I have started to take a position in some midstream energy partnerships. They are primarily focussed on midstream reoccurring revenues and mostly unaffected by commodity fluctuations in energy prices. Of course volumes matter.Q2 profits & revenue were very similar to Q1 2020.PSXP has risks related to balken pipeline litigation and potential total loss of investment. My estimate is this is $600 MM of loan exposure that they back and $50 MM+ in future annual operating profit? Their stock decline from $35 to $29 on the day that this exposure surfaced. Over $1 BB in market cap.They are both off more than 50% from their 52 week highs and pay out 13.5% to 18.5% at their current dividend rate, which SHLX has forecast to continue throughout 2020.Both earn 110% or more of their current dividends.PSXP is approximately 75% owned by PSX.I am trying to figure out why the whole category continues to trade lower. My guess is their association with pipelines servicing fracking areas. and in PSXP case their pipeline shutdown risk on the balkens.I would love to capture 10% plus income for a lengthy period and think this is a low risk possibility. Any thoughts?
People think oil prices are down for the count. My opinion is that they are down because of a worldwide recession and not because electric cars and solar have taken a bite out of their business. The supply will dwindle with reduced exploration and when the world economy recovers (and it will) profits will skyrocket. I'm buying petroleum assets as well.
"My opinion is that they are down because of a worldwide recession..."This is my suspicion as well. Just yesterday I added to my EPD (an MLP).Good management, balance sheet, and down almost 40% this year.>10% yield, which should be sustainable. Down a bit I'm guessing due to hurricane Sally.(Of course it was MUCH cheaper back in March and early April.)
I work for a large oil company and several employees and I were talking our stock the other day. One theory we tossed around for the continued depressed values for all oil stocks - 2020 and all that entails taken out of the mix - is the makeup of who is buying stocks:In a very broad sense, "Boomers" and those who are starting to trim equity positions and shift into income generating categories probably had very high affinity for oil stocks. They reaped the benefits of 30+ years of holding XOM, etc., but now they're starting to sell. So that obviously means we need a new buyer. Oil CEOs do a great job of highlighting the benefits of our companies to analysts, and to their employees internally. (Trust me it works; every year I get all psyched up during investor day). But it's a much harder sell for the stock buying public.The younger set, from Gen X on down, grew up with Exxon Valdez, "global climate chaos", Deepwater Horizon, etc. Speaking broadly of course, their first foray into stock ownership, all the way through present day is seeing fortunes made (and lost) with technology stocks. Dot-Coms in the 90s up to the FAANGs of today.Further, there's the growing popularity of ETFs touting "social responsibility" and "sustainable investing". These guys ain't buying P66, Valero, and especially not pipeline companies, right? I mean these generations protest every time someone wants to put a shovel in the ground, especially if it's to move crude oil. So no way are they signing up on Robinhood to buy shares of PSXP, even if they can cover their dividend.Just a thought.
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