Opportunities In Pipelines

Adam Feik - INO.com Contributor - Energies

I wrote a few weeks ago about investing in Master Limited Partnerships (MLPs) and pipeline companies, and some of the nuances involved. Starting with the fact that there ARE some major differences between MLP funds and pipeline funds, so investors need to know what they're getting.

As I stated in that article, I believe the US oil & gas boom means pipelines and energy infrastructure are going to remain in high demand for the foreseeable future – despite Hillary Clinton's Tuesday announcement of her opposition to Keystone XL. Plus, I generally regard pipelines as being a historically defensive area of the stock market, comprised of relatively steady, fee-for-service businesses. Hence, today I present a continuing analysis of a couple ways to play the midstream energy industry – whose stocks may be receiving undue punishment in the midst of the oil crash of the past 15 months.

To be clear, the midstream industry's haircut to date, while noteworthy, has not nearly so bad as the carnage in oil or the rest of the energy sector. As the graph below shows, pipeline stock prices are down about 16% since June 20, 2014, compared to nearly a 38% decline for the overall energy sector, and a 63% crash in oil prices.

EMLP vs. XLE vs. DBO

Graph from Yahoo! Finance. EMLP is First Trust North American Energy Infrastructure Fund, shown here as a proxy for pipeline stocks. XLE is the Energy Select Sector SPDR, shown here as a proxy for energy sector stocks. DBO is the PowerShares DB Oil ETF, shown here as a proxy for oil prices.

Actually, ALL the of pipeline stocks' decline in the last 15 months has come since roughly May 5th this year (shown on the graph above with a dotted vertical line), which is the date oil prices bumped up against its most recent top and began melting down again. Pipeline stock prices had been flat throughout oil's collapse for the prior 10+ months; but since that May 5th peak, pipelines (as measured by EMLP) are down 18.75%, the broad energy sector (XLE) is down 23%, and oil is down 24%. See graph below. Continue reading "Opportunities In Pipelines"

Playing The Oil & Gas Pipeline Opportunity In America

Adam Feik - INO.com Contributor - Energies

One thing the energy production boom means – besides the wild, now-14-month-long crash in oil and gas prices – is that pipelines and energy infrastructure are going to remain in high demand. As American oil & gas companies continue producing – as they've shown they can & will do –, those producers will have to continue using the services of the pipeline, transportation, and storage facility owners.

The term "MLP" can mean many things

Many investors equate "pipelines" and "energy infrastructure" with Master Limited Partnerships (MLPs) like Enterprise Product Partners (EPD), Energy Transfer Partners (ETP), Williams Partners LP (WPZ), Enbridge Energy Partners (EEP), Magellan Midstream Partners LP (MMP), etc.

Yet not all MLPs are pure pipeline plays, nor are all pipeline companies are structured as MLPs!

First, many MLPs aren't "midstream" energy companies at all, but rather, are involved in "upstream" activities like exploration and production (e&p). As a result, these "upstream" MLPs' distributions depend on production – which, in turn, is highly affected by oil & gas prices. Continue reading "Playing The Oil & Gas Pipeline Opportunity In America"

Should Energy Stocks Be On Your Bargain-Hunting List?

Adam Feik - INO.com Contributor - Energies

Everyone's bargain list just got a LOT longer. Energy stocks can finally stop feeling so lonely. They have plenty of company now.

If you've (hopefully) followed Adam Hewison's posts, he illustrated on Monday that it's not yet safe to start acting on your bargain list, as far as stocks are concerned. The broad-market long-term trade triangles are (obviously) flashing red right now, and Fibonacci indicators don't show support for this falling knife until much lower levels.

Adam specifically touched on crude oil in his Tuesday post, saying its RSI is very oversold and flat, and combined with a falling market, one would expect a bottoming out at some point. "Not to say it can't go lower," he added.

So even though your bargain list might be just that – a "watch list" – let's begin looking at whether to even consider energy.

A brief look back

Remember $108 oil, back in the summer of 2014? WTI crude has already traded as low as $38.00 this week, and looks as though it's unlikely to return even to the $60s – in a sustained way – for perhaps many years. In fact, a dip into the $20s seems at least equally likely at this point, given the supply glut combined with the newfound volatility and fear across all markets.

So oil has shed about 65% so far, and has generally held below $60 for all but 14 days since falling below that level 9 months ago. And, of course, oil's plunge has taken the value of most oil companies with it. Feast your eyes: Continue reading "Should Energy Stocks Be On Your Bargain-Hunting List?"

Renewable Cash Flow

Adam Feik - INO.com Contributor - Energies

Having spent the lion's share of the last two weeks in Las Vegas and Denver, I've seen my share of solar panels lately. In fact, the express purpose of my Denver trip was to visit and tour a solar plant owned by Greenbacker Renewable Energy Company, a non-traded publicly-registered "YieldCo" investment available to qualified investors through advisors.

Want proof? Here's a dashing photo of me at Greenbacker's Denver International Airport Solar Farm, taken just this Wednesday:

Greenbacker Denver International Airport Solar Farm

The tour was very interesting, as was our group's educational seminar about Greenbacker (I was an attendee). Greenbacker currently owns 82 already-producing solar facilities in 7 states plus Ontario, Canada. Since the firm's goal is to provide its investors with steady, increasing cash distributions, Greenbacker has locked in contracts with an average of 16 years remaining to sell power to its "offtakers," including credit-worthy utilities, government entities, and corporations. Most contracts include some modest annual increase to account for inflation. Continue reading "Renewable Cash Flow"

Is It Time to Take Profits on Oil Refining Stocks? (re-visited)

Adam Feik - INO.com Contributor - Energies

I wrote on February 24th about whether the time had come to take profits on oil refining stocks like Tesoro, Valero, and others. (My conclusion was to hold the stocks for the time being, but to keep a close eye on them).

Since then, oil refiners have continued rising (generally), as oil prices have showed continuing weakness – especially in the last 30 days. Crude oil, of course, is the key input for refiners, so refiners benefit when its raw materials prices are low. Nymex crude fell below $50/bbl Wednesday, having fallen from $61 on June 23, 2015, and from $107 on June 20, 2014 (data from eia.gov).

Here's an updated table showing performance of selected refiners through July 22:

On Thursday, July 23rd, oil and refining stocks both fell. But more often recently, it's been… Continue reading "Is It Time to Take Profits on Oil Refining Stocks? (re-visited)"