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Elliott Gue  

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  • American Midstream Partners LP: Be Cautious, Yield Moths!
    Tue, Feb. 24 AMID 13 Comments

    Summary

    • Analysts almost universally bullish on midstream MLPs, but falling commodity prices have increased risks, especially for firms with exposure to gathering and processing, marginal basins and/or weak customers.
    • The past several years have trained investors to buy energy stocks on the dip. Income-seeking investors also tend to gravitate toward the highest-yielding names - a recipe for pain.
    • AMID wasn't the only MLP to lower its 2015 guidance and not follow through with planned distribution increases, but the partnership's lack of scale and counterparty risk are concerns.
  • 5 Takeaways From Schlumberger's Q4 Earnings Call
    Mon, Feb. 9 SLB 7 Comments

    Summary

    • SLB earnings calls often include useful insight for all links in energy value chain, thanks to forthright management team and breadth of service offerings.
    • SLB's uncertainty surrounding drilling activity levels should give investors pounding the table for rebound in energy stocks pause.
    • Valuation metrics and SLB's comments during Q4 call suggest it isn't time to buy this best-of-breed stock.
    • Pressure to renegotiate contracts suggests more downside for SDRL and other contract drillers and proppant producers such as HCLP, EMES and SLCA.
  • Deal Talk: Energy Transfer Partners LP Buys Regency Energy Partners LP
    Mon, Feb. 2 ETP, RGP 15 Comments

    Summary

    • The market had expected this deal for a long time. A drop in NGL prices and a sell-off in RGP explain the timing of the deal.
    • Tbe two MLPs own complementary assets, with RGP's gathering assets in Marcellus Shale likely benefiting from construction of the Rover Pipeline. The combination also gives ETP greater scale in Permian Basin.
    • ETP has ways to unlock value, including a kick-up transaction involving general-partner interest in SUN and the potential spin-off of coal royalties acquired in the PVR takeover PVR.
  • Linn Energy, LLC: Why There's More Downside To Come
    Fri, Jan. 16 LINE, LNCO 188 Comments

    Summary

    • LINE's management continues to make all the right moves to deal with a challenging situation.
    • We like LINE's recent asset sales and swaps, the deal with Blackstone and ongoing negotiations with private equity to improve liquidity.
    • Nevertheless, our model of LINE's cash flow raises questions about the distribution's sustainability, especially in 2016.
  • Avoid Linn Energy LLC And These Other MLP Value Traps
    Dec. 31, 2014 LINE 290 Comments

    Summary

    • The recent downdraft in oil prices is fundamentally different from the collapse that occurred in late 2008 and early 2009.
    • An extended period of weak oil prices will weigh on upstream MLP's cash flow and ability to cover their distributions, especially as oil hedges roll off.
    • The 14 upstream MLPs will all take a hit after the first one announces a distribution cut.
    • Looking at 17 MLPs that have cut distributions reveals that these stocks continue to tumble for about 6 months after announcing lower payout.
    • Investors should avoid these value traps.
  • AmeriGas Partners And CrossAmerica Partners: Pull These Babies From The Bathwater And Put Them In Your Portfolio
    Editors' Pick • Dec. 19, 2014 CAPL 21 Comments

    Summary

    • Slowing oil demand growth in China and other key markets, and surging output from US shale plays - and their implications for global spare productive capacity - have sent crude prices plummeting.
    • US producers can sink high-probability new wells within a week; spare capacity should keep a lid on oil prices in the intermediate term, barring OPEC action or disruption or security-related production outage.
    • Forget pundits who ignore energy's cyclicality and pound the table for E&Ps. If you wade into this pool, focus on bulletproof balance sheets, high-quality assets and options to raise low-cost capital.
    • APU and CAPL are two energy-related stocks that offer above-average yields and exposure to growth stories that are largely independent of commodity prices. These are a good stores of value.
  • Take Your Head Out Of The Sand: Elevated Downside Risk For High-Flying Proppant Producers
    Editors' Pick • Nov. 26, 2014 BHI, EMES, HAL 18 Comments

    Summary

    • HCLP, SLCA and EMES have outperformed over past 18 months, thanks to surging demand for fracking sand and logistical bottlenecks.
    • Q3 conference calls from HCLP, SLCA and EMES highlighted these growth trends, but also warned that lower oil prices could shrink demand growth.
    • On the supply side, HCLP, SLCA and EMES plan significant investments in railcars and new capacity. EMES indicated that spot-market prices for fracking sand have softened relative to contracts.
    • Proposed merger of HAL and BHI would create oil-field services juggernaut that would be able to push sand producers on price and contract terms.
    • At these levels, the potential downside risk in HCLP, SLCA and EMES outweighs potential upside.
  • Drilling Into Transocean Partners LLC And Seadrill Partners LLC
    Nov. 11, 2014 RIGP, SDLP 48 Comments

    Summary

    • RIG created RIGP to monetize the portion of its fleet that operates under longer-term contracts.
    • We prefer SDLP to RIGP because of SDRL's larger inventory of potential asset drop-downs.
    • Secondary offerings and headline risk for offshore contract drillers should create ample buying opportunities.
  • 3 Reasons Why U.S. Natural Gas Prices Will Remain Low
    Editors' Pick • Nov. 5, 2014 UNG 19 Comments

    Summary

    • US natural gas prices should remain low over the next few years, unless we're on the cusp of a new ice age.
    • Associated gas production from liquids-rich plays continues to grow, while increased drilling efficiency, process innovation and improved completion techniques have enabled operators to extract more gas from fewer rigs.
    • An uptick in domestic demand and exports are still a ways off.
    • Overlooked shadow capacity in the Haynesville Shale and other plays will ensure that any meaningful increase in natural-gas prices is short-lived.
  • Alon USA Energy Has Lots Of Levers To Pull To Unlock Shareholder Value
    Oct. 24, 2014 ALJ 4 Comments

    Summary

    • ALJ is sponsor to ALDW and owns an 81.6 percent equity interest in the V-MLP.
    • ALJ and ALDW's West Texas and Gulf Coast refineries are well-positioned to profit from favorable price differentials.
    • ALJ's logistics projects in California could unlock significant value for the company.
    • ALJ could be a takeover target for other refining related MLPs or could unlock value by spinning off its logistics assets as a traditional MLP.
  • 5 Myths About SeaDrill That Could Cost You Real Money
    Editors' Pick • Oct. 17, 2014 SDRL 287 Comments

    Summary

    • SeaDrill boosters often cite numbers (backlog, yield, day-rates) without placing these figures into context. We address 5 common myths about this stock.
    • SeaDrill proponents cite day-rates on fixtures that were negotiated 12 to 18 months ago to argue that the market for new rigs hasn't softened. The supply-demand balance tells a different story.
    • SeaDrill has a roughly $20 billion backlog. The timing of contract expirations and the likelihood of securing fixtures at similar prices much more important to cash flow.
    • Forget stock price and yield, industry fundamentals ultimately will dictate SeaDrill's performance.
  • Our Take On Enterprise Products Partners LP's Acquisition Of Oiltanking Partners LP
    Oct. 5, 2014 EPD 15 Comments

    Summary

    • Investors should take profits on OILT, which offers much different investment proposition than EPD. Portfolio managers likely will rotate out of name in favor of other growth-oriented fare.
    • NS or NSH would be suitable replacements for OILT in your portfolio; these turnaround stories should deliver yield compression. NS also has valuable dock space in Corpus Christi.
    • OILT acquisition not immediately accretive, but strategic value of assets is critical b/c of NGLs and crude oil flowing to Gulf Coast. Also provides dock space to ramp condensate exports.
    • EPD a foundational portfolio holding, but investors should only buy on pullbacks. Fear of rising interest rates should provide buying opportunities.
  • Seadrill: Lessons From The Frontline
    Editors' Pick • Sep. 18, 2014 SDRL 238 Comments

    Summary

    • SDRL bears a striking resemblance to FRO, another Fredriksen company that expanded rapidly, paid out most of its cash flow as a generous dividend and relied heavily on leverage.
    • Investors in FRO took a huge hit when overzealous ordering created a persistent supply overhang in the tanker market.
    • We don't expect rig market to collapse like tankers, but supply-demand balance in floaters and jack-ups has shifted in favor of customers, putting SDRL's cash flow under pressure.
    • Don't try to catch this falling knife.
  • 2 MLP Turnaround Stories: Enbridge Energy Partners LP And NuStar GP Holdings LLC
    Sep. 2, 2014 EEP, NSH 3 Comments

    Summary

    • Bottom fishing in the MLP space can deliver differentiated returns. We prefer beaten-down names with a credible plan to restore the MLP's growth prospects.
    • EEP has spun off its under-performing gas-related assets as MEP, providing a reliable source of low-cost capital to fund growth projects. ENB's restructuring of EEP's IDR also provides breathing room.
    • ENB has also reiterated commitment to dropping down assets to EEP once the MLP's cost of capital improves; expect ENB to continue to pursue policies that drive EEP yield compression.
    • NS management has divested underperforming assets and established impressive growth platform in Eagle Ford Shale. In Q2, NS covered distro for first time in almost 3 years.
    • NSH offers leveraged exposure to NS' turnaround story.
  • Enterprise Products Partners LP: Great Company, Not A Great Stock
    Aug. 18, 2014 EPD 27 Comments

    Summary

    • EPD's prescient management team, consistent execution, impressive asset base and conservative finances make the company the preeminent master limited partnership--a foundational portfolio holding.
    • The most recent example of EPD's excellence: obtaining a private-letter ruling from the Commerce Dept to export minimally processed condensate.
    • But a great company isn't necessarily a great stock. EPD looks expensive at these levels; investors should wait for a pullback or consider less expensive names with better near-term upside.
  • The Search For Yield Compression: MLP Takeover Targets
    Editors' Pick • Aug. 8, 2014 NSH 18 Comments

    Summary

    • Individual investors often focus on distribution yield, but yield compression has accounted for much of the return posted by the best-performing MLPs.
    • Three of the 10 top-performing MLPs in 2013 were beaten-down names that surged after a private-equity outfit stepped in, creating a visible pipeline of growth opportunities.
    • Investors should focus on potential takeover targets that have other upside drivers to provide a degree of protection if the expected transaction never comes to fruition.
    • NSH could be a potential takeover target and, even if a deal doesn't materialize, the firm's turnaround story should continue to gain traction.
  • 4 Key Takeaways From The Year's Biggest Acquisition In The Energy Patch
    Jul. 22, 2014 WMB 14 Comments

    Summary

    • WMB's acquisition of the remaining general-partner interest in ACMP and proposed merger of ACMP and WPZ hold several important implications for investors.
    • The transaction served as a reminder that the energy bull market favors general partners, which benefit disproportionately from their associated MLPs' growth stories.
    • Blue-chip MLPs will continue to rely on acquisitions to drive above-trend distribution growth.
    • For much of the money flowing into the MLP space, yield compression is preferable to distribution accumulation. This momentum can reverse quickly.
    • MLPs with extensive, integrated asset bases have the scale to pursue growth projects that aren't feasible for smaller operators.
  • Outlook For U.S. LNG Exports
    Editors' Pick • Jun. 6, 2014 UNG, CQP, DGAZ 47 Comments

    Summary

    • Although more than 30 prospective LNG export projects have been announced, only projects that have secured sufficient volume commitments from customers will be able to obtain the necessary financing.
    • Many prospective US liquefaction schemes involve the addition of export capacity to existing import-only facilities, reducing construction costs relative to projects in Australia and offshore East Africa.
    • US LNG exports offer a modicum of price relief to Asian buyers. However, the primary appeal resides in reduced exposure to supply disruptions and long-term protection against rising oil prices.
    • How much LNG export capacity the US ultimately builds and the utilization rates of these facilities remain uncertain.
    • The timing of these projects suggests that investors should focus on names that stand to benefit from the potential growth in natural-gas volumes, as well as near-term upside drivers.
  • An Overview Of The Global LNG Market And Future Outlook
    Editors' Pick • Apr. 25, 2014 BRGYY, CVX, CQP 34 Comments

    Summary

    • Supply-demand balance in the global LNG market remained tight in 2014, thanks to China's rapidly growing demand for this commodity and limited capacity additions on the supply side.
    • Tightness should continue through the end of 2016, with the next slug of export projects in Australia bringing a degree of price relief and potentially redirecting some cargos back to Asia.
    • The global LNG market should loosen toward the end of the decade as additional supplies come onstream and some contract rotation occurs.
    • Against this backdrop, the Asian market's premium to North American natural gas (after liquefaction and transportation costs) could shrink to $2.00 per mmBtu from $4.00 per mmBtu.
    • Steer clear of pure plays on LNG exports because of expenses and extended timelines to build infrastructure. Prefer names that offer exposure to trend, but also near-term upside drivers.
  • Key Takeaways From Enterprise Products Partners LP's Recent Analyst Day
    Apr. 3, 2014 EPD 9 Comments

    Summary

    • EPD's extensive asset base and forward-thinking management team provide lots of useful info about the direction of future commodity prices and investable trends.
    • At its recent Analyst Day, management again highlighted the movement of the opportunity set downstream, including LPG and refined-product exports.
    • EPD management reiterated the bullish outlook for the Permian Basin espoused by the largest oil-field services companies and the region's producers.
    • EPD identified the deepwater Gulf of Mexico as an oft-overlooked source of upside for midstream operators.
  • Kinder Morgan Energy Partners LP Doesn't Skimp On Maintaining Its Pipelines
    Mar. 5, 2014 KMP 31 Comments

    Summary

    • KMP has come under renewed pressure after Barron's published an article rehashing a bear case that failed to gain traction last fall.
    • Argument that KMP doesn't spend enough maintenance capex on its natural-gas pipelines is invalidated by MLP's safety record.
    • Comparing SEP and KMP's maintenance capex is comparing apples to oranges. when you factor in maintenance capex and operating expenses, KMP spends more per pipeline mile.
    • Management's detailed explanation of discrepancy between El Paso's maintenance capex on pipelines now owned by KMP makes perfect sense and doesn't set off any alarms.
    • If KMP were classifying maintenance capex and operating expenses as growth capex to inflate DCF, MLP would need to borrow to pay distribution. but net debt to EBITDA has declined.
  • Master Limited Partnership IPOs: Special Opportunities For Income Investors
    Feb. 24, 2014 FISH, SXL 8 Comments
  • Clearing Up Some Misconceptions About Linn Energy, Vanguard Natural Resources And Other Upstream MLPs
    Editors' Pick • Feb. 3, 2014 LINE 39 Comments
  • Arc Logistics Partners: Near-Term Upside Catalysts, Longer-Term Questions
       • Jan. 21, 2014 ARCX 4 Comments
  • Surveying The Push For US Crude Oil Exports
    Jan. 8, 2014 CQP, MPC, PSX 6 Comments
  • Kinder Morgan Energy Partners' Unexpected Move Into Tankers Is Savvy Investment
    Editors' Pick • Jan. 2, 2014 KMP, KMI 139 Comments
  • Dynagas LNG Partners LP: A Dynamite Investment?
       • Dec. 27, 2013 DLNG 5 Comments
  • Don't Follow Warren Buffett's Lead On Exxon Mobil
    Editors' Pick • Dec. 16, 2013 XOM 80 Comments
  • North American Energy Trends: The Views From 2 Midstream Giants
    Dec. 3, 2013 PAA, EPD 14 Comments
  • The Best Way To Play Natural Gas As A Transportation Fuel
    Nov. 26, 2013 CMI 3 Comments
  • Icahn's Activism Prompts Transocean To Raise Dividend, But There Are Other Contract Drillers In The Sea
    Nov. 20, 2013 RIG 46 Comments
  • Salute Your Drillmasters: Gains In Drilling Efficiency A Boon For Oil-Field Service Providers And Oil And Gas Producers
    Nov. 17, 2013 HAL, EOG, OAS 10 Comments