US Oil Fundamentals Trending in the Right Direction
08/06/20 | Insights
While hard to believe, it’s been almost four months since WTI oil prices traded in negative territory as demand was troughing and producers scrambled to shut in wells. Much has changed for the better since April in terms of the US petroleum market. Today’s note recaps the ripple effects of demand destruction earlier this year, improvements seen in recent months, and the implications for midstream.
Assessing the Threat of the Energy Transition for Oil and Gas
08/04/20 | White Papers
The buzz around renewables and electric vehicles has only increased in recent months with the prevalence of net-zero emission targets from corporations and countries alike. While most would agree that renewables are a long-term threat to businesses oriented around hydrocarbons, there is not necessarily agreement on what constitutes long term. Timelines for the energy transition...
Getting Real: The Case for Investing in Real Assets
08/04/20 | Insights
Real assets are a unique asset class with several factors that set them apart from traditional financial assets like equities and fixed income. Most investors are familiar with using precious metals, such as gold, as a hedge against a weak economy, but what other benefits can an allocation to real assets provide? Today, we discuss real asset investment considerations and how the asset class, and energy infrastructure in particular, can play an important role in a diversified portfolio.
Assessing the Threat of the Energy Transition Part 2: Electric Vehicles
07/30/20 | Insights
Rounding out the discussion on the impact of the pending energy transition, today’s piece examines the implications of electric vehicles (EVs) for oil demand and the drivers for long-term demand besides passenger vehicles. Even in forecasts with significant sales of EVs in 2030, the overall demand impact for oil appears moderate at only a fraction of the 2020 demand destruction associated with COVID-19.
Assessing the Threat of the Energy Transition Part 1: Power
07/28/20 | Insights
Summary // While most would agree that renewables are a long-term threat to hydrocarbons, there is less agreement on what constitutes long term. Energy transitions likely take longer than one might expect as coal demand exemplifies. Energy consumption and policy around the world vary significantly. While electrification and decarbonization are key themes in developed economies,...
Pipelines vs. Power: Comparing Midstream/MLPs to Utilities
07/23/20 | Insights
With the US 10-year Treasury rate still within striking distance of its all-time low, the search for yield has intensified for income seekers. Investors have historically turned to energy infrastructure and utilities for their attractive income, and while these sectors share many similarities, there is also a great deal that sets them apart. Today, we discuss the key considerations of making an allocation to utilities and midstream energy infrastructure and what differentiates the two industries from an investment perspective, including macroeconomic drivers, yields, performance, correlations with other asset classes, and valuations.
Making the Case for Midstream with the AMNA Index
07/21/20 | Insights
The Alerian Midstream Energy Index (AMNA) was launched in June 2018 to meet the needs of investors and industry stakeholders primarily concerned with sector representation. Today’s piece provides an overview of the AMNA Index and explores the investment case for midstream using the attributes of the index.
AMNA: The Benchmark Index for North American Midstream
07/21/20 | White Papers
Several years ago, Master Limited Partnerships (MLPs) dominated the midstream universe, making MLP-only indexes a decent proxy for midstream broadly. Today, MLPs represent less than 40% of the North American midstream universe by market capitalization. An MLP-only index is ideal for benchmarking MLPs but is not sufficient for gauging North American midstream performance given the...
Framing Current Midstream/MLP Yields with Stress Tests
07/16/20 | Insights
After several cuts in 1Q20 payouts, midstream dividends today seem much more durable, but yields remain elevated given ongoing weakness in equity performance. Today’s piece frames current midstream yields by drawing comparisons with the past, stress testing, and stacking midstream against other income-oriented sectors. Even in a stress test, midstream maintains a considerable yield advantage.
Previewing 2Q Midstream Earnings: COVID-19 Impacts, Distributions, & More
07/14/20 | Insights
While the initial impacts of COVID-19 in the US first appeared at the end of 1Q20, the most severe impacts in terms of demand and oil production were squarely in 2Q20. Today’s post discusses the headwinds in 2Q, outlook for midstream distributions following several 1Q cuts, and key topics of interest heading into earnings season.
Revisiting MLP vs. C-Corp Taxation as Election Day Looms
07/09/20 | Insights
Despite an ongoing debate about the structure of MLPs versus C-Corps, MLPs remain the most tax-efficient way to own midstream energy infrastructure assets. Even after the passage of tax reform in late 2017 that lowered the corporate tax rate, MLPs maintain a noticeable tax advantage over corporations. With a presidential election around the corner, today’s note revisits how the effective tax rate for an MLP investment stacks up against a C-Corp dividend and discusses how the benefits could be impacted by the Biden tax plan.
Dominion News: Buffett Buys Gas Infrastructure, ACP Cancelled
07/06/20 | Insights
While holiday weekends are normally quiet, Dominion Energy (D) made a splash on Sunday by announcing a ~$10 billion sale of natural gas infrastructure to Berkshire Hathaway (BRK.A) and the cancellation of the Atlantic Coast Pipeline with its project partner, Duke Energy (DUK). Today’s note discusses these announcements and the read-through for the midstream space.
US Targets Energy Independence Despite COVID-19 Impacts
07/02/20 | Insights
US energy independence has long been a key goal for policymakers and oil and gas companies alike, and the exponential growth in energy production over the last decade has brought the US close to achieving that goal. While COVID-19’s impact on global markets and domestic oil production has likely disrupted progress towards consistent net exports, the US remains on the path to attaining energy independence. Ahead of Independence Day this weekend, today’s note examines the role of the US as a major energy exporter before and after coronavirus and the outlook for energy independence.
Examining Midstream Contracts Amid Slowing Volumes
06/30/20 | Insights
Alerian examines midstream contracts and expirations amid declining volumes and macro headwinds for the space.
Focusing on Fundamentals: Oil Price Update and Outlook
06/25/20 | Insights
The history-making moves in oil this year have seemed to give way to a momentary calm with the oil market on firmer footing. While a multitude of factors can impact oil prices, today’s note provides an update on three key areas of focus – the demand recovery from COVID-19 lockdowns, the outlook for US oil production, and OPEC+ cuts – and discusses the price outlook from here.