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Frequent Contributor

Re: Midstream prospects

Hi EL,

I looked at AMLP a little deeper, and I still cannot find the love.

AMLP2.jpg

The top chart is total return on an annual basis. The bottom chart is total return calculated when the distribution was made by adding the distribution to the price.

Either way, it looks like you are in a classic "High-Yield Hotel California". Dividend payments are not making up for the loss in share price.

There might be some volatility-rebalance strategies that may help you recover your capital losses, but AMLP is certainly not a long-term buy and hold position in my view. 

Thank you,

Holiday

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Re: Midstream prospects


@Holiday wrote:

Hi EL,

I looked at AMLP a little deeper, and I still cannot find the love.

AMLP2.jpg

The top chart is total return on an annual basis. The bottom chart is total return calculated when the distribution was made by adding the distribution to the price.

Either way, it looks like you are in a classic "High-Yield Hotel California". Dividend payments are not making up for the loss in share price.

There might be some volatility-rebalance strategies that may help you recover your capital losses, but AMLP is certainly not a long-term buy and hold position in my view. 

Thank you,

Holiday


As I explained, AMLP was a great buy whenever oil bottomed, expecting capital appreciation, collecting a well funded distribution, with most of the future return coming from the MLP biggies.  In the alternative, you, or others, might choose individual MLPs.  I choose the ETF to 'diversify'.

ElLobo, de la casa de la toro caca grande
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Re: Midstream prospects

Hi EL,

This is a snapshot of the Midstream sub-industry taken from yesterday's CFRA webinar. I had expected worse based on decreased volume-based revenue, but the niche is the strongest player in the weakest sector. E/P companies can cap wells to "store" crude underground thereby reducing volume-based cash flow of midstreams.

For now, CFRA thinks most dividends are reasonably sustainable which does not exclude discretionary cuts.

Midstream 1.jpg

Midstream 2.jpg

Midstream 3.jpg

Upstream capex defines the cycle, and cycles are long. They often span a decade or more. The whole value stream suffers when crude prices are $30.

As with the broad equity indices, crude is priced for a V-shaped global economic recovery  with WTI easing into 2016-like conditions.

midstream 4.jpg

The energy sector drawdown is expected to be 8x what was experienced in 2009.

Holiday

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Re: Midstream prospects

Sold/closed some XLE calls this AM. Still have some more.

YBB
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Re: Midstream prospects

        El - maybe I got hit in the head too many times in my youth but I took a position in a CEF, TPZ, when it was 50% down and yielded 17% mostly ROC due to the nature of the holdings and certainly no long term growth. Cheap consistent payouts was the reason primarily. I’ve added to it on the way up in value and NAV twice since them. It may even double in value if it gets back to it’s normal drab ways. I know you dabble in CEF’s, did you catch that? Still at about a 18% discount when the 5 year was around 10%. Maybe value remains.

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Re: Midstream prospects

@Holiday 

Regardless of anything else, oil/gas taken from the ground has to be moved to a refinery or cracking plant.  That involves a tanker and/or a pipeline.  You invest in these kinds of things NOT expecting growth.  You expect income (divey/distribution cash).  In general, it's efficient to buy a given cash flow at a low price, not at a high price!  That's what Buffett/Icahn value investing is all about!  8-)

ElLobo, de la casa de la toro caca grande
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Re: Midstream prospects

Hi EL,

I think you read my post with some bias.  The tables show that:

  • Of the energy chain industries, the midstream sector has the best outlook at neutral
  • Net Debt to Capital Ratios for midstream companies are lower now than for 2016 and 2017. The ratio is only slightly higher than 2018.
  • Cash / (Distributions + Growth Capex) is greater than 100.  Dividends look sustainable.
  • The WTI spot price is improving which helps the rest of the value chain. Most are profitable above $30

Everything considered, it was a good report card for Midstream Companies.  I expected worse but did not see it.  I thought you would be happy.

Holiday

 

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Re: Midstream prospects


@Holiday wrote:

Hi EL,

I think you read my post with some bias.  The tables show that:

  • Of the energy chain industries, the midstream sector has the best outlook at neutral
  • Net Debt to Capital Ratios for midstream companies are lower now than for 2016 and 2017. The ratio is only slightly higher than 2018.
  • Cash / (Distributions + Growth Capex) is greater than 100.  Dividends look sustainable.
  • The WTI spot price is improving which helps the rest of the value chain. Most are profitable above $30

Everything considered, it was a good report card for Midstream Companies.  I expected worse but did not see it.  I thought you would be happy.

Holiday

 


My happiness really has nothing much to do about anything.  My OP, written a month ago, simply stated an opinion that mid-March was probably a good time to take a new position in oil space, and that I had done so, based upon my personal criteria for such an investment.  Twasn't my intention to suggest, let alone attempt to influence, anyone else!  8-))

Kinda like the Norwegian woman who asked her husband of 25 years why he never tells her he loves her.  His response is that he told her so on the day they married and, ifn he changes his mind, he'll let her know!

ElLobo, de la casa de la toro caca grande
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