MMP

ExxonMobil’s Immense Upside in Guyana

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Image Source: ExxonMobil Corporation – 2021 Investor Day Presentation By Callum Turcan On June 27, we added shares of ExxonMobil Corporation (XOM) as an idea to the Best Ideas Newsletter portfolio and the Dividend Growth Newsletter portfolio (link here). The backdrop for the energy complex has improved considerably in recent months. Raw energy resources pricing has surged in the wake of demand for refined petroleum products beginning to recover in earnest, while demand for various petrochemical products is also on the rise. Near-term Brent and WTI futures are trading north of $70 a barrel as of this writing, keeping in mind Brent averaged ~$60-61 per barrel and WTI averaged ~$57-$58 per barrel during the first three months of 2021. On … Read more

ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline

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ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline — — In this 40+ minute video jam-packed with must-watch content, Valuentum’s President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He’ll talk about which companies Valuentum likes and why, and which areas he’s avoiding. This and more in Valuentum’s 2020 Exclusive conference call.   Note: This video was originally published August 2, 2020.    To watch the video >>   The Theory of Universal Valuation —– Valuentum members have access to our 16-page stock reports, … Read more

The Real Reasons Why Buffett Wants You in Index Funds

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Image Shown: Since mid-June 2015, on a price-only basis, the S&P 500 (SPY) has nearly doubled, while shares of Kinder Morgan have nearly halved. In Morgan Housel’s The Psychology of Money, chapter 16 leads in with “Beware taking financial cues from people playing a different game than you are.” The people on CNBC are playing a different game than you, and so is Warren Buffett. Buffett’s principles of stock selection are golden, but you must understand that he is near the top of the Forbes’ Billionaires List. He absolutely should be taking his own advice and indexing! With the threat of long-term inflation and price-agnostic trading, the everyday investor, even with a few million in the bank, is not so … Read more

Earnings from Our Two Favorite Midstream MLPs: EPD and MMP

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Image Source: Enterprise Products Partners L.P. – Fourth Quarter of 2020 IR Earnings Presentation In Alphabetical Order by Ticker: EPD, MMP By Callum Turcan The energy market is recovering and that speaks favorably towards the midstream side of the oil & gas industry. Midstream companies operate pipelines, storage facilities, processing plants, marine terminals, gathering systems and other energy infrastructure assets. As global health authorities work to bring an end to the coronavirus (‘COVID-19’) pandemic, aided by ongoing vaccine distribution efforts, that should enable North American raw energy resources production to post a sustained recovery. Raw energy resources include crude oil, natural gas, and natural gas liquids (such as propane, butane, and ethane). North American energy production took a big hit … Read more

Chevron’s Forward-Looking Dividend Coverage is Becoming Stressed

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Image Shown: Chevron Corporation reduced its capital expenditure expectations a couple of times this year, though that still has not enabled the firm to generate meaningful free cash flows given the various headwinds facing its businesses. Image Source: Chevron Corporation – November 2020 IR Presentation By Callum Turcan On October 30, Chevron Corporation (CVX) reported third quarter earnings for 2020. As expected, it was a brutal report from Chevron. The ongoing coronavirus (‘COVID-19’) pandemic decimated global energy demand and severely weakened raw energy resources pricing at a time when refining margins are quite weak. This double whammy saw Chevron post a $0.2 billion GAAP net loss in the third quarter of 2020 as its revenues tanked. Dividend Coverage Facing Serious … Read more

Exxon Mobil’s Weak Forward-Looking Dividend Coverage is Very Concerning

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Image Source: Exxon Mobil Corporation – Third Quarter of 2020 IR Earnings Presentation By Callum Turcan Exxon Mobil Corporation (XOM) has contended with enormous headwinds so far in 2020 due to the ongoing coronavirus (‘COVID-19’) pandemic, and that has put its dividend at risk. Over the past couple of years, the company has come nowhere close to generating enough free cash flow to cover its dividend obligations. Exxon Mobil’s forward-looking dividend coverage appears quite weak and the company is currently leaning heavily on debt markets to keep making good on those obligations. As of this writing, shares of XOM yield ~9.7% as investors are increasingly pricing in the chance for a meaningful payout cut. Deteriorating Upstream Outlook The long-term slide … Read more

Our Thoughts on Magellan Midstream’s Latest Earnings

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Image Shown: Keeping the many headwinds facing the energy infrastructure space in mind, Magellan Midstream Partners LP remains one of our favorite midstream master limited partnerships. Image Source: Magellan Midstream Partners LP – October 2020 IR Presentation By Callum Turcan On October 30, Magellan Midstream Partners LP (MMP) reported third quarter 2020 earnings that beat both top- and bottom-line consensus estimates. The midstream master limited partnership (‘MLP’) space has faced enormous headwinds due to the ongoing coronavirus (‘COVID-19’) pandemic, though the firm was still able to generate sizable free cash flows during the first nine months of 2020. Magellan Midstream is a modestly-weighted holding in the High Yield Dividend Newsletter portfolio, and as of this writing, units of MMP yield … 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

ConocoPhillips Is Buying Concho Resources

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Image Shown: An overview of the pro forma asset base of ConocoPhillips and Concho Resources Inc. Please note that Concho Resources’ main operations are in the Permian Basin in West Texas and Southeastern New Mexico, a region that ConocoPhillips seeks to grow its exposure to. ConocoPhillips has an expansive upstream portfolio with operations worldwide, though its North American position is set to become a much larger part of its company-wide profile. Image Source: ConocoPhillips – ConocoPhillips & Concho Resources Transaction Announcement IR Presentation By Callum Turcan On October 19, ConocoPhillips (COP) announced it was acquiring Concho Resources Inc (CXO) through an all-stock deal. If the deal goes through as planned, each share of CXO will be exchanged for 1.46 shares … Read more

Our Thoughts on the Potential Acquisition of Concho Resources by ConocoPhillips

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Image Source: ConocoPhillips – November 2019 Annual & Investor Meeting Presentation By Callum Turcan According to Bloomberg, the super-independent ConocoPhillips (COP) is currently talking with Concho Resources Inc (CXO) about acquiring the company. We do not expect that such a deal will come with a significant premium, and furthermore, and we expect that such a deal will likely be funded with equity. Our reasoning is underpinned by recent M&A activity in the oil patch, such as the all-stock acquisition of Noble Energy by Chevron Corporation (CVX) through a ~$5 billion deal that was completed in early-October. That deal involved Chevron paying a ~12% premium (based on ten-day average closing stock prices) at the time of the announcement, though please note … Read more