Renewable Energy MLP Achieves 'Clean Results from Strong Hydrology' in Q2/19

Source: Streetwise Reports 08/02/2019 The highlights of the quarterly update are presented in an iA Securities report. In a July 31 research note, iA Securities analyst Jeremy Rosenfield reported that Brookfield Renewable Energy Partners L.P.’s (BEP.UN:TSX; BEP:NYSE) Q2/19 results were “roughly in line with estimates.” Rosenfield reviewed the quarter’s numbers and the near-term outlook for the master limited partnership (MLP). Strong output, including from hydroelectric assets in North America, which was about 7% higher than the long-term average, drove the quarterly results. Consolidated EBITDA was $630 million, higher than iA Securities’ forecast of $602 million and consensus’ estimate of $598 million. Proportionate adjusted EBITDA was $400 million, between iA’s $365 projection and consensus’ $407 million forecast. Q2/19 funds from operations came in at $0.74 per share, above both iA and consensus’ estimates of $0.72 and $0.68 per share, respectively. Another highlight of the quarterly update, Rosenfield pointed out, is that the development pipeline of MLP “continues to support organic growth,” specifically an average annual 3–5% growth in funds from operations per share (FFO/share) and excluding mergers and acquisitions (M&A) activity. In the hopper are about 130 megawatts (MW) of under construction projects, another greater than 600 MW of construction-ready work and an additional roughly 220 MW of potential repowering jobs. Supporting longer-term potential upside are the two recent investments, noted Rosenfield—Terraform Power’s acquisition of a generation portfolio for about $720 million along with Brookfield and co-investors’ acquisition of a 50% stake in X-Elio for about $500 million. These transactions could … Continue reading

Oil & Gas Firm's Q2/19 Results Drive Lower Target Price, Same Rating

Source: Streetwise Reports 07/31/2019 The rationale and an explanation of the downgrade are discussed in a CIBC report. In a July 29 research note, analyst Dave Popowich reported that CIBC reiterated its Outperformer rating on Vermilion Energy Corp. (VET:TSX) because it “consistently ranks among the highest netback producers in our coverage universe.” However, CIBC’s “conviction has decreased somewhat following Q2/19 results,” added Popowich, and accordingly, the bank revised its estimates on Vermilion. For one, it reduced its cash flow per share forecast for 2019 by 3% to $5.85 and for 2020, by 6% to $5.52. Also, it projects year-end 2019 net debt at 2.2 times. Those and other changes led CIBC to decrease its target price on Vermilion to $32.50 per share from CA$35. In comparison, it is currently trading at around $23.62 per share. Of concern to CIBC is that Vermilion’s “rising financial leverage is increasingly becoming a key risk to the stock’s valuation,” Popowich pointed out, particularly since the company chose to spend capital rather than reduce debt in H2/19. Investors are questioning whether Vermilion will be able to sustain its capex requirements and its dividend. Vermilion should be able to manage both, CIBC estimated based on its 2019 adjusted payout ratio calculation of 102%, recently up from 100%. However, “execution will be critical for Vermilion through year-end,” Popowich commented. If the company can “produce near the high end of its annual guidance range, it will be much better equipped to address questions about the sustainability of its … Continue reading

Rating Downgraded But Value Maintained on Energy Infrastructure Firm

Source: Streetwise Reports 07/31/2019 The current headwinds facing the company and their expected impact are described in a BMO Capital Markets report. In a July 29 research note, analyst Danilo Juvane reported that BMO Capital Markets downgraded its rating on Kinder Morgan Inc. (KMI:NYSE) to Market Perform due to a paucity of upcoming catalysts and the likelihood of decreased future revenue. “We see Kinder Morgan stock as having a balanced risk/reward,” added Juvane. At the same time, BMO maintained its $22 per share target price on Kinder Morgan because the energy firm has been “one of the best year-to-date performers in the midstream sector,” Juvane highlighted. This was driven by its “significant deleveraging, an improved organic growth outlook and financial flexibility.” Kinder Morgan’s current share price is around $20.68. In terms of catalysts on the horizon, the only possibilities are a sale of the CO2 business or a sale of Kinder Morgan Canada Ltd. “However, we don’t see either catalyst materializing,” Juvane commented. Kinder Morgan Canada has indicated it intends to keep its structure intact, and the Tall Cotton issues will likely preclude Kinder Morgan receiving an acquisition proposal at an attractive multiple. Regarding the expectation for decreased revenues, Juvane pointed out they’re likely to come, in part, from Kinder Morgan’s carbon dioxide segment, specifically, due as a result of recent suspension of Tall Cotton capex. BMO estimated the resulting drop in EBITDA by 2023 at $300 million. Another factor likely to negatively affect revenue is the “well-known” and “well-worn” … Continue reading

Enphase Gets a Charge from Q2 Earnings and Bright Outlook

Source: Streetwise Reports 07/31/2019 Enphase Energy’s shares are surging by more than 30% today after releasing strong growth and earnings for Q2/19. Global solar energy technology firm and major supplier of solar microinverters Enphase Energy Inc. (ENPH:NASDAQ) announced financial results for the second quarter of 2019 yesterday after markets closed. The company reported revenue of $134.1 million for Q2/19, an increase of 34% sequentially and 77% year-over year. The firm indicated that its Enphase IQ 7 products shipments equaled 98% of all microinverters sold. Enphase added that it shipped approximately 416 megawatts DC, or 1,283,680 microinverters, and advised that it continues to see strong demand across the board from customers. The company further reported Q2/19 GAAP operating income of $17.4 million (non-GAAP $23.2 million) and GAAP net income of $10.6 million (non-GAAP $23.2 million) resulting in GAAP diluted EPS of $0.08 (non-GAAP $0.18). President and CEO Badri Kothandaraman commented, “While demand continued to outstrip available supply, we were able to increase capacity to better support our customers and we are on track to have a supply of approximately 2,000,000 microinverters in Q2/19.” The company reiterated some of the business highlights in the quarter, noting that in June it announced that more than 500 solar installation companies in the U.S. have benefitted from significantly reduced solar design complexity and logistics by adopting Enphase Energized AC Modules. Also in June, Enphase announced that it renewed its low-income solar partnership with GRID Alternatives, a national leader in making renewable energy technology and job … Continue reading

South American Explorer's Stock Doubles on News Flow

Source: Peter Epstein for Streetwise Reports 07/30/2019 In this interview, CEO Philip Thomas of A.I.S. Resources discusses his company’s prospects in the lithium and manganese sectors with Peter Epstein of Epstein Research. A.I.S. Resources Ltd. (AIS:TSX.V) is a lithium brine exploration and development company with projects in Argentina, and is setting up a potentially lucrative manganese (Mn) trading operation in Peru that could generate positive cash flow this quarter and well beyond. The market seems to like the near-term cash flow aspect; the share price took off on very heavy volume on July 23 based on this press release. What on earth was in that release to cause a doubling in the share price to CA$0.13 per share (it has since pulled back to CA$0.09)!?! The prospects for near-term cash flow, possibly significant amounts relative to A.I.S.’ market cap, that’s what. Although just 150 tonnes of high-grade (49%) Mn fines ore has been loaded into six containers to be shipped the week of July 28, the press release discusses plans for 10,000 tonnes/month within about six to nine months. Based on current Mn pricing and expected costs, A.I.S. should be able to make approximately US$100/tonne operating profit, or US$1 million per month (if /when selling 10,000 tonnes/month). In a sense, that’s all readers need to know. If the company can generate US$1 million per month, the current market cap of CA$7.3 million will prove to be way too cheap. However, of course, there’s a lot of risk between a single … Continue reading

Technical Analyst: The Outlook for Oil Is Bleak

Source: Clive Maund for Streetwise Reports 07/29/2019 Technical analyst Clive Maund explains why he is bearish on oil and what could alter that outlook. A commodity that will certainly not do well in a recession/depression is oil. So much capacity has been brought on-stream in recent years, particularly in the U.S., that in any economic contraction, supply will quickly turn into oversupply. As we know, a cyclical recession/depression is already well overdue and it has only been staved off so far by rate slashing and reckless money printing, which will eventually have catastrophic consequences. We have now arrived at the stage where desperate rate reductions and bouts of QE are having little to no effect—they are pushing on a piece of string as we transition from the stage where we have zombie banks and companies to a global zombie economy. About the only hope for the oil producers is if they can somehow engineer a crisis by, for example, goading Iran into blocking the Straits of Hormuz, and, as it happens, that appears to be what is in train, and they have much more chance of achieving this because they have Israel on side, which is looking for any opportunity to inflict damage on Iran. While the blocking of the Straits of Hormuz and the ensuing crisis in the oil markets would certainly generate massive windfall profits for oil producers and oil companies over a medium-term timeframe, this tactic will not be good for anyone long-term because it will implode … Continue reading

Oil & Gas Services Firm's Q2/19 a Beat, Domestic Headwinds Ahead

Source: Streetwise Reports 07/28/2019 A Raymond James report indicates how it expects market conditions to affect margins of this Texas-based company in H2/19. In a July 22 research note, analyst Praveen Narra reported that Raymond James lowered its target price on Halliburton Co. (HAL:NYSE) to $37 per share from $39 (the current share price is $23.03). The change reflects Raymond James reducing its H2/19 estimates on the energy company by 2% due to current weakened oilfield activity in North America and lower drilling and evaluation (D&E) margins. Narra highlighted that despite those factors, Halliburton’s Q2/19 results were “ahead of expectations on better-than-expected completion and production (C&P) margins.” Further, looking forward, Narra purported that Haliburton should continue generating free cash flow despite today’s flat oil prices if it continues cutting costs and potentially reduces capex in 2019. Raymond James expects Halliburton to generate, assuming a higher oil price, free cash flow of around $1 billion and $1.6 billion for 2019 and 2020, or, at today’s prices, a yield of 5% and 8%, respectively. With respect to margins in specific corporate divisions, Narra pointed out that Halliburton likely will not see a rebound in its C&P numbers until 2020. This is because a slowing U.S. North American oilfield typically translates to depressed C&P margins for the company. Another reason is the likely continuing uncertainty in Q4/19 due to seasonality and exhausted budgets. In contrast, Narra noted, D&E margins are “poised for improvement” because “international markets are expanding with early signs of pricing … Continue reading

Fund Manager's Top Picks for the Early Stages of a Trend Change

Source: Streetwise Reports 07/25/2019 Brian Ostroff, a partner at Windermere Capital, in this interview with Streetwise Reports, discusses three companies in his portfolio that he believes are poised to benefit from the rise in commodity prices. Streetwise Reports: Brian, you are a partner in Windermere Capital. Would you give us a brief introduction to the firm? Brian Ostroff: Windermere operates two funds that are involved in the mining space. We are different than most funds in that most of the people involved have a technical background. Our partners in the fund are the former ore and concentrate trading team from the Pechiney Group. When Alcan bought Pechiney, they did a management buyout. So it today is a global offtaking group of traders focused primarily on the base metals. Its team is made up of mining engineers, geologists, logistical experts and people who really understand the business. Windermere is the financial overlay. My colleague Chris Wright and I are the financial overlay, where we look at particular opportunities and, between the technical expertise and the financial expertise, make some decisions. We operate more like private equity. We are not active traders. We get involved in situations, very few, but the ones we get involved in we are usually the largest shareholder. We’re there for successive rounds of financing and look to advance companies usually to some liquidity event. In a lot of cases, our positions are so large in these companies that, again, it’s not something that we can necessarily get … Continue reading

Energy Firm's 'Progress On Asset Sales Leads To Bump In Price Target'

Source: Streetwise Reports 07/24/2019 The aim and developments of the program are recapped in a CIBC report. In a July 22 research note, analyst Robert Catellier reported that CIBC increased its target price on AltaGas Ltd. (ALA:TSX) to CA$21 per share from CA$20 due to “a stronger result on the distributed energy asset sale and in light of the solid progress on asset sales in general.” The energy infrastructure company’s current share price is around CA$20.71. Regarding the former, AltaGas’ sale of its distributed generation assets to TerraForm Power generated CA$940 million in proceeds and a 12x EBITDA valuation, “both higher than we expected,” Catellier indicated. Regarding the latter, on plan to garner CA$1.5–2 billion from asset sales, AltaGas has raised CA$1.3 billion. It should be able to achieve the last roughly CA$200 million in sales, added Catellier, and could simply do so by selling its remaining interest in AltaGas Canada. With sales of other assets in addition, the energy firm could exceed the CA$2 billion goal. Catellier highlighted that “the company has struck a nice balance between the required urgency to remove the funding gap and remaining disciplined enough to achieve attractive valuations.” Partially offsetting some of the company’s asset sale progress, however, is the near and medium-term impact of “surplus production leading to pressure on natural gas liquids prices and frack spreads,” Catellier wrote. In light of those environmental factors, CIBC revised its estimates accordingly. CIBC has a Neutral rating on AltaGas. Sign up for our FREE newsletter … Continue reading

Oil & Gas Explorer Meets 'Capital Discipline Goals' Despite NGL Price Weakness

Source: Streetwise Reports 07/23/2019 A Raymond James report looks at 2019, 2020 spending and production expectations for and by this company. In a July 18 research note, John Freeman reported that Raymond James decreased its target price but maintained its Outperform rating on SM Energy Co. (SM:NYSE) in response to a recent operational update. The new target price, which better reflects “weakness in commodity pricing relative to our prior bullish forecast,” Freeman wrote, is $15 per share, down from $20. It compares to SM’s current share price of about $10.14. Freeman indicated that two factors are expected to decrease SM’s Q3/19 production numbers. One is SM’s intention to reject ethane for most of H2/19 due to its price. The other is shut-ins by offset operators in the Midland Basin, which are estimated to reduce volumes by about 1,500,000 barrels of oil equivalent (boe) in Q3/19. The net result will likely be an approximate 4% decline in SM’s sequential production in Q3/19 to 131,500 boe per day (131.5 Mboe/day). On a positive front, highlighted Freeman, SM met its capital discipline goals so far in 2019. Q2/19 spending came in at $261 million versus the Street’s estimate of $314 million and Raymond James’ forecast of $302 million. Also, SM just increased its 2019 volume model by about 1% at the midpoint, 130 Mboe/day. Freeman noted, “Our model remains at the high end of the expected range for the year, given SM’s propensity to outperform expected production ranges in its Permian operations.” Looking … Continue reading