In Episode 4 of SL Advisors Talks Energy, Simon reports on 2Q19 pipeline earnings and provides his insights on the weeks’s major stories in energy politics.

Show Notes:

In this week’s podcast, I’m going to talk about pipeline company earnings and why valuations are attractive, followed by some comments on climate change politics

Pipeline Earnings Are Good 1:08

Energy out of favor 1:10

Too much investing in new projects, not enough cash back to investors 1:22

Democratic primary debates show political risk given extreme positions 1:27

But cash flows are growing 1:40

Some big companies reported 2:10

EPD increased EBITDA 18%. $66BN company 2:14

WMB been weak because of natgas but had good earnings and popped 2:22

OKE, CEQP, TC Pipelines all good quarters 2:38

Still expect FCF to reach $7-8BN for AEITR this year, up from $1BN 2:47

Balance sheets are stronger, 4.1X Debt:EBITDA 3:40

Dividend yields >2X bond yields 4:00

…credit analysts, banks fine with risk 4:05

Industry has growing FCF, better credit profile, lots of PE interest 4:40

Energy politics

2 Items caught my eye

• Annual Google Camp 5:10

Attendees of rich and famous, secretive affair 5:20

Barry Diller, Dave Geffen, Katy Perry, Tom Cruise, Leonardo DiCaprio 5:25

Many arriving by private jet – one estimate of 111 separate flights 5:30

Let’s hope there’s no sermonizing on climate change from this crowd 5:40

• Democratic Debate 6:05

Most candidates endorse GND 6:12

We wrote Bovine Green Dream 6:16

Completely impractical 6:25

Climate change solutions include 6:50

Government support for nuclear 7:05

Increased natgas and phasing out of coal 8:30

R&D on cleaner use of fossil fuels, share results 9:23

Greater honesty, that dealing with climate change will be expensive 10:11

Americans won’t spend >$10 per months fighting climate change 10:18

US 15% of emissions 11:15

Andrew Yang: Find high ground 11:32

Links to Additional Information:

The Coming Pipeline Cash Gusher

The Bovine Green Dream

Natural Gas: The Big Energy Story

Although much of the press coverage focuses on solar and wind, the big story in energy is the growth in natural gas. In this podcast, Simon Lack reviews how natural gas growth is far more important than renewables.

Show Notes:

New natgas hookups in Westchester County are prohibited (1:00)

Will constrained natgas hookups hurt demand (1:07)

Energy is undergoing a transformation (1:12)

Renewables receive all the press (1:15)

Solar and wind prices are falling (1:17)

Nextera Energy analyst day (1:20)

Berkeley, CA won’t allow new buildings to use natgas (1:44)

In 2018 natgas was 43% of growth in world energy use, vs 18% renewables (1:57)

U.S. natgas share rose almost 2% to 31%; renewables rose from 3.9% to 4.2% (2:08)

China burns half the world’s coal (2:41)

Political issue. Killing citizens, causing respiratory problems (2:44)

China wants to reach 15% natgas share by 2030, vs 7.5% today (3:01)

With China’s growth of 4.3% they needs to more than triple natgas consumption (3:15)

They need almost ¾ of today’s U.S. consumption (3:30)

They need a U.S. Shale Revolution (3:37)

But Chinese forecasts of shale output keep being revised down (3:51)

Russian exports from eastern Siberia will help (4:00)

Two seasonal peaks, China has too little storage (4:06)

But volumes not able to vary (4:31)

Chinese LNG imports will increase, likely to grow 2-4X, maybe more based on 5 year plan (4:57)

Liberal media focus on renewables (5:44)

Natgas is the real transformation in energy (5:58)

Links to Additional Information:

SL Advisors Blog Post https://sl-advisors.com/natural-gas-the-big-energy-story 

Next Era Energy Investor Day  https://sl-advisors.com/is-nextera-running-in-place

BP Statistical Review of World Energy https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

Columbia|SIPA A Natural Gas Giant Awakens: China’s Quest for Blue Skies Shapes Global Markets

https://energypolicy.columbia.edu/research/commentary/natural-gas-giant-awakens-china-s-quest-blue-skies-shapes-global-markets