from the ongoing … Read more

Energy Sector In Shambles, Looks to Recover But Headwinds Persist

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Image Source: ConocoPhillips – November 2019 Analyst and Investor Meeting IR Presentation Executive Summary: Though raw energy resource pricing is on the rebound, the outlook for the oil and gas industry remains stressed. Global demand for oil and related refined petroleum products remains subdued due to headwinds generated by the ongoing coronavirus (‘COVID-19’) pandemic. The OPEC+ oil cartel has responded by pledging to keep a significant amount of oil output off the market for an extended time. However, raw energy resource prices need to go much higher and be sustained at elevated levels before the space could become attractive from a longer-term perspective. In our view, the US upstream industry (specifically those in the shale patch) need WTI to move … Read more

ICYMI: Exxon Mobil’s Bright Growth Outlook

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This article originally appeared on our website December 8, 2021. Image Source: Exxon Mobil Corporation – December 2021 IR Presentation By Callum Turcan At the start of December 2021, Exxon Mobil Corporation (XOM) laid out its longer term strategy for the 2020s decade. We are going to cover that outlook, the state of the global energy complex, Exxon Mobil’s stellar and improving financial position, and what to expect going forward. Exxon Mobil is a tremendous enterprise and one of our favorite energy names out there. Outlook Overview The company noted in its early-December update that its capital expenditures would come in around ~$20-$25 billion from 2022-2027. Its investments are focused on its operations in the Permian Basin, Guyana, Brazil, its … Read more

Valuentum’s Comprehensive Outlook for Crude Oil and Natural Gas Prices

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Let’s take a deep dive into the energy sector. The best dividend growth ideas, the most likely takeout candidates and more…

ICYMI — Video: Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway?

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President of Investment Research and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how US policymakers are stuck between a rock and a hard place, and how the market may be factoring in too high of a probability of a return to normalcy before 2021. This and more in the latest video report. Summary Make sure you review Value Trap on Amazon. Do so here. We think those that bought equities near the bottom of this swoon may be looking to take profits at present levels. The market is currently reflecting an 80%-85% probability of a return to normalcy before 2021, which we believe is too high at this time. Our main concern is that government … Read more

The Dividend Cushion Ratio: Unadjusted Is Less Subjective, Adjusted Is More Subjective

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  Image Source: Mike Lawrence Question: I’m a subscriber. I’m looking at your Dividend Report for Enterprise Product Partners (EPD). It says your Valuentum Adjusted Dividend Cushion ratio for EPD is 1.8 (a ratio that includes future expected proceeds from capital raising endeavors in the coming years), but several lines below it says the Unadjusted Dividend Cushion ratio, which is your regular normal ratio (a ratio that does not include future expected proceeds from capital raising endeavors in the coming years), is 0.22. Please explain the difference between the two ratios, and what is considered a good ratio for the Unadjusted Dividend Cushion ratio, what is an excellent score, what is neutral and what is poor? Also, how much relative importance should … Read more

Creditor Risk Aversion Rises Considerably in Energy, Metals & Mining Sectors

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Not all is well with commodity producers. Moody’s (MCO) has been very quick to point out that “the latest plunge by base metals prices and the renewed slide (in) crude oil prices are more ominous for corporate credit than was the earlier plummet by crude oil prices amid relatively steady industrial metals prices.” The credit rating agency’s industrial metals price index has dropped more than 10% in the past 20 days ending July 9, reaching levels not seen since the depths of the Financial Crisis in 2009. Moody’s industrial metals price index has fallen an incredible 25% since the same time stamp last year, something we’ve been witnessing anecdotally. The International Energy Agency recently warned that the bottom in crude oil … Read more