Halfway through a year in which the unwelcome phrase, “lower for longer,” rudely invaded the industry vernacular, investors who parked their funds in public midstream energy entities are likely thinking that things could be worse.
A check of the collective stock performance of The Midstream 50, Hart Energy’s ranking of the top-performing companies in the sector based on 2015 EBITDA, showed a solid 17.7% gain for the year as of June 30. From 2016’s low point on Jan. 20—the day West Texas Intermediate (WTI) crude oil closed below $27 per barrel—the 50 companies were up a glee-inspiring 51.9%.
Read: The Midstream 50: Our Ranking Of The Sector’s Major Players
Calculations for The Midstream 50 were performed by Barclays Capital Inc. The ranking includes both the major MLPs and conventional corporations, or C corps, active in the midstream space.
Commodities have also recovered since mid-January, following crude oil’s 25% descent in the first three weeks of the year to a low close of $26.55. From then until June 30, WTI’s price leaped 79.7%. The natural gas benchmark Henry Hub price per million Btu rose a less-startling 13.8%.
By comparison, the S&P 500 Energy Sector Index notched a 14.3% increase for the first six months of the year, and a 31.9% rise since Jan. 20. The Kayne Midstream/Energy Fund, up 16.1% through June 30, more than doubled in value since Jan. 20.
While broader stocks were dragged down by oil’s woes, the Dow Jones industrial average, which tumbled to 15,766.74 on Jan. 20, has climbed by 13.7% since that date, though its increase for the year is only 2.9%.
Among the 10 highest ranked companies, strong first halves were enjoyed by Kinder Morgan Inc. (No. 1), TransCanada Corp. (No. 4), ONEOK Inc. (No. 9) and Targa Resources Corp. (No. 10). ONEOK’s stock nearly doubled its value in the first six months of the year.
Hamstrung by a drawn-out, failed merger, Energy Transfer Equity LP (No. 2) saw only a 4.6% increase, and The Williams Cos. Inc. (No. 5) suffered a 15.8% drop as members of its board of directors engaged in an internal struggle over the direction of the company.
The strength of the sector’s rebound was anticipated by Michael Underhill, chief investment officer of Wisconsin-based Capital Innovations LLC.
“We were increasing our positions in MLPs and energy companies in early February,” he told Hart Energy earlier in the year. “And then Feb. 11 we backed up the truck and took our infrastructure portfolio more than 50% in energy. Conventional oil and gas energy is not going away.”
Joseph Markman can be reached at jmarkman@hartenergy.com. Twitter handle: @JHMarkman
Recommended Reading
What's Affecting Oil Prices This Week? (April 15, 2024)
2024-04-15 - While concerns about the stability of oil supply are increasing, Stratas Advisors does not expect oil supply to be disrupted – unless there is further escalation in the Middle East.
Oil Rises After OPEC+ Extends Output Cuts
2024-03-04 - Rising geopolitical tensions due to the Israel-Hamas conflict and Houthi attacks on Red Sea shipping have supported oil prices in 2024, although concern about economic growth has weighed.
What's Affecting Oil Prices This Week? (April 8, 2024)
2024-04-08 - Stratas Advisors says geopolitics are providing a boost for oil prices as conflicts escalate–and while crude oil and oil products continue to flow, the possibility of disruption is increasing.
What's Affecting Oil Prices This Week? (March 11, 2024)
2024-03-11 - Stratas Advisors expects oil prices to move higher in the middle of the year, but for the upcoming week, there is no impetus for prices to raise.
Oil Dips as Demand Outlook Remains Uncertain
2024-02-20 - Oil prices fell on Feb. 20 with an uncertain outlook for global demand knocking value off crude futures contracts.