Energy Prospectus

The Sweet 16 is off to a bad start in 2023, but even at today's oil and gas prices these companies are very profitable.

Maybe this will help ease the pain.

From one of our very smart New York members: Bank of America Corp.’s contrarian indicator that aggregates Wall Street strategists’ allocation views is the
nearest it’s been to flashing a “buy” signal on US equities since 2017.

* Sell-side indicator fell 33 basis points to 53% in December, 1.5 percentage points away from a level that’s historically associated with a good buying opportunity
* When this indicator was at current levels or lower before, the S&P 500’s subsequent 12-month return was positive 95% of the time
* The ratio of stock vs bond allocation recommended by strategists fell to 1.6, the lowest level since 2016
* “One reason we are more constructive on equities in 2023 is the big drop in sentiment during 2022,” BofA strategists including Savita Subramanian write in a note to clients
* BofA’s year-end S&P target stands at 4,000, compared with a 4,078 average of Wall Street strategists tracked by Bloomberg
* Read: US Recession ‘Pretty Likely’ But Not Severe, Bill Dudley Says
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MY TAKE: Despite the "2023 recession being the most widely predicted in history", I don't think it will be as bad as expected. Primarily because the unemployment rate is still too low to be a major recession even if you count the millions of American that have stopped looking for work. BTW how do these lazy people survive anyway?
It will take a MAJOR RECESSION to lower global demand for oil & gas.
Atlanta Fed: 4Q’22 GDP looks to be 3.7% < no sign of a recession in 2H 2022.
At this point all we need is less FEAR to start a bull market in commodities.

Do I understand this correctly?

For EPG portfolio stocks that pay dividends or do buybacks, a set amount of free cash flow is set aside. I always reinvest my dividends. So it seems that beaten down stocks due to recession fears is a good thing when dividends and buybacks are executed.

Thoughts?

All of the Sweet 16 are generating lots of free cash flow.

In the Sweet 16 only AR, CPE, ESTE, LPI and SBOW do not yet pay dividends, but they may soon. They are using free cash flow to pay down debt and fund more growth.

For higher dividends and steady growth, I recommend the large-cap upstream companies in our High Yield Income Portfolio: CTRA, DVN, EOG, FANG, PDCE, PXD

My #1 criteria for the High Yield Income Portfolio is to find companies that are committed and capable of maintaining their current dividend payments.
> The minerals companies (BSM, KRP, STR and VNOM) pay very nice dividends, but they are "variable".
> The safest best today for dividends are the midstream companies (AM, OKE, PAGP). They are all C-Corps. I personally like PAGP because it the general partner of PAA, an MLP that has a lot of upside and they have announced plans to increase dividends.

BSM is the only MLP in the High Yield Income Portfolio. It has a super strong balance sheet and an ultra-conservative management team.

Recently updated profiles on the companies mentioned above can be downloaded from the EPG website. Just click on the High Yield tab.

CRK didn't get the memo

On tomorrow's webinar I will explain why you might be happy they did not hedge this year.
Winter is not over yet and the same things that caused last summer's Bidding War for natural gas could easily happen again this year.

The U.S. natural gas market is MUCH DIFFERENT than the global market for oil.