Commodity & Infrastructure Insights

The inaugural ESG Day is becoming more common. Enterprise Products Partners (EPD) held theirs in early March. Pipeline companies are quite rightly asserting their role in combating climate change. EPD noted the beneficial effects of natural gas in limiting coal consumption.  SVP Tony Chovanek also discussed the growing interest in clean-burning hydrogen.

In November, Engie, a French utility, pulled out of discussions with NextDecade Corp (NEXT) to import up to $7BN of Liquified Natural Gas (LNG). It was a big blow to NEXT, which is seeking partners to underwrite its construction of an LNG export facility in Brownsville, TX. Engie concluded that the natural gas sourced by NEXT would be tainted by its involvement in fracking, methane leaks and flaring. It wasn’t consistent with their energy transition goals.

In November, Engie, a French utility, pulled out of discussions with NextDecade Corp (NEXT) to import up to $7BN of Liquified Natural Gas (LNG). It was a big blow to NEXT, which is seeking partners to underwrite its construction of an LNG export facility in Brownsville, TX. Engie concluded that the natural gas sourced by NEXT would be tainted by its involvement in fracking, methane leaks and flaring. It wasn’t consistent with their energy transition goals.

Covid accelerated a trend already in place in the U.S. energy sector, which is to grow Free Cash Flow (FCF) rather than production. Chevron’s Investor Day last week promised 10% annual increase in FCF through 2025. This return to shareholder-friendly metrics is attracting investors – including recently Berkshire Hathaway.

Covid accelerated a trend already in place in the U.S. energy sector, which is to grow Free Cash Flow (FCF) rather than production. Chevron’s Investor Day last week promised 10% annual increase in FCF through 2025. This return to shareholder-friendly metrics is attracting investors – including recently Berkshire Hathaway.

Fed chair Jay Powell wasn’t to blame for Thursday’s equity market sell-off, no matter what journalists thought. His comments were dovish, reaffirming the Fed’s desire to see meaningful improvement in employment before moderating their bond buying. Tightening is nowhere in sight. Had he said the opposite, markets would have probably fallen further, which simply means bonds are in a bear market.

Fed chair Jay Powell wasn’t to blame for Thursday’s equity market sell-off, no matter what journalists thought. His comments were dovish, reaffirming the Fed’s desire to see meaningful improvement in employment before moderating their bond buying. Tightening is nowhere in sight. Had he said the opposite, markets would have probably fallen further, which simply means bonds are in a bear market.

The Fed is walking a fine line, and it’s easy to take this comment out of context. Inflation can be too low, and in order to ensure they adhere to their dual mandate of maximum employment consistent with stable prices, the Fed is willing to take a little risk with price stability. Nonetheless, if the marble hallways of the Federal Reserve building in Washington DC display carved quotes from Powell’s predecessors, this one is unlikely to be added.