(Petrolytic) – It’s been a long, hot summer. And things are just warming up. Q2 energy-sector earnings have been tepid, to say the least, however we have on our radar a handful of critical players. Among those to watch out for:
- Schlumberger – This morning (July 24) before market open
- NextEra Energy – This morning (July 24) before market open
- Shell – July 30 before market open
- Total – July 30
- ExxonMobil – July 31 before market open
- Chevron – July 31 before market open
- Eni – July 31
- SunPower Corp – August 5 before market open
- First Solar, Inc – August 6, after market close
- Brookefield Renewable Partners – August 7 before market open
- Duke Energy – August 10 before market open
- Oxy – August 11 before market open
Given the amount of chatter surrounding deteriorating market share of traditional energy sources, it’s imperative to pay attention to who appears to be gaining and losing position. The COVID-induced economic coma has undoubtedly wreaked havoc on energy demand in general, but out of the turmoil will rise new leaders.
Keeping a pulse on the management discourse and footnotes included in the 10-Q and 10-K filings can provide arguably more information than any financial statement. This becomes increasingly important with regard to future guidance. Many more subjective details can be gleaned. Financial statements are the past, while management commentary provides a glimpse through the lens of corporate leadership (most definitely motivated by shorter-term financial goals).
In any case, with record infrastructure spending almost guaranteed to pass after the US Presidential Election in November, we’re bound to see a flurry of investment in the energy sector. Regardless of who wins, pay close attention to the handful of organizations that secure funding. It could have the potential to drive energy trends for the next decade.
Yesterday, we covered Halliburton and Baker Hughes, and this morning, we want to share a recap of $KMI’s Q2 filing. We anxiously await the 10-Q filing to dig into the MD&A. In summary:
- Net loss of $637 MM
- Distributable cash flow (DCF) of $1B
- $1B goodwill impairment to natural gas midstream business
- Reduced capital budget by 30% (or $660 MM); this should improve near-term DCF
- Expects DCF to be >10% lower than initial 2020 guidance
- No reported CARES Act benefit
- The Permian Highway Pipeline (PHP) is expected to be put online in early 2021
KMI appears to be somewhat optimistic in tone as they anticipate fully funding the dividend payout and discretionary spending with internally generated cash. Furthermore, the company believes, with reasonable certainty, they have enough cash from operations, cash on hand, and excess borrowing capacity to manage day-to-day requirements and maturing debt over the next 18 months.
With all the pipeline drama lately, we’d expect them to face some resistance, but the jury is still out.
To wrap things up, a few food-for-thought links to get you through Friday:
- Solar powered oilfield
- ESG funds becoming increasingly popular – what are the implications of judging companies not by tangible financials, but by alternative social metrics? Is not financial performance an incredibly beneficial social good?
- First glimpse at alien solar system – pretty cool stuff
Have a great weekend everyone. Stay safe.