Entries by Simon Lack

Chevron Writes Shale’s Next Chapter

In the 1990s U.S. bankers were consolidating. My own career spans several bank mergers. Manufacturers Hanover merged with Chemical Bank in 1992, followed by Chase Manhattan in 1996 and JPMorgan in 2000. Other smaller deals occurred along the way, such as Hambrecht & Quist in 1999, and  Robert Fleming in 2000. I remember then-CEO of […]

Shale Cycles Faster, Boosting Returns

Chevron (CVX) CEO Mike Wirth must have used the term “short-cycle” at least half a dozen times on Friday’s conference call discussing their $33BN acquisition of Anadarko (APC). It’s a feature of the Shale Revolution that’s still unappreciated by investors, even while it’s highly valued by upstream companies. A faster capital cycle boosts returns. The […]

Enlink CEO Talks Strategy

Sharply higher commodity prices shouldn’t be a major source of concern for pipeline investors. But that was the answer Enlink (ENLC) President and CEO Michael Garberding gave to a question we’re often asked – what could go wrong. His reason was that it would induce midstream infrastructure to add excess capacity. “Our industry has shown […]

MLP Humor — A Target-Rich Environment

Humor can be a most effective weapon against your adversaries, especially when more extreme measures are unavailable.  MLP management teams have made many poor capital allocation decisions in recent years, providing a rich source of material for an observer armed with both wit and a deep knowledge of the sector’s history. On Twitter, such a […]

Blinded By The Bonds

German 30 year bunds yield 0.6%. Investors are inured to insultingly low yields, but somehow this still shocks. The ECB defines price stability as inflation “…below, but close to, 2% over the medium term.” Assuming it averages 1.5%, investors are accepting a negative real return virtually in perpetuity. French energy company Total (TOT) issued perpetual […]

The Quiet Investors in Energy

The S&P Energy sector has delivered the worst returns of eleven sectors for four of the past five years. Reflecting investor disdain, energy is now around 6% of the S&P500, down by half in the past decade. Realizing the full potential of the Shale Revolution has demanded a lot of capital – over $1TN by […]

Bond Market Corrects Fed

Last week stocks shuddered as ten year yields dipped below treasury bills, reminding investors that yield curve inversions eerily precede recessions. A Cleveland Fed model using the yield curve gives a 30% probability of a recession within a year, up from 24% in December. Nonetheless, the S&P500 is within 5% of its all-time high, reflecting […]

A Slogan Not Science

JPMorgan’s recent Eye on the Market: Energy Outlook 2019 is the best analysis we’ve seen of the Green New Deal (GND). Author Mike Cembalest, whom I know from when I worked there, as always takes a balanced approach supported by insightful research. Cembalest breaks down the challenge aided by figures and charts to pick the […]

Deja Vu All Over Again for Pipelines?

Years ago, before the Shale Revolution became the phenomenon it is, comparisons were often made between MLPs and REITs. Both offered attractive yields from real assets, and income-seeking investors were drawn to them. As a result, their performance tracked each other pretty closely. Investors focused on the relative value of one versus another generally kept […]

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