{"id":6739,"date":"2015-03-23T05:58:44","date_gmt":"2015-03-23T10:58:44","guid":{"rendered":"http:\/\/olduvai.ca\/?p=6739"},"modified":"2015-03-23T05:58:44","modified_gmt":"2015-03-23T10:58:44","slug":"wall-street-banks-hit-by-oil-gas-defaults-bankruptcies","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=6739","title":{"rendered":"Wall Street Banks Hit by Oil & Gas Defaults, Bankruptcies"},"content":{"rendered":"

Wall Street Banks Hit by Oil & Gas Defaults, Bankruptcies<\/a><\/h3>\n

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\u00a0take on\u00a0even<\/em>\u00a0more debt. They can never get off that treadmill. And their suppliers are on the treadmill with them.<\/p>\n

This worked as long as the Fed\u2019s interest-rate repression blinded investors to risk, made them desperate for yield, and encouraged them to sink ever more money into the industry.<\/p>\n

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, \u201cleveraged-loan\u201d transactions, the sale of bonds and junk bonds, and M&A.<\/p>\n

That\u2019s $6 billion in fees per year! Over the last four years, these banks made over $4 billion in fees on just \u201cleveraged loans.\u201d 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.<\/p>\n

For Wall Street it doesn\u2019t matter what happens to these junk bonds and leveraged loans after they\u2019ve been moved on to mutual funds where they can decompose sight-unseen. And it doesn\u2019t matter to Wall Street what happens to leverage loans after they\u2019ve been repackaged into highly rated Collateralized Loan Obligations that are then sold to others. CLOs are hot.<\/p>\n

\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,3],"tags":[3903,195,200,1519,4033,1729,1775,860],"class_list":["post-6739","post","type-post","status-publish","format-standard","hentry","category-economics","category-energy-2","tag-bankruptcies","tag-debt","tag-default","tag-fracking-boom","tag-fracking-bust","tag-oil-and-gas-industry","tag-oil-price-collapse","tag-wall-street"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6739"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6739\/revisions"}],"predecessor-version":[{"id":6740,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6739\/revisions\/6740"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}