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2/27/25 Capitalist Times Live Chat
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Jack A.
2:23
Hi Elliott:

If you were to pick one energy focused stock or MLP that, at today's prices, offers the greatest upside potential for price appreciation, what stock or MLP would that be?

Thanks
AvatarElliott Gue
2:23
That's a tough one. It's something I was asked at the Orlando Money Show late last year and I'm going to answer in the same way I did there. My favourite energy investment theme right now is natural gas and if I had to pick my favorite play on that theme, I'd have to go with Expand Energy (EXE).
David H.
2:35
Hello! Thanks for doing this, can’t believe it’s almost March.

Question:
Do you think the change in CEOs will be a pivotal moment for Devon? Or more of the same?

Thanks for your time and knowledge.
AvatarElliott Gue
2:35
I don't think there will be a major change in strategy for DVN as a result of the change in CEOs. The key things I'm watching from them this year is oil production of the the Delaware (western Permian).  GORs (gas-to-oil ratios) have been rising industry wide for years, which makes sense because wells become gassier over time and so rising gas output from legacy wells puts upward pressure on GORs. However, DVN has seen a bigger shift than most in favor of gas.

They did a deal in the Bakken Shale -- Grayson Mill -- I believe, in large part, to address their gassy production drift. (Wells in the Bakken have higher oil cuts than in the DE Basin). However, this was really just a bolt-on deal and I think the market is a little disappointed in their Permian position and that they didn't participate in any of the M&A over the past 18 months -- they didn't buy more acreage/inventory in the field as competitors like FANG did.

I've seen a lot of Wall St. analysts that rank DVN among their top picks for 2025 based
AvatarElliott Gue
2:35
, in part, on improving realizations for their gas production out of the Permian thanks to the new line that opened up late last year (Matterhorn Pipeline). All that bullish sentiment scares me -- I think a lot of the good news about Matterhorn was priced in via the rally we saw in DVN in late December and early January. My view is that if you want to play natural gas -- a great theme in my view -- why not buy a gas producer like EXE rather than buying a mixed oil/gas player like DVN. Or, if you really want a producer with exposure to multiple oil/gas basins, why not OVV, which has the Canada LNG export story on the gas side. As for pure oil plays -- I'd rather own a name like XOM, for example, that has growing low-cost oil output. DVN is a good company but I think it's a hold.
AvatarRoger Conrad
2:52
A.Hi Dan. Thanks for joining us today. I’ll take these questions in order.
 
First, the Brookfield/National Grid transactions should benefit both sides. The price tag of $1.74 billion is relatively small for both companies. And it has some regulatory hurdles, which is why both parties expect it to take roughly one year to close. But the properties should profitably add to Brookfield’s scale. Also, per usual the parent is taking on much of the financial risk for BEP. As for National Grid, this is another step to streamline its business to regulated utilities in the UK, with some in the US. The cash will support a massive CAPEX plan over the next few years. NGG is a buy at 60 or lower. BEP/BEPC are buys up to 40.
Opps sorry questions first!
2:53
Q. Hi guys. Thanks for hosting these chats. I have eight questions.
 
First, what are your thoughts on Brookfield buying National Grid Renewables’ US business? Second, what’s your view on the narrative in the financial press that some companies are exiting renewables because of reduced profitability? Third, are you planning to add Brookfield Infrastructure to the Conrad’s Utility Investor coverage universe? Four, how solid are current prospects for Veolia (Paris: VIE, OTC: VEOEY)? Five, how goes the Algonquin Power and Utilities (TSX: AQN, NYSE: AQN) turnaround? Six, what’s your reaction to Northland Power’s (TSX: NPI, OTC: NPIFF) Q4 results and do you anticipate keeping them on the Endangered Dividends List? Seven, what do you think Dominion Energy’s (NYSE: D) growth rate would be if they are successful in meeting service area demand for electricity including data centers? And eight, what are you looking for in AES Corp’s (NYSE: AES) results to be announced after tomorrow’s close? Thanks—Dan N.
Second, if there’s one common thread from guidance of every utility and power producer in America—as well as natural gas transmission companies—it’s that demand for electricity is rising faster than it has in decades. Regulated utility CAPEX is soaring and prices paid in long-term supply contracts are rising, regardless of power source. There has been ongoing consolidation of renewable energy generation in the US the past few years, really starting when the green bubble burst in 2021-22. And that’s being driven by realization that this is a scale business, just like anything else in electricity. But the value of contracted power generation assets is rising in this country.
 
Third, it’s still a possibility. But BIP is really just a collection of assets, not a real operating company—a lot going on here is really outside the purview of CUI.
Fourth, Veolia announced results and guidance today that are very much in line with what management has been indicating, which is why the stock hasn’t moved much on the news. I will have more detailed analysis of the results in the March CUI (March 10). But bottom line is they’re in a lot of good businesses globally—and the fact revenue grew twice as fast as long-term annual guidance is a god sign the long-term strategic positioning since the Suez merger is working. It’s not a utility per se. But Veolia has a lot of utility like characteristics and I rate it buy at 19 or lower.
 
Five, we’ll know a lot more about the Algonquin turnaround on March 7, when they report Q4 numbers and update guidance in time for the March CUI. I’m expecting to see a big cut in debt and solid progress reducing regulatory lag. It’s for patient investors only at a price of 6 or lower.
2:54
Six, I will have a more detailed discussion of Northland Power in the March CUI. I did think the Q4 numbers were decent and I was encouraged by the 2025 EBITDA guidance. And it looks like free cash flow guidance will cover (barely) the current dividend rate, even as the company pushes ahead with its major projects. Those are really the key to the company’s long-term ability to pay the current dividend. And it’s encouraging they now include some natural gas. But the most important projects are the offshore wind in Taiwan (over 50% complete) and the Baltic Sea (Poland). Management said both are still on track with “costs aligned with original expectations.” But there’s still work to be done and until we get closer I’ll probably keep NPI on the Endangered Dividends List.
Seven, Dominion delivered in guidance in 2024—not just financially but operationally (offshore wind construction etc) and with transactions, closing the gas unit sales ahead of schedule enabling it to cut debt faster than expected. The company also raised 2025 guidance, which is the baseline for the 5-7% projected annual growth range. And they boosted 5-year capital spending plans by 16% to $50 bil. I do think management is keeping earnings growth projections conservative for good reason—starting with the fact that they’ve got to get the Coastal Virginia Offshore Wind project over the finish line without significant additional cost increases. The $900 mil increase announced this month is arguably not their fault—as it’s an estimate of what the PJM grid will assign it this year in transmission connection costs. But they did have to eat some of it. Also, while CVOW is fully permitted, there’s still the possibility of legal/regulatory challenges before it’s completed. I don’t think likely. But it’s still
possible. All that said, if they are able to plan, site, permit, procure for, finance and build the needed infrastructure to meet all this demand, I think they’ll be growing earnings 8-10% a year the next few years. They’re going to need regulators’ support to get there, which is highly likely but hardly 100% certain with Virginia elections later this year. But that’s where I think they could go. And I would look for a share price over 80 when they do.
 
And finally eight, AES will be on the spot tomorrow to provide a plan to meet investment-led financial guidance that analysts find credible. And there’s obviously a lot of skepticism they will at the current price of 5.4X expected next 12 months earnings. The bar of expectations is very, very low and won’t hard to beat. And the dividend increase announced in December (maintained this month) is a good sign management is still confident in its plans. But we’re just going to have to wait and see what they report.
Roy D
2:56
Good afternoon to all.  My question is about Sinclair (DINO). A Year or two ago they bought my shares of Holly Energy Partners.  I wish they hadn't because ever since then the shares of Sinclair have steadily gone down. Do you think there's any hope that they're going to go up anytime soon?
AvatarElliott Gue
2:56
DINO's main business is refining. Refining margins -- known as crack spreads -- have been weak since last spring. The main issue appears to be concerns about weakness in demand. While demand has held up OK in the US, we have seen weakness in Asian refining margins, which I think is largely a function of weak economic growth in China. While DINO doesn't export refined products directly, there's a link between US and global refining margins because the US does export refined products out of the Gulf Coast.

In my view, refining margins should recover later this year barring recession. I'm watching the China situation closely -- the Chinese stock market has popped lately due, in part, to optimism the government there is serious about kickstarting growth. If that proves out, I think you could see a recovery in US and global crack spreads that would aid names like DINO.

The only refiner we recommend in the portfolio is VLO, which is the highest quality independent name in my view. Their positioning on the US
AvatarElliott Gue
2:56
Gulf Coast also gives them access to a variety of different crude oil feedstocks (produced domestically or imported) and a variety of export market options.
das
2:58
I sent this question in as a pre-chat by email, but apparently it was missed. I may have missed it, but I am interested to learn of Roger and Elliot's "favorite" choice in the energy space for 2025. Last year Roger chose ET, which has done quite well. Thanks.
AvatarElliott Gue
2:58
I don't know if we've put it in the service, but my top theme in energy this year is natural gas.I like a lot of names around that theme but if I had to choose, I'd go with Expand Energy (EXE).
AvatarRoger Conrad
3:01
I still like Energy Transfer for anyone who hasn't already bought it. I would also take a look at South Bow (NYSE: SOBO)--which was spun out of TC Energy last year. it yields pretty close to 8% and investor worries that its Keystone XL system is exposed to tariffs are now diminishing rapidly.
Jack A.
3:02
Hi Roger:

You had mentioned that one of the reasons for the fall in price of AES was its removal from the Utility Index to make room for other utilities, but the question is what led to the choice of AES to be removed as opposed to some other utility? Were they not doing as well as their peers?

Thanks
AvatarRoger Conrad
3:02
Hi Jack. I definitely think the stock's underperformance was a major reason Dow Jones removed AES Corp (NYSE: AES) from the DJUA. Swapping out underperformers for outperformers--in this case the replacement was Vistra Corp (NYSE: VST)--is pretty common practice for index sponsors, who are always incented to maximize near-term performance so more ETFs will track them.

AES, however, had underperformed prior to being dumped because of exposure to emerging markets and renewable energy--and skepticism they can maintain growth and investment guidance. They're going to be under the gun tomorrow when they release Q4 results and update guidance. I think they'll beat very low expectations but will want to affirm strength of the underlying business.
Pete H
3:11
Hello Roger,
Following SRE earnings release and lower guidance, the stock is down 17% from last week’s closing price. Why did the company missed its earnings so badly, and cut its guidance so suddenly.
My understanding was that the utility growth was in itself enough to support SRE’s 6-7% earnings growth through 2028, and could even be considered conservative if one take into account the contracted LNG and renewables activities expansions. What has changed and what is your take on the management lower growth target, are they reliable.
Thanks again for your comments over the years. Always insightful.
AvatarRoger Conrad
3:11
Hi Pete. Honestly, i think what happened to Sempra Energy (NYSE: SRE) this week can best be summed up as too much upside momentum coming out of November elections (for the LNG growth), followed by an extreme over-reaction on the downside in the face of what really was not a significant shift in the only guidance that really matters--which is longer term. The price right now is about where the stock traded for most of last year. And remember that my highest recommended entry point for Sempra has been consistently 78--a level justified by long-term business growth.

They did cut 2025 guidance from $4.90 to $5.25 to a range of $4.30 to $4.70. That compares to $4.65 in 2024, which was in guidance. And it cited accelerated investment as the primary reason. But it also increased the long-term growth rate from 6-8% to 7-9%--not a bad thing, as accelerated investment means higher costs now but bigger returns later.

The stock actually went to the low 60s on the 25th before coming back to the low 70s where it is now.
AvatarRoger Conrad
3:14
I think that volatility says a lot more about the nature of this stock market now than anything to do with Sempra. Mainly, when companies are perceived to miss a number, the selling is fast and immediate--overwhelming buy orders and driving stocks far lower than would be justified by the actual news and numbers. The silver lining is we can use these selloffs as opportunities to buy high quality stocks on the cheap--and I congratulate anyone who was able to pick up Sempra shares in the 60s.
Ben F.
3:17
Good morning from New Mexico,

Thoughts on SRE, Sempra?
AvatarRoger Conrad
3:17
Hi Ben. Per my answer to the previous question, I think Sempra is a very strong company with a lot of opportunity to invest to grow in Texas as well as in the LNG business, where it has several projects under construction as well as in operation. The risk some people seem to be imputing to the California operations also looks way overblown--they largely avoided liability from the state's historic and thankfully passed wildfire season.And rates of return are still robust. I think the drop in price is a nice opportunity for those without positions to pick up some.
Susan P.
3:24
As always, thanks for the opportunity to ask questions:

As a subscriber to multiple subscriptions, I have noticed the use of debt/capital as well as debt/EBITDA and I am wondering how you determine the use of each measure? Does it depend on the sector -- e.g., energy companies vs utilities vs reits, etc.? Any general observations on these measurements' usefulness would be helpful.
AvatarRoger Conrad
3:24
Hi Susan. Yes I would agree debt/capital and debt/EBITDA are really only useful as metrics when you consider the underlying business. In general, you want to see a low numbers for both. But a 100% regulated utility like Atmos Energy, for example, can handle higher ratios than a company with a lot of commodity price exposure like Constellation Energy. So when I assess balance sheet strength for Quality Grades or risk ratings, I always put them in context of the underlying business. And every 3 months when we do a full on Quality Grade analysis in Utility Report Card of CUI, my comments try to do that.
RON
3:33
Elliot, Why is EXE down over 4 points today
AvatarElliott Gue
3:33
The entire natural gas complex is down today -- actually, EXE is outperforming peers like EQT, RRC, AR, CRK  likely because of their solid earnings out last night.

More broadly, the entire market has come in today after hitting ATH on the 19th.

My guess would be that there's some correlation between S&P and Natgas names today. Natural Gas E&Ps have been major outperformers since last fall -- EXE was up about 60% from the autumn lows to the recent highs -- so you've probably seen a lot of general money/active money flow into the group. That means when there's a "risk off" trade you tend to get a coordinated sell-off where all the momentum names pull back regardless of sector/fundamentals.
Sandy
3:34
Roger,
I appreciate your calls on stocks. My portfolios are holding steady. I read that Warren Buffett says he is no longer buying US companies. The blowback on Trump's tariff proposals has turned Canada's energy from the USA to Europe. And the EU is taking strong measures as well. What sector in the foreign companies look promising recipients of Trump's threats?
AvatarRoger Conrad
3:34
Hi Sandy. In the February feature article of Conrad's Utility Investor, I highlighted a basket of non-US utilities from those in our coverage universe and portfolios that I think will benefit from multiple trends the next few years--and which are pretty cheap now mainly because investors are hyper focused on politics.

I also think generally that electric utilities and natural gas pipeline companies are in a very good position here from industrial re-shoring, which is a response to wanting to safeguard supply chains but also to the threat of tariffs.

I think the Canadian midstream companies that own and/or are developing Pacific coast energy export infrastructure have just received a huge boost--as Canadian energy goes to Asia. Pembina announces today and I expect good news on the heels of December's very positive guidance.
AvatarRoger Conrad
3:36
I've also highlighted a number of other income stock beneficiaries of tariffs in CUI Plus/ CT Income--as well as the REIT Sheet. Anyone interested in what I have to say there should give Sherry a call at 877-302-0749 anytime Monday through Friday 9-5 ET.
John C.
3:39
Please comment on recent news from Sempra and guidance.

thanks
AvatarRoger Conrad
3:39
Hi John. I don't have much to add to what I said about Sempra answering a couple questions just now in the chat. Short answer is I think the stock had become too expensive with all the hype about LNG exports. That set the price up for the extreme volatility we saw this week. But end of the day, this is the same story--a financially healthy company with a huge growth opportunity in Texas and with LNG the next few years. And while the earnings growth from this investment is deferred a couple years, there will be no impact on the dividend and its growth.
Brian
3:49
Hi Roger, I love what you do for the small investors!

I Know you're probably sick of talking about Dominion. Unfortunately I bought shares 3 weeks before they cut the dividend. Any hope for D
I bought BEPC and I like the results so far. SIMPLY WALL STREET voices concerns:

that the interest payments are not well covered by earnings,dividends not well covered by earnings or cash flow, and that earnings are expected to decline by 28.8% for the next three years. Your thoughts. Thank You
AvatarRoger Conrad
3:49
Thanks Brian. Yeah, I think there's plenty of upside ahead for Dominion. The dividend cut was back in 2020, so you've held this stock a while--though not nearly as long as I have. And I think the underlying investment story is quite strong. There are a couple of challenges now--the big one getting the still low cost Coastal Virginia Offshore Wind facility into operation by late 2026 as scheduled, and navigating this year's elections in Virginia by staying out of the limelight. But I think the next few years, we're going to see earnings growing 8-10% a year--as opposed to current guidance for 5-7%. And I think we'll see a price north of $80 again.

Regarding Brookfield, the analyst consensus is still pretty bullish--Koyfin lists 15 research houses at "buy" (8 strong buy), versus 2 holds and just 1 sell. Also, BEP is organized as an MLP for tax advantages--which means earnings per share are minimized. FFO is a better measure, as it is with all MLPs and REiTs.
Susan P.
3:59
I ask with the gratitude for your availability:

Roger's commentary on Edison Int'l was compelling -- e.g., Wall Street's price target and the potential limited liability dollar amount. Do you have concerns about a dividend cut if EIX becomes more and more of a target to blame, regardless of the merit (or lack of) that culpability?

Elliott has discussed the Chevron/Hess potential merger. Do you have added insight on the outcome, given this Administration's "energy emergency declaration"? And if approved, what's your expectation for CVX, Hess and Hess Midstream?

Thanks guys
AvatarRoger Conrad
3:59
Hi Susan. Yes, I think there's still a lot of uncertainty regarding utility liability for California's recent wildfires. Edison is going to announce Q4 earnings and hold a guidance call after today's close. So we're about to find out a lot more about its situation. The key issue is whether or not the utility's equipment is responsible for the Eaton Fire. And until that issue is settled, we can expect the stock to trade at a discount. Otherwise, though, this is still a great investment story. And if the wildfire liability is found to be less than an absolute worst case scenario, the stock will recover.

Chevron/Hess has already received all needed regulatory approvals--so I don't really see any impact from federal policy at this time. The key is the arbitration hearing later this year with ExxonMobil. if CVX can reach a deal or wins the case, the merger will close shortly after. And I think Hess Midstream will be absorbed soon after into CVX. If XOM wins, the deal is off.
Don C.
4:04
Roger--are there any utilities that you think will benefit disproportionately as AI rolls out over the next few years.

Thanks for holding these chats.
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