Market Monitor: Rob Thummel

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

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