Entries by Simon Lack

Clean Energy Isn’t Just About Renewables

Technological advances in solar, wind and batteries receive widespread media coverage. Costs are falling and battery back-up is improving, vital to cope with renewables’ intermittency. As Enbridge CEO Al Monaco noted last week (listen to our podcast, Oh Canada’s Pipelines!), the world is going to use more energy, and consumption of every form of energy […]

Pipeline Buybacks To Shift Fund Flows

The pipeline sector’s increasing Free Cash Flow (FCF) has quietly allowed several companies to initiate buyback programs. We calculate that over $8.5BN in buyback programs have been announced this year, including $3.5BN following 3Q earnings. One of the biggest headwinds to improved equity returns this year has been selling by funds. There was the forced […]

MLP Closed End Funds – Masters Of Value Destruction

When MLP investors cast around for characters to blame for the past few years of underwhelming  equity returns, management teams are the obvious target. Like their upstream clients, midstream businesses embraced the endless volume growth of the Shale Revolution with sharply increased growth capex. By 2018 they’d heard the message from investors that stability trumps […]

Investors Continue To Rotate Into Energy

The pipeline sector continued on its tear last week. The catalyst was Pfizer’s vaccine announcement a month ago, but cheap valuations have drawn increasing attention as prices have risen. The buybacks announced by several companies added further support. For many months, we’ve argued that the biggest problem with the sector was negative sentiment. Since peaking […]

Enterprise Products Keeps On Going

November was a month of records for stocks, including for the energy sector. The American Energy Independence Index (AEITR) was +20.8%. This year has seen the top two months, and it’s still –16.1% YTD.  Crude oil grabs most of the attention, but propane is an under-appreciated area of rising production that’s driving higher exports. It’s generally used for […]

Investors Rotate Into Energy

November is on track to be the second best month in the history of the American Energy Independence Index (AEITR). Through yesterday, the index is up 27% for the month. April’s 39% bounce off the March lows is the biggest, but with the index having doubled in value since then, November is on track to be the biggest points move ever. It’s eclipsed […]

The Hidden Cost of Renewables

Renewables receive a disproportionate share of media coverage given their still small size. In 2019, less than 9% of America’s power came from solar and wind. Fossil fuels (mainly coal and natural gas) are over 62%. Moreover, electric power is only 37% of our total energy use. Renewables receive outsized attention because of the hope they will lead to lower emissions. A […]

Energy’s Momentum Continues

Last week’s news from Pfizer triggered some big sector moves, as investors sold technology stocks in favor of value like energy and financials (see The Big Rotation Begins). Pfizer CEO Albert Bourla didn’t overstate the case when he said, “It is a great day for humanity when you realize your vaccine has 90% effectiveness. That’s overwhelming,”  Moderna followed up […]

Fighting Climate Change Is Hard

Incoming President Biden is expected to take the U.S. back into the Paris Climate Agreement, which will mean policies to reduce emissions of GHGs (Green House Gases) will figure in Administration policy.   Polls showed that two thirds of registered U.S. voters described climate change as “somewhat” or “very” important in how they voted. As we saw last week, opinion polls were […]

The Big Rotation Begins

Monday’s dramatic news on Pfizer’s vaccine triggered a sector rotation which could be enduring. A vaccine that’s 90% effective is a far better outcome than most had expected, bringing the prospect of an early end to lockdowns, self-quarantines and the rest of the Victorian-era public health measures we’ve come to accept.   The ratio of the […]