Results for: Energy

The LMP Capital and Income Fund (SCD) has consistently outperformed its benchmark and peer group, delivering strong returns over the years. Its portfolio composition is well-positioned for the current economic environment, with overweights in energy, real estate, and value-oriented stocks. While the current discount to NAV is near historical highs, SCD remains an attractive long-term investment. Its focus on MLPs and REITs sets it apart from peers who are more heavily allocated to tech stocks or high-yield fixed income vehicles. However, higher expenses and a potential impact on distributions in the short term warrant caution.

Core Laboratories Inc. (NYSE: CLB) reported first quarter 2024 revenue of $122.6 million. Core’s operating income was $18.5 million, with diluted earnings per share (EPS) of $0.25, all in accordance with U.S. generally accepted accounting principles (GAAP). Operating income, ex-items, a non-GAAP financial measure, was $24.4 million, yielding operating margins of 12%, and EPS, ex-items, of $0.32. Core Lab used excess free cash to reduce debt by $44.5 million in the first quarter of 2024. The company’s leverage ratio of 1.76 was unchanged compared to prior quarter-end. The company anticipates sustainable activity growth in the years ahead to support crude-oil demand and energy security concerns.

Prime Minister Justin Trudeau has warned Saskatchewan Premier Scott Moe of potential consequences for his decision to stop collecting and remitting carbon taxes on natural gas. The move puts the province in direct conflict with the Canada Revenue Agency (CRA), which is responsible for enforcing tax laws. Trudeau emphasized that the CRA is well-equipped to collect unpaid taxes, suggesting that Saskatchewan may face legal challenges and financial repercussions. The dispute stems from the federal government’s exemption of home heating oil from the carbon tax, which Moe argued created an unfair advantage for Atlantic Canada.

Energy stocks declined in the lead-up to Wednesday’s market open, with Commerzbank observing that geopolitical developments continue to influence risk premiums. The oil market’s subdued response to Iran’s attack on Israel was also noted as a factor.

A consortium led by CK Infrastructure Holdings and CK Asset Holdings has agreed to acquire Phoenix Energy, the largest natural gas network company in Northern Ireland, for £757 million ($941 million). The transaction is expected to be completed by the end of this month. Phoenix Energy operates a network that covers nearly half of the local population, including Greater Belfast, and 78% of gas connections in Northern Ireland. The deal marks CK Infrastructure’s first acquisition of an asset in Europe since 2017 and is expected to provide stable cash flow and recurring profits.

Oil companies planning to ship crude on the expanded Trans Mountain pipeline in Canada are worried that the project may not begin full service on May 1 but are still obligated to pay tolls from that date, according to a letter sent to the Canada Energy Regulator (CER) by Suncor Energy and other shippers like BP and Marathon Petroleum.

The share of electricity generated by coal and gas in the UK has plummeted to a record low of just 2.4%, marking significant progress towards the goal of a zero-carbon electricity system. In 2024, there have already been 75 half-hour periods when fossil fuels accounted for less than 5% of power demand, compared to only 5 such periods in 2022. The decline in fossil fuel usage is driven by the increasing deployment of renewable energy sources such as wind and solar, as well as the retirement of coal plants and a reduction in the share of electricity generated by gas.

Iraq has a long history of making promises to the United States regarding reducing gas and electricity imports from Iran, but has consistently failed to follow through. In 2020, Iraq signed a historic five-year deal to import gas and electricity from Iran, despite promising the US that it would reduce its reliance on Iranian energy. Iraq also continues to flare large amounts of natural gas that could be used for power generation or exports. Despite signing agreements with US companies to reduce gas flaring, Iraq has made little progress and continues to be the second-largest gas flaring country in the world. The US has repeatedly granted Iraq waivers from sanctions, but Iraq has not fulfilled its commitments to reduce its reliance on Iranian energy or reduce gas flaring.

Occidental Petroleum (OXY) has outperformed the broader market this year, driven by the recovery in oil prices.

The company’s recent acquisition of CrownRock is expected to boost free cash flow and earnings, making it an attractive investment.

Analysts at BofA have a price target of $80 on OXY, while I believe the stock is worth $80-96, representing a 20-44% upside potential from the current price.

Despite the risks associated with oil price volatility, I believe OXY’s management team is effective and the company is well-positioned to benefit from the ongoing bullish cycle in the oil market.

U.S. oil and gas deals reached a record $51 billion in the first quarter of 2023, continuing the merger spree seen in the top U.S. shale field. Energy companies have been aggressively expanding their drilling inventories, particularly in the Permian Basin, where production costs are relatively low. The largest deal proposed last quarter was Diamondback Energy’s $26 billion acquisition of Endeavor Energy Partners, bringing together two major Permian operators. Other notable deals included Apache Corp’s $4.5 billion purchase of Callon Petroleum and Chesapeake Energy’s $7.4 billion acquisition of Southwestern Energy. However, some mergers, such as Chesapeake’s and those executed by Exxon Mobil and Chevron last year, have been delayed by antitrust reviews due to concerns about market concentration. Despite the high number of deals, analysts expect the pace to slow as strong oil prices make it more advantageous for companies to hold on to their assets.