You are viewing the chat in desktop mode. Click here to switch to mobile view.
X
Return toEnergy & Income Advisor
Energy & Income Advisor Live Chat August 2020
powered byJotCast
Prev Page View Full Chat
salvatore
5:43
Evening Gentlemen    Appreciate  your  imput as always
AvatarRoger Conrad
5:43
Thank you for reading!
salvatore
5:53
My  Question  is weather shell midstream partn  dividend is sustainable
AvatarRoger Conrad
5:53
Based on the assets and cash flow sustainability the answer is definitely yes. The great unknown with this one is always what the general partner Royal Dutch Shell is going to do--sell, convert it to a corporation, keep it the same, drop down more assets, sell the assets they would have dropped down, etc. They really do play it close to the vest so therefore investors are always at least somewhat in the dark. That keeps the shares at a discount--and is the primary reason for the split opinion on Wall Street of 3 buys, 5 holds and 3 sells. I definitely like the insider interest--boosting holdings by almost 60% the last six months is bullish as is the elimination of IDRs--which means Shell owns 68.51% of common shares and is definitely now on the same page with the rest of us. The current price assumes a big distribution cut, which again doesn't have to happen. But I think this is one to be patient with.
AvatarRoger Conrad
5:54
We track it in the MLPs and Midstream table on the EIA website BTW. It's currently a hold.
Jon B
6:01
Hi. Wondering what you think about SPH these days. Has it been fully derisked? Any catalysts to drive the stock? Or are we looking at a stock that pays a high dividend only to cut it in 5 to 7 years? Propane doesn't seem to be a growth industry.
AvatarRoger Conrad
6:01
The distribution cut was a bit deeper than I expected at 50%--and apparently that was the case for many investors as the shares have continue to decline. To be honest, I'm not 100% sure what that means--though the scenarios I come up with frankly aren't so bullish. True, cutting deeper now means they have more cash to tackle debt--especially the $110 mil still drawn on the credit line maturing next year. Their cost of longer term debt capital has moderated considerably with bonds due March 2027 now trading at a premium and yielding 4.9% to maturity. And the FYQ3 numbers were not terrible, considering the concern management expressed about Covid-19 fallout during the Q2 earnings call in May. I also like the fact that the company did warn of a cut back then--so the fact there was one in late July wasn't really a surprise.

The key for Suburban, however, is propane distribution is a mature business that faces competition from many fronts and is constantly at risk to weather and commodity price volatility.
AvatarRoger Conrad
6:06
Continuing with Suburban, the key to dealing with these challenges is to gain scale. My view is this company was achieving it on its own, and was also the most valuable fuels distribution property in the US now that Amerigas was absorbed by UGI. I still think it's a logical takeover target and that Superior Plus of Canada is a likely eventual suitor. What makes me a little leery about coming back into SPH now is there's a pretty decent risk that this deeper than expected dividend cut is a warning that scaling up wasn't providing quite the boost for maintaining what was supposed to be a sustainable payout when SPH cut back in late 2017. That's basically sliding guidance and yes it does make me think we may not have seen the last dividend cut here. If I'm shopping for a nearly 10% I'd rather stick with EPD or MMP.
das
6:17
Are you handicapping the DAPL result?
AvatarRoger Conrad
6:17
If you pin me down, I think the owners will eventually win their appeal to overturn the District Court judge's ruling to shut it down--and that the pipeline will stay open until the final ruling. In fact, Boasberg's decision to allow the pipeline to stay running pending another U.S. Army Corps of Engineers review may be a signal that he was aware of that as a likely outcome and wanted to do something to keep his imprint on the case.

I would not say that the odds of a shutdown are zero or even close to it. And in fact, if the pipeline were shut and there were a change at various federal agencies come next year, there's a decent risk it might never reopen. Again, I don't think that's likely and I do think there's an understanding among most people familiar with the case that any decision to shut down would cause a lot of pain--and therefore should not be made offhand. But if we've learned anything the last 4 years, it's that pipeline politics are never a sure bet.
Ed
6:20
Where do you see CXO's future in the next couple years
AvatarRoger Conrad
6:20
We think it's pretty bright thanks to a combination of rich reserves, low costs, a strong balance sheet and the likelihood oil prices are headed higher later this year. We would not be surprised to see a price well north of $100 in that time frame.
AvatarRoger Conrad
6:21
Well that looks like all we have in the queue today. Once again, our deepest thanks to everyone who participated in this chat. As always, you've given us a lot to think about. And we'll look forward to our next chat in the latter part of September.
6:23
If for some reason your question was not answered fully, please feel free to send us an email at service@capitalisttimes.com. And as always, we'll be sending you a link to the complete transcript of this Q&A shortly after I sign off. Have a great rest of the week--and of course a relaxing Labor Day weekend everyone!
Connecting…