JotCast | Energy & Income Advisor Live Chat April 2020

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Energy & Income Advisor Live Chat April 2020

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Hans

4:55

Any update on PBA and PAA

Roger Conrad

4:55

I addressed Plains earlier in the chat. Short answer is the reduced dividend should hold and we believe still it's a high quality way to keep exposure to an eventual volume recovery. They announce Q1 results on May 1, so we'll know a lot more about where they stand then.

With Pembina, earnings are May 7. Our view is this is one of a half dozen or so North American midstreams with the scale, diversification, quality of contracts (investment grade counterparties, capacity-based rather than volume dependent), experienced management and balance sheet strength to not only weather this worst of all worlds for energy but to continue positioning to ride the recovery. The monthly dividend of 21 cents Canadian per share also looks secure, though management has said it likely won't raise it again in 2020 (last boost in February).

Again, I want to see what they report. But the moves already announced to delay growth CAPEX and increase liquidity appear to have positioned Pembina well. And our advice is still B<38.

Hans

5:03

Is CPLP still a good hold

Roger Conrad

5:03

The fact they followed through on their May dividend--declaring 35 cents per share per quarter on April 28--is a good sign I think for what they will report for Q1 in mid-May. That said, this business has been and is going to be hit hard by the weakness in the global economy this year. Charters will protect them to some extent and I think the division of the company last year was successful in forging a more conservative entity with greater predictability of earnings. But while our advice is still Buy<12, this is still for aggressive investors only, and particularly until we see those Q1 results and updated guidance.

Guest

5:07

Is it possible to make the E&P and services, MLPs and Midstreams, and Canada and Australia info easier to read and scroll on the E&I Advisor website? Thanks! Susan A

Roger Conrad

5:07

If there's anything specific you'd like to suggest we'd appreciate it. Write to service@capitalisttimes.com

We recently made some extensive changes to the coverage universe tables on the site specifically so they'd be easier to read. And in fact, you no longer have to scroll down. You just click on "Next" or "Previous" at the top of the tables to get where you want to go. Even the longest (MLPs and Midstream) is only four pages, so it really doesn't take a lot of time to move through these tables any more.

Anyway, we'd be interested in your thoughts. Thanks.

Brian

5:19

What is your outlook for oasis? Will they survive? Bankruptcy?Takeover? Which of the majors are likely to scoop up juniors?

Elliott Gue

5:19

Oasis definitely looks vulnerable...I don't see it as a takeover candidate as I can't think of an acquirer for them at the moment. I'd imagine both XOM and CVX -- which have extensive acreage in the Permian -- might be interested in buying assets threre on the cheap. Eventually, as oil prices recover, you could see some of the independents (PXD, CXO for example) act as acquirers.

drg

5:21

The dream prices in your May issue of EIA are in many uinstances lower than the current prices. Don't you think the dream prices should be adjusted based on current market realities otherwise the whole purpose is defeated. Your thoughts please.

Roger Conrad

5:21

Well, that's not really the purpose of the Dream Buy prices. What we've done is set levels that would only be reached under extreme circumstances--and therefore if you buy there, you're locking in a windfall, provided of course the company is still solid on the inside.

We have had a rally in these stocks, so about half are now trading above these prices. The rest still are below Dream prices, notably EPD, XOM, HESM, KMI, MMP, OKE, OXY, PBA, SLB and SPH--so there are plenty to choose from even now. I would also point out that pretty much every company in the Portfolios and the High Yield Energy List is trading below our buy price--which is a level from which we believe stocks will generate at least a 10% annualized return the next 3 to 5 years.

One more thing. I don't know what you're considering to be current market realities. But we continue to believe there's considerable risk of another down leg in the stock market. If that's the case, you may not have to wait long for Dream Buys again.

Brian

5:23

How much storage capacity is left? Floating vs land.

Elliott Gue

5:23

With floating storage it's all a matter of price and the degree of contango as there are a lot of tankers that could be pressed into floating storage. On land, it varies widely depending on where you look -- the most important place to watch for the US is Cushing where inventories are at 63.4 million bbl vs. capacity of approx. 76 million. I doubt you will see Cushing reach total capacity because terminal operators need a bit of space for blending, etc. Storage there above 70 to 72 million bbl would basically be pushing it.

Jack

5:30

KMI had a spill that has damaged some drinking water. Do you see this affecting your recommendation? Thanks.

Roger Conrad

5:30

It may sound callous, but managing spills and potential resulting legal fallout is a part of doing business in midstream energy. In this case, what you have is a project to build a natural gas pipeline (Permian Highway)--not a leak at operating infrastructure. The risk to the company is not from what's happened. It's rather if it results in construction permits being revoked.

The accident occurred in late March and the company has been responding with clean up efforts and aid to the local community. The project has survived two other court challenges in Texas to date. It seems likely it will be able to remedy this problem and continue the project, though that is pending future developments and isn't certain.

What is, however, is that Kinder doesn't need this project to meet 2020 cash flow guidance, which is what's backing the 5% dividend increase announced last week. So these developments don't affect our recommendation.

Dave

5:36

I find information on the EIA website are are often dated and don't reflect the changing realities of the market. That's extremely unfortunate and shows lack of focus on your core and existing services as you expand product / services scope of Capitalist Times.

Roger Conrad

5:36

Is there anything specific you'd like to share? We'd very much appreciate hearing about it if you'd drop us a line at service@capitalisttimes.com.

As I answered to a previous question, we update all of the website and portfolio tables when each issue goes to post, which is twice monthly. The information in the tables (advice and numbers) is current as of the issue date, which is April 30.

We also update specific advice on Portfolio recommendations in between issues via alerts. The most recent was April 21--when we took a profit on half our SCO position.

And of course, you can ask about anything during these monthly online chats, or in between them by shooting us an email.

Please let us know you'd like to see us do.

Arnold S

5:41

Early in today's chat, you mentioned that AM and ENLC might not get back up if they fall again. Is there somewhere on the site that has a list of the companies that are least likely to survive?

Roger Conrad

5:41

That's an interesting idea. In the meantime, you can scan the coverage universes for companies that no longer pay dividends or that are on the Endangered Dividends List--and therefore are in imminent danger of dividend cuts. They're the best candidates for falling and not being able to get back up.

As you look at those coverage universes--as well as the EDL table--you'll see a large number of companies we rate sells. That's a good place to start for weeding out the at risk stocks.

Roger Conrad

5:47

That's all we have in the queue and from pre-chat emails. We'd like to thank everyone for participating today. As usual your questions and comments have given us a lot to think about. We will be sending a link to the complete transcript of all questions and answers shortly, which will also be posted on the website.

I want to remind everyone again that there is a new issue of Energy and Income Advisor up on the site now--just posted a few hours ago. And as I said earlier, that means all of the tables are updated too.

5:48

We very much appreciate your business. Thanks again everyone and have a great evening. Stay well!

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