Commodity & Infrastructure Insights

When the final energy production figures for 2023 are in, the US will have set numerous records.

Bonds had a great month in November. Indications that the Fed will pause again were extrapolated into easing expectations as soon as next quarter. Lower yields help the relative valuation of equities, although Factset earnings forecasts are no longer trending upwards.

Media coverage of reliable energy tends to focus on oil and gas. Oil comes in hundreds of different grades of complex hydrocarbon molecules. Natural gas, methane, is the simplest hydrocarbon of them all with a molecular formula of CH4. In between methane and crude oil lie Natural Gas Liquids (NGLs) – successively more complex combinations of carbon and hydrogen. Methane, also known as “dry” gas, is measured in cubic feet or BTUs. NGLs are measured in Millions of Barrels per Day (MMB/D). When NGLs are found with methane, it’s called “wet” gas.

Media coverage of reliable energy tends to focus on oil and gas. Oil comes in hundreds of different grades of complex hydrocarbon molecules. Natural gas, methane, is the simplest hydrocarbon of them all with a molecular formula of CH4. In between methane and crude oil lie Natural Gas Liquids (NGLs) – successively more complex combinations of carbon and hydrogen. Methane, also known as “dry” gas, is measured in cubic feet or BTUs. NGLs are measured in Millions of Barrels per Day (MMB/D). When NGLs are found with methane, it’s called “wet” gas.

It’s been hard to beat the S&P500 so far in 2023. And yet, midstream energy infrastructure continues to close in on a third successive calendar year of outperformance.

It’s been hard to beat the S&P500 so far in 2023. And yet, midstream energy infrastructure continues to close in on a third successive calendar year of outperformance.

It’s always interesting to learn how financial advisers use our energy infrastructure investments in their portfolios. Often, it’s for income, because the 6-7% yields are well covered by cash flow, growing and supported by continued reluctance to boost growth capex. America has the pipeline network we need. New construction gets held up by court challenges from climate protesters, with the delays increasing costs. Equitrans with their Mountain Valley Pipeline project is an example. They announced a further delay because hiring is hard. Their recent 8K SEC filing noted, “multiple crews electing not to work on the project based on the history of court-related construction stops when there’s the risk of another court order stopping work.”

It’s always interesting to learn how financial advisers use our energy infrastructure investments in their portfolios. Often, it’s for income, because the 6-7% yields are well covered by cash flow, growing and supported by continued reluctance to boost growth capex. America has the pipeline network we need. New construction gets held up by court challenges from climate protesters, with the delays increasing costs. Equitrans with their Mountain Valley Pipeline project is an example. They announced a further delay because hiring is hard. Their recent 8K SEC filing noted, “multiple crews electing not to work on the project based on the history of court-related construction stops when there’s the risk of another court order stopping work.”