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Will The ‘Next Permian’ Ever Be Developed?

Will The ‘Next Permian’ Ever Be Developed?

Vaca Muerta

The Vaca Muerta Shale Basin in Argentina is the only unconventional play outside of North America where activity has already made the transition from exploration to full-scale development. The potential prize is huge – geographically, the Vaca Muerta Shale is three times the size of the highly prolific Permian Basin in the US, and it could turn out to be the “next Permian” if the right conditions are established. But much remains to be done before that happens.

Rystad Energy’s Shale Intel group, in collaboration with Luxmath Consulting, has released a comprehensive new report covering all aspects of the Vaca Muerta Shale – including development status, production forecasts, drilling and completion projections, and the outlook for the various service segments in the industry. The report integrates Rystad Energy’s well-level research for Argentina, public disclosures from oil & gas companies and service contractors active in the region, and our conversations with on-the-ground field experts.

(Click to enlarge)

“There are several major bottlenecks that are currently affecting Vaca Muerta – proppant, infrastructure, labor, pressure pumping and the macro economic situation in Argentina. In addition, investments need to be made in water transportation infrastructure as drilling and completions increase within the region,” says Ryan Carbrey, Senior Vice President of Shale Research at Rystad Energy.

Vaca Muerta should see the tally of fracked wells reach between 140 and 150 this year. Only three of those wells are vertical, while all other wells are high-density horizontal completions. It is expected that fracking activity will grow at a rate of 20% per year from 2019 through 2021, reaching about 250 wells in 2021. According to Rystad Energy research, this heightened activity will generate a significant boost in Vaca Muerta oil production – from about 60,000 bpd in the third quarter of 2018 to between 160,000 and 200,000 bpd in the fourth quarter of 2021. Most of this growth will come from the liquids-rich Loma Campana portion of the play, operated by YPF.

…click on the above link to read the rest of the article…

The Stock Market Just Crashed In Italy, And Argentina Has Panic-Raised Interest Rates To 65 Percent

The Stock Market Just Crashed In Italy, And Argentina Has Panic-Raised Interest Rates To 65 Percent

In the 9th largest economy in the world, the financial markets are crashing, and in the 21st largest economy in the world the central bank just raised interest rates to 65 percent to support a currency that is completely imploding.  While the mainstream media in the United States continues to be obsessed with all things Kavanaugh, an international financial crisis threatens to spiral out of control.  Stock prices are falling and currencies are collapsing all over the planet, but because the U.S. has been largely unaffected so far the mainstream media is mostly choosing to ignore what is happening.  But the truth is that this is serious.  The financial crisis in Italy threatens to literally tear the EU apart, and South America has become an economic horror show.  The situation in Brazil continues to get worse, the central bank of Argentina has just raised interest rates to 65 percent, and in Venezuela starving people are literally eating cats and dogs in order to survive.  How bad do things have to get before people will start paying attention?

On Friday, Italian stocks had their worst day in more than two years, and it was the big financial stocks that were on the cutting edge of the carnage

Shares in Italian banks .FTIT8300, whose big sovereign bond portfolios makes them sensitive to political risk, bore the brunt of selling pressure, sinking 7.3 percent as government bonds sold off and the focus turned to rating agencies.

Along with the main Italian stock index .FTMIB, the banks had their worst day since the June 2016 Brexit vote triggered a selloff across markets.

Italian bonds got hit extremely hard too.  The following comes from Business Insider

…click on the above link to read the rest of the article…

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

It appears the market is willing to test BCRA’s mettle as it pukes pesos down to a new record low against the greenback and pushes towards the bottom of its new “no intervention” band.

The new record low is now 41.54/USD…

While not ‘allowed’ to intervene directly until 44/USD, Bloomberg reports that Argentina just hiked its Leliq rate to 65%.

The sharp drop follows Thursday’s 2.8% decline and comes despite the IMF agreeing on Wednesday to increase its bailout package to the Latin American country by an extra $7.1bn.

Paging Christine Lagarde…

Argentina Gets Record $57 Billion As IMF Boosts Bailout, Creates “No Intervention” Zone For The Peso

Just a few months after the IMF announced in June what was a record-setting $50 billion, 36-month bailout agreement with Argentina, the International Monetary Fund said it would expand the credit line to $57 billion in an attempt to halt the economic and financial crisis that has sent the country’s currency plunging over 50% this year, and pummeled the third-largest Latin American economy. In exchange, Argentina will set a “no intervention” zone for the peso from 34 to 44, meaning the exchange rate will be flexible but not floating.

The revised standby agreement is “aimed at bolstering confidence and stabilizing the economy,” IMF chief Christine Lagarde said Wednesday in a joint statement with Argentine Economy Minister Nicolas Dujovne.

The agreement, which is subject to IMF Executive Board approval, “front loads IMF financing, increasing available resources by US$19 billion through the end of 2019, and brings the total amount available under the program to US$57.1 billion through 2021,” according to statement.

Argentina had started renegotiating the terms of the bailout deal last month when it became obvious that the original funds would be insufficient, and when President Mauricio Macri asked to speed up payments in the original agreement. Meanwhile, as part of the deal, Argentina would be required to fulfill certain stipulations under the agreement, which would need congressional approval by way of the 2019 budget. In exchange, the IMF would cover a significant portion of Argentina’s financing through next year, according to Moody’s.

As part of the government’s efforts to cut its debt, which is projected to reach 70% of GDP next year. Macri and finance minister, Nicolas Dujovne unveiled economic reforms earlier this month, including highly unpopular spending cuts and export tax increases demanded by the IMF.

…click on the above link to read the rest of the article…

Trump Admin Accelerates Push to Export Fracking to Argentina

Trump Admin Accelerates Push to Export Fracking to Argentina

Rick Perry and energy ministers at G20 Summit in Argentina

The technology that has allowed for the shale gas revolution in America, we want to make available to Argentina,” Perry said.

At the summit, which was intended to focus on a transition to cleaner energy, Perry instead pledged the U.S. Department of Energy’s support in helping Argentina exploit its vast fossil fuel resources. Namely by connecting the nation with U.S.companies that know how to extract shale oil and gas via hydraulic fracturing (fracking).

But DOE isn’t the only part of the U.S. government facilitating fracking in Argentina. Under the Trump administration, the Departments of Interior and State — working closely with Pennsylvania State University — have been involved in multiple workshops focused on developing shale oil and gas in the South American nation.


Excited to join my fellow energy ministers at the . This is an exciting time for Argentina and the region. Argentina’s leadership in energy is good for our hemisphere and the world. pic.twitter.com/5X37kAEiXb

View image on Twitter

Argentina has the second largest shale gas reserves in the world, but is still a net energy importer. Working together, our countries can partner to deliver abundant, affordable energy to the Americas and the world.


The main target for fracking in Argentina is Vaca Muerta (translated as “Dead Cow”), one of the world’s largest unconventional oil and gas deposits, located in the Neuquén Basin. The oil and gas industry has been eyeing this formation in west-central Argentina since its existence was announced in 2011.

…click on the above link to read the rest of the article…

Good Times…

Good Times…

My son wanted to know why it is that Venezuela (a topic that gets discussed around the dinner table at home) chose such painfully, obviously asinine policies.

After much thought I explained it thus.

Hard times create strong men. Strong men create good times. Good times create weak men. Weak men create hard times.CLICK TO TWEETI’d seen it before somewhere and so I dug it up. Here it is in a different form.

We bipeds don’t change. I’ve come to realise not to fight it, just see it for what it is and make sure you’re positioned accordingly…for your friends family and those you care about. Speaking of which you should consider joining our family.

No special offers, no steak knives, no wild ridiculous promises – simply rational analysis and positioning for a macro world we’ve never encountered before. EVER! That’s both exciting and terrifying at the same time.

We’re Bad

At literally everything. We buy high, sell low, look to what Johnny next door is wearing, what car he drives. We get taken in and scammed by shysters, we believe in the unbelievable.

Which brings me swiftly to EM where fund managers desperate for yield dived into the fire over the last few years. Now the inevitable pain is hitting as default fears mount for “BATS” as the emerging-market rout deepens.

Turkey’s implied default odds climbed to highest since 2008 and over in the land of great steaks default risk in Argentina is …ahem…substantial.

As Bloomberg points out:

  • Argentina’s implied default probability over the next five years climbed this month to 41 percent, the highest since Mauricio Macri’s government ended the nation’s decade-long legal battle with most holdout creditors.
  • Turkey’s implied default odds during that span rose to 31 percent, the highest since the 2008 global financial crisis.
  • Brazil’s implied default odds increased to 18 percent, the highest since the country’s worst-ever recession deepened in late 2016.
  • South Africa’s implied default odds soared to 15 percent, the highest since Donald Trump’s election in November 2016.

…click on the above link to read the rest of the article…

Major Currencies All Over The World Are In “Complete Meltdown” As The $63 Trillion EM Debt Bubble Implodes

Major Currencies All Over The World Are In “Complete Meltdown” As The $63 Trillion EM Debt Bubble Implodes

The wait for the next global financial crisis is over.  Major currencies all over the planet are in a “death spiral”, many global stock markets are crashing, and economic activity is beginning to decline at a stunning rate in quite a few nations.  Over the past 16 years, the emerging market debt bubble has grown from 9 trillion dollars to 63 trillion dollars.  Yes, you read that correctly.  Now that emerging market debt bubble is imploding, and as a result emerging market currencies all over the globe are in “complete meltdown”.  In fact, at least 20 different currencies have fallen by double-digit percentages against the U.S. dollar so far in 2018, and nobody is quite sure what is going to happen next.

You may be tempted to think that this must be a good thing for the United States since the value of the U.S. dollar has been rising, but it is not.

During the “boom years”, trillions of dollars were borrowed by emerging market economies, and a high percentage of those loans were denominated in U.S. dollars.  Now that their currencies are crashing, it is going to take much more local currency to service those U.S.-denominated debts, and a whole lot of them are going to start going bad.

That means that many financial institutions here in the United States and over in Europe are going to end up holding enormous piles of bad debt, and the losses could potentially be astronomical.

The dominoes are starting to fall, and even the mainstream media is admitting that what we are facing is really bad.  For example, the following comes from a CNBC article entitled “The emerging market crisis is back. And this time it’s serious”

…click on the above link to read the rest of the article…

Don’t Cry for Me Argentina – It’s a Global Debt Crisis

QUESTION: Mr. Armstrong; Our government here in Argentina has told us we should expect more poverty and there is no hope for the future. Socrates has been amazing on its forecasts on our currency. There are enough of us down here who would sincerely ask would you consider advising Argentina to straighten out our economy and nation? You have forecast this emerging market crisis long before anyone else and your solution video on YouTube is very thought-provoking. If we can demand the government meets with you, would you do it?

KRD

ANSWER: The sone maybe Don’t Cry for Me Argentina, but it applies to the entire world for what happens in Argentina is merely the beginning of the global debt crisis. We can see from the chart that the dollar has been soaring. However, the Array picked August as the Panic Cycle and that has been spot on. Unfortunately, it does not look like this is going to calm down. We may be headed into a real Emerging Market crisis by October.

The reason why we are able to forecast such events well in advance is rather common sense. As I have said before, every solution to a crisis sets the stage for the next crisis. The Emerging Market debt crisis is unfolding because central banks in the USA and Europe lowered interest rates to “stimulate” the economy and they have no idea about how an economy truly functions. This is all based upon Keynesianism which is in turn based upon an isolated theory of the economy. They never consider that you lower interest rates and there are pensions who simply need higher rates to break-even. Then emerging markets issued debt in dollars with higher yields for the pension funds bought it assuming there was no currency risk.

…click on the above link to read the rest of the article…

Argentine President Admits “More Poverty” To Come, Announces Price Controls, Higher Taxes, Smaller Govt

Having been told by The IMF that he must stop using their bailout funds to prop up his currency (which has been utterly futile), Argentine President Mauricio Macri addressed the troubled nation this morning to announce his plans to satisfy Christine Lagarde’s demands in order to receive the next tranche of bailout cash sooner.

Things have not worked out so well since The IMF “bailed them out”…

In his address, there was good news, bad news, and ugly news.

“Everyone has to make sacrifices,” Macri implored of his nation’s citizens – who have lost 50% of their wealth year-to-date due to the collapse of the peso, which he also attributes to being “exaggerated by Turkey and Brazil weakness.”

Having blamed “mostly external factors” for the collapse of the economy (not bingeing on too much dollar-denominated debt in order to manufacture a smoke-and-mirrors-based boom), Macri notes that investors “have started doubting” Argentina’s ability to function.

The Good News

Macri has promised to dramatically shrink the size of the government, eliminating several ministries entirely, adding that Argentina must “set a goal not to spend more than we have.”

The Bad News

In an effort to close its budget gap, Macri will raise taxes on its one positive economic attribute – its exporters.

The Ugly News

Amid the hyperinflationary regime shift that is occurring, Macri will resort to price controls of some essential foods. When has that ever ended well.

All of which, as Bloomberg notes, is intended to signal a shift in the government’s strategy as it heads into talks on Tuesday with the International Monetary Fund to speed up the disbursement of cash from a $50 billion credit line.

Macri is now caught between the ‘rock’ of pleasing investors by cutting spending, and the ‘hard place’ of ensuring that the belt-tightening of austerity doesn’t cause social upheaval ahead of next year’s election.

These measures, Macri warned “will lead to more poverty.”

For now, the peso is stable (modestly weaker)…

As Emerging Market Currencies Collapse, Gold is being Mobilized

As Emerging Market Currencies Collapse, Gold is being Mobilized

In recent weeks, global financial markets have been increasingly spooked by an intensifying crisis in emerging market currencies including those of Turkey and Argentina. Add to this the ongoing currency crisis in Venezuela and the currency problems of Iran. While all of these countries have economy specific reasons that explain at least some of their currency weakness, there are some common themes such as a stronger US dollar, high domestic inflation rates, economic mismanagement, reliance on foreign borrowing, and in some cases economic sanctions imposed by the US.

As one currency plummets, this intensifies emerging market risk across the entire asset class, and it’s not unreasonable at this time to at least speculate whether the contagion could spread. The Brazilian Real and South African Rand have come under pressure and in Asia, the Indonesian Rupiah and Indian Rupee are also now weakening against the US Dollar.

It is against this backdrop that physical gold is being increasingly mentioned within these emerging economies, with gold coming to the fore as it always does in times of crisis. It is for this reason that its interesting to take a look at a number of these currencies and examine how gold is playing the role of safe haven for these countries’ citizens as well as creating a challenge for these nations’ leaders and central banks.

Buying up Gold as the Turkish Lira Plunges

With ongoing currency and external debt problems, Turkey, with a population of 90 million, has played a central role in the current currency crisis and remains a catalyst for potential risk contagion across other troubled emerging market currencies.

Turkey’s currency woes come against a backdrop of a stronger US dollar, domestic inflation of 15%, increasing default risk, market skepticism about the independence of Turkey’s monetary policy, and a series of US sanctions against the Turkey economy.

…click on the above link to read the rest of the article…

Peso Set To Disintegrate After IMF Tells Argentina To Stop Supporting Currency

On May 11, three days after Argentina secured a $50 Billion IMF bailout – the largest in the fund’s history – we jokingly noted that with the peso resuming its slide, an indication the market did not view the IMF backstop as credible, the ECB would need to get involved.


ARGENTINE PESO EXTENDS LOSS, HITS NEW ALL-TIME LOW AT 23.16/USD
Time to add ECB to IMF bailout


In retrospect, it now appears that this may not have been a joke, because with the Peso plummeting, and surpassing the Turkish Lira as the worst performing currency of 2018 having lost half its value YTD…

… with the bulk of the collapse taking place in August…

… Christone Lagarde had some very bad news for Buenos Aires and Argentina president Mauricio Macri: the IMF now insists that after burning through billions in central bank reserves, Argentina should stop using funds to support the peso, and float it freely.

According to Infobae, the Argentine foreign currency reserves have declined below the level demanded by the IMF, with Argentine authorities selling $2.5BN to support the peso in August; meanwhile the overall level of reserves has slumped even more, approaching the levels before the IMF bailout and failing to prop up the peso which, as shown below, has collapsed in a move reminiscent of what is taking place in hyperinflating Venezuela.

Worse, the Argentine Peso suffered its latest sharp drop in the days after the central bank unexpectedly hiked rates to 60% – the highest in the world – and another indication that the market is firmly convinced that not even the IMF backstop will force Argentina into a painful, and politically destabilizing structural program.

…click on the above link to read the rest of the article…

In Argentina “All Bets Are Off” As Peso Disintegrates

“All bets are off” in Argentina” – as Bloomberg puts it – where the value of the local peso has plummeted, falling 20% this week alone. It is now 50$ weaker on the year versus the USD, making it the worst performing currency of 2018 and sending massive shockwaves through Argentina’s economy. The effect on business owners and anyone who transacts in local currency has been profound, according to Bloomberg.

“There’s no clear price reference after the peso plunge,” one business owner told Bloomberg. The price plunge has created havoc for him and his surgical equipment business, where he buys in foreign currencies and sells in pesos.

Unlike hyperinflating economic basket case Venezuela, Argentina is a sizable $640 billion economy that is now being put to the test to see how much strain it can truly endure.

The peso crippling could also be a precursor to political unrest, as President Mauricio Macri’s chances of being reelected are reportedly falling, despite being known as a leader who has been friendly to the markets over the course of his tenure. However, as a result of the recent turmoil, he’s “struggling” to restore investor confidence in the Argentinian peso.

Argentina and its Central Bank have taken a number of decisive steps to try and halt the plunge, yesterday hiking interest rates to the world’s highest 60%. Previously, the country had requested quicker payouts from the International Monetary Fund, which promptly granted the collapsing country’s request.

And speaking of Argentina $50 billion loan agreement in place with the IMF – the largest ever in IMF history – this isn’t that too different from the country’s 2001 default, when it was on a similar IMF loan program. Since then, the country underwent a “decade of budget-busting left-populist government – and isolation from world financial markets”.

The result appears to be the country coming full circle.

…click on the above link to read the rest of the article…

Economic Doom Returns: Emerging Market Currencies Collapse To Record Lows As Global Financial Chaos Accelerates

Economic Doom Returns: Emerging Market Currencies Collapse To Record Lows As Global Financial Chaos Accelerates

After a little bit of a lull, the international currency crisis is back with a vengeance.  Currencies are collapsing in Argentina, Brazil, India, Turkey and other emerging markets, and central banks are springing into action.  It is being hoped that the financial chaos can be confined to emerging markets so that it will not spread to the United States and Europe.  But of course the global financial system is more interconnected today than ever before, and a massive wave of debt defaults in emerging markets would inevitably have extremely serious consequences all over the planet.  It would be difficult to overstate the potential danger that this new crisis poses for all of us.  Emerging market economies went on an unprecedented debt binge over the past decade, and a high percentage of those debts were denominated in U.S. dollars.  As emerging market currencies collapse, it is going to become nearly impossible to service any debts denominated in U.S. dollars, and that could ultimately mean absolutely enormous losses for international lenders.  Our system tends to do fairly well as long as everybody is paying their debts, but once the dominoes begin to tumble things can get messy really quickly.

Let’s start our roundup today with India.  While India is currently not in as bad shape as some of the other emerging markets, the truth is that they could get there pretty rapidly if they keep going down this path.

On Thursday, concerns about rising oil prices drove the Indian rupee to a brand new all-time record low

The Indian rupee fell to a record low on Thursday morning, following a declining trend all year — which economists attributed to rising oil prices, broader emerging market concerns, and strong month-end dollar demand.

…click on the above link to read the rest of the article…

No Other Banks Are This Exposed to Turkey, Argentina, Brazil…. Emerging Markets Haunt Spanish Banks

No Other Banks Are This Exposed to Turkey, Argentina, Brazil…. Emerging Markets Haunt Spanish Banks

To diversify from the euro-debt-crisis, the biggest Spanish banks pushed deeply into Emerging Markets. Now, they’re in a new crisis. 

Almost exactly six years ago, the Spanish government requested a €100 billion bailout from the Troika (ECB, European Commission and IMF) to rescue its bankrupt savings banks, which were then merged with much larger commercial banks. Over €40 billion of the credit line was used; much of it is still unpaid. Yet Spain’s banking system could soon face a brand new crisis, this time not involving small or mid-sized savings banks but instead its alpha lenders, which are heavily exposed to emerging economies, from Argentina to Turkey and beyond.

In the case of Turkey’s financial system, Spanish banks had total exposure of $82.3 billion in the first quarter of 2018, according to the Bank for International Settlements. That’s more than the combined exposure of lenders from the next three most exposed economies, France, the USA, and the UK, which reached $75 billion in the same period.

According to BIS statistics, Spanish banks’ exposure to Turkey’s economy almost quadrupled between 2015 and 2018, largely on the back of Spain’s second largest bank BBVA’s madcap purchase of roughly half of Turkey’s third largest lender, Turkiye Garanti Bankasi. Since buying its first chunk of the bank from the Turkish group Dogus and General Electric in 2010, BBVA has lost over 75% of its investment under the combined influence of Garanti’s plummeting shares and Turkey’s plunging currency.

But the biggest fear, as expressed by the ECB on August 10, is that Turkish borrowers might not be hedged against the lira’s weakness and begin to default en masse on foreign currency loans, which account for a staggering 40% of the Turkish banking sector’s assets. If that happens, the banks most exposed to Turkish debt will be hit pretty hard.

…click on the above link to read the rest of the article…

 

That Escalated Quickly: The Emerging Market Currency Crisis Of 2018 Threatens To Destabilize The Entire Global Financial System

That Escalated Quickly: The Emerging Market Currency Crisis Of 2018 Threatens To Destabilize The Entire Global Financial System

We haven’t seen emerging market currencies crash like this in over a decade, and analysts are warning that if this continues we could witness a devastating global debt crisis.  Over the past decade, there has been an insatiable appetite for cheap loans in emerging market economies, and a very substantial percentage of those loans were denominated in U.S. dollars.  When emerging market currencies crash relative to the U.S. dollar, lending dries up and servicing the existing loans becomes extremely oppressive, and that is precisely what we are witnessing right now.  This week, most of the top headlines in the financial media have been about the crisis in Turkey.  The Turkish lira fell another 8 percent against the U.S. dollar on Monday, and it is now down about 35 percent over the past week.  Overall, the lira has fallen 82 percent against the U.S. dollar in 2018, and this is putting an enormous amount of stress on the Turkish financial system

“It is about credit, since Turkey has been a huge borrower in global capital markets over the past number of years when the world’s central banks were encouraging investors to stretch for yield,” David Rosenberg, chief economist and strategist at Gluskin Sheff, said in his daily market note. “Over half of the borrowing is denominated in foreign currencies, so when the lira sinks, debt-servicing costs and default risks rise inexorably.”

Turkey’s economy, just like all of the other major economies around the world, is utterly dependent on the flow of credit, and now lending is becoming greatly restricted.

…click on the above link to read the rest of the article…

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