Entries by Simon Lack

Pipeline Technicals Turn Bullish

Although we rarely write about technical analysis, charts are helpful in showing visually where prices have come from. We also have a good number of clients who use charts to form investment opinions. This is especially true when it comes to changing portfolio allocations. Recently, bullish energy sector charts have come up in conversations. The […]

Natural Gas Prices Rise for Democrats

In recent weeks, 2021 natural gas have been quietly moving higher. November ’21 futures have rallied over 40 cents, to just under $3 per Thousand Cubic Feet (MCF). Covid and the election are both behind this. Research reports from Goldman Sachs and Morgan Stanley both explore energy markets through the pandemic and likely policy changes […]

Pipeline Companies Should Buy More Stock

The energy sector has long been criticized for reinvesting too much capital back into its business, without ensuring that such investments exceed their cost of capital. No business can survive unless its return on investments is more than the cost of financing them. Equitrans Midstream Corporation (ETRN) has an opportunity to demonstrate that they understand […]

Pipeline Buybacks and ESG Flexibility

Targa Resources, a perennial mis-allocator of capital, is not an obvious candidate to initiate a buyback program. Nonetheless they did on Monday, and the stock rose almost 11% on the news. In February last year, when Joe Bob Perkins was CEO, he responded to questions about their capex plans by arrogantly calling them “capital blessings.” […]

Trump’s Odds

The positive Presidential Covid test has provided plenty of material for the media. Trump’s known physical disposition is being compared with tables of statistics to assess his likely prognosis. The Financial Times noted that he is in the “vulnerable” population, and gave him 20% odds of requiring hospitalization with a 5% risk of death. Regardless […]

Devon Shows Occidental How To Buy

The merger between Devon (DVN) and WPX Energy (WPX) offers a marked contrast to Occidental’s (OXY) ill-fated acquisition of Anadarko. Synergies are coming from cost savings not revenue opportunities, a defensive move that will likely spur further consolidation. The annual savings of $575MM will cover the modest 2.6% premium paid by DVN in less than […]

The Smart Money In Pipelines

With pipeline stocks having their worst month since the depths of Covid-panic selling in March, investors are wondering when the smart money will finally respond to today’s extreme undervaluation and commit capital. Recent price action makes little sense, something that becomes very apparent in discussions with clients. 2Q20 earnings were as expected, and dividends unchanged. […]

Risk and Return Part Ways

More risk more return is a truism of finance, and much else besides. It makes intuitive sense (why bungee jump unless the rush of near-death exceeds the actual risk?) and also has a place in finance, via the Capital Asset Pricing Model (CAPM). This formalizes the relationship between risk and return, allowing securities to be […]