INVESTING IN THE ENERGY VALUE CHAIN

Insights

Energy is an exciting sector with attractive return potential and the ability to hedge against rising rates and inflation. Recent technological advances have helped the US become a leading global energy producer and will likely continue to create compelling investment opportunities.

Growing demand for energy

The global population is expected to grow by 1.8 billion people by 2040, fueling demand for energy. Oil and gas are anticipated to meet 53% of the world's energy needs through 2040 and will require investments of around $10 trillion.1

Attractive return potential

Since 1970, on average, positive periods of rising oil prices were 9.3 times stronger and 1.4 times longer than negative periods.2 And, continued cost efficiencies are enabling energy producers to profit at lower oil prices.

Hedge against rising rates and inflation

Commodities typically benefit from rising rates and inflation with valuations that tend to rise when traditional stocks and bonds fall, making them a source of diversification in investment portfolios.

Articles

The energy cycle explained

Learn what drives energy cycle dynamics and which catalysts could push the sector into the next phase of
the cycle.

What the Venezuelan crisis could mean for oil prices

If rising tensions with Venezuela lead to lower supply hitting the market, it may support oil prices and energy stocks.

Recent trends favor MLP investing

Oil prices may remain challenged from higher production while MLPs gain more revenue opportunity.

The Energy Value Chain

The energy value chain is the connective process of finding and extracting oil and gas (upstream), transporting and storing the resources (midstream), and refining and distributing them to the end users (downstream). Each segment of the energy value chain is driven by different factors, making it possible to uncover attractive investment opportunities regardless of energy price movement.

Upstream Exploration & Production

Discovery and production of oil and natural gas

  • Oil & Gas Exploration & Production
  • Coal & Consumable Fuels
  • Oil & Gas Drilling
  • Oil & Gas Services and Equipment

Midstream Energy Infrastructure

Transportation of oil and gas via pipes and storage of excess resources

  • Crude Oil & Refined Products Pipeline & Storage
  • Diversified Midstream Pipeline & Storage
  • Marine Shipping & Transportation
  • Natural Gas Gathering & Processing
  • Natural Gas Pipeline & Storage
  • Oil Field Services

Downstream End Market Users

Marketing and distribution of refined oil and gas to end users

  • Oil & Gas Refining
  • Oil & Gas Marketing & Distribution
  • Commercial / Residential
  • Industrial Gases
  • Diversified & Specialty Chemicals
  • Utilities & Power Generation

Investment Opportunities

Jennison Associates is a leader in energy investing with over $6 billion in assets under management and more than 20 years of experience investing in energy.3 Jennison's Global Natural Resources team provides insights into emerging upstream and downstream energy trends. Jennison's Infrastructure team has been investing in midstream infrastructure companies since the late 1990s and includes downstream analysts that specifically cover the utilities sector and chemicals industry.

Prudential Jennison Global Infrastructure Fund Opens in a new window

Seeks total return by investing worldwide in companies that own, operate, build, and service infrastructure assets.

Prudential Jennison MLP Fund Opens in a new window

Seeks total return, through a combination of current income and capital appreciation, by investing primarily in Master Limited Partnerships (MLPs) and MLP-related investments.

Prudential Jennison Natural Resources Fund, Inc. Opens in a new window

Seeks long-term capital growth by investing in companies that own, explore, mine, process, and develop natural resources commodities.

Prudential Jennison Utility Fund Opens in a new window

Seeks total return that includes capital appreciation and current income by investing in utilities and utility-related companies.


1 Source: OPEC World Oil Outlook 2017.

2 Source: Morningstar Direct, PGIM Investments as of 9/30/17. Data for WTI crude oil, excluding current positive period that started after February 2016 low.

3 Source: Jennison Associates as of 12/31/16.

Diversification does not assure a profit or protect against loss in declining markets. West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. WTI is the underlying commodity of the New York Mercantile Exchange’s oil futures contracts.

The energy sector is nondiversified and subject to a greater degree to risk of loss as a result of adverse economic, business, regulatory, environmental or other developments affecting industries within the sector than investments more diversified across different industries. There are special risks associated with investing in natural resources. Earthquakes, floods, and other acts of nature can affect the overall supply of natural resources in a given area and also impact the value of companies that deal in these commodities.

 

Consider a fund's investment objectives, risks, charges and expenses carefully before investing. The prospectus Opens in a new window and the summary prospectus contain this and other information about the fund. Contact your financial professional for a prospectus and the summary prospectus. Read them carefully before investing.

An investment in our money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of your clients investment at $1.00 per share, it is possible to lose money by investing in the funds.

Mutual fund investing involves risk. Some mutual funds have more risk than others. The investment return and principal value will fluctuate and investor's shares when sold may be worth more or less than the original cost. Fixed income investments are subject to interest rate risk, and their value will decline as interest rates rise. Asset allocation and diversification do not assure a profit or protect against loss in declining markets. There is no guarantee a Fund's objectives will be achieved. The risks associated with each fund are explained more fully in each fund's respective prospectus. Your clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation.

This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. Clients seeking information regarding their particular investment needs should contact a financial professional.

Investment products are distributed by Prudential Investment Management Services LLC, a Prudential Financial company, member SIPC. Jennison Associates and PGIM, Inc. (PGIM) are registered investment advisors and Prudential Financial companies. QMA is the primary business name of Quantitative Management Associates LLC, a wholly owned subsidiary of PGIM. PGIM Fixed Income and PGIM Real Estate, are units of PGIM. © 2017 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM Real Estate, PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

Prudential Financial, Inc. of the United States is not affiliated with Prudential plc. which is headquartered in the United Kingdom.

Investment Products: Are not insured by the FDIC or any other federal government agency, may lose value, and are not a deposit of or guaranteed by any bank or any bank affiliate.

 

For Compliance Use Only: 0270847-00012-00 Ed. 11/2017