Although the second quarter was challenging in some respects, Dynegy
For this second quarter, the independent power producer reported that total revenue was down 4% as average power prices fell 2% and net volumes declined 16%. Revenue isn't typically something that a lot of investors in this space focus on, but the underlying fact that pricing and production were both down is relevant in my book.
Though fuel oil prices were up about 24% from last year (Dynegy does have plants that use fuel oil), overall EBITDA nevertheless rose 29% and power generation EBITDA climbed 59%. Looking at guidance, management did bump up the bottom of the range slightly but also lowered the top end, taking the mid-point of guidance (for EBITDA) down about 2%.
I can appreciate how the world of independent producers like Dynegy, NRG Energy
As something of a play on natural gas, investors do need to be aware of the impact of high gas storage levels and the risk of lower spark spreads in the future. That said, the expiry of a contract with Ameren
Personally, I'm not a huge fan of the stock right here. That's mostly due to takeover speculation that I feel has taken some of the margin of safety out of the shares. Nevertheless, if you're a believer in higher spark spreads, particularly in the Midwest, Dynegy is most likely worth a look.
For more Foolish thoughts on energy:
Check out our suite of investing newsletters with a 30-day trial.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).