Market Monitor: Rob Thummel, Tortoise Managing Director & Portfolio Manager (AUMl $21B)
Date: 11/9/18
Stock Picks
1) Cheniere Energy (NYSE: LNG)
- Purest way to play growing global liquefied natural gas (LNG) theme
- Cheniere has delivered LNG to 29 countries throughout the world
- Natural gas can play a pivotal role in reducing carbon dioxide emissions around the world
- Global LNG demand forecasted to double by 2035
- U.S. is expected to become the second or third largest supplier of LNG representing 15% of the aggregate global LNG market share by 2023
2) Enterprise Products Partners (NYSE: EPD)
- Operates a diversified network of essential energy infrastructure assets that transport crude oil, natural gas and natural gas liquids
- Delivering record earnings and cash flow growth tied to rising exports of U.S. produced crude oil, natural gas, and natural gas liquids
- 6.4% dividend yield
- 56 consecutive quarters of dividend growth
- Significant project backlog to support continued dividend growth in the future
3) EQT Corporation (NYSE: EQT)
- Largest natural gas producer in the U.S. with a significantacreage position in the coveted Marcellus Shale Basin
- Trading around 4.0x 2019 EBITDA which is a significant discount to other oil and gas producers
- Weak performer during 2018 down 35% YTD but poised to rebound based upon recent management changes
- Natural gas prices rising as natural gas inventories entering the winter season are at the lowest levels since 2005
Where are oil prices headed?
- WTI $65- $75 per barrel expect higher volatility in oil prices through the remainder of the year
- Substantial decline in oil prices since the beginning of October a result of too much supply coming to the market too fast
- Oil production growth from OPEC mainly Saudi Arabia and the U.S. has more than offset reductions in supply from Iran and Venezuela
- Expect OPEC to begin discussing reducing production again
- Little margin for error remains in global oil markets as OPEC spare capacity is low
Thoughts on oil industry right now?
- Global oil demand has increased 33 out of the last 34 years. Trend expected to continue well into the future
- U.S. setting records for crude oil production and crude oil exports
- Fundamental backdrop for U.S. oil shale producers is as good as it has ever been yet stock price performance has become disconnected from strong fundamental backdrop
- U.S. oil producers becoming more disciplined focusing more on generating free cash flow in order to buy backshares or increase dividends
Disclosures: Tortoise owns LNG, EPD & EQT
