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Latest Valuentum Commentary
Nov 18, 2019
Big Energy Earnings Roundup
Image Source: Exxon Mobil Corporation – Third Quarter 2019 Earnings Presentation. As long as raw energy resource prices remain lackluster, the upstream divisions of the major energy giants will continue to generate far less cash flows than they did during the boom period (2010-2014). For Chevron, Shell, Total, and Exxon Mobil, their downstream operations offer a degree of stability but their large net debt positions and hefty capital expenditure budgets will continue to pressure their financials for some time. While Conoco doesn’t possess downstream operations anymore after the split with Phillips 66 in 2012, management’s focus on net debt reduction and free cash flows post-2014 puts COP in a better position than most of these bigger integrated peers (particularly CVX, RDS and XOM). That being said, we don’t include Conoco in any of our newsletter portfolios in part due to its lack of a “natural hedge” (downstream operations) and its direct exposure to raw energy resource prices. BP plc continues to represent one of our favorite plays in the energy space and shares of BP are included in our simulated High Yield Dividend Newsletter portfolio. We like BP’s cash flow profile, its stellar operational execution of late (upstream projects are consistently getting turned online under-budget and ahead of schedule), and its impressive downstream asset base. Members interested in reading more about why we like BP should check out this piece here, and if you may wish to add the High Yield Dividend Newsletter to your membership, please click here. Shares of BP yield 6.3% as of this writing and our fair value estimate of $45 per share of BP is comfortably above where shares are currently trading at.
Nov 13, 2019
Chesapeake Energy’s Pain Indicates Nothing “Safe” About Energy MLP Distributions
Image Source: Valuentum slide deck, December 2015. Valuentum released its bearish case on MLPs in June 2015. 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 Chesapeake bankruptcy, and this could have implications across the pipeline MLP arena.
Nov 11, 2019
High Yield Dividend Newsletter Portfolio Holding BP Sees Cash Flow Profile Improvements Ahead
Image Source: BP plc – Third quarter 2019 earnings infographic. If you may wish to add the High Yield Dividend Newsletter to your membership, please click here.We continue to like BP as a holding in the High Yield Dividend Newsletter portfolio. Rising upstream production levels, a quality downstream footprint, and reduced Gulf of Mexico oil spill-related payments will go a long way in enhancing BP’s cash flow position. Raw energy resource prices remained subdued around the globe, but that isn’t stopping BP from fully covering its organic capital expenditures and dividend payments with underlying cash flows. We would like to see BP’s gearing ratios move lower, which is the stated goal.
Nov 5, 2019
High Yield Dividend Newsletter Portfolio Holding Magellan Midstream Keeps Growing
Image Shown: Magellan Midstream is focusing heavily on growing its fee-based operations, with an eye towards expanding its refined products pipeline segment. Image Source: Magellan Midstream Partners L.P. – August 2019 IR Presentation. If you may wish to add the High Yield Dividend Newsletter to your membership, please click here.We continue to like Magellan Midstream as a holding in our High Yield Dividend Newsletter portfolio. The company’s investment grade credit ratings (BBB+/Baa1 as of August 2019) and preference to fund its growth trajectory with debt instead of equity (equity issuances have been very muted since 2010) allows for steady sustainable increases in the company’s per unit distribution. Magellan Midstream retains access to capital markets at attractive rates and will likely take advantage of the subdued interest rate environment by refinancing portions of its existing debt load at lower rates when able. Magellan Midstream’s quarterly distribution per unit has grown by almost three-fold since the start of 2010, and there’s room for additional payout increases over the coming years.
Oct 25, 2019
Dividend Increases/Decreases for the Week Ending October 25
Let's take a look at companies that raised/lowered their dividend this week.
Sep 16, 2019
Saudi Arabia Attacked, Oil Prices Shoot Higher
Disaster struck this weekend when several drones took out the Abqaiq oil processing facility and the massive onshore Khurais oil field in Saudi Arabia on Saturday, with WTI and Brent both surging on the news once trading resumed at the start of the week. We will be monitoring this situation very closely going forward. The pace at which Saudi Arabia can bring capacity back online will have an outsize impact on global oil markets going forward, as the world no longer has any spare capacity to turn to during times like these (when supply is severely curtailed). Geopolitical tensions are clearly growing and that could spill over into a war directly between Saudi Arabia and Iran, but for now there’s no signs of troops mobilizing for such an endeavor.
Aug 28, 2019
BP Says Goodbye to Alaska After 60 Years
Image Source: BP IR Presentation. We are supportive of BP’s decision to divest its Alaskan operations as the company has been successfully bringing upstream projects online on-time and on-budget all over the globe over the past few years, driving its net oil & gas production levels higher (upstream output was up 4% year-over-year in the second quarter of 2019). BP’s operational execution of late has been nothing less than stellar and the energy giant is included in our simulated High Yield Dividend Newsletter portfolio. Shares of BP yield 6.7% as of this writing.
Aug 23, 2019
Kinder Morgan Reaches a Deal to Divest Stake in Canadian Spin-Off
Image Shown: A look at Kinder Morgan's massive oil & gas infrastructure operations that crisscross North America. The natural gas midstream giant is selling its Canadian segment by divesting its 70% equity stake in Kinder Morgan Canada and the US portion of the Cochin pipeline to Pembina Pipeline Corporation (PBA). Image Source: Kinder Morgan Inc – IR Presentation. We like Kinder Morgan because it's one of the few midstream firms actually targeting free cash flow generation instead of focusing on distributable cash flow, which we see as a deeply flawed metric (not taking growth-related capital expenditures into account completely misses the picture in our view). The company’s natural gas assets in the US are irreplaceable and its pipelines transport ~40% of US natural gas according to Kinder Morgan.
Aug 7, 2019
Tallgrass Energy’s Growth Runway Shorter Than Expected
Image Source: Tallgrass Energy LP -- IR Presentation. We parted with Tallgrass as we see greater opportunities in other midstream firms and different parts of the high-yield universe, such as Enterprise Products Partners, which have stronger growth runways and assets that better cater to the ever-evolving needs of North America’s oil & gas industry. Recent weakness in TGE indicates the market is losing faith in Tallgrass’ growth trajectory and its future free cash flows.
Aug 5, 2019
Our Reports on Stocks in the Oil & Gas Pipeline Industry
Image Shown: Valuentum's thesis on MLPs prior to their collapse in mid-2015. Our reports on stocks in the Oil & Gas Pipeline industry can be found in this article. Reports include ENB, ET, EPD, KMI, MMP.
Latest Press Releases
The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Nelson Exclusive publication, and any reports, articles and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. The sources of the data used on this website are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor and does not offer brokerage or investment banking services. Valuentum, its employees, and affiliates may have long, short or derivative positions in the stock or stocks mentioned on this site.