Entries filed under 'Energy'

    Drilling for Oil Bonds

    May 13, 2016 11:33 AM by Lord Abbett Editorial Staff

    While overleveraged exploration and production (E&P) companies most exposed to the shale boom remain pressured, some investment opportunities have arisen.

    While many actively managed fixed-income strategies were underweight the oil sector through most of the commodities correction, some shifted to an overweight of E&P in early winter of 2016, as companies with substantial high-yield debt but solid long-term fundamentals (and no trigger for default) appeared attractive.

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    Cautious Optimism on Oil Stocks

    May 6, 2016 11:50 AM by Yoginder Kak

    With oil prices recently up nearly two-thirds from their 13-year low in February, bullish sentiment has increased, despite concerns about near-record stockpiles.

    Has oil finally turned a corner? Recent market developments are encouraging, but this is no time for complacency.

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    High Yield: Oil Impact Spills Over to Other Sectors

    December 23, 2014 4:25 PM by Stephen Hillebrecht

    Negative sentiment toward energy bonds has extended into other areas of the high-yield market. That may present an attractive opportunity.

    The steep decline in oil prices and its effect on securities of energy companies in the high-yield bond market has garnered much attention in the past several weeks. Due to large issuance of high-yield bonds by energy companies in the past several years, the sector now accounts for more than 13% of the Bank of America Merrill Lynch U.S. High Yield Master Index. Although recent price declines have reduced energy’s weight, it is still the largest sector in the index. Certainly, there are many highly leveraged companies that will face challenges if oil prices stay at these levels, but not all energy companies’ fortunes are equally tied to the price of crude.

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    High Yield: Falling Oil Prices Highlight Need for Active Management

    December 9, 2014 4:50 PM by Stephen Hillebrecht

    Not all segments of the energy sector are affected equally. 

    While the decline in the price of oil has been well publicized over the past several weeks, recent reports have noted the possibility of a negative impact on the high-yield bond market. The energy sector is the largest component of this market, with a 15.3% weighting in the Bank of America Merrill Lynch High Yield Index. However, before drawing any conclusions about your allocation to high yield, further analysis is required.

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    Weighing the Pluses and Minuses of a Commodities Downturn

    November 3, 2014 12:30 PM by Leah G. Traub, Ph.D.

    Sure, sharp drops in commodities prices have hurt major producing countries that have not been able to diversify their economies away from commodities, but heavy importers should benefit.   

    People forget that more than half of the emerging markets universe is comprised of commodity importers. These countries are not just exporters, which generally suffer when commodity prices drop, and the market will start to differentiate if the price declines continue. One prime example is India, which should benefit tremendously from lower commodity prices, as at least 50% of India’s total imports are commodities. So should Turkey, which hasn’t been able to implement any kind of structural reforms to control its current account deficit that is dominated by an oil imbalance. 

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    Does Divesting Oil and Gas Companies Make Sense?

    August 25, 2014 4:29 PM by Lord Abbett Editorial Staff

    While a number of institutional investors have divested companies engaged in fossil fuels amid growing concerns about climate change, such decisions may compromise their fiduciary responsibility by sacrificing performance.

    Will the fossil fuel divestiture movement become as big as past avoidance of tobacco companies or companies doing business in South Africa during apartheid?  Don’t count on it.  Even with geopolitical tensions, oil and gas companies will likely remain an integral part of investors’ portfolios for many years to come.   

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    Oil Spillover: Could the Iraq Conflict Dampen U.S. Growth?

    June 16, 2014 4:05 PM by Milton Ezrati

    Expectations of stronger second-quarter growth may have to be trimmed if gasoline prices rise sharply.  

    Given the deepening conflict in Iraq, it is remarkable that oil prices have not risen higher than the $107 per barrel (Bloomberg data) reached on June 16.  Whichever side has the advantage-—the government of Prime Minister Nouri al-Maliki, or the insurgency led by the Islamic State of Iraq and Syria (ISIS)—or whether the United States or Iran, cooperatively or unilaterally, intervene in the conflict, the prospect of ongoing fighting and chaos threatens to keep some or all of Iraq's ample oil supplies off the market. 

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    Quantifying the United States' Energy Advantage

    May 27, 2014 11:12 AM by Harold E. Sharon

    The global repercussions of the shale boom are enormous. 

    One of the greatest technological achievements of our time is not a product of Silicon Valley, but the result of blood, sweat and tears on America’s oil fields. The engineering breakthrough in hydraulic fracturing and horizontal drilling is a "made-in-the-USA" phenomenon, and its impact on shale gas and oil production is adding economic value globally. (See "Breaking Bad Rocks: How the Shale Boom Has Fueled Growth.")

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