Future Returns: Investing In the Soaring Energy Sector
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,436,707 (+0.82%)       Melbourne $958,938 (-0.18%)       Brisbane $805,276 (+0.20%)       Adelaide $743,261 (+0.57%)       Perth $641,111 (+1.35%)       Hobart $739,768 (-1.32%)       Darwin $641,804 (-0.09%)       Canberra $971,787 (-1.13%)       National $936,660 (+0.16%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $694,570 (-0.33%)       Melbourne $471,297 (-0.44%)       Brisbane $430,588 (-1.62%)       Adelaide $353,294 (-0.18%)       Perth $357,545 (+0.46%)       Hobart $558,931 (+4.60%)       Darwin $356,380 (-2.21%)       Canberra $476,932 (+0.93%)       National $489,111 (+0.53%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 10,093 (-72)       Melbourne 13,872 (+186)       Brisbane 10,770 (+38)       Adelaide 3,078 (+82)       Perth 9,971 (+180)       Hobart 911 (+13)       Darwin 300 (-7)       Canberra 996 (+8)       National 49,991 (+428)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,400 (-137)       Melbourne 7,842 (-9)       Brisbane 2,243 (-20)       Adelaide 542 (+7)       Perth 2,413 (+1)       Hobart 156 (+3)       Darwin 371 (-4)       Canberra 529 (+5)       National 22,496 (-154)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $660 (+$10)       Melbourne $500 (+$10)       Brisbane $560 (+$10)       Adelaide $510 (+$10)       Perth $550 ($0)       Hobart $550 ($0)       Darwin $650 (+$25)       Canberra $700 (+$5)       National $593 (+$9)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $600 ($0)       Melbourne $450 (+$5)       Brisbane $500 ($0)       Adelaide $403 (+$3)       Perth $470 ($0)       Hobart $473 (-$3)       Darwin $550 ($0)       Canberra $560 ($0)       National $508 (+$)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 6,525 (+243)       Melbourne 7,106 (-5)       Brisbane 3,920 (+102)       Adelaide 1,146 (+39)       Perth 1,623 (+85)       Hobart 243 (+11)       Darwin 102 (-7)       Canberra 588 (+44)       National 21,253 (+512)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 8,070 (+376)       Melbourne 5,906 (+117)       Brisbane 1,516 (+27)       Adelaide 327 (+5)       Perth 673 (-3)       Hobart 86 (+5)       Darwin 232 (+7)       Canberra 662 (+66)       National 17,472 (+600)                HOUSE ANNUAL GROSS YIELDS AND TREND       Sydney 2.39% (↑)      Melbourne 2.71% (↑)      Brisbane 3.62% (↑)      Adelaide 3.57% (↑)        Perth 4.46% (↓)     Hobart 3.87% (↑)      Darwin 5.27% (↑)      Canberra 3.75% (↑)      National 3.29% (↑)             UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 4.49% (↑)      Melbourne 4.97% (↑)      Brisbane 6.04% (↑)      Adelaide 5.92% (↑)        Perth 6.84% (↓)       Hobart 4.40% (↓)     Darwin 8.03% (↑)        Canberra 6.11% (↓)       National 5.40% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 1.6% (↑)      Melbourne 1.8% (↑)      Brisbane 0.5% (↑)      Adelaide 0.5% (↑)      Perth 1.0% (↑)      Hobart 0.9% (↑)      Darwin 1.1% (↑)      Canberra 0.5% (↑)      National 1.2%    (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 2.3% (↑)      Melbourne 2.8% (↑)      Brisbane 1.2% (↑)      Adelaide 0.7% (↑)      Perth 1.3% (↑)      Hobart 1.4% (↑)      Darwin 1.3% (↑)      Canberra 1.3% (↑)      National 2.1%   (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 30.4 (↓)       Melbourne 29.7 (↓)       Brisbane 36.6 (↓)       Adelaide 25.3 (↓)     Perth 41.0 (↑)        Hobart 32.2 (↓)       Darwin 33.8 (↓)       Canberra 28.3 (↓)       National 32.2 (↓)            AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 33.0 (↓)       Melbourne 30.1 (↓)       Brisbane 35.1 (↓)       Adelaide 29.4 (↓)     Perth 43.7 (↑)        Hobart 26.9 (↓)     Darwin 44.0 (↑)      Canberra 31.9 (↑)        National 34.3 (↓)           
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Future Returns: Investing In the Soaring Energy Sector

The sector came roaring back to life late last year on positive vaccine news.

By Karen Hube
Wed, May 19, 2021 10:47amGrey Clock 4 min

Energy has transitioned from the worst- to best-performing sector in a matter of months. How long is it likely to outperform? And which companies are most promising for investors?

Serious difficulties for the energy sector began in April 2020. Demand screeched to a halt under pandemic lockdowns, and the futures prices on the global benchmark West Texas Intermediate (WTI) cratered to negative territory for the first time. The per-barrel price plummeted from US$18 to negative US$37 due to oversupply as Covid-19 crippled industry and mobility around the globe.

But the sector came roaring back to life late last year on positive vaccine news and surged through this year’s first quarter, as successful vaccine rollouts enabled relaxation of Covid-19 restrictions and economic activity rekindled.

In the first quarter, many big oil companies banked a profit for the first time since the pandemic began. Meanwhile, investors have been soundly rewarded. Through last week, the energy sector was up 35% this year compared to 9.5% for the S&P 500.

Bull or Bear?

Sam Halpert, Philadelphia-based chief investment officer at Macquarie Investment Management who oversees the firm’s natural resources equity strategy, views the recent outperformance as a cyclical bull market in the context of a secular bear market for the sector.

“The bull market could last two or three years, but there are still long-term issues around hydrocarbon and the energy transition that will impact the sector,” Halpert says.

The energy sector was under pressure even prior to the pandemic as investors were increasingly hesitant to commit capital as an inevitable transition from fossil fuels to greener choices loomed.

Lack of capital flowing into energy companies focused on shale technology is a hindrance to oil production. “Investors have not been willing to finance shale, there’s been a decrease in investment and production,” Halpert says. “Production was 11 million barrels a day last week, and we peaked at 13.1 million barrels a day in March 2020.”

Pressure on the sector isn’t likely to let up. In fact, the transition from the U.S.’s reliance on fossil fuels to low-carbon energy alternatives has renewed political momentum under President Joseph Biden, who supports policies that elevate greener alternatives and aims for the U.S. to have a 100% clean energy economy and net-zero carbon emissions by 2050.

Investors’ decline in interest in energy has been steady and notable. In 1980, the sector accounted for almost 30% of the index. By 2019 the percentage was 5.3% and this it slipped to 2.33%.

While energy will clearly be impacted over the long term by fundamental changes, “there are a lot of companies that can benefit during the transition and are changing the way they do things,” Halpert says. “They’re becoming more environmentally friendly or changing business slightly to areas that have more growth, and the market is rewarding that.”

Consolidation Boom

Some of the best opportunities are among companies that are not only accommodating environmental factors in the way they do business, but that are sound enough to be gobbling up smaller players in what has been a highly fragmented industry.

The consolidation has been rapid: For example, in late 2019, Parsley Energy of Midland, Texas, acquired Denver-based Jagged Peak. Since then, Parsley was acquired by Pioneer Natural Resources of Irving, Texas, which in May completed the acquisition of Midland, Texas-based DoublePoint Energy.

A central region for the consolidation boom is the Permian Basin, a 75,000-square-mile region from West Texas to Southeastern New Mexico. With rich oil reserves discovered some dozen years ago, it now accounts for more than one-third of oil production in the U.S. Just two years ago the Permian Basin unseated Saudi Arabia’s Ghawar oilfield as the biggest producer in the world.

“There have been too many players, many with marginal acreage or fields they’re developing,” says Geoffrey King, senior vice president and portfolio manager at Macquarie. As investor capital has declined, many of the smaller players have struggled.

King looks for opportunities among companies with sustainable practices that are in position to buy the smaller players. They’re benefiting from strengthened commodity prices and a perked-up demand.

“They have the ability to not only develop and maintain a growth rate comparable to the overall average S&P 500 growth rate, but to deliver excess cash to shareholders,” King says. “The model is being proven out and we’re in inning two or three.”

Veteran Industry Players

Among biggest holdings in Halpert’s and King’s institutional strategy is Plano, Texas-based Denbury (DEN), one of their few small-cap names that focuses on producing carbon negative barrels oil through carbon sequestration, which is the process of capturing and storing carbon dioxide.

“As people talk more about carbon sequestration, this is the game in town,” King says. “A lot of industrial companies don’t want to deal with the complexity of storing carbon. We think this is a very unique small-cap story that’s underappreciated.”

Another is Valero, the San Antonio-based largest independent refiner in the U.S.

“It has best-in-class assets and best-in-class management team,” Halpert says. “They’ve done a really good job returning capital to shareholders over the last several years.”

The company recently entered into an agreement with Darling, which processes waste such as from meat processing plants and the leftover oil from restaurants and food businesses. Valero transforms the waste into the fuel equivalent of ethanol.

“It has the identical chemical properties as ethanol, but ethanol has constraints around usage. It’s tough in the cold weather because it can cause engines to clog,” Halpern says. “Valero’s product is a low carbon fuel and low cost to produce.”

Another noteworthy holding is the big oil service company Schlumberger (SLB), based in Houston but with a global reach. “It’s involved in lithium, carbon sequestration, and a number of technologies that will be important in the energy transition,” Halpert says.

While there are numerous new entrants to the energy transition play, “we prefer to play it with a company with a balance sheet like Schlumberger and the technology of Schlumberger.”

Reprinted by permission of Penta. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 18, 2021

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Andy Warhol’s portrait of the late Queen Elizabeth II sold for C$1.14 million (US$855,000) at an auction last week, setting a record price for an editioned print by the Pop artist, the Canadian auction house Heffel said.

Warhol created the screenprint in 1985 based on a photograph taken by Peter Grugeon at Windsor Castle in 1975, which was released in 1977 on the occasion of the Queen’s Silver Jubilee, according to Heffel.

Queen Elizabeth II died in September at the age of 96 after a seven-decade reign, making her one of the longest-reigning monarchs in history.

The portrait features the then-reigning Queen wearing the diamond-and-pearl Grand Duchess Vladimir Tiara and a matching necklace, and a blue sash pinned with a medallion with a miniature portrait of her father, George VI, on regal blue background. The outline of the portrait was accentuated by diamond dust, which glimmered in the light.

This print is one of only two editions signed as “HC” for Hors d’Commerce (not for sale) aside from the 30 numbered editions with this colour scheme and diamond dust, according to Heffel.

The consignor acquired the print circa 1996 from Bob Rennie, a prominent Vancouver businessman and collector, according to Heffel, which declined to disclose the identities of the consignor and the buyer.

Offered as a highlight at Heffel’s 85-lot auction of Post-War and contemporary art on Nov. 24 in Toronto, the print realised a price more than double its presale estimate, and was the highest achieved by an editioned print by Warhol, the auction house said.

The previous auction record for an editioned Warhol print was for a piece from the same edition, also in the regal blue coloursold in September at Sotheby’s for £554,400 (US$662,000), according to Heffel.

The most expensive Warhol work is his portrait of Marilyn Monroe, Shot Sage Blue Marilyn, which was acquired by gallerist Larry Gagosian at a Christie’s auction in May for US$195 million, marking a record price for a work by an American artist at auction.

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