“It’s obvious that the crude has bottomed and the outlook from an energy standpoint is dramatically better than it was a year ago,” says Cushing CEO Jerry Swank. “It’s a lot easier to do these talks now than it was last year.”
A year ago oil was trading in the $30s after falling below that briefly in February 2016. For nearly everyone in the market, the end was near. Shale oil drillers were filing for bankruptcy. We were in an earnings slump because energy was in a recession. OPEC finally took their collective boots off the necks of American shale and agreed to a production cut. Now there is breathing room. Oil is expected to hit $60 this year, according to Barclays Capital estimates.
Swank gives OPEC a 90% likelihood of expanding production cuts in May. As a result, he sees crude oil going to $55 in the next couple of weeks. The May futures contract for WTI is currently $53.57 per barrel. We’re almost there.
Another aspect of the “renaissance” is Trump infrastructure and lower tax rates. (Whenever that happens.) Several MLPs have even converted to C-Corp’s in anticipation of that.
Cushing has a number of funds focused on upstream, mid- and downstream. “We don’t have to take a view on whether oil prices are going higher or lower, we just need to know a range and allocate accordingly,” says Saket Kumar, portfolio manager at Cushing. “As the energy sector rebounds there are second and third derivatives in these segments that get overlooked and that is reflective in valuations. That’s great for us in terms of finding opportunities.” Kumar invests across the board: natural gas value chains (from E&P to shipping and storage); oil value chain (E&P on out to transportation) and energy infrastructure (from construction of pipelines to maintenance and business services).
Cushing retail funds include MainStay Cushing Energy Income (CURAX 1,80 0,00 0,00%); the closed-end Cushing Energy Income (SRF 4,12 -0,04 -0,84%); MainStay Cushing MLP Premier (CSHAX 9,35 +0,03 +0,32%); and MainStay Renaissance Advantage. (CRZAX 8,72 0,00 0,00%)
Investment advisors on the webcast were curious about OPEC production. Cushing fund managers believe that behemoth Saudi Arabia is possibly the “biggest credible threat” to oil because it really does need higher oil prices while U.S. firms can survive on $45. There are plenty of OPEC economies that don’t work well with oil at these prices. (Look at Venezuela today.)
The Saudi’s are planning an IPO of Aramco, its state-owned enterprise. If they do pull the trigger, Cushing thinks it only happens if oil is close to or over $60.
Back in the U.S., valuations are cheapest in the tar sands, an area that is still relatively new and has sub-optimal logistics. Long-termers like Cushing like U.S. Silica Holdings (SLCA 12,82 +0,14 +1,10%) as a derivative of this space. They are an industrial materials company making silica sand for use in oil and gas wells, but their silica sand is also used in wind power and solar energy manufacturing. Their stock is up a nice 118% in the last 12 months.
Commodity prices can choke off demand for the MLP fund, but volume is key for the companies underlining most of the MLPs out there. The good news is that volume is moving. There is a need for liquids gathering; they’re adding frack capacity in the Permian basin in Texas. It’s all about demand.
Kevin Gallagher, another Cushing fund manager, says the energy apocalypse is over. “I can only think of one midstream companies that went bankrupt and they were later bought out,” he says. “The fear was that the MLP business model would not survive last year’s crash in oil prices. This industry has a strong ability to adapt. I wouldn’t bank on their inability to move through these down cycles. General partners stepped into provide relief. You had contract protection. I think between last year and the downturn in 2008 you have some evidence that MLPs can weather the storm. We are sitting pretty for the recovery right now.” Cushing Asset Management: MLPs Are “Sitting Pretty”
Guess what? The U.S. energy renaissance is back… again.
The first quarter has given the RIA community a new look at the energy-related plays that were quite popular for fixed income investors about four to five years ago through master limited partnership funds. The pipeline and general energy sector infrastructure gurus over at the $4 billion Cushing Asset Management firm sponsored a webinar recently to look at the resurrection of the energy MLP. After a good year and a half of being in the doldrums, specialist investment firm Cushing is breathing a sigh of relief. Their favorite asset class is back from the brink.
“It’s obvious that the crude has bottomed and the outlook from an energy standpoint is dramatically better than it was a year ago,” says Cushing CEO Jerry Swank. “It’s a lot easier to do these talks now than it was last year.”
A year ago oil was trading in the $30s after falling below that briefly in February 2016. For nearly everyone in the market, the end was near. Shale oil drillers were filing for bankruptcy. We were in an earnings slump because energy was in a recession. OPEC finally took their collective boots off the necks of American shale and agreed to a production cut. Now there is breathing room. Oil is expected to hit $60 this year, according to Barclays Capital estimates.
Swank gives OPEC a 90% likelihood of expanding production cuts in May. As a result, he sees crude oil going to $55 in the next couple of weeks. The May futures contract for WTI is currently $53.57 per barrel. We’re almost there.
Another aspect of the “renaissance” is Trump infrastructure and lower tax rates. (Whenever that happens.) Several MLPs have even converted to C-Corp’s in anticipation of that.
Cushing has a number of funds focused on upstream, mid- and downstream. “We don’t have to take a view on whether oil prices are going higher or lower, we just need to know a range and allocate accordingly,” says Saket Kumar, portfolio manager at Cushing. “As the energy sector rebounds there are second and third derivatives in these segments that get overlooked and that is reflective in valuations. That’s great for us in terms of finding opportunities.” Kumar invests across the board: natural gas value chains (from E&P to shipping and storage); oil value chain (E&P on out to transportation) and energy infrastructure (from construction of pipelines to maintenance and business services).
Cushing retail funds include MainStay Cushing Energy Income (CURAX 1,80 0,00 0,00%); the closed-end Cushing Energy Income (SRF 4,12 -0,04 -0,84%); MainStay Cushing MLP Premier (CSHAX 9,35 +0,03 +0,32%); and MainStay Renaissance Advantage. (CRZAX 8,72 0,00 0,00%)
Investment advisors on the webcast were curious about OPEC production. Cushing fund managers believe that behemoth Saudi Arabia is possibly the “biggest credible threat” to oil because it really does need higher oil prices while U.S. firms can survive on $45. There are plenty of OPEC economies that don’t work well with oil at these prices. (Look at Venezuela today.)
The Saudi’s are planning an IPO of Aramco, its state-owned enterprise. If they do pull the trigger, Cushing thinks it only happens if oil is close to or over $60.
Back in the U.S., valuations are cheapest in the tar sands, an area that is still relatively new and has sub-optimal logistics. Long-termers like Cushing like U.S. Silica Holdings (SLCA 12,82 +0,14 +1,10%) as a derivative of this space. They are an industrial materials company making silica sand for use in oil and gas wells, but their silica sand is also used in wind power and solar energy manufacturing. Their stock is up a nice 118% in the last 12 months.
Commodity prices can choke off demand for the MLP fund, but volume is key for the companies underlining most of the MLPs out there. The good news is that volume is moving. There is a need for liquids gathering; they’re adding frack capacity in the Permian basin in Texas. It’s all about demand.
Kevin Gallagher, another Cushing fund manager, says the energy apocalypse is over. “I can only think of one midstream companies that went bankrupt and they were later bought out,” he says. “The fear was that the MLP business model would not survive last year’s crash in oil prices. This industry has a strong ability to adapt. I wouldn’t bank on their inability to move through these down cycles. General partners stepped into provide relief. You had contract protection. I think between last year and the downturn in 2008 you have some evidence that MLPs can weather the storm. We are sitting pretty for the recovery right now.”
“It’s obvious that the crude has bottomed and the outlook from an energy standpoint is dramatically better than it was a year ago,” says Cushing CEO Jerry Swank. “It’s a lot easier to do these talks now than it was last year.”
A year ago oil was trading in the $30s after falling below that briefly in February 2016. For nearly everyone in the market, the end was near. Shale oil drillers were filing for bankruptcy. We were in an earnings slump because energy was in a recession. OPEC finally took their collective boots off the necks of American shale and agreed to a production cut. Now there is breathing room. Oil is expected to hit $60 this year, according to Barclays Capital estimates.
Swank gives OPEC a 90% likelihood of expanding production cuts in May. As a result, he sees crude oil going to $55 in the next couple of weeks. The May futures contract for WTI is currently $53.57 per barrel. We’re almost there.
Another aspect of the “renaissance” is Trump infrastructure and lower tax rates. (Whenever that happens.) Several MLPs have even converted to C-Corp’s in anticipation of that.
Cushing has a number of funds focused on upstream, mid- and downstream. “We don’t have to take a view on whether oil prices are going higher or lower, we just need to know a range and allocate accordingly,” says Saket Kumar, portfolio manager at Cushing. “As the energy sector rebounds there are second and third derivatives in these segments that get overlooked and that is reflective in valuations. That’s great for us in terms of finding opportunities.” Kumar invests across the board: natural gas value chains (from E&P to shipping and storage); oil value chain (E&P on out to transportation) and energy infrastructure (from construction of pipelines to maintenance and business services).
Cushing retail funds include MainStay Cushing Energy Income (CURAX 1,80 0,00 0,00%); the closed-end Cushing Energy Income (SRF 4,12 -0,04 -0,84%); MainStay Cushing MLP Premier (CSHAX 9,35 +0,03 +0,32%); and MainStay Renaissance Advantage. (CRZAX 8,72 0,00 0,00%)
Investment advisors on the webcast were curious about OPEC production. Cushing fund managers believe that behemoth Saudi Arabia is possibly the “biggest credible threat” to oil because it really does need higher oil prices while U.S. firms can survive on $45. There are plenty of OPEC economies that don’t work well with oil at these prices. (Look at Venezuela today.)
The Saudi’s are planning an IPO of Aramco, its state-owned enterprise. If they do pull the trigger, Cushing thinks it only happens if oil is close to or over $60.
Back in the U.S., valuations are cheapest in the tar sands, an area that is still relatively new and has sub-optimal logistics. Long-termers like Cushing like U.S. Silica Holdings (SLCA 12,82 +0,14 +1,10%) as a derivative of this space. They are an industrial materials company making silica sand for use in oil and gas wells, but their silica sand is also used in wind power and solar energy manufacturing. Their stock is up a nice 118% in the last 12 months.
Commodity prices can choke off demand for the MLP fund, but volume is key for the companies underlining most of the MLPs out there. The good news is that volume is moving. There is a need for liquids gathering; they’re adding frack capacity in the Permian basin in Texas. It’s all about demand.
Kevin Gallagher, another Cushing fund manager, says the energy apocalypse is over. “I can only think of one midstream companies that went bankrupt and they were later bought out,” he says. “The fear was that the MLP business model would not survive last year’s crash in oil prices. This industry has a strong ability to adapt. I wouldn’t bank on their inability to move through these down cycles. General partners stepped into provide relief. You had contract protection. I think between last year and the downturn in 2008 you have some evidence that MLPs can weather the storm. We are sitting pretty for the recovery right now.”