Energy & Utilities

On January 16, Weatherford International’s (WFT) implied volatility (or IV) was ~64%. Its 3Q17 earnings were announced on November 1, 2017. Since then, its implied volatility has increased from 54% to the current level.

With the mixed performance from energy commodities, energy stocks are down this week. As of January 17, the Energy Select Sector SPDR Fund (XLE) has fallen ~0.4% this week.

Georgia-based Southern Company (SO) currently offers a dividend yield of 5.2%, the highest among top SPX utilities.

The EIA estimates that global crude oil inventories could rise in 2018 and 2019, which is bearish for oil prices.

The EIA estimated that Iraq’s crude oil production increased by 60,000 bpd to 4,380,000 bpd in December 2017—compared to the previous month.

Any increase in Iran’s crude oil production has a negative impact on oil prices. Lower oil (OIL) (DBO) prices are bearish for energy producers (IXC) (FXN).

Williams Companies (WMB) has had a massive start to the year. It’s risen nearly 9% in seven trading sessions in 2018. Overall, the C corporation GP (general partner) has risen ~14% since the start of December 2017.

As of January 2018, 21 of the 22 analysts covering American Tower stock have given it a “buy” or “strong buy” rating. The remaining analyst gave it a “hold” rating.

Southern Company (SO), the second largest rate-regulated utility, is currently trading at an EV-to-EBITDA multiple of 10.5x.

MLPs had a strong start to the new year. The Alerian MLP Index rose 5% in the first week of 2018.

US dry natural gas production rose by 1.2 Bcf (billion cubic feet) per day or 1.6% to 74 Bcf per day on January 4–10, 2018, according to PointLogic.

Valero Energy’s operating revenue fell 14% in 2016 before rising 23% in 9M17. Refining revenues drove the decline in 2016, offset by ethanol revenues.

US natural gas inventories fell by 359 Bcf (billion cubic feet) to 2,767 Bcf between December 29, 2017, and January 5, 2018, according to the EIA.

During 3Q17, American Tower (AMT) strengthened its revenues on higher organic growth in domestic and international markets such as India and Mexico.

Mexico is one of American Tower’s (AMT) vital international markets. AMT has entered into an agreement to acquire certain telecommunication assets in Mexico.

Data usage is increasing in international markets due to smartphone penetration.

American Tower (AMT) has increased its 2017 revenue outlook to $6.55 billion from $6.53 billion, an addition of $15 million and a 0.2% increase.

US gasoline inventories rose by 4.1 MMbbls (million barrels) to 237.3 MMbbls between December 29, 2017, and January 5, 2018.

US crude oil inventories fell by 4.9 MMbbls (million barrels) to 419.5 MMbbls between December 29, 2017, and January 5, 2018.

The EIA forecast that Brent (BNO) crude oil would average $59.74 per barrel in 2018—4.3% higher than the previous estimates in December 2017.

The US Dollar Index fell ~9.8% in 2017. The dollar fell partly due to the improving economy outside the US. It was the worst annual drop since 2003.

Magellan’s history Magellan Midstream Partners (MMP), which began trading in 2001, has grown through various asset acquisitions and expansion projects over the years. Magellan was formerly a part of Williams Companies (WMB). The company started trading as Williams Energy Partners in 2001, and changed its name to Magellan Midstream Partners in 2003. In 2004, the […]

The Alerian MLP ETF (AMLP) invests only in infrastructure MLPs. Similarly, the Global X MLP ETF (MLPA) invests at least 80% of its assets in MLPs.

The First Trust North American Energy Infrastructure Fund (EMLP) generated total returns of 42% over a five-year period, the highest among the top five MLP ETFs that we are discussing in this series.

US crude oil futures contracts for February delivery fell 0.1% to $61.95 per barrel at 1:05 AM EST on January 5, 2018—the highest level since December 2014.

The EIA estimated that US gasoline inventories increased by 4.8 MMbbls (million barrels) or 2.1% to 233.1 MMbbls on December 22–29, 2017.

According to IHS, the top quintile wells are dominated by EOG Resources (EOG), Marathon Oil (MRO), and ConocoPhillips (COP).

WTI crude oil (USL) prices are at their 30-month high. The US benchmark also opened above $60 per barrel in January for the first time since 2014.

Cheniere Energy (LNG) has risen 9.7% in the last six trading sessions. It rose 12.1% in December 2017 alone.

US utilities have corrected notably over the past few weeks, and their recent valuations could start attracting new entrants.

Weatherford International’s (WFT) EV (enterprise value) when scaled by a trailing 12-month adjusted EBITDA is close to the peer average in our group.

February US natural gas (UNG) futures contracts were above their 20-day moving averages on December 29, 2017.

Baker Hughes released its US crude oil rig count report on December 29. It reported that US crude oil rigs were flat at 747 on December 22–29, 2017.

A larger-than-expected withdrawal in US natural gas inventories compared to historical averages would help natural gas prices this week.

US crude oil production declined by 35,000 bpd (barrels per day) or 0.4% to 9,754,000 bpd from December 15 to 22, 2017, per the EIA.

February WTI crude oil futures (DWT)(SCO) contracts rose 0.8% to $60.3 per barrel at 12:45 AM EST on December 29, 2017—the highest level since June 2015.

The steep fall in utilities in the last couple of weeks seems to have aggravated utilities due to their record high valuations.

In the EIA’s STEO report, it predicted that the Henry Hub natural gas benchmark price would average $3.12 per MMBtu in 2018.

Cushing inventories rose by 754,000 barrels or 1.4% to 52.9 MMbbls (million barrels) on December 8–15, 2017, according to the EIA.

In the week ended December 22, the natural gas rig count was 88.5% below its record high of 1,606 in 2008.