Archive for: SL Advisors Talks Energy

In Episode 5 of SL Advisors Talks Energy, Simon Lack talks about market volatility, valuations in midstream energy, and Canada’s new way to export its crude oil.

Show Notes:

Volatile week with more tariffs on China roiling markets (:51)

Still assuming Trump will take China deal in time for election (:52)

Falling bond yields reflect widespread risk aversion (1:28)

Equity risk premium is favoring equities (2:15)

Investors asking why energy stocks are down again (2:48)

Sector remains out of favor, falls farthest when stocks are weak (2:53)

But valuations are compelling (3:03)

Energy Transfer yields >9%, 2X covered by DCF (3:10)

Williams 6% yield, also 2X covered (3:24)

ENLC fired its CEO and lowered guidance but still expects to raise distribution, yielding 15% (3:36)

Midstream energy infrastructure earnings generally good, but sentiment poor (3:51)

Misallocated cash, although signs of improvement (4:00)

Weak natural gas prices, although not hurting pipeline earnings (4:30)

Fears over climate change, although oil and gas consumption continue to grow (5:00)

Turn to Canada – big challenge to get crude out of Alberta (6:55)

Keystone XL much delayed although TC Energy (FKA TransCanada) expects to finally build it (7:32)

ENB told us they wouldn’t build a Canadian crude pipeline except in Alberta (7:47)

Plans to build railway from Edmonton and Ft McMurray to Alaska (8:10)

Amazing considering 2013 crude disaster in Quebec, 47 deaths (8:34)

But pipeline opponents have done this (8:41)

Railway will travel up through Yukon Territory, allowing Canadian crude exports from Alaska (9:19)

Also unlocking mineral reserves in Yukon by providing transport (9:22)

Project still in planning stage, but reflects ongoing global demand for crude in spite of fears over climate change (9:38)

Links:

Alaska – Alberta Railway Development Corporation

http://www.a2arail.com/about-a2a.html

Stocks Offer Bond Investors an Opening              

https://sl-advisors.com/stocks-offers-bond-investors-an-opening

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