EPD is an MLP & I no longer invest in MLP's.
I still have a few EPD shares so just holding those. WMB my #3 holding, I like their operation, ok dividend and has yet to hit all time highs.
I am giving management time to restructure some of their larger long term delivery contracts like KMI is doing. WMB did report record results and still making large Capex investments.
I have buys going back to 2019 & 2020 and will begin to peel off some high cost shares 10% higher. If/when WMB get their new long-term delivery contracts in place, revenues will be growing and be subject to reduced volatility due from commodity price changes.
Traditional Fixed-Price Contracts:
- The majority of Williams' current contracts are fixed-price agreements. This means the price per unit of gas or oil remains fixed throughout the contract term, regardless of fluctuations in market prices.
- These contracts offer stability and predictability for both Williams and their suppliers.
- Fixed-price contracts were advantageous years ago due to volatile market conditions. They provided stability for producers and ensured predictable revenue for Williams.
Shifting Landscape:
- Recently, the natural gas and oil markets have become more stable.
- Producers are increasingly seeking flexibility in pricing as technology and production methods improve.
- Additionally, some argue that fixed-price contracts can discourage investment in new exploration and production due to limited upside potential.
Variable-Price Options:
- Recognizing these shifts, Williams has introduced variable-price options into some new contracts.
- These contracts base the price on market benchmarks or indexes, allowing for fluctuations based on supply and demand.
- This approach can be advantageous for producers when market prices are high, offering greater potential profit.
- However, it also exposes them to risk when prices fall.
Key Points:
- While Williams offers variable-price options, it's not accurate to say all existing contracts are being renegotiated to this model.
- The company maintains a diverse mix of fixed and variable-price contracts, adjusting the approach based on specific needs and market conditions.
- This gradual shift reflects the evolving energy landscape and the demands of both producers and pipeline operators.
-----------------------------------------------------
We will need to see what KMI does and how other industry players respond. The contract cycle is long term (10 years) so any change takes a long time.
Good luck w/ the MLP's but I have sold most/all of those and have large positions in WMB, KMI & PBA in my pipeline basket.
FWIW, I believe Paul Sr also has avoided MLP's. The main reason for me are the difficulty in reporting the taxes (some require filings in several States). Easier for me to just avoid them, than deal w/ that issue.
I have over 125 securities and it's not worth my time (even if the potential yield is 100% higher) |
