Home » Posts tagged 'fracking bust'
Tag Archives: fracking bust
Planet of the Space Bats
Planet of the Space Bats
As my regular readers know, I’ve been talking for quite a while now here about the speculative bubble that’s built up around the fracking phenomenon, and the catastrophic bust that’s guaranteed to follow so vast and delusional a boom. Over the six months or so, I’ve noted the arrival of one warning sign after another of the impending crash. As the saying has it, though, it’s not over ‘til the fat lady sings, so I’ve been listening for the first notes of the metaphorical aria that, in the best Wagnerian style, will rise above the orchestral score as the fracking industry’s surrogate Valhalla finally bursts into flames and goes crashing down into the Rhine.
I think I just heard those first high notes, though, in an improbable place: the email inbox of the Ancient Order of Druids in America (AODA), the Druid order I head.
I have no idea how many of my readers know the first thing about my unpaid day job as chief executive—the official title is Grand Archdruid—of one of the two dozen or so Druid orders in the western world. Most of what goes into that job, and the admittedly eccentric minority religious tradition behind it, has no relevance to the present subject. Still, I think most people know that Druids revere the natural world, and take ecology seriously even when that requires scrapping some of the absurd extravagances that pass for a normal lifestyle these days. Thus a Druid order is arguably the last place that would come to mind if you wanted to sell stock in a fracking company.
Nonetheless, that’s what happened. The bemused AODA office staff the other day fielded a solicitation from a stock firm trying to get Druids to invest their assets in the fracking industry.
…click on the above link to read the rest of the article…
Wall Street Losing Millions From Bad Energy Loans
Wall Street Losing Millions From Bad Energy Loans
Oil companies continue to get burned by low oil prices, but the pain is bleeding over into the financial industry. Major banks are suffering huge losses from both directly backing some struggling oil companies, but also from buying high-yield debt that is now going sour.
The Wall Street Journal reported that tens of millions of dollars have gone up in smoke on loans made to the energy industry by Citigroup, Goldman Sachs, and UBS. Loans issued to oil and gas companies have looked increasingly unappetizing, making it difficult for the banks to sell them on the market.
To make matters worse, much of the credit issued by the big banks have been tied to oil field services firms, rather than drillers themselves – companies that provide equipment, housing, well completions, trucks, and much more. These companies sprung up during the boom, but they are the first to feel the pain when drilling activity cuts back. With those firms running out of cash to pay back lenders, Wall Street is having a lot of trouble getting rid of its pile of bad loans.
Related: 100,000 Layoffs And Counting: Is This The New Normal?
Robert Cohen, a loan-portfolio manager at DoubleLine Capital, told the Wall Street Journal that he declined to purchase energy loans from Citibank. “We’ve been pretty shy about dipping back into the energy names,” he said. “We’re taking a wait-and-see attitude.”
But some big investors jumped back into the high-yield debt markets in February as it appeared that oil prices stabilized and were even rebounding. However, since March 4 when oil prices began to fall again, an estimated $7 billion in high-yield debt from distressed energy companies was wiped out, according to Bloomberg.
…click on the above link to read the rest of the article…
Global Shale Fail: Oil Majors Leaving Fracking Fields Across Europe, Asia
Global Shale Fail: Oil Majors Leaving Fracking Fields Across Europe, Asia
With some analysts predicting the global price of oil to see another drop, many oil majors have deployed their parachutes and jumped from thehydraulic fracturing (“fracking”) projects rapidly nose-diving across the world.
As The Wall Street Journal recently reported, the unconvetional shale oil and gas boom is still predominantly U.S.-centric, likely to remain so for years to come.
“Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC have packed up nearly all of their hydraulic fracturing wildcatting in Europe, Russia and China,” wrote The Wall Street Journal.
“Chevron halted its last European fracking operations in February when it pulled out of Romania. Shell said it is cutting world-wide shale spending by 30% in places including Turkey, Ukraine and Argentina. Exxon has pulled out of Poland and Hungary, and its German fracking operations are on hold.”
Though the fracking boom has taken off in the U.S. like no other place on Earth, theU.S. actually possesses less than 10 percent of the world’s estimated shale reserves, according to The Journal.
Despite this resource allotment discrepency, the U.S. Energy Information Administration (EIA) recently revealed that only four countries in the world have produced fracked oil or gas at a commercial-scale: the United States, Canada, China and Argentina.
…click on the above link to read the rest of the article…
Wall Street Banks Hit by Oil & Gas Defaults, Bankruptcies
Wall Street Banks Hit by Oil & Gas Defaults, Bankruptcies
The fracking boom has been cash-flow negative for oil and gas drillers from the very beginning. The steep decline rates of fracked wells force producers to drill more wells just to keep production and revenues flat, even at high oil prices. They fund this drilling with debt. To show revenue growth, drillers have to get on an ever faster moving treadmill of more production and more debt. To support that growing debt, they have to produce more and take on even more debt. They can never get off that treadmill. And their suppliers are on the treadmill with them.
This worked as long as the Fed’s interest-rate repression blinded investors to risk, made them desperate for yield, and encouraged them to sink ever more money into the industry.
It suited Wall Street just fine: according to Dealogic, banks extracted $31 billion in fees from the US oil and gas industry and its investors over the past five years by handling IPOs, spin-offs, “leveraged-loan” transactions, the sale of bonds and junk bonds, and M&A.
That’s $6 billion in fees per year! Over the last four years, these banks made over $4 billion in fees on just “leveraged loans.” These loans to over-indebted, junk-rated companies soared from about $40 billion in 2009 to $210 billion in 2014 before it came to a screeching halt.
For Wall Street it doesn’t matter what happens to these junk bonds and leveraged loans after they’ve been moved on to mutual funds where they can decompose sight-unseen. And it doesn’t matter to Wall Street what happens to leverage loans after they’ve been repackaged into highly rated Collateralized Loan Obligations that are then sold to others. CLOs are hot.
…click on the above link to read the rest of the article…
The US Oil Bust Just Got Worse
The US Oil Bust Just Got Worse
The price of Oil did today what it has been doing for a while: it waits for a trigger and plunges. As I’m writing this, West Texas Intermediate is down 4.4%, trading at $44.99 a barrel, less than a measly buck away from this oil bust’s January low. It’s down over 20% from the peak of the most recent sucker rally.
US oil drillers have been responding by slashing capital expenditures, including drilling, in a deceptively brutal manner. In the latest week, drillers idled 56 rigs that were classified as drilling for oil, according to Baker Hughes. Only 866 rigs were still active, down 46.2% from October, when they’d peaked at 1,609. In the 22 weeks since, drillers have taken out 743 rigs, the most dizzying cliff dive in the data series, and probably in history:
You’d think this sort of plunge in drilling activity would curtail production. Eventually it might. But for now, the industry has focused on efficiencies, improved drilling technologies, and the most productive plays. Drillers are trying to raise production but with less money so that they can meet their debt payments. Thousands of wells have been drilled recently but haven’t been completed and aren’t yet producing. This is the “fracklog,” a phenomenon that has been dogging natural gas for years.
…click on the above link to read the rest of the article…
Has California’s Fracking Boom Already Gone Bust?
Has California’s Fracking Boom Already Gone Bust?
We accelerate down the runway — a tiny asphalt strip next to Taft Skydiving. Our little Piper Cherokee lifts off and as we ascend, I peer out the window.
Below us is California’s Kern County and more than a century of oil exploration — from the gushers of the 1800s to today’s less robust reality. It’s a spider web of dirt roads, drilling rigs, pump jacks, pipes and boilers.
At least I’m pretty sure that’s what’s below us. The air quality is so bad that the San Joaquin Valley we’re flying over looks like the blurred work of an impressionist painter. Our view is smudged by stubborn smog that’s refused to budge for days.
It’s a perfect metaphor for trying to understand the future of oil and gas production in California, which is why we’ve taken flight in the first place.
For years, the biggest talk in California’s energy industry has been about hydraulic fracturing (or fracking) and whether or not the method of pumping sand, chemicals and water at very high pressure to release trapped hydrocarbons will kick off a boom comparable to surging North Dakota.
There was a time, just a few years ago, that most news reports deemed a shale oil boom inevitable in California. But now, it’s not looking like such a sure thing after all.
…click on the above link to read the rest of the article…
