Doomstead Diner Menu => Energy => Topic started by: RE on August 11, 2014, 02:20:15 PM

Title: Fracker Debt Bubble
Post by: RE on August 11, 2014, 02:20:15 PM
Fat paychecks fo managers all built on irredeemable debt sold to granny's pension fund.  Grifters and Con Artists in the Energy Biz.  Criminals who prey on widows and orphans while destroying the environment.

RE


Oil and gas company debt soars to danger levels to cover shortfall in cash (http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html)

Energy businesses are selling assets and took on $106bn in net debt in the year to March

(http://www.telegraph.co.uk/multimedia/archive/02178/oil_2178010b.jpg)
A labourer pours oil that he scooped up from the oil spill with a helmet into an oil drum, near Dalian port, Liaoning province
The net debt of 127 oil companies from around the world rose by $106bn in the year to March Photo: Reuters

By Ambrose Evans-Pritchard

6:10AM BST 11 Aug 2014


The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.

The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.

This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions. For it to occur five years into an economic expansion points to a deep structural malaise.

The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.

The EIA said the shortfall between cash earnings from operations and expenditure -- mostly CAPEX and dividends -- has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011.

The agency, a branch of the US Energy Department, said the increase in debt is “not necessarily a negative indicator” and may make sense for some if interest rates are low. Cheap capital has been a key reason why US companies have been able to boost output of shale gas and oil at an explosive rate, helping to lift the US economy out of the Great Recession.

The latest data shows that “tight oil” production has jumped to 3.7m barrels a day (b/d) from half a million in 2009. The Bakken field in North Dakota alone pumped 1m b/d in May, equivalent to Libya’s historic levels of supply. Shale gas output has risen from three billion cubic feet to 35 billion in just seven years. The EIA said America will increase its lead as the world’s largest producer of oil and gas combined this year, far ahead of Russia or Saudi Arabia.

However, the administration warned in May that “continued declines in cash flow, particularly in the face of rising debt levels, could challenge future exploration and development”. It said that upstream costs of exploring and drilling have been surging, causing companies to raise long-term debt by 9pc in 2012, and 11pc last year.

Upstream costs rose by 12pc a year from 2000 to 2012 due to rising rig rates, deeper water depths, and the costs of seismic technology. This was disguised as China burst onto the world scene and powered crude prices to record highs. Major disruptions in Libya, Iraq, and parts of Africa have since prevented oil from falling much below $100, even though other commodities have been in the doldrums. But even flat prices for three years have exposed how vulnerable the whole oil and gas edifice is becoming.

The major companies are struggling to find viable reserves, forcing them take on ever more leverage to explore in marginal basins, often gambling that much higher prices in the future will come to the rescue. Global output of conventional oil peaked in 2005 despite huge investment.

Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said.

Analysts are split over the giant Petrobras project off the coast of Brazil, described by Citigroup as the “single-most important source of new low-cost world oil supply.” The ultra-deepwater fields lie below layers of salt, making seismic imaging very hard. They will operate at extreme pressure at up to three thousand meters, 50pc deeper than BP’s disaster in the Gulf of Mexico.

Petrobras is committed to spending $102bn on development by 2018. It already has $112bn of debt. The company said its break-even cost on pre-salt drilling so far is $41 to $57 a barrel. Critics say some of the fields may in reality prove to be nearer $130. Petrobras’s share price has fallen by two-thirds since 2010.

The global oil and gas nexus is clearly over-extended and could face a severe crunch if oil prices slip towards $80. A growing number of experts say it would be wiser to shrink the industry to a profitable core, returning revenues from existing ventures to shareholders and putting some companies into partial “run-off” rather than risking fresh money on projects that may prove to be ruinous white elephants.

The International Energy Agency in Paris says global investment in fossil fuel supply rose from $400bn to $900bn during the boom from 2000 and 2008, doubling in real terms. It has since levelled off, reaching $950bn last year. The returns have been meagre. Not a single large oil project has come on stream at a break-even cost below $80 a barrel for almost three years.

A study by Carbon Tracker said companies are committing $1.1 trillion over the next decade to projects requiring prices above $95 to make money. Some of the Arctic and deepwater projects have a break-even cost near $120. “The oil majors like Shell are having to replace cheap legacy reserves with new barrels from much more difficult places,” said Mark Lewis from Kepler Cheuvreux.

The new worry is that many companies will be left with “stranded assets” as climate accords kick in. The IEA says companies have booked assets that can never be burned if there is a deal limit to C02 levels to 450 (PPM), a serious political risk for the industry. Estimates vary but Mr Lewis said this could reach $19 trillion for the oil nexus, and $28 trillion for all forms of fossil fuel.

For now the major oil companies are mostly pressing ahead with their plans. ExxonMobil began drilling in Russia’s Arctic ‘High North’ last week with its partner Rosneft, even though Rosneft is on the US sanctions list.

“Exxon must be doing a lot of soul-searching as they get drawn deeper into this,” said one oil veteran with intimate experience of Russia. “We don’t think they ever make any money in the Arctic. It is just too expensive and too difficult.”
Title: Re: Fracker Debt Bubble
Post by: RE on August 11, 2014, 02:29:32 PM
(http://www.eia.gov/todayinenergy/images/2014.07.29/main.png)
Title: Wall Street Fracker Fraud EXPOSED! Geochemists Facing Perp Walks!
Post by: RE on August 13, 2014, 06:45:23 PM
(http://i.bnet.com/blogs/ken-lay-perp-walk.jpg)

(http://www.judiciaryreport.com/images/Bear-Stearns -fbi-arrest.jpg)

Jimbo just got this one up on Zero Hedge.  :icon_mrgreen:

RE

Wall Street's Shale 'Fraud' Exposed (http://www.zerohedge.com/news/2014-08-13/wall-streets-shale-fraud-exposed)

Submitted by Tyler Durden on 08/13/2014 18:50 -0400
 
Via Jim Quinn's Burning Platform blog,

U.S. energy independence, we're told, is at our fingertips thanks to the so-called “shale revolution”. Offsetting declines in conventional oil and gas production, shale gas and tight oil (shale oil) are being heralded as the means by which the U.S. will become energy independent – a net exporter of natural gas and once again the world’s largest oil producing nation.

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140813_shale1_0.jpg)
But two new reports by Post Carbon Institute and Energy Policy Forum show that the hype simply doesn’t stand up to scrutiny.

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/08/20140813_shale_0.jpg)

KEY FINDINGS, SHALE GAS

    High productivity shale gas plays are not ubiquitous: Just six plays account for 88% of total production.
    Individual well decline rates range from 80-95% after 36 months in the top five U.S. plays.
    Overall field declines require from 30-50% of production to be replaced annually with more drilling – roughly 7,200 new wells a year simply to maintain production.
    Dry shale gas plays require $42 billion/year in capital investment to offset declines. This investment is not covered by sales: in 2012, U.S. shale gas generated just $33 billion, although some of the wells also produced liquids, which improved economics.

KEY FINDINGS, TIGHT OIL (SHALE OIL)

    More than 80 percent of tight oil production is from two unique plays: the Bakken and the Eagle Ford.
    Well decline rates are steep – between 81 and 90 percent in the first 24 months.
    Overall field decline rates are such that 40 percent of production must be replaced annually to maintain production.
    Together the Bakken and Eagle Ford plays may yield a little over 5 billion barrels – less than 10 months of U.S. consumption.

KEY FINDINGS, THE FINANCIAL PICTURE

    Wall Street promoted the shale gas drilling frenzy which resulted in prices lower than the cost of production and thereby profited [enormously] from mergers & acquisitions and other transactional fees.
    Industry is demonstrating reticence to engage in further shale investment, abandoning pipeline projects, IPOs and joint venture projects.
    Shale gas has become one of the largest profit centers in some investment banks, in direct parallel with the decline of natural gas prices.
    Due to extreme levels of debt, stated proved undeveloped reserves (PUDs) may have been out of compliance with SEC rules at some shale companies because of the threat of collateral default for some operators.
    With natural gas prices far higher outside the U.S., exports are being pursued in an effort to shore up ailing balance sheets invested in shale assets.

http://www.youtube.com/v/4uKgU7krWzE?feature=player_embedded

 
Title: Fracker Debt Bubble - Trader Who Scored $100 Million Payday Bets Shale Is Dud
Post by: g on September 04, 2014, 07:07:54 AM
Due to intense Diner interest in this topic, I have taken the liberty to post the entire article rather than an excerpt. Comments from our energy students most welcome.


 
Trader Who Scored $100 Million Payday Bets Shale Is Dud
By Bradley Olson - Sep 3, 2014
Bloomberg Markets Magazine

Andrew John Hall -- known as the God of Crude Oil Trading to some of his peers -- has built his success on a simple creed: Everyone who disagrees with him is wrong.

For most of the past 30 years, that has been a killer strategy. Like a poker player on an endless hot streak, Hall has made billions for the companies for which he’s traded by placing one aggressive bet after another. He was one of the few traders who anticipated both the run-up in and the eventual crash of oil prices in 2008.

Hall was so good that he bagged a $98 million payday in 2008, when he ran Citigroup Inc.’s Phibro LLC trading unit, and was up for about $100 million more in 2009.

In the end, Bloomberg Markets will report in its October 2014 issue, he couldn’t collect the 2009 payout from Citi because an anti–Wall Street backlash against the bank -- which had just received a $45 billion U.S. government bailout -- led regulators to block it. No such bonuses have awaited Hall of late. He’s racked up losses in two of the past three years.

His wager that oil prices would rise and rise has run headlong into an unanticipated energy revolution -- the frenetic push in the U.S. and elsewhere to wring crude out of shale. Shale drilling has boosted U.S. oil output to the highest level in 27 years; it helped the U.S. supply 84 percent of its energy demand last year. Oil prices, far from taking the upward trajectory Hall predicted, have been essentially unchanged since 2011.

Lost Touch?

For the 63-year-old Hall, who has used his wealth to build an extensive modern art collection, this has meant a sobering comedown. Assets under management at his Astenbeck Capital Management LLC hedge-fund firm fell to $3.4 billion in May, down from as much as $4.8 billion in January 2013. Astenbeck, based in Westport, Connecticut, fell 3.8 percent in 2011, posted a 3.4 percent gain in 2012 and slid another 8.3 percent in 2013, according to Astenbeck letters obtained by Bloomberg. This makes some wonder whether Hall has lost his touch.

“At one point, Phibro traders were the rulers of the world,” says Carl Larry, a former trader who publishes a newsletter on oil markets. “The best always learn how to adapt. Maybe it’s taking him longer to do that now. Or maybe his time has come.”

Hall, based on comments in his letters to investors, is unfazed by the losses and secure in his view that the price of oil is destined to rise. In those letters, he regularly mocks those who are convinced that a shale boom will mean long-term cheap, abundant energy.
‘Inconvenient Obstacles’

“When you believe something, facts become inconvenient obstacles,” Hall wrote in April, taking issue with an analyst who predicted a shale renaissance could result in $75-a-barrel oil over the next five years.

Hall is going all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less.

Investing ever-larger sums of his own money, he’s buying contracts for so-called long-dated oil, to be delivered as far out as 2019, according to interviews with two dozen current and former employees and advisers who are familiar with Hall’s trading but aren’t authorized to speak on the record. To attract buyers, the sellers of these long-dated contracts -- typically shale companies that have financed the boom with mounds of debt -- need to offer them at a discount to existing prices.

Hall’s strategy -- which in a May letter he described as more akin to “loan-sharking” than market speculation -- has already shown some signs of success.
Futures Rise

In February, a futures contract for a barrel of December 2019 West Texas Intermediate benchmark crude was selling for $76. In July, those contracts were selling for $88. That means Hall could have made $12 a barrel by cashing out -- a 16 percent gain, according to those who understand his positions.

The thing is, Hall may not cash out. He may stand pat, waiting for those price spikes he’s certain are coming. If he’s right, he could pocket way more than $12 a barrel, perhaps doubling the money he’s invested for himself and his clients.

If he’s wrong, Hall could sully his reputation and deal another blow to Phibro, a storied commodities firm with century-old roots that once had 2,000 employees and helped create modern oil-trading markets.

Hall, in addition to running his hedge fund, has remained chairman and chief executive officer of Phibro, positions he’s held since 1993 -- even as the firm has changed hands. Already, Phibro’s current corporate parent, Occidental Petroleum Corp., which acquired it from Citi in late 2009, has said the company is for sale. If it’s sold, the new owner would be Phibro’s third in five years.
Wall Bump

Occidental, which declined to comment for this story, owns 20 percent of Astenbeck’s management company; Hall owns the rest of it. Tom O’Malley, the chairman of refiner PBF Energy Inc. who recruited Hall to Phibro in 1982 after winning a bidding war for the trader’s services against self-proclaimed King of Oil Marc Rich, says the market may yet turn Hall’s way.

“You can’t play the game without bumping into the wall every now and then,” O’Malley says. “Anybody who bets against Andy Hall might be making a poor bet.”

An introvert with eyes shading to pale blue, Hall has long been known for his intense study and grasp of historical oil markets. When he’s not watching the markets on his computer terminal, he’s parsing reports or calling analysts and economists to pepper them with questions on drilling projects from North Dakota to Saudi Arabia.
Rowing Passion

The son of a former British Airways Plc pilot instructor, Hall was born in Bristol, England, and earned a chemistry degree from the University of Oxford, where he began a lifelong passion for rowing. He started working for British Petroleum Co., now BP Plc, in 1969 and soon enough would be thrown into the tumult of the early 1970s Arab oil embargo when the oil majors lost pricing power to OPEC.

After earning an MBA from France’s INSEAD business school, he arrived in New York in 1981 to run BP’s trading operation.

Hall, with a streak of clever trades, caught the eye of O’Malley at Phibro, which had recently been re-branded from its roots as Philipp Brothers. At Phibro, he and O’Malley bought large, long positions, betting on rising prices.

Hall was convinced as far back as 2004 that the world was entering an age of scarcity, according to “Oil,” a 2010 book by Tom Bower. That conviction, based on his belief in massive demand coming from China and other emerging markets, led Hall to bet more than $1 billion, according to the book.
‘Really Long’

“As one of my clients once told me, he has three gears: long, longer and really long,” says Philip Verleger, president of Carbondale, Colorado–based PK Verleger LLC and a consultant and economist whom Hall has tapped for advice.

Phibro has a complex pedigree. In 1981, Phibro Corp. acquired Salomon Brothers and eventually the firm became Salomon Inc. In 1997, Travelers Group Inc. acquired Salomon, which became part of Citigroup the next year after Travelers and Citicorp combined. In 2008, the unit, once again known as Phibro, with Hall at the helm, was one of the only profitable divisions at Citi in a year when the company lost $28 billion.

Hall, after netting about $100 million in 2007 and $98 million in 2008, was on track to receive the same or more in 2009. In the tumult of the financial crisis, with Citi now a ward of the state, the bonus was “untenable,” says Kenneth Feinberg, President Barack Obama’s special master for executive compensation.
Occidental Sale

The controversy forced the sale to Occidental, which agreed to defer payment of that $100 million or so by allowing Hall to reinvest those funds into Astenbeck, according to those familiar with the transactions.

Phibro had been profitable every fiscal year since 1997 and in 80 percent of the quarters during that period, according to data compiled by Bloomberg. The trading house’s gains during those years, driven by Hall, amounted to $4.4 billion. Hall remained silent throughout the pay controversy and turned to building Astenbeck’s assets.

Oil prices fell in the 2008-to-2009 recession, hitting $110 a barrel in February 2011 and remaining close to that level since then. Brent crude, the global benchmark, traded at $104.28 on Aug. 13. The pressure on prices, even as economic growth has recovered, has come from a surfeit of supply.

The unprecedented rise in U.S. oil production has been spurred by fracking, a process that breaks up brittle shale layers to release previously unreachable oil and gas. Hall has no charity for those touting the message that shale drilling will take over the globe and usher in a new era of lower energy prices.
Lower Forecasts

Predictions of $75 oil, espoused by Citigroup oil analyst Edward Morse in a Barron’s story in March, really bug him, according to those who know his thinking.

“We are not sure what supports his conviction,” Hall wrote of the analyst’s theories in his June newsletter, although he didn’t identify Morse by name. “It is apparently not facts or analysis.”

The shale revolution faces political, environmental and technical hurdles in other parts of the world that will stall its rollout, Hall wrote. Morse, who also correctly predicted the sharp rise in crude prices in the past decade, says Hall has let his admiration of peak oil theorists cloud his judgment.

“It took a long time for believers in the Cold War to admit it was dead. So, too, is it taking a long time for peak oil believers to admit that it is dead,” Morse says.

The numbers currently don’t seem to augur in Hall’s favor. Oil prices have slumped to the $92 to $96 a barrel range in recent days. Reflecting those prices, regular gasoline in some parts of the nation, including New Jersey, Virginia and Louisiana, is selling for under $3 a gallon, the lowest in four years.
Falling Prices

Hall’s main problem with the falling-price scenario is that it contains the seeds of its own demise. Shale drilling depends on high prices to survive. If oil falls toward $75 a barrel, much of the wave of new U.S. production would become unprofitable, prompting output to be cut, Hall wrote in April.

Scarcity would then start to drive up prices. Hall’s position is that the world may be awash in new oil but that new oil isn’t cheap to produce. The fact that the U.S. shale revolution has been able to replace most of the crude lost to strife in recent years in places such as Iraq and Libya is a fluke, in his opinion.

And while energy powers such as Russia and Saudi Arabia still have plenty of oil, they’ll have to significantly increase investments to maintain production levels. In a June letter, Hall made note of a statement from an OAO Lukoil executive, who acknowledged the “threat” that Russia’s “traditional reserves are being exhausted.”
IOC Toast

Hall’s confidence in rising prices is expressed in an April letter to Astenbeck investors in which he poses the seemingly audacious question of whether the world’s biggest oil companies are doomed.

“Are the IOCs (international oil companies) toast?” he asked. While Exxon Mobil Corp. and its four biggest peers have posted more than $1 trillion in combined profits in the past decade, Hall points out that they’ve subsequently been spending almost every dime they’ve earned.

Since 2004, Exxon, Chevron Corp., Royal Dutch Shell Plc, Total SA and BP have tripled capital spending, reaching $166 billion last year, only to see their combined output decline by more than 1.4 million barrels a day. That’s like running as fast as you can only to stand still, according to Hall’s investor letters. Prices, in his view, have to take the long road up.
Technological Innovations

A Chevron spokesman said the company expects its production to start increasing in the next two years. BP said the Gulf oil spill has hurt its oil output. Exxon declined to comment. Shell and Total didn’t respond to queries seeking comment.

Hall doubters respond that technological innovations in the recent past have rendered wrong many predictions that either the world would run out of oil or prices were destined for a permanent arc upward.

M. King Hubbert, a geophysicist who first propounded the theory of peak oil, accurately predicted in 1956 a crest in U.S. oil production by 1970, a forecast that intrigued Hall. Yet fracking has undermined the second part of Hubbert’s theory -- that American oil output would then begin an unstoppable decline.
Production Record

The U.S. Energy Information Administration is now predicting domestic production will reach an all-time high by 2016. Such projections don’t move Hall, a man who owns most of a town in Vermont and a castle in Germany and is featured nude with his wife, Christine, in a painting by American artist Eric Fischl, whose work the Halls collect.

In his counterarguments, he digs deep, delving into the minutiae of how Texas discloses oil production, the tendency of some shale wells to play out quickly and the degree to which the boom has relied on debt. The simplest of his reasons, though, is that producers have already drilled in many of the best areas, or sweet spots. Hall predicts that growth in shale output will begin to moderate this year and U.S. production will peak as soon as 2016.

“Once those areas have been drilled out, operators will have to move to more-marginal locations and well productivity will fall,” Hall wrote in March. “Far from continuing to grow, production will start to decline.”


Slowing Growth?

So far this year, there are signs that he may be on the right track. In North Dakota’s Bakken and Texas’ Eagle Ford formations, which have accounted for almost all of the jump in U.S. output, the combined year-over-year growth in production in July fell below 30 percent for the first time since February 2010.

Two central questions about technology and shale will likely determine the outcome for Hall: how many wells producers will be able to drill in a finite amount of land that sits atop oil-bearing layers of rock and whether the U.S. renaissance will be repeatable abroad. Hall is betting no on both counts. Morse, and many in the energy world, are betting yes.
Surface Scratch

“We haven’t scratched the surface,” Hall’s former mentor O’Malley says. “There are massive additional shale fields in the United States. Technology does tend to move forward.”

Hall supporters point out that Astenbeck -- benefiting from a rise in global demand and volatility caused by turmoil in places such as Iraq -- is up 19 percent this year after the losses of last year.

“He’s a phenomenal trader,” says David Neuhauser, a money manager at Livermore Partners who has followed Hall’s progress as an Occidental shareholder. “I believe he’s right about long-term prices; we’re in the same camp. What I don’t know is how long it will take for the market to catch up.”

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editors responsible for this story: Ken Wells at kwells8@bloomberg.net Joel Weber, Tina Davi

                                                                 (http://www.bloomberg.com/image/iC9k5n.TuRB8.jpg)


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      http://www.bloomberg.com/news/2014-09-03/trader-who-scored-100-million-payday-bets-shale-is-dud.html (http://www.bloomberg.com/news/2014-09-03/trader-who-scored-100-million-payday-bets-shale-is-dud.html)  :icon_study:

Title: Re: Fracker Debt Bubble
Post by: Surly1 on September 04, 2014, 08:16:33 AM
Interesting article, GO. Just skimmed it-- will come back to it later-- busy at work.

Yet I must tell you--
Quote
The numbers currently don’t seem to augur in Hall’s favor. Oil prices have slumped to the $92 to $96 a barrel range in recent days. Reflecting those prices, regular gasoline in some parts of the nation, including New Jersey, Virginia and Louisiana, is selling for under $3 a gallon, the lowest in four years.

I must tell you that since Christmas, $3.11/gal. is the cheapest I've seen regular in Virginia. And typically the further north and west you go from this little armpit of the world, the higher it gets. Can't speak to Joisey...

FWIW. :icon_mrgreen:
Title: Frackonomics Ponzi
Post by: RE on September 19, 2014, 04:19:21 PM
Basically Criminal Fraud, Enron on a bigger scale.

(http://photos1.blogger.com/blogger/4819/1302/320/bushies.jpg)

RE

Shale Fracking Is a “Ponzi Scheme” … “This Decade’s Version of The Dotcom Bubble” … “A Lot In Common With the Subprime Mortgage"

George Washington's picture



 

In 2011, the New York Times wrote:

“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company,  wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”

 

“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company,  wrote in an e-mail on Aug. 28, 2009.

 

***

 

“And now these corporate giants are having an Enron moment,” a retired geologist from a major oil and gas company  wrote in a February e-mail about other companies invested in shale gas.

 

***

 

Deborah Rogers, a member of the advisory committee of the Federal Reserve Bank of Dallas, [and a]  former stockbroker with Merrill Lynch ... showed that wells were petering out faster than expected.

 

“These wells are depleting so quickly that the operators are in an expensive game of ‘catch-up,’ ” Ms. Rogers wrote in an e-mail on Nov. 17, 2009, to a petroleum geologist in Houston, who wrote back that he agreed.

 

***

 

A review of more than 9,000 wells, using data from 2003 to 2009, shows that — based on widely used industry assumptions about the market price of gas and the cost of drilling and operating a well — less than 10 percent of the wells had recouped their estimated costs by the time they were seven years old.

 

***

 

“Looks like crap,” the Schlumberger official wrote about the well’s performance, according to the regulator, “but operator will flip it based on ‘potential’ and make some money on it.”

In 2012, the New York Times pointed out:

The gas rush has ... been a money loser so far for many of the gas exploration companies and their tens of thousands of investors.

 

***

 

Although the bankers made a lot of money from the deal making and a handful of energy companies made fortunes by exiting at the market’s peak, most of the industry has been bloodied — forced to sell assets, take huge write-offs and shift as many drill rigs as possible from gas exploration to oil, whose price has held up much better.

 

***

 

Now the gas companies are committed to spending far more to produce gas than they can earn selling it. Their stock prices and debt ratings have been hammered.

Rolling Stone reported the same year:

Fracking, it turns out, is about producing cheap energy the same way the mortgage crisis was about helping realize the dreams of middle-class homeowners. For Chesapeake, the primary profit in fracking comes not from selling the gas itself, but from buying and flipping the land that contains the gas. The company is now the largest leaseholder in the United States, owning the drilling rights to some 15 million acres – an area more than twice the size of Maryland. McClendon [the CEO of fracking giant Chesapeake] has financed this land grab with junk bonds and complex partnerships and future production deals, creating a highly leveraged, deeply indebted company that has more in common with Enron than ExxonMobil. As McClendon put it in a conference call with Wall Street analysts a few years ago, "I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 per million cubic feet."

 

According to Arthur Berman, a respected energy consultant in Texas who has spent years studying the industry, Chesapeake and its lesser competitors resemble a Ponzi scheme, overhyping the promise of shale gas in an effort to recoup their huge investments in leases and drilling. When the wells don't pay off, the firms wind up scrambling to mask their financial troubles with convoluted off-book accounting methods. "This is an industry that is caught in the grip of magical thinking," Berman says. "In fact, when you look at the level of debt some of these companies are carrying, and the questionable value of their gas reserves, there is a lot in common with the subprime mortgage market just before it melted down."

 

***

 

In February, Chesapeake announced that, because of low gas prices, its revenues will fall $3.5 billion short of its expenses this year.

Jim Quinn noted last year:

Royal Dutch Shell is one of the biggest corporations in the world, with financial resources greater than 99% of all the organizations on earth. Their CEO [Peter  Voser] probably knows a little bit more about oil exploration than the Wall Street systers and CNBC bimbos. His company has poured $24 billion into shale exploration in the U.S. It has been a huge failure. They have already written off $2.1 billion. They are trying to sell huge swaths of land in the Eagle Ford area. They are losing money in the shale oil and gas business. If Shell can’t make it profitable, who can?

Bloomberg noted in February:

Independent producers will spend $1.50 drilling this year for every dollar they get back.

Oil Price reported in March:

Shell’s new boss, Ben van Beurden, said bets on U.S. shale plays haven’t worked out for his company.

 

***

 

“Some of our exploration bets have simply not worked out,” Shell’s Chief Executive Officer Ben van Beurden said. It was bad management policy to commit close to $80 billion in capital on its North American portfolio and still lose money. Now, he said, it’s time to cut the loss and slash exploration and production investments by 20 percent for 2014.

 

***

 

Shell’s problems say more about the difficulties of shale exploration than they do about the company itself.

The Wall Street Journal pointed out this April:

These newly public companies are spending more than they make ....

Bloomberg wrote in May:

Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.

 

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”

 

***

 

In a measure of the shale industry’s financial burden, debt hit $163.6 billion in the first quarter, according to company records compiled by Bloomberg on 61 exploration and production companies that target oil and natural gas trapped in deep underground layers of rock.

 

***

 

Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

 

***

 

“Interest expenses are rising,” said Virendra Chauhan, an oil analyst with Energy Aspects in London. “The risk for shale producers is that because of the production decline rates, you constantly have elevated capital expenditures.”

And Tim Morgan - former global head of research at Tullett Prebon - explained last month at the Telegraph:

We now have more than enough data to know what has really happened in America.

 

***

 

If a huge number of wells come on stream in a short time, you get a lot of initial production. This is exactly what has happened in the US.

 

The key word here, though, is "initial". The big snag with shale wells is that output falls away very quickly indeed after production begins. Compared with “normal” oil and gas wells, where output typically decreases by 7pc-10pc annually, rates of decline for shale wells are dramatically worse. It is by no means unusual for production from each well to fall by 60pc or more in the first 12 months of operations alone.

 

Faced with such rates of decline, the only way to keep production rates up (and to keep investors on side) is to drill yet more wells. This puts operators on a "drilling treadmill", which should worry local residents just as much as investors. Net cash flow from US shale has been negative year after year, and some of the industry’s biggest names have already walked away.

 

The seemingly inevitable outcome for the US shale industry is that, once investors wise up, and once the drilling sweet spots have been used, production will slump, probably peaking in 2017-18 and falling precipitously after that. The US is already littered with wells that have been abandoned, often without the site being cleaned up.

 

Meanwhile, recoverable reserves estimates for the Monterey shale – supposedly the biggest shale liquids play in the US – have been revised downwards by 96pc. [Background; and see this.]  In Poland, drilling 30-40 wells has so far produced virtually no worthwhile production.

 

In the future, shale will be recognised as this decade's version of the dotcom bubble. In the shorter term, it's a counsel of despair as an energy supply squeeze draws ever nearer.

Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on September 20, 2014, 07:48:02 AM
You want to know a secret?  Fracking natural gas isn't as unprofitable as they make it out to be.

One of the major ongoing expenses for the drilling/pumping companies are pipeline fees.  These, of course, are shared with the landowner and taken out of their royalties.

Guess who owns the pipeline companies?  The same people who own the drilling companies.  Guess who gets to keep ALL of the profits?

Corporate malfeasance, indeed.
Title: Re: Fracker Debt Bubble - Question About Current Status?
Post by: g on September 27, 2014, 07:45:57 AM
Hopefully this is the correct thread to pose this financial query.

The drop in oil of the past few months has been substantial and relentless, especially when one considers the goings on in the middle east.

Might I pose the question that if we peak oilers are correct about fracking being a ponzi scheme; that major cracks should start appearing soon in this house of leverage and constantly required drilling or fracking of costly wells.

My abilities in this area are very limited so I am asking how long should we have to wait to see problems arising if we are correct in assuming fracking is a scam operation?

Shouldn't financing and borrowing problems be arising already?

My suspicion has been all along that this fracking being hailed as our savior is a fiction, should the house of cards begin collapsing now or do we require still lower prices?

My experience with markets is that they usually look ahead and have not yet witnessed the chaos my instincts told me to expect after this recent fall in prices.   :icon_scratch:

                                                         (http://content.barchart.com/genericapi/cache/1d019e23274cd083e6a09874541d98bc.png)
Title: Re: Fracker Debt Bubble - Question About Current Status?
Post by: MKing on September 27, 2014, 01:13:07 PM
Might I pose the question that if we peak oilers are correct about fracking being a ponzi scheme; that major cracks should start appearing soon in this house of leverage and constantly required drilling or fracking of costly wells.

Tight/shale oil and gas wells aren't expensive, the most recent range of numbers provided to the public by the Texas BEG are in the 3-10 million each range, drilling and completing, I confirmed this independently after I last spoke with Tinker and his group a month or two back.

These kinds of numbers are nearly insignificant when compared to conventional oil or gas production in places like the North Slope or GOM, North Sea, anywhere in the Arctic, and are less than half the cost of doing the SAME thing in Argentina, China, or Russia.

As far as hydraulic fracturing itself being a ponzi scheme, it has been going on for 60+ years, I don't think it has much to do with overall financial performance myself, but more with the relationship between price, cost and well performance.

For example, using financial reports on public companies allows interesting analysis of the aggregate, but not the distribution of profitability at the well level of resolution.

For example, lets take two oil companies in the Bakken. One of them is run by a bloviating amateur, he drills and completes a $10M well, pays $1500/month to have someone operate it for him, and requires a nice office building, a staff of sycophants to blow smoke up his ass, all of these things cost money, and the overhead for this company is $100K/month.

This company will probably lose money, and badly, trying to recoup not only the initial CapEx but the $101.5K month nut they have created.

Whereas another company, requiring only one person to achieve the same result, and wanting a modest income of $2k month from this well, will probably make money.

No difference in anything other than the overhead sitting on top of the well's performance.

Fortunately, when the first company goes bankrupt, the second will buy the discounted cash flow of the first companies wells (doesn't give a crap about the building, let the bank foreclose) and make their money off expected increases in price as peak oil takes hold and the price of oil increases as Malthusians expect.

The combination of these three things at the detail level, and aggregate, is important. Amateurs don't tend to know the difference, in part because they don't see how the performance of private companies works, and how they are just salivating right now, waiting for someone to fall, that their assets might be acquired at a discount.


Quote from: Golden Oxen
Shouldn't financing and borrowing problems be arising already?

They certainly might be.

My connections with Wall Street money says that they are still looking to get in, you can barely get them to bite on 1/4B deals, they really want 1B deals right now, and can easily come up with 10B for the right deal.

So the money does not seem to have dried up yet.
Title: Re: Fracker Debt Bubble
Post by: MKing on September 27, 2014, 01:14:24 PM
You want to know a secret?  Fracking natural gas isn't as unprofitable as they make it out to be.

Some of us can even give you the exact odds, based on your acreage, on how profitable, or not, it is.
Title: Re: Fracker Debt Bubble - Question About Current Status?
Post by: agelbert on September 27, 2014, 04:39:54 PM
Might I pose the question that if we peak oilers are correct about fracking being a ponzi scheme; that major cracks should start appearing soon in this house of leverage and constantly required drilling or fracking of costly wells.

Tight/shale oil and gas wells aren't expensive, the most recent range of numbers provided to the public by the Texas BEG are in the 3-10 million each range, drilling and completing, I confirmed this independently after I last spoke with Tinker and his group a month or two back.

These kinds of numbers are nearly insignificant when compared to conventional oil or gas production in places like the North Slope or GOM, North Sea, anywhere in the Arctic, and are less than half the cost of doing the SAME thing in Argentina, China, or Russia.

As far as hydraulic fracturing itself being a ponzi scheme, it has been going on for 60+ years, I don't think it has much to do with overall financial performance myself, but more with the relationship between price, cost and well performance.

For example, using financial reports on public companies allows interesting analysis of the aggregate, but not the distribution of profitability at the well level of resolution.

For example, lets take two oil companies in the Bakken. One of them is run by a bloviating amateur, he drills and completes a $10M well, pays $1500/month to have someone operate it for him, and requires a nice office building, a staff of sycophants to blow smoke up his ass, all of these things cost money, and the overhead for this company is $100K/month.

This company will probably lose money, and badly, trying to recoup not only the initial CapEx but the $101.5K month nut they have created.

Whereas another company, requiring only one person to achieve the same result, and wanting a modest income of $2k month from this well, will probably make money.

No difference in anything other than the overhead sitting on top of the well's performance.

Fortunately, when the first company goes bankrupt, the second will buy the discounted cash flow of the first companies wells (doesn't give a crap about the building, let the bank foreclose) and make their money off expected increases in price as peak oil takes hold and the price of oil increases as Malthusians expect.

The combination of these three things at the detail level, and aggregate, is important. Amateurs don't tend to know the difference, in part because they don't see how the performance of private companies works, and how they are just salivating right now, waiting for someone to fall, that their assets might be acquired at a discount.


Quote from: Golden Oxen
Shouldn't financing and borrowing problems be arising already?

They certainly might be.

My connections with Wall Street money says that they are still looking to get in, you can barely get them to bite on 1/4B deals, they really want 1B deals right now, and can easily come up with 10B for the right deal.

So the money does not seem to have dried up yet.
[/size]
  (http://www.freesmileys.org/emoticons/tuzki-bunnys/tuzki-bunny-emoticon-026.gif)

To paraphrase Samuel Clemens in regard to some of his experiences with people that make holes in the ground to get stuff out of and sell to us for "profit", a FRACKING site is a hole the ground with a bunch of LIARS on top.

Here's an article MKing will disagree with and ridicule as "garden variety" or "irrelevant" or disdain with some other pejorative bit of puffery.

The only part of the article he will agree with is that the Oil and Gas industry ACTUALLY gave solar power technology development a boost back in the 70s because PV supplied power to very remote locations the fossil fuelers tend be located for new profit over planet piggery.  ;D

The FULL story of how we-the-people have supported these fossil fuel and nuclear welfare queens is there from the start until this day. The appearance of profitability ignores our tax money for research and continuous subsidy.

Fossil fuelers have an amazing ability to ignore, not just externalized costs, but the giveaways from we-the-people! They have the brass balls to compute those subsidies as part of the ROI. That's a blatant accounting falsehood. Without subsides they are not profitable, period. But MKing will continue with his fantasies, come hell or high water. So it goes.  :P


SNIPPPET 1:

Quote
The bias against renewable funding and support is clear. Recent analysis found that over the first fifteen years an industry receives a subsidy, nuclear energy received an average of $3.3 billion, oil and gas averaged $1.8 billion,Fto and renewables averaged less than $0.4 billion.

Renewables received less than one-quarter of the support of oil and gas and less than one-eighth of the support that nuclear received during the early years of development, when strong investment can make a big difference. Yet even with this disparity, more of our energy supply now comes from renewables than from nuclear, which indicates the strength of renewables as a potential energy source.

SNIPPET 2:
Quote

The momentum behind renewable development came to a rapid halt as soon as Ronald Reagan was elected president. Not only did he remove the solar panels atop the White House, he also gutted funding for solar development and poured billions into developing a dirty synthetic fuel that was never brought to market.

Unnatural Gas: How Government Made Fracking Profitable (and Left Renewables Behind)

http://www.dissentmagazine.org/online_articles/unnatural-gas-how-government-made-fracking-profitable-and-left-renewables-behind (http://www.dissentmagazine.org/online_articles/unnatural-gas-how-government-made-fracking-profitable-and-left-renewables-behind)





 
Title: Shale Oil Boom Breaking Down
Post by: Thomas Lewis on October 08, 2014, 03:44:32 AM

From the keyboard of Thomas Lewis Follow us on Facebook Follow us on Twitter @Doomstead666

No, this is not a Dallas suburb, it’s a fracking field. If you don’t like it now, imagine it in a few years, when it has been abandoned. (Photo by Simon Fraser University)

No, this is not a Dallas suburb, it’s a fracking field. If you don’t like it now, imagine it in a few years, when it has been abandoned. (Photo by Simon Fraser University)

First published at The Daily Impact  October 1, 2014

Recent research suggests that fracking causes earthquakes; they have no doubt of that at the fourth largest trading and investment company in Japan — Sumitomo Corporation — which has just experienced a Magnitude 10. The profit Sumitomo expected to make this year, a hefty $2.27 billion, has been all but wiped out. News of the disasteratomized 13 per cent of its stock value in one day.  Its credit rating went to “negative.” And almost all of this was caused by hideous losses incurred in fracking for tight oil in Texas.

Sumitomo samurai rolled into Texas just two years ago (seems like only yesterday) with a $2 billion dollar investment in the Permian shale-oil play, in partnership with Devon Energy of Oklahoma. So here we have Japan’s fourth-largest trading company, along with one of the largest US fracking companies, going into the (potentially, according to the oil interests) richest tight-oil basin in the United States in the midst of a tight oil boom. What could possibly go wrong?

 Sumitomo has no idea. They have appointed a committee to try to figure it out. “It is difficult,” said a dazed-sounding statement from the top, “to extract the oil and gas efficiently.” They could not, as it turned out, expect enough production “to recover the investment.” Wow. Not much of a business plan there.

 What Sumitomo missed, as its investigating committee may or may not figure out, is that fracked wells are not at all like normal oil wells: they are twice as expensive to set up, many times more expensive to operate, and run out 10-20 times faster. The simple fact is that the wells are not paying for themselves. They look like they are going to, in their first year, but by the third or fourth year it’s clear that they are not going to. (For a devastating explanation of this point by the former head of research for a London money broker, see “Shale Gas: The Dotcom Bubble of Our Times.”)

Sumitomo is not alone in its mystification. Itochu Corporation, Japan’s third largest trading company, has written off 80 percent of a nearly $80 million investment in a US fracking company. And then there is Shell, which took a $2 billion hit last August as punishment for its shale-oil and -gas enthusiasm, and this year bailed out of a business in which it had been one of the largest players.

 Every Ponzi scheme and bubble is based on the Greater Fool hypothesis of investing, which is that the real value of the assets you’re buying don’t matter as long as you can find a greater fool, someone who knows even less about the assets than you do, who will buy them from you. When you run out of fools, the market crashes.

 With Sumitomo bailing now — that is, selling its leases — the search for the next greater fools is becoming really intense.  They are going to experience peak fools very soon. And then there is going to be an earthquake we will all feel.

***

Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

Title: Re: Shale Oil Boom Breaking Down
Post by: MKing on October 08, 2014, 08:53:06 AM
No, this is not a Dallas suburb, it’s a fracking field. If you don’t like it now, imagine it in a few years, when it has been abandoned. (Photo by Simon Fraser University)

What is a "fracking field" Tom? This looks like Pinedale or Jonah to be honest.

Quote from: Thomas Lewis
Recent research suggests that fracking causes earthquakes;......

Actually fracking looks to be okay, the issues appear to be well integrity. Funny how folks knew this before all the hysteria ensued, but then they were probably really smart folks and knew something about wells and whatnot.

http://www.nola.com/politics/index.ssf/2014/09/faulty_well_integrity_not_frac.html (http://www.nola.com/politics/index.ssf/2014/09/faulty_well_integrity_not_frac.html)

Quote from: ThomasLewis
And almost all of this was caused by hideous losses incurred in fracking for tight oil in Texas.

Amazing! And these Japanese folks, they brought their domestic oil and gas experts to Texas and figured they understood what was going on, based on their domestic experience in the vast oil and gas fields of Japan? Or did they make the mistake the same folks did who thought fracking was polluting groundwater, when in fact the experts always knew that couldn't be the problem?

Quote from: Thomas Lewis
>Every Ponzi scheme and bubble is based on the Greater Fool hypothesis of investing, which is that the real value of the assets you’re buying don’t matter as long as you can find a greater fool, someone who knows even less about the assets than you do, who will buy them from you. When you run out of fools, the market crashes.

Quite true. And the oil and gas business has been going since 1859 and 1825 respectively, so either they "fool accumulation" rate is really low, or they aren't  Ponzi scheme.
Title: Re: Shale Oil Boom Breaking Down
Post by: RE on October 08, 2014, 10:01:51 AM
Actually fracking looks to be okay, the issues appear to be well integrity.

OMFG.

(http://navylifeofapilotswife.files.wordpress.com/2014/04/triple_facepalm.png)

(http://fc05.deviantart.net/fs71/i/2011/252/a/d/bird_56___cuckoo_4_cocoa_puffs_by_masterkrypton-d49chro.jpg)

RE

Title: Fracker Fraud Exposed!
Post by: RE on October 10, 2014, 01:05:10 AM
The LIES from the Fracker Shills are starting to see the Light of Day now.  :icon_sunny:

I gotta see if I can get John Lee from the University of Houston on for a Podcast.  :icon_sunny:

RE

Selling The Shale Boom: It's All About Reserves

EconMatters's picture



 

By EconMatters

 

Over a year ago, Netflix CEO Reed Hasting got into trouble with the SEC when Netflix stock price spiked 21% after Hasting boasted on his Facebook page that Netflix monthly viewing exceeded 1 billion hours 3 weeks before the company's scheduled earnings release.  At the time, we opined that

Ever since the collapse of Enron and Lehman Brothers, corporate executive behavior and communication has been under the microscope with increasing regulatory scrutiny. There’s a good reason why almost all Fortune 500 C-Suite executives are very cautious and tight-lipped when speaking to the public about anything with stock price moving potential ..... It is irresponsible for a CEO to announce something without all the facts and figures.    

Well, apparently we were too harsh on Hasting.  Bloomberg reported even more serious discrepancies rife in the U.S. shale industry (see also chart below from Bloomberg):

Sixty-two of 73 U.S. shale drillers reported one estimate [of oil and gas reserves] in mandatory filings with the Securities and Exchange Commission while citing higher potential figures to the public, according to data compiled by Bloomberg.   

Chart Source: Bloomberg.om

For example, Bloomberg cited Pioneer Natural Resources (PXD) Co.’s estimate was 13 times higher, while Goodrich Petroleum Corp. (GDP) was 19 times.  Bloomberg also noted the number PXD told to potential investors has increased by 2 billion barrels a year in each of the last five years -- even as the proved reserves it files with the SEC have declined.   Similarly, the investor presentation by Rice Energy (RICE) shows 2.7 billion barrels. Rice, which went public in January, reported 100 million barrels to the SEC in March, that's almost 27 times higher.

 

Read More >>> Solar in Oil Drilling:  Beat Them or Join Them?

 

So in other words, these companies tell SEC one number, then can just turn around inflate that number to whatever 'estimates' companies believe to be 'probable' and/or 'possible'.  If you think executives would be held responsible for this kind of 'mis-communication', you would be wrong. Apparently it is legal and a common operational procedure as Bloomberg explains:

The SEC requires drillers to provide an annual accounting of how much oil and gas their properties will produce, a measurement called proved reserves, and company executives must certify that the reports are accurate.  

No such rules apply to appraisals that drillers pitch to the public, sometimes called resource potential. In public presentations, unregulated estimates included wells that would lose money, prospects that have never been drilled, acreage that won’t be tapped for decades and projects whose likelihood of success is less than 10 percent ........ 

Many of the companies use their own variation of resource potential, often with little explanation of what the number includes, how long it will take to drill or how much it will cost. The average estimate of resource potential was 6.6 times higher than the proved reserves reported to the SEC, the data compiled by Bloomberg News show.

Meanwhile, Bloomberg quoted comments from two of the drillers.  From the Chairman and CEO of Pioneer Natural Resources (PXD):

"Experienced investors know the difference between the two numbers........We’re owned 95 percent by institutions. Now the American public is going into the mutual funds, so they’re trusting what those institutions are doing in their homework.”

Here is the spokesperson of Marathon Oil chiming in:

Figures the company executives cite during presentations “are used in the capital allocation process, and are a standard tool the investment community understands and relies on in assessing a company’s performance and value,”

So this means Wall Street analysts model valuation, growth, and therefore stock recommendation based on 'estimate' that does not meet SEC reporting rules but thrown out by executives to tell a better story of their stocks to the potential investors?

 

Read More >>> The Oil Market QE Premium Is Coming out of Price

 

Honestly, it seems even worse than Enron's off-Balance Sheet Financing scheme.  Ultimately, in the Enron aftermath, CEO Jeff Skilling is serving 14 years of a 24-year original sentence for misleading investors.  Unfortunately, that precedent does not seem to have made as much impact you'd think at least within the onshore E&P industry.  In that regard, we totally agree with John Lee, a Petroleum Engineering professor at University of Houston:

If I were an ambulance-chasing lawyer, I’d get into this.

This 'over-optimism' also opens up a whole new can of worms as to the current projection of U.S. oil reserves and production.  Is the U.S. really on its way to become energy self-sufficient as some may believe based on "resource potential"?  We certainly hope U.S. government checks all supporting data and facts before lifting the crude oil export ban.

 

Read More >>> Brent Oil Faces Headwinds in 2014

 

According to Bloomberg, investors poured $16.3 billion in the first seven months of the year into mutual funds and exchange-traded funds focused on energy companies.  Our advise to retail investors -  Do your homework and double fact-checking, if something sounds too good to be true, it usually is.

Title: Re: Shale Oil Boom Breaking Down
Post by: roamer on October 12, 2014, 04:53:43 PM
No, this is not a Dallas suburb, it’s a fracking field. If you don’t like it now, imagine it in a few years, when it has been abandoned. (Photo by Simon Fraser University)

What is a "fracking field" Tom? This looks like Pinedale or Jonah to be honest.

Quote from: Thomas Lewis
Recent research suggests that fracking causes earthquakes;......

Actually fracking looks to be okay, the issues appear to be well integrity. Funny how folks knew this before all the hysteria ensued, but then they were probably really smart folks and knew something about wells and whatnot.

http://www.nola.com/politics/index.ssf/2014/09/faulty_well_integrity_not_frac.html (http://www.nola.com/politics/index.ssf/2014/09/faulty_well_integrity_not_frac.html)

Quote from: ThomasLewis
And almost all of this was caused by hideous losses incurred in fracking for tight oil in Texas.

Amazing! And these Japanese folks, they brought their domestic oil and gas experts to Texas and figured they understood what was going on, based on their domestic experience in the vast oil and gas fields of Japan? Or did they make the mistake the same folks did who thought fracking was polluting groundwater, when in fact the experts always knew that couldn't be the problem?

Quote from: Thomas Lewis
>Every Ponzi scheme and bubble is based on the Greater Fool hypothesis of investing, which is that the real value of the assets you’re buying don’t matter as long as you can find a greater fool, someone who knows even less about the assets than you do, who will buy them from you. When you run out of fools, the market crashes.

Quite true. And the oil and gas business has been going since 1859 and 1825 respectively, so either they "fool accumulation" rate is really low, or they aren't  Ponzi scheme.

I got a laugh out of this, after being in the oil fields for a short while its no wonder MKing is always ranting at the misinformation about the industry.  Its horrendously thick.   Fracking itself is not the environmental issue its made out to be, certainly not to the extent presented by misinformed or worse opponents.  Well integrity and proper casing has caused natural gas leakage near a few water tables but its always been an issue with oil wells.  But how many people here realize the extent to which coal generated methane NATURALLY contaminates many water tables in north dakota and other regions??  Mother nature aint always pure and nice, volcanoes, ice ages, viruses, ruthless predators, death, disease, all very natural.  A bigger point is that almost every aspect of our industrial society is still dependent on this resource and contrary to pro renewable dialogues we do not have a replacement, not one that works with our high growth necessitating economy at least not yet anyways...

In the meantime these folks shouldn't  fret the small stuff, water contamination and CO2 pollution are miniscule threats to the carnage the declining net energy is going to have on our societal order.  The debt based fracking is one very good sign of this decline.  I think though unlike most ponzi schemes it actually has actually been a bit of a useful reprieve from the harsh thermodynamic realities which beckon.  Lots of rich people basically threw in their money to produce expensive oil cloaked as cheap oil expecting a return.  Its given solar more time to mature in under the guise of normal market conditions and given the US a few options to play with the oil markets for geopolitical gain.   Things could be much worse right now and we have largely the fracking "ponzi" to thank for that.
Title: Re: Shale Oil Boom Breaking Down
Post by: RE on October 13, 2014, 01:08:36 AM

I got a laugh out of this, after being in the oil fields for a short while its no wonder MKing is always ranting at the misinformation about the industry.  Its horrendously thick.   Fracking itself is not the environmental issue its made out to be, certainly not to the extent presented by misinformed or worse opponents.  Well integrity and proper casing has caused natural gas leakage near a few water tables but its always been an issue with oil wells.  But how many people here realize the extent to which coal generated methane NATURALLY contaminates many water tables in north dakota and other regions??  Mother nature aint always pure and nice, volcanoes, ice ages, viruses, ruthless predators, death, disease, all very natural.  A bigger point is that almost every aspect of our industrial society is still dependent on this resource and contrary to pro renewable dialogues we do not have a replacement, not one that works with our high growth necessitating economy at least not yet anyways...

In the meantime these folks shouldn't  fret the small stuff, water contamination and CO2 pollution are miniscule threats to the carnage the declining net energy is going to have on our societal order.  The debt based fracking is one very good sign of this decline.  I think though unlike most ponzi schemes it actually has actually been a bit of a useful reprieve from the harsh thermodynamic realities which beckon.  Lots of rich people basically threw in their money to produce expensive oil cloaked as cheap oil expecting a return.  Its given solar more time to mature in under the guise of normal market conditions and given the US a few options to play with the oil markets for geopolitical gain.   Things could be much worse right now and we have largely the fracking "ponzi" to thank for that.

I tend to agree with you on the "don't sweat the small stuff" issue, and overall direct pollution of the water supply by fracking is just one of many contributors to this problem.

Where fracking is more of an issue is in its competition for the same water supply utilized for agriculture and drinking water.  The more wells you frack, the more water you consume of course.

Also, like with QE and the various games played to keep the financial system from collapsing, in the near term the fact the main systems haven't collapsed does give people more time to prep up, change lifestyle, reduce consumption etc. 

At the same time though, the longer BAU continues onward, the more profound the crash will be when it finally does come to your neighborhood.  Also, the truth of the matter is that most people are not using this "Bonus Time" to prepare, but rather continuing on with the same old paradigm, at least if they have not already fallen off the economic cliff already.  For its part, Da Goobermint isn't doing anything to make a transition off fossil fuel more possible, mainly in not coming up with any alternative economic model to stem the problem of an ever shrinking job market and fewer people all the time able to waste copious quantities of fuel to keep the current economic system running.

Besides the local issues, you of course also still have the escalating Geopolitical problems and the emerging health issues coming from Ebola, Marburg etc.  In the face of that, the pollution problem with fracking is relatively small potatoes overall.  For many people though, it represents a kind of bellweather for the overall degradation of the environment that has essentially turned the whole earth into a sewer at this point.

I do hope for your sake the fracking boom lasts long enough for you to pay off your college debt and set up your dairy somewhere.  Not looking too good in the Futures Market tonight though.

Now, back to packing up for the move to the new SUN  :icon_sunny: Community!

RE
Title: Re: Fracker Debt Bubble
Post by: RE on October 13, 2014, 01:43:40 AM
From Bloomberg (http://www.bloomberg.com/news/2014-05-26/shakeout-threatens-shale-patch-as-frackers-go-for-broke.html)

RE

Shakeout Threatens Shale Patch as Frackers Go for Broke

Photographer: Ty Wright/Bloomberg

Drillers must keep borrowing to pay for exploration needed to offset the steep... Read More

The U.S. shale patch is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground.

Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”

Some investors are already bailing out. On May 23, Loews Corp. (L), the holding company run by New York’s Tisch family, said it is weighing the sale of HighMount Exploration & Production LLC, its oil and natural gas subsidiary, at a loss.

HighMount lost $20 million in the first three months of the year, after being unprofitable in 2013 and 2012, Loews said it its financial reports. As with much of the industry, HighMount has shifted its focus to oil after natural gas prices plunged and has struggled to find sites worth developing, company records show.

Mary Skafidas, a spokeswoman for Loews, declined comment.

In a measure of the shale industry’s financial burden, debt hit $163.6 billion in the first quarter, according to company records compiled by Bloomberg on 61 exploration and production companies that target oil and natural gas trapped in deep underground layers of rock. And companies including Forest Oil Corp. (FST), Goodrich Petroleum Corp. (GDP) and Quicksilver Resources Inc. (KWK) racked up interest expense of more than 20 percent.

Production Declines

Quicksilver acknowledges the company is over-leveraged, said David Erdman, a spokesman for Quicksilver. The company’s interest expense equaled almost 45 percent of revenue in the first quarter. “We have taken concrete measures to reduce debt,” he said.

Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

Interest Expenses

“Interest expenses are rising,” said Virendra Chauhan, an oil analyst with Energy Aspects in London. “The risk for shale producers is that because of the production decline rates, you constantly have elevated capital expenditures.”

Chauhan wrote a report last year titled “The Other Tale of Shale” that showed interest expenses are gobbling up a growing share of revenue at 35 companies he studied. Interest expense for the 61 companies examined by Bloomberg totalled almost $2 billion in the first quarter, 4.1 percent of revenue, up from 2.3 percent four years ago.

The drilling spree boosted U.S. oil production to 8.4 million barrels a day, 16 percent more than a year ago and the highest since 1986. Growth has been driven by advances in horizontal drilling and hydraulic fracturing, or fracking, which unlocked crude and natural gas trapped in formations like North Dakota’s Bakken shale or the Marcellus in the U.S. northeast.

Costly Gains

The gains haven’t come cheaply. Goodrich said earlier this month that it’s trying to whittle its well costs in the Tuscaloosa Marine Shale down to $11.5 million apiece. The $1.1 billion company, based in Houston, spent almost $52 million more than it earned in the first quarter.

The company has enough money to cover its 2014 capital needs and is working with its board to fund 2015 as it ramps up drilling, spokesman Daniel Jenkins said in an e-mail.

A successful well announced last month has propelled Goodrich shares to $25.34, more than double the 2014 low of $12.28.

While borrowing to spend is typical of start-up companies, it’s not always sustainable. Forest Oil, where interest expense totaled 27 percent of revenue in the first quarter, in February reported disappointing well results, and warned that it might run afoul of its debt agreements. Forest on May 6 announced a plan to sell itself to Sabine Oil & Gas LLC in an all-stock transaction. Denver-based Forest declined to put a value on the deal. The company declined comment. Shares have declined 39 percent so far this year.

Eagle Ford

Zaza Energy Corp. (ZAZA), which got its start as a joint venture with Hess Corp. (HES), bought up oil rights in the Eagle Ford shale field and the nearby Eaglebine in South Texas, near the heart of the U.S. oil boom. Its first quarter revenue fell short of interest expense. The firm’s accountants in March voiced “substantial doubt” about the Houston-based company’s ability to stay afloat.

Hess, which dissolved the partnership almost two years ago, lost money on the deal. And its foray into what has turned out to be the biggest shale play in the U.S. prompted Elliott Management Corp., billionaire Paul Singer’s investment firm, to oust John Hess last year from the chairmanship of a company his father founded more than 80 years ago. Zaza has since entered into a joint venture with EOG Resources Inc. in Houston, one of the few shale companies to bring in more cash than it spends. Zaza’s shares have declined 28 percent this year.

“We are now significantly increasing our production volumes and revenue,” said Todd A. Brooks, president and chief executive officer.

Negative Outlook

Swift Energy Co. (SFY) has slowed drilling while trying to sell acreage or find a partner to shoulder some of the costs. The company on May 6 announced a $175 million joint venture with a unit of a government-controlled energy company in Indonesia. The proceeds will be used to help pay down debt. The deal announcement still didn’t stop Standard & Poor’s from cutting Swift’s credit rating on May 15 and tagging the company with a negative outlook. Shares have declined 19 percent so far this year.

“Traditionally we’ve been a financially conservative company,” said Bruce Vincent, president of Houston-based Swift. “We’ve become more leveraged than we historically have been and we’ve become uncomfortable with that.”

Title: Re: Shale Oil Boom Breaking Down
Post by: WHD on October 13, 2014, 07:54:29 AM
No, this is not a Dallas suburb, it’s a fracking field. If you don’t like it now, imagine it in a few years, when it has been abandoned. (Photo by Simon Fraser University)

What is a "fracking field" Tom? This looks like Pinedale or Jonah to be honest.

Quote from: Thomas Lewis
Recent research suggests that fracking causes earthquakes;......

Actually fracking looks to be okay, the issues appear to be well integrity. Funny how folks knew this before all the hysteria ensued, but then they were probably really smart folks and knew something about wells and whatnot.

http://www.nola.com/politics/index.ssf/2014/09/faulty_well_integrity_not_frac.html (http://www.nola.com/politics/index.ssf/2014/09/faulty_well_integrity_not_frac.html)

Quote from: ThomasLewis
And almost all of this was caused by hideous losses incurred in fracking for tight oil in Texas.

Amazing! And these Japanese folks, they brought their domestic oil and gas experts to Texas and figured they understood what was going on, based on their domestic experience in the vast oil and gas fields of Japan? Or did they make the mistake the same folks did who thought fracking was polluting groundwater, when in fact the experts always knew that couldn't be the problem?

Quote from: Thomas Lewis
>Every Ponzi scheme and bubble is based on the Greater Fool hypothesis of investing, which is that the real value of the assets you’re buying don’t matter as long as you can find a greater fool, someone who knows even less about the assets than you do, who will buy them from you. When you run out of fools, the market crashes.

Quite true. And the oil and gas business has been going since 1859 and 1825 respectively, so either they "fool accumulation" rate is really low, or they aren't  Ponzi scheme.

I got a laugh out of this, after being in the oil fields for a short while its no wonder MKing is always ranting at the misinformation about the industry.  Its horrendously thick.   Fracking itself is not the environmental issue its made out to be, certainly not to the extent presented by misinformed or worse opponents.  Well integrity and proper casing has caused natural gas leakage near a few water tables but its always been an issue with oil wells.  But how many people here realize the extent to which coal generated methane NATURALLY contaminates many water tables in north dakota and other regions??  Mother nature aint always pure and nice, volcanoes, ice ages, viruses, ruthless predators, death, disease, all very natural.  A bigger point is that almost every aspect of our industrial society is still dependent on this resource and contrary to pro renewable dialogues we do not have a replacement, not one that works with our high growth necessitating economy at least not yet anyways...

In the meantime these folks shouldn't  fret the small stuff, water contamination and CO2 pollution are miniscule threats to the carnage the declining net energy is going to have on our societal order.  The debt based fracking is one very good sign of this decline.  I think though unlike most ponzi schemes it actually has actually been a bit of a useful reprieve from the harsh thermodynamic realities which beckon.  Lots of rich people basically threw in their money to produce expensive oil cloaked as cheap oil expecting a return.  Its given solar more time to mature in under the guise of normal market conditions and given the US a few options to play with the oil markets for geopolitical gain.   Things could be much worse right now and we have largely the fracking "ponzi" to thank for that.

There are a lot of big dicks being swung about fracking. That it could be much worse has more to do with big dicks, than ponzi fracking is to having given us a reprieve, thanks. Earth as Mother BTW is growing tired of big dicks, wagging. Nature trumps big dicks wagging for their own sake.  :icon_mrgreen:
Title: Re: Fracker Debt Bubble
Post by: roamer on October 13, 2014, 09:06:18 AM
WHD, my point dickheads aside, is would you rather have initiated energy descent with financial and social chaos or frack and hope solar energy and tech provides better options down the road.  If I was somehow forced to make that choice  I would frack.  It would be the poor that would suffer most not the dickheads in a fast oil descent.  I'm optimistic too for that matter that we are getting closer to having tech and systems ready to transition than six years ago.  Solar and blockchain economies seem promising as a parallel system to assist in descent.  Frack borrowed time at least gives us these potentials.
Title: Re: Fracker Debt Bubble
Post by: monsta666 on October 14, 2014, 03:18:00 AM
WHD, my point dickheads aside, is would you rather have initiated energy descent with financial and social chaos or frack and hope solar energy and tech provides better options down the road.  If I was somehow forced to make that choice  I would frack.  It would be the poor that would suffer most not the dickheads in a fast oil descent.  I'm optimistic too for that matter that we are getting closer to having tech and systems ready to transition than six years ago.  Solar and blockchain economies seem promising as a parallel system to assist in descent.  Frack borrowed time at least gives us these potentials.

I know this question was directed at WHD but to answer your question I think the answer depends on who you are. For this fracking boom to yield a real benefit not only must one fully understand the full implications of a collapse but take active steps to prepare for one. Only if those two conditions are met can you say any measure used to extend business as usual is useful. As such I can see how an extension could benefit yourself and William because you are aware what is coming and are actively saving in preparation for this event however the vast majority of people (including those in the oil field I feel) are not in your position.

Most people see an extension of business as usual as a means of extending their unsustainable consumption levels. When I go to work I see many people are living paycheck to paycheck with little to no savings or worse (going into more debt). Do these people benefit from an extension of business as usual? In the short-term perhaps a case could be made it is better as they avoid the immediate pains associated with collapse but in the long-term no because the eventual shock will be greater. I think the thing to factor here is a collapse at some point is inevitable so the question essentially boils down to when it happens. Thing is the longer business as usual carries on the higher the peak throughput in global consumption will be and so the decline will be that much steeper. If on the other hand collapse comes sooner then the peak will not be as high and the collapse will not be as sharp.

The reason this happens is because a delayed peak comes about due to increased efficiency over extracting and allocating resources. If we make the extraction process more efficient in effect we are lowering the cost of the base resource which allows us to deplete more of our resources before the negative feedback loops from diminishing returns can take hold. To give you an example the reason communism failed before capitalism is become communism is less efficient at extracting and allocating resources than capitalism. Ultimately though since we do not have infinite resources or energy and are bound by the laws of thermodynamics growth will stop however if the process in which we achieve resource consumption is more efficient what we can do is buy more time, maximise peak consumption i.e. peak GDP but this comes at a price of more dramatic collapse. This issue is particularly true when you think that quite often increased efficiency comes at the expense of resiliency so when things breakdown there is less to fall back onto. This lack of resiliency and fall back options means a future collapse is likely to be different to the depression or the fall of the Soviet Union.

The final thing to consider is that while a delayed collapse could benefit you or me potentially it will come at the expense of future generations as a delayed collapsed insures more resources are depleted and the environment degradation is greater before consumption levels are restored to more sustainable levels. In the end what I am saying is that the "we" who truly benefits from delayed collapse is quite narrow and in the grand scheme it is probably better a collapse happens today rather than tomorrow. However I do stress this statement comes when taking the bigger picture as I feel the vast vast majority of people are not preparing for collapse and are just using technology as an enabler of destructive behavioural patterns. At the end of the day what we face is a behavioural problem that needs changing. What we tend to do however is dress this issue as a technical problem as technical "solutions" enable us to maintain our behaviours of excessive consumption. 

Saying all that if the focus is saving yourself and close loved ones then a delayed collapse is the better option. I don't know about you but I am more interested in saving myself and those around me than saving the world so I see how delaying a collapse is a good thing. But if one was less attached to the world (either socially, financially or emotionally) or is not born yet then a collapse today is the best option. 
Title: Re: Fracker Debt Bubble
Post by: WHD on October 14, 2014, 09:43:08 AM
WHD, my point dickheads aside, is would you rather have initiated energy descent with financial and social chaos or frack and hope solar energy and tech provides better options down the road.  If I was somehow forced to make that choice  I would frack.  It would be the poor that would suffer most not the dickheads in a fast oil descent.  I'm optimistic too for that matter that we are getting closer to having tech and systems ready to transition than six years ago.  Solar and blockchain economies seem promising as a parallel system to assist in descent.  Frack borrowed time at least gives us these potentials.

A more honest conversation about energy could initiate more growth in solar and "blockchain" economies, than a mere fracking bubble built on lies about eternal growth and Saudi 'Merica energy abundance for the next three generations, energy independence, net-exporter, etc - is all I'm sayin. Arguably, J6P is LESS informed about energy now than in 2007, coming to believe that lower prices for gasoline are emblematic of "Merica being awash in hydrocarbons, soon to have a surplus.

Anyway, that we did not have an honest conversation about energy - we did not then have a CHOICE about fracking or not. Necessity is a greater mother of invention than time. We aren't helping invention by pretending that fracking is salvation. America needs a wake-up call, a serious, no-bullshit conversation about our future, and our use of energy.

My bitching about it is moot, I allow. It is all hindsight - we got the fracking whether we needed it or not. Perhaps even, all those big dicks lying their way to the fracking bonanza etc have both "given time" for solar to build, but also exacerbated the likelihood of their being cut off, when their lies are revealed. 
Title: Re: Fracker Debt Bubble - on big dicks and violence
Post by: WHD on October 15, 2014, 12:48:18 AM
WHD:
Quote
My bitching about it is moot, I allow. It is all hindsight - we got the fracking whether we needed it or not. Perhaps even, all those big dicks lying their way to the fracking bonanza etc have both "given time" for solar to build, but also exacerbated the likelihood of their being cut off, when their lies are revealed. 

I have been thinking about this quote all day. The reference is "big dicks." The metaphor is "cut off."

Did I advocate anything like violence? Do I advocate violence?

I think a lot of people are thinking about violence. I think a lot of people are thinking about violence being done to them; about doing violence, to themselves or another. I admit, I have thought about violence, when it comes to the Federal Reserve, the big banks, the total surveillance state, the threatened copper/nickel sulfide mining in northern Minnesota, the big Agriculture near-monopoly on food production, the...the..the...

I've long avoided violence in myself, and in others. Though I have long felt a deep undercurrent of violence in myself. There is a strong current of violence above and below-board in America. In many places worldwide (and in America), it is ever-present.

Did I advocate violence? No. Do I advocate violence? No.  I recommend, if we "cut off" anything, we just make it harder for "big dick" types (control freaks and power fiends) to access credit, to offer credit, to govern, to manage. 

Otherwise, love. Love this life. Love yourself. Love others. Love this earth.  :)

WHD

(But then, I do not mean to condescend, because it is up to you, what violence you will do.)






























Title: Thomas Paine RE on COMMON FUCKING SENSE
Post by: RE on October 15, 2014, 04:02:33 AM
Did I advocate violence? No. Do I advocate violence? No.  I recommend, if we "cut off" anything, we just make it harder for "big dick" types (control freaks and power fiends) to access credit, to offer credit, to govern, to manage. 

Otherwise, love. Love this life. Love yourself. Love others. Love this earth.  :)

Nobody accused you of advocating violence.  You are about the biggest proponent of Non-Violence on the Diner, although there are many others here who believe in Non-Violence as essential to fixing our problems, Surly and Ashvin write regularly on this topic.

There is a big difference between Advocating Violence and OBSERVING how both Goobermints and Individuals react in a Collapsing Economy.

Does pointing out that the Collapse of the French Economy led to the French Revolution and the Reign of Terror make you an Advocate of Violence?  No it just makes you a student of history.

IMHO, the best way to prevent or at least possibly reduce the amount of Violence which is bound to occur in this spin down is to get the Elite to realize that eventually the Violence will not just be theirs to Dish Out, but is quite likely to turn round and come back at them in an Order of Magnitude difference.  Even Billionaire Nick Hanauer realizes this, but most do not seem to get the picture here.

How do you get the Elite to grasp this relatively straightforward concept?  By WRITING and developing a large readership base.  It doesn't do too much good to pass out one Pamphlet on a streetcorner which one or two people actually read before they toss it in the trash bin.  You need to pass out MANY PAMPHLETS in MANY PLACES, and get MANY READERS before you can have some effect.

DOOMSTEAD DINER GLOBAL RANKING NOW 176K with 32 Minutes Time on Site for Readers/Listeners

This Pamphlet is getting some readership now.  So GET WRITING!

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Thomas Paine RE
Title: Fracker Debt Bubble: Comes the SQUEEZE!
Post by: RE on November 05, 2014, 02:00:01 AM
It's SHOWTIME!

RE

0 % Interest Rates: Federal Reserve Keeps Shale Gas Fracking Bubble Afloat (http://www.globalresearch.ca/0-interest-rates-federal-reserve-keeps-shale-gas-fracking-bubble-afloat/5411745)

By Steve Horn
Global Research, November 04, 2014
DeSmogBlog
Region: USA
Theme: Global Economy, Oil and Energy

In August 2005, the U.S. Congress and then-President George W. Bush blessed the oil and gas industry with a game-changer: the Energy Policy Act of 2005. The Act exempted the industry from federal regulatory enforcement of the Safe Drinking Water Act, the Clean Water Act and the National Environmental Policy Act.

While the piece of omnibus legislation is well-known to close observers of the hydraulic fracturing (“fracking”) issue — especially the “Halliburton Loophole” — lesser known is another blessing bestowed upon shale gas and tight oil drillers: near zero-percent interest rates for debt accrued during the capital-intensive oil and gas production process.

Or put more bluntly, near-free money from the U.S. Federal Reserve Bank. That trend may soon come to a close, as the Federal Reserve recently announced an end to its controversial $3 trillion bond-buying program.

In response to the economic crisis and near collapse of the global economy, the Federal Reserve dropped interest rates to between 0 percent and .25 percent on December 16, 2008, a record low percentage. It also began its bond-buying program, described in a recent Washington Post article asimplemented to provide a “booster shot” to the economy.

“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Fed stated in a press release announcing the maneuver. “In particular, the [Federal Reserve] anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

That free money, known by economics wonks as quantitative easing, helps drilling companies finance fracking an increasingly massive number of wells to keep production levels flat in shale fields nationwide.

But even with the generous cash flow facilitated by the Fed, annual productivity of many shale gas and tight oil fields have either peaked or are in terminal decline. This was revealed in Post Carbon Institute‘s recently-published report titled, “Drilling Deeper: A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom.”

Were it not for the Federal Reserve’s policy, the ever-accelerating drilling treadmill would likely slow down, making shale oil and gas production a far less lucrative endeavor for oil and gas companies and the financiers bankrolling it.

Some articles in the business press, including in the Houston Chronicle andBloomberg, speculate the Fed could lift interest rates on debt in 2015. That would sharply hinder many smaller and mid-level independent oil and gas companies.
Junk Debt Keeps Drillers on Treadmill

A June article published in the Houston Chronicle highlighted the heavy reliance drillers have on “junk debt” to stay on the drilling treadmill. That is, the ever-increasing number of wells drilled to keep production numbers flat on a field-by-field basis, measured monthly or annually.

“[T]he gatekeeper of the nation’s money supply already has signaled it is planning to end its multibillion-dollar bond-buying program by the end of the year, and then begin to raise short-term interest rates toward historically typical levels from the near-zero rates that helped jump-start the recovery,” wrote Chronicle energy reporter Collin Eaton.

That bond-buying program, Bloomberg pointed out, helps frackers to “stay on [the] treadmill.” The combination of the end of the bond-buying and raising of interest rates is no small matter for drillers.

“Higher interest rates might make risky new bond issues by shale producers less attractive, and a flight of investor capital could leave the producers short on a commodity even more precious than oil: Cash,” explained Eaton.

Junk debt earned the name for a reason: it means risky business for investors, but also a higher yield of the cut if the bet goes well. It also means the cash needed for frackers to do exploration and production and the drill baby, drill process.

According to Bloomberg Businessweek, the horizontal drilling process for a single well can cost between $3.5 million to $9 million per well.

“What that tells us is it’s an operation heavily dependent on debt,” Vivendra Chauhan, an analyst for Energy Aspects, told the Chronicle. “Any cash you’re bringing in is being consumed by capital expenditures. This becomes a 2015, 2016 story about what happens when interest rates do rise. If they stop lending, you’ll get a pullback in production growth.”

The accelerating treadmill comes at a steep ecological cost even if the cash has come free of charge via the Fed.

“We’re concerned about what riding out the accelerating treadmill means,” Hugh MacMillan, senior researcher for Food and Water Watch and author of the report “The Urgent Case for a Ban on Fracking,” told DeSmogBlog.“It means tens of thousands of new wells each year, for decades, playing out as waves of systematic, widespread and intensive targeting of communities as years go by and as local economies go boom and bust. It means far more climate pollution than we can afford, and it means a legacy of risk to vital sources of drinking water for generations.”
“Melting Ice Cube Business”

According to Eaton, U.S. independent oil and gas producers sold $2.3 billion worth of bonds in the first quarter of 2014 alone. And Bloomberg reported that the number of bonds issued by oil and gas companies has grown by a factor of nine since 2004.

Critics within the world of finance say some investors have erred when it comes to shale, falsely assuming production levels would stay high despite the contrary facts on the ground.

“There’s a lot of Kool-Aid that’s being drunk now by investors,” Tim Gramatovich, chief investment officer and founder of Peritus Asset Management LLC, told Bloomberg in an April article.

“People lose their discipline. They stop doing the math. They stop doing the accounting,” he continued. “They’re just dreaming the dream, and that’s what’s happening with the shale boom.”

If production levels do not stay high and if the price of oil continues to drop, it could mean a real financial squeeze for investors, as well as the demise of smaller, independent oil and gas companies.

“This is a melting ice cube business,” Mike Kelly, an energy analyst at Global Hunter Securities, explained to Bloomberg back in April. “If you’re not growing production, you’re dying.”
0% Interest Rates: Not for Average People

While U.S. oil and gas companies have benefitted from near zero percent interest rates for loans, average people have not been so lucky.

A case in point: federal student loans for university students have interest rates ranging from 3.4 percent to 8.5 percent. Another example: credit cards in the U.S. generally have interest rates ranging from 7 percent to 36 percent.

Indeed, an entire activist movement offshoot of Occupy Wall Street started because of the debt crisis faced by average people. That movement coined itself Strike Debt.

Carl Gibson, founder of the anti-austerity group US Uncut, believes it is a trend emblematic of a greater whole.

Carl Gibson, US Uncut; Photo Credit: Carl Gibson

“The benefits these drilling companies get are the result of a quid-pro-quo system of government. The more they put in, the more the U.S. government puts out,” Gibson said. “When you don’t have the means to shower Congress with millions in campaign donations or hire armies of lobbyists to rig the rules in your favor, the system will always be stacked against you.”
Title: The Oil Crash: it is happening now!
Post by: Guest on November 05, 2014, 02:05:34 AM

Off the keyboard of Ugo Bardi


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Published on Resource Crisis on November 4, 2014


Triangle-of-Doom-1101141Latest Triangle of DOOM from Steve Ludlum on Economic Undertow


Discuss this article at the Energy Table inside the Diner



James Schlesinger said once that humans have only two modes of operation: complacency and panic. This bimodal kind of functioning seems to be applied also to the oil market, where everything is judged on the base of a simple binary rule: high prices: bad; low prices: good. So, with oil prices falling rapidly during the past few days, the general attitude seems to be mostly of rejoicing. All worries about peak oil are being swept under the carpet and SUV owners seem to be happily expecting the fall of gas prices that will allow them to fill up their tanks on the cheap.


Unfortunately, the bimodal perception of the world makes people blind to the fact that nothing happens in isolation in the world. It is the basic law of complex systems: you can’t do just one thing. If something changes in a complex system, it is because something else has made it change. And if something changes, then something else will have to change. Complex systems work in this way. And changes are unavoidable and not always for the good of those experiencing them.


That’s true also for the crude oil producing system, which is not an isolated system. Changing some of its features reverberates all over the world. So, bringing down oil prices has an effect on other parameters. Look at this figure (from an article by Hall and Murphy on The Oil Drum)



Of course, these data are to be taken with some caution – they are only estimates. But there are other, similar, estimates, including a 2012 report by Goldman and Sachs where you can read that most recent developments need at least 120 $/barrel to be profitable. So, you see what is the problem? Prices under 80 $/barrel destroy the profitability of about 10% of the oil presently produced. If prices were to go back to values considered “normal” just 10 years ago, around 40 $/barrels, then we would lose around half of the world’s production. Anyone saying “peak oil”? Well, yes, this is the mechanism that generates peak oil: an irreversible decline of the world’s oil production. But it is not just a question of reduced oil production: if oil demand collapses, then the whole world plunges into deep recession, as it happened already in 2009, when prices briefly collapsed down to about 40 $/barrel.


Maybe this is just a temporary fluctuation; maybe things will go back to “normal” in a few months. After all, the market worked some magic during the past 4-5 years that kept oil prices high enough to generate profits high enough to make the industry able to keep producing at the usual levels (and even increase them a little). And these prices seemed to be not so high to destroy demand (not too much, anyway). But, in the long run, it is a no-win game. Depletion makes extraction progressively more expensive and not even the mighty market can work the magic needed to keep selling something that customers can’t afford to buy. The oil crash takes time to unfold, but it is happening, and it is happening now.


Title: Re: The Oil Crash: it is happening now!
Post by: WHD on November 05, 2014, 08:03:20 AM
Funny, I heard NPR yesterday, reporting that everything will be fine in the oil patch, even @ $40/brl. LOL. I think that was right after I heard about increased sales of SUVs and Trucks. "Energy Independence" was an oft' heard phrase here in Minnesota, this election cycle. It is like a religious incantation, something like probably, whatever those Mayan elite were chanting in the late days of Mayan power, when thye were cutting off heads to placate angry gods. I've no doubt "energy independence" will be just as effective.

WHD
Title: Re: The Oil Crash: it is happening now!
Post by: Surly1 on November 05, 2014, 09:39:59 AM
Funny, I heard NPR yesterday, reporting that everything will be fine in the oil patch, even @ $40/brl. LOL. I think that was right after I heard about increased sales of SUVs and Trucks. "Energy Independence" was an oft' heard phrase here in Minnesota, this election cycle. It is like a religious incantation, something like probably, whatever those Mayan elite were chanting in the late days of Mayan power, when thye were cutting off heads to placate angry gods. I've no doubt "energy independence" will be just as effective.

WHD

Never forget, NPR now stands for "National Petroleum Radio" on those occasions when it is not "National Pentagon Radio."
Title: Saudi Pipeline goes BOOM!
Post by: RE on November 05, 2014, 04:49:49 PM
Maybe this will get Oil Prices back up?

RE

Follow the link for the rest of the graphics on ZH

Saudi Stocks, Currency Tumble As Aramco Pipeline Explodes; ISIS Sabotage Concerns (http://www.zerohedge.com/news/2014-11-05/isis-sabotage-saudi-stocks-currency-tumble-aramco-pipeline-explodes)

Submitted by Tyler Durden on 11/05/2014 12:33 -0500
 

UPDATE: Nothing to see here, move along...

    ARABIAN SECURITY SOURCE SAYS FIRE OCCURRED IN AN OIL PIPELINE, NOT TERRORIST ATTACK.
    FIRE BROKE OUT DURING REPAIERS, NOW UNDER CONTROL

*  *  *

It appears Saudi markets are back in play. As Bloomberg's Richard Breslow noted this morning, Riyal forwards have jerked notably higher (implying weakness expected) and the Tadawul All Share Index has dropped 7% in the last 2 days after the killing of Shi'ites by unknown parties and now news that a pipeline has exploded. As Breslow warns, "if that indeed signifies the spread of Islamic State into Saudi Arabia, it would be the first time they crossed Saudi borders. That would be a big deal and a major escalation of problems over in that part of the world, far beyond what it would do to capital markets."

Yesterday there were attacks on Shi'ites (as Reuters reported)

    Saudi security forces on Tuesday shot dead a member of an armed group that killed five people in an overnight attack on Shi'ite Muslims marking an important religious anniversary, al-Arabiya television reported.

     

    The late Monday assault on a Shi'ite gathering in al-Ahsa district is likely to test already strained relations between Sunnis and Shi'ites across the Middle East because it coincided with the annual Ashoura commemoration of Shi'ite Islam.

     

    The Dubai-based al-Arabiya said security forces who had been hunting suspects in the al-Ahsa attack clashed with and killed "a wanted man" at a rest area in the al-Qassim province, north-west of the capital Riyadh.

... and today, what is allegedly an Aramco pipeline, just exploded near the town of Sudair, south of Riyadh.

http://www.youtube.com/v/CNRpQOiKj14?feature=player_embedded

RE
Title: Frackquake in Kansas
Post by: RE on November 12, 2014, 03:21:25 PM

Frackquake: 4.8 Magnitude Earthquake Felt Throughout Kansas

Tyler Durden's picture





 

While it is unclear if moments ago the Mississippian Lime Play under south Kansas was the first major shale quake to hit Kansas, or this was simply the first yet to be named shale company going Chapter 11, but moments ago the USGS reported that a 4.8 quake located 30 miles SSW of Wichita as well as a various other smaller quakes in north Oklahoma,shook the two states.

From KWCH:

 
 

KWCH has received numerous reports of an earthquake felt throughout the state.

 

The U.S. Geological Survey has confirmed the epicenter of the quake as 8 miles south of Conway Springs, Kansas.

 

The earthquake was felt near Haysville, Derby, Wichita, and Oklahoma City.

 

So far, there have been no reports of damage or injuries due to this earthquake.

That said, it will likely take a few more, substantially stronger frackquakes in shale regions, before the popular mood turns against America's shale revolution which has been blamed - in Ohio and elsewhere- on an increased incidence of tremors.

Title: Frack-o-nomics Fractures
Post by: RE on November 14, 2014, 01:33:24 AM

There Will Be Blood - How The Fed Has Flooded The Shale Patch With Junk Debt

Tyler Durden's picture





 

Authored by Wolf Richter of Wolf Street blog via Contra Corner,

It is possible that a miracle intervenes and that the price of oil bounces off and zooms skyward. But miracles have become rare. US light sweet crude last traded at $76.90 a barrel, down 26% from June, a price last seen in the summer of 2010.

But this price isn’t what drillers get paid at the wellhead. Grades of oil vary. In the Bakken, the shale-oil paradise in North Dakota, wellhead prices are significantly lower not only because the Bakken blend isn’t as valuable to refiners as the benchmark West Texas Intermediate, but also because take-away capacity by pipeline is limited. Crude-by-rail has become the dominant – but more costly – way to get the oil from the Northern Rockies to refineries on the Gulf Coast or the East Coast.

These additional transportation costs come out of the wellhead price. So for a particular well, a driller might get less than $60/bbl – and not the $76.90/bbl that WTI traded for at the New York Mercantile Exchange.

Fracking is expensive, capital intensive, and characterized by steep decline rates. Much of the production occurs over the first two years – and much of the cash flow. If prices are low during those two years, the well might never be profitable.

Meanwhile, North Sea Brent has dropped to $79.85 a barrel, last seen in September 2010.

So the US Energy Information Administration, in its monthly short-term energy outlook a week ago, chopped down its forecast of the average price in 2015: WTI from $94.58/bbl to $77.55/bbl and Brent from $101.67/bbl to $83.24/bbl.

Independent exploration and production companies have gotten mauled. For example, Goodrich Petroleum plunged 71% and Comstock Resources 58% from their 52-week highs in June while Rex Energy plunged 65% and Stone Energy 54% from their highs in April.

Integrated oil majors have fared better, so far. Exxon Mobil is down “only” 9% from its July high. On a broader scale, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) is down 28% from June – even as the S&P 500 set a new record.

So how low can oil drop, and how long can this go on?

The theory is being propagated that the price won’t drop much below the breakeven point in higher-cost areas, such as the tar sands in Canada or the Bakken in the US. At that price, rather than lose money, drillers would stop fracking and tar-sands operators would shut down their tar pits. And soon, supplies would tighten up, inventories would be drawn down, and prices would jump.

But that’s not what happened in natural gas. US drillers didn’t stop fracking when the price of natural gas plunged below the cost of production and kept plunging for years until in April 2012 it reached not a four-year low but a decade-low of about $1.90 per million Btu at the Henry hub. At the time, shorts were vociferously proclaiming that gas storage would be full by fall, that the remaining gas would have to be flared, and that the price would then drop to zero.

But drillers were still drilling, and production continues to rise to this day, though the low price also caused an uptick in consumption that coincided with a harsh winter, leaving storage levels below the five-year minimum for this time of the year.

The gas glut has disappeared. The price at the Henry hub has since more than doubled, but it remains below breakeven for many wells. And when natural gas was selling for $4/MMBtu at the Henry hub, it was selling for $2/MMBtu at the Appalachian hubs, where the wondrous production from the Marcellus shale comes to market. No one can make money at that price.

And they’re still drilling in the Marcellus.

Natural gas drillers had a cover: a well that also produced a lot of oil and natural gas liquids was profitable because they fetched a much higher price. But this too has been obviated by events: on top of the rout in oil, the inevitable glut in natural gas liquids has caused their prices to swoon too (chart).

Yet, they’re still drilling, and production is still rising. And they will continue to drill as long as they can get the moolah to do so. They might pick and choose where they drill, and they might back off a smidgen, but as long as they get the money, they’ll drill.

Money has been flowing into the oil and gas business in form of a tsunami unleashed by yield-desperate investors who, driven to near insanity by the Fed’s scorched-earth policies, do what the Fed has been telling them to do: close their eyes and hold their noses and disregard risk and hand over their money, and borrow money for nearly free and hand over that money too.

Oil and gas companies have issued record amounts of junk bonds. They’ve raised record amounts of money via a record number of IPOs. They’ve raised money by spinning off assets into publically traded MLPs. They’ve borrowed from banks that then packaged these loans into securities that were then sold. The industry has been awash in cheap money and has drilled it into the ground.

This is one of the consequences of the Fed’s decision to flood the land with free liquidity. When the cost of capital is near zero, and when returns on low-risk investments are near zero as well, or even below zero, investors go into a sort of coma. But when they come out of it and realize that “sunk capital” has taken on a literal meaning, they’ll shut off the spigot. Only then will drilling and production decline. As with natural gas, it can take years, and the price might plunge through a four-year low and hit a decade low – which would be near $40/bbl, a price last seen in 2009. The bloodletting would be epic.

Worldwide, the balance of power in the oil business is shifting. Read… Oil Price Collapse Ricochets Around the World, Hits US Drillers, the Ruble … and Russia’s Probability of Default

4.285715
 
 
 

Title: Petrobras Going Under?
Post by: RE on November 20, 2014, 01:19:41 AM
Forget the Frackers over here going broke with Deflating Oil Prices, the State Oil Behemoth of Brasil, Petrobras is on the ROPES here in SERIOUS fashion.  Stock Price down 87% from Peak.  Break-Even price for the Deepwater wells @ $120, with current prices coming in around $75.  Credit drying up.

A COLLAPSE of unimaginable proportions if Petrobras goes Belly Up!

RE

Oil industry risks trillions of ‘stranded assets’ on US-China climate deal (http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11242193/Oil-industry-risks-trillions-of-stranded-assets-on-US-China-climate-deal.html)

Petrobas’ hopes of becoming the world’s first trillion dollar company have deflated brutally
Petrobas stock has dropped 87pc from the peak

By Ambrose Evans-Pritchard

9:52PM GMT 19 Nov 2014

Brazil’s Petrobras is the most indebted company in the world, a perfect barometer of the crisis enveloping the global oil and fossil nexus on multiple fronts at once.

PwC has refused to sign off on the books of this state-controlled behemoth, now under sweeping police probes for alleged graft, and rapidly crashing from hero to zero in the Brazilian press. The state oil company says funding from the capital markets has dried up, at least until auditors send a “comfort letter”.

The stock price has dropped 87pc from the peak. Hopes of becoming the world’s first trillion dollar company have deflated brutally. What it still has is the debt.

Moody’s has cut its credit rating to Baa1. This is still above junk but not by much. Debt has jumped by $25bn in less than a year to $170bn, reaching 5.3 times earnings (EBITDA). Roughly $52bn of this has been raised on the global bond markets over the last five years from the likes of Fidelity, Pimco, and BlackRock.

Part of the debt is a gamble on ultra-deepwater projects so far out into the Atlantic that helicopters supplying the rigs must be refuelled in flight. The wells drill seven thousand feet through layers of salt, blind to seismic imaging.

The Carbon Tracker Initiative says the break-even price for these fields is likely to be $120 a barrel. It is much the same story – for different reasons – in the Arctic ‘High North’, off-shore West Africa, and the Alberta tar sands. The major oil companies are committing $1.1 trillion to projects that require prices of at least $95 to make a profit.

The International Energy Agency (IEA) says fossil fuel companies have spent $7.6 trillion on exploration and production since 2005, yet output from conventional oil fields has nevertheless fallen. No big project has come on stream over the last three years with a break-even cost below $80 a barrel.

“The oil majors could not even generate free cash flow when oil prices were averaging $100 ,” said Mark Lewis from Kepler Cheuvreux. They have picked the low-hanging fruit. New fields are ever less hospitable. Upstream costs have tripled since 2000.

“They have been able to disguise this by drawing down legacy barrels, but they won’t be able to get away with this over the next five years. We think the break-even price for the whole industry is now over $100,” he said.

A study by the US Energy Department found that the world’s leading oil and gas companies were sinking into a debt-trap even before the latest crash in oil prices. They increased net debt by $106bn in the year to March – and sold off a net $73bn of assets – to cover surging production costs.

The annual shortfall between cash earnings and spending has widened from $18bn to $110bn over the last three years. Yet these companies are still paying normal dividends, raiding the family silver to save face.

This edifice of leverage – all too like the pre-Lehman subprime bubble – will surely be tested after the 30pc plunge in Brent crude prices to $78 since June.

Prices could of course spike back up at any moment. Data from the US Commodity Futures Trading Commission show that speculators have taken out big bets on crude oil futures. NYMEX net long contracts have reached 276,000. This is a wager that the OPEC cartel will soon cut output.

Yet there is little sign so far that the Saudis are ready to do so on a big enough scale to make a difference. JP Morgan expects US crude to slide to $65 over the next two months, a level that could lead to a “cumulative default rate” of 40pc for the low-grade energy bonds that have financed much of the fracking boom, if it drags on for two years.

Gordon Kwan from Nomura says OPEC (or at least the Saudi-led part) is “engaged in a price war with US shale producers” and will not rest until it has inflicted serious damage. He thinks Saudi Arabia will deflate US crude prices to $70 and hold them there for three to six months, targeting high-cost shale plays in the Bakken and Eagle Ford fields.

OPEC has a clear motive to do this. The US has slashed its net oil imports by 8.7m barrels a day (b/d) since 2005, equal to the combined exports of Saudi Arabia and Nigeria. Yet this game of chicken could be dangerous. There will be collateral damage along the way.

Deutsche Bank says the oil price needed to balance the budget is $162 for Venezuela, $136 for Bahrain, $126 for Nigeria, and over $100 for Russia. Algeria is extremely high, and already sliding into political crisis. Any one of these countries could fly out of control.

Nor is it certain that $70 oil prices will in fact stop the US juggernaut. Shale wildcatters have hedged much of their production by selling forward into 2015 and 2016. They can withstand a short hit. Citigroup’s Edwin Morse says shale critics are “wildly underestimating” the resilience of key US fields.

Yet the greater question is whether any of the world’s oil projects in high-cost regions make sense as China and the US agree to slash carbon emissions. The accord signed between President Barack Obama and China’s Xi Jinping last week – if ratified by the US Congress – has devastating implications. Oil companies have booked vast assets that can never be burned.

These are the world’s G2 superpowers, the two biggest economies and biggest polluters. Their deal marks the end of a bitter stand-off between the rich nations and the emerging economies that has dogged climate talks for years. It isolates the dwindling band of hold-outs, and greatly increases the likelihood of a binding global accord in Paris next year.

The IEA says that two-thirds of all fossil fuel reserves are rendered null and void if there is a deal to limit CO2 levels to 450 particles per million (ppm), the target level agreed by scientists to stop the planet rising more than two degrees centigrade above pre-industrial levels.

Chevreux’s Mr Lewis said the fossil fuel industry would lose $28 trillion of gross revenues over the next two decades under a two degree climate deal, compared with business as usual. The oil companies would face “stranded assets” of $19 trillion.

The Obama-Xi deal does not in itself secure the two degree goal but it does commit China to peak CO2 emissions by 2030 for the first time. China will raise the share of renewable energy by 2020 from 15pc to 20pc, a remarkable target that can only be achieved by breakneck expansion of solar power.

China is already shutting down its coal-fired plants in Beijing. It has imposed a ban on new coal plants in key regions after a wave of anti-smog protests. Deutsche Bank and Sanford Bernstein both expect China’s coal use to peak as soon as 2016, a market earthquake given that the country currently consumes half the world’s coal supply.

The US in turn has agreed to cut emissions by 26-28pc below 2005 levels by 2025, doubling the rate of CO2 emission cuts to around 2.6pc each year in the 2020s.

Whether or not you agree with the hypothesis of man-made global warming, the political reality is that the US, China, and Europe are all coming into broad alignment. Coal faces slow extinction by clean air controls, while oil faces a future of carbon pricing that must curb demand growth far below what was once expected and below what is still priced into the business models of the oil industry.

This is happening just as solar costs fall far enough to compete toe-to-toe with diesel across much of Asia, and to reach “socket parity” for private homes in much of Europe and America. The technological advantage is moving only in one direction only as scientists learn how to capture ever more of the sun’s energy, and how to store the electricity cheaply for release during the night. The cross-over point is already in sight by the mid-2020s.

Mr Lewis said shareholders of the big oil companies are starting to ask why their boards are ignoring so much political and technological risk, investing their money in projects that are so likely to prove ruinous, and doing so mechanically as if nothing had changed.

“Alarm bells are ringing. Investors can see that this is unsustainable. They are starting to ask whether it wouldn’t be better to return cash to shareholders, and wind down the companies,” he said.

Great fortunes were made in 18th Century in the British canal boom. The network of waterways halved coal prices and drove the first leg of the Industrial Revolution. Yet you had to know when the game was up.

The canal industry was on borrowed time even before the Liverpool and Manchester Railway first opened in 1830, unleashing the railway mania that entirely changed the character of Britain.

These historic turning points are hard to call when you are living through them but much of today’s the fossil fuel industry has a distinct whiff of the 19th Century canals, a pre-modern relic in a world that his moving on very fast.
Title: Re: The Oil Crash: it is happening now!
Post by: RE on November 23, 2014, 03:51:11 PM
More on the collapsing price of Oil from ZH.

Like it makes a difference here what the Saudis do?  The consumers are running the show here, not the Saudis.  They don't have money to buy the Oil, so the Saudis have to keep lowering the price if they want to sell any at all.  How come nobody ever publishes a DEMAND graph?  Rhetorical question.

RE

The Worst Case If The Oil Slump Continues: "A Profit Recession"

Tyler Durden's picture



 

With hopes high, at least among corner offices of the majors, that this week's OPEC meeting will somehow manage to slow down the biggest plunge in crude prices since Lehman, it will take much more than mere talk and hollow promises to offset the recent cartel-busting actions of Saudi Arabia. So in a worst case scenario where supply remains unchanged even as global energy demand continues to decline sharply due to the ongoing global slowdown...

... what is the worst case scenario that could happen - aside from the mass energy HY defaults discussed previously - should the price of a barrel of oil continue to correlate the change in 2014 global GDP estimated? Here are some thoughts from Deutsche Bank.

 
 

The plunge in oil is a net negative to S&P EPS, particularly for Energy, Industrials and Materials. We expect 2015 EPS growth of ~5% with Financials up 10%, Energy down 10% and ex. Energy & Financials up 6%.

 

 

... Every $5/bbl lower oil price lowers energy earnings by 5-10% and S&P EPS by ~$1, all else equal. Lower oil prices adversely affect Industrials and Materials via lower US and global capex. About 1/3rd of S&P 500 capex is done by the energy sector. The boost to Consumer earnings from lower oil prices is small and should be offset by stronger FX as many have foreign exposure.

 

 

Since 1960, there have been only 10 instances when there was a decline in trailing 4-qtr EPS, of which only 3 were not during economic recessions. 1967 was on aggressive Fed tightening, but 1985-86 was caused by ~50% decline in oil prices coupled with a strong dollar and 1998 by ~40% decline in oil prices and Russian default.

 

 

Energy is capital intensive to produce. Rising energy prices drive energy exploration. Simply looking at GDP accounts understates the share of energy capex as it only accounts for direct spending on energy related equipment and construction. Financial accounts show that 32% of S&P 500 capex is done by the energy sector and we think is a more accurate representation.

 

* * *

Bottom line: as we, jokingly, hinted when we summarized the outcome of the "secret" deal between John Kerry and Saudi Arabia, the costs joke may be on the US after all: in attempting to crush the primary Russian funding source, Obama may have sown the seeds of not only a profit, but broad economic recession. Which, all things considered about the current administration, is about par for the course.

Title: Fracker Debt Bubble: Frackers are an Endangered Species
Post by: RE on November 26, 2014, 02:42:41 PM

19 US Shale Areas That Are Suddenly Endangered, "The Shale Revolution Doesn't Work At $80"

Tyler Durden's picture



 

Despite the constant blather that lower oil prices are "unequivocally good" for America, we suspect companies working and people living these 19 Shale regions will have a different perspective...

 

Drilling for oil in 19 shale regions loses money at $75 a barrel, according to calculations by Bloomberg New Energy Finance. Those areas pumped about 413,000 barrels a day, according to the latest data available from Drillinginfo Inc. and company presentations.

 

“Everybody is trying to put a very happy spin on their ability to weather $80 oil, but a lot of that is just smoke,” said Daniel Dicker, president of MercBloc Wealth Management Solutions with 25 years’ experience trading crude on the New York Mercantile Exchange. “The shale revolution doesn’t work at $80, period.”

Source: Bloomberg

Title: Re: Fracker Debt Bubble
Post by: roamer on November 26, 2014, 06:30:40 PM
I believe the axe is about to start falling here in the Bakken where i am currently working on an oil rig.  A couple rigs are being laid down and old hands in the know are getting noticeably nervous. 

There are plenty of "environmentalists" who will celebrate this bubble popping.  Though i am environmentally minded i can not say i will be celebrating this bubble popping.  For i think this will be one of the more tumultuous periods in the beginnings of our net energy fall from the profound energy ascent of the oil age.  There are no ready made answers of the scale we need to avoid chaos in the "developed" western world let alone for the billions kept alive by oil produced grains and despite pondering this for many years my mind recoils at the profound mess we are entering.
Title: Re: The Oil Crash: it is happening now!
Post by: roamer on November 26, 2014, 06:39:43 PM
We hid the net energy decline for some time with credit bubbles.  This time though the consumer is truly tapped and maxed out and another credit bubble is unlikely to give the consumer anymore credit as the pathways from FED to Banks are nicely corrupted.  I do not see how we avoid energy descent at this point.
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 26, 2014, 08:31:17 PM
I believe the axe is about to start falling here in the Bakken where i am currently working on an oil rig.  A couple rigs are being laid down and old hands in the know are getting noticeably nervous. 

There are plenty of "environmentalists" who will celebrate this bubble popping.  Though i am environmentally minded i can not say i will be celebrating this bubble popping.  For i think this will be one of the more tumultuous periods in the beginnings of our net energy fall from the profound energy ascent of the oil age.  There are no ready made answers of the scale we need to avoid chaos in the "developed" western world let alone for the billions kept alive by oil produced grains and despite pondering this for many years my mind recoils at the profound mess we are entering.

Hey Roamer

What is your assessment of canada in this, the 'tar sands' etc. Are they right about fucked on top of chinese  now shying away from buying buildings unsighted, no negotiation like the recent good old days for the real estate big bucks, keeping the economy a safe investment haven?
Title: Re: Fracker Debt Bubble
Post by: g on November 26, 2014, 09:18:49 PM
Hi Roamer, Have been checking in now and then hoping to hear some first hand, truthful information on what is goings on in fracking land from a reliable source, namely you.

I have a keen interest in this area as my instincts tell me it could easily be a black swan that sets of a bomb in the junk bond markets.

Your insights and updates would be most appreciated, MSM is now so tainted that one can believe nothing from them.

Hope you hold on to your job as long as possible and was thinking about your absolutely perfect correct insights on the corn markets.

                                                                                                                                    Thanks and Regards GO

Title: Re: Fracker Debt Bubble
Post by: g on November 26, 2014, 09:29:23 PM
Hi Uncle Bob, Great to see you, hope all is well.

Just thought I would drop in and say hello and wish everyone a Happy Thanksgiving and Holiday Season 

Happy Holidays Diners.

                                              (http://2.bp.blogspot.com/-k-bJK_ejP9k/T4qA06KpoOI/AAAAAAAAKy8/MbEkYy22jlc/s640/Paul+Cornoyer+%284%29+oil+on+canvas.jpg)

Title: Re: Fracker Debt Bubble
Post by: RE on November 26, 2014, 11:30:44 PM
I believe the axe is about to start falling here in the Bakken where i am currently working on an oil rig.  A couple rigs are being laid down and old hands in the know are getting noticeably nervous. 

There are plenty of "environmentalists" who will celebrate this bubble popping.  Though i am environmentally minded i can not say i will be celebrating this bubble popping.  For i think this will be one of the more tumultuous periods in the beginnings of our net energy fall from the profound energy ascent of the oil age.  There are no ready made answers of the scale we need to avoid chaos in the "developed" western world let alone for the billions kept alive by oil produced grains and despite pondering this for many years my mind recoils at the profound mess we are entering.

It definitely will be interesting to see how both the economy reacts and what supply issues there are when the unconventional oil plays are shut in.

Right now it appears there is so much demand destruction, particularly in China that it may be some time before real shortages start to appear here in the FSoA.

The other tail end risk is on the Geopolitical front, since this will further increase tensions with the Ruskies.

Last price I saw was around $73/barrel for WTI.  If/when it breaks into the $60s, it looks like TSHTF in Bakken.

Were you able to sock away some savings here so far?

RE
Title: Fracker Debt Bubble: Closing in on the $70 Print
Post by: RE on November 27, 2014, 04:42:46 AM
When it goes into the 60s, it's not gonna be pleasant in North Dakota.

RE

Oil Slumps To 4 Year Low Ahead Of OPEC, Eurozone Yields New Record Lows: Summary Of Overnight Events
(http://www.zerohedge.com/news/2014-11-27/oil-slumps-ahead-opec-announcement-eurozone-yields-touch-new-record-lows-summary-ove)

Submitted by Tyler Durden on 11/27/2014 06:46 -0500

    Barclays
    Bond
    Central Banks
    Chicago PMI
    China
    Consumer Prices
    CPI
    Creditors
    Crude
    Eurozone
    Finland
    Germany
    Gilts
    Greece
    Initial Jobless Claims
    Iraq
    Italy
    Jim Reid
    Michael Lewis
    Michigan
    Monetary Policy
    Money Supply
    Moral Hazard
    New Home Sales
    Nikkei
    OPEC
    Precious Metals
    RANSquawk
    Real estate
    Reuters
    Shenzhen
    Unemployment
    University Of Michigan
    Wells Fargo

While the US takes the day off after another near-record low volume surge to a new all time high in the S&P500, a level which is now just 125 points away from Goldman's year end target for 2016, the rest of the world will be patiently awaiting to see if oil's next move, as a result of today's OPEC meeting will be to $60 or to $100. For now at least the answer is the former (see more here from the WSJ), with Brent recently touching a fresh 4 year low in the mid-$75s, as WTI doesn't fare much better and was down 2% at last check to $72.20 after touching a low of $71.89. It appears the prepared remarks by the OPEC president to the 166th conference have not eased fears that despite all the rhetoric OPEC will be unable to get all sides on the same story, even though the speech notes "ample supply, moderate demand and warns that "if falling price trend continues, “long-term sustainability of capacity expansion plans and investment projects may be put at risk."

But while crude is crashing, Eurozone bonds continue to reach for fresh record high, with all peripheral bond yields down to new all time lows and the Germany 10 Year sliding as low as 0.711%, in its quest to catch up with the 10 Year JGB which at last check was trading just a fraction over 0.40%.

One outlier is Greece: what has been increasingly questioned by credit investors of late is the disbursement of Greece’s bailout programme. Following a marathon 24hour discussion in Paris, Greece and its EU/IMF lenders apparently failed to reconcile their differences over next year’s fiscal gap which is holding up the final review of the programme. Per the WSJ, international creditors are looking at extending Greece’s bailout program by up to 6 months but to get the extension the Greek government would have to formally request it by the end of next week. The discussions will move from Paris to Brussels ahead of the Eurogroup meeting on December 8th. There is also an emergency meeting this morning between Samaras and Vice President/Foreign Minister Venizelos. Greek as well as Spanish and Italian bonds were the clear underperformer yesterday amid the further strength in core government bond markets. As a result, this morning the 10yr Greek bond yield has jumped substantially and stood just shy of 8.50% at last check.

And with central banks now firmly in control of all assets, as bonds rise so do stocks, and European equities trade in the green across the board after steadily ebbing higher throughout the session with the DAX ascending towards the 10,000 handle; a level which hasn’t been reached since the 7th July.

As RanSquawk summarizes, macro newsflow has remained relatively light throughout the session, although this morning’s Eurozone data releases have continued to highlight a dreary picture of the area’s inflation prospects with both Spanish and German state CPI's highlighting the deflationary pressures in Europe. More specifically, the prospect of falling inflation in the Euro-zone will likely re-ignite the premise of potential QE from the ECB in order to stimulate prices and safe guard the Euro-zone. As such bund futures have continued to edge higher touching fresh contract highs at 152.75, albeit in relatively light volume owning to the Thanksgiving holiday.

To summarize:

European shares rise with the real estate and chemicals sectors outperforming and oil & gas, retail underperforming. The German and Italian markets are the best- performing larger bourses. German jobless rate reaches record low, Brent crude drops to 4-year low, Spanish consumer prices drop more than forecast. China’s central bank refrained from selling repo agreements for first time since July, loosening monetary policy further. U.S. Thanksgiving holiday today.
Euronext says indexes not calculating due to technical problem.

The euro is weaker against the dollar. French 10yr bond yields fall; German yields decline. Brent and WTI crude fall as OPEC ministers start meeting in Vienna.

Market Wrap

    S&P 500 futures little changed at 2071.4
    Stoxx 600 up 0.3% to 347.4
    German 10Yr yield down 2bps to 0.71%
    MSCI Asia Pacific down 0.2% to 141.1
    Gold spot down 0.2% to $1196/oz

FX

In FX markets, EUR has remained under pressure ever since European participants came into the market following the aforementioned data releases. More specifically, EUR/USD consolidated its break below 1.2500 and EUR/GBP tested 0.7900 after EUR/USD broke out of its overnight range. Elsewhere, antipodean currencies have pulled away from their best levels seen overnight with NZD higher overnight following RBNZ data which showed the central bank did not intervene in Oct, while AUD was seen higher during Asia-Pacific trade following strong CapEx data.

COMMODITIES

WTI and Brent Crude futures continue to see selling pressure and currently reside at session lows with OPEC firmly looking set to maintain their production target with the formal announcement due later today. This comes after comments yesterday from Saudi Oil Minister Al-Naimi who said Persian Gulf countries have reached a consensus on output and will take a “unified position”, with the likely course of action being maintaining the current ceiling as reported by the WSJ on Tuesday. In metals markets, Overnight in the precious metals, notable weakness was observed across the complex with spot gold falling below yesterday's lows (down as much as 2%), platinum declining by 1.1% and silver tumbling 2%, after breaking back below the 50% fib retracement level of the October sell-off seen at USD 16.435. Nonetheless, a bulk of these losses were pared heading into the European open amid no fundamental news and light volumes with the US closed for Thanksgiving.

* * *

DB's Jim Reid concludes the summary of overnight events

Happy Thanksgiving to our US readers. It’s likely to be a quiet day but we do have an important OPEC meeting to look forward to. As we mentioned in yesterdays EMR, DB’s Michael Lewis believes that oil fundamentals are currently suggesting that a coordinated cut in OPEC supply is inevitable based on supply and demand dynamics, although uncertainty centres on the timing and whether this turns out to be coordinated or not. Oil came under further pressure yesterday with WTI (-0.54%) and Brent (-0.74%) closing at $73.69 and $77.75 respectively at the end of NY trading before sliding further this morning. A Gulf OPEC delegate apparently told Reuters that the GCC had reached a consensus not to cut oil output. Three OPEC delegates also apparently told Reuters they believed OPEC was unlikely to take any action today. Indeed there seems to be different views amongst top oil producers. Venezuela and Iraq are calling for production cuts. Rosneft has said that it will not reduce output even if oil falls to US$60. Iran’s oil minister said his position on oil is close to that of Saudi Arabia’s. Saudi’s oil minister was quoted as having said that ‘the market will stabilise itself eventually’ signaling little willingness to reduce production. The impact of lower oil is also starting to feed through the banking system with FT overnight reported that Wells Fargo and Barclays now face potential losses on a US$850m bridge loan to help fund the merger of two US based oil companies. Anyways the OPEC meeting will start at 9.30CET and a live webcast streaming is available on the OPEC website for those interested in the proceedings.

Away from Oil one of the key data prints today will be inflation stats from Germany ahead of the euroland CPI tomorrow. Our European economics team sees the risks of this week’s November CPI prints skewed to the upside, especially in Germany. They expect Germany’s yoy inflation to remain broadly unchanged from October. Whilst energy prices are expected to be a drag on headline inflation, our colleagues think the food inflation outlook is more uncertain in that unprocessed food inflation has started to normalise and services inflation has been trending broadly sideways. Overall this could lead to a temporary bounce but overall the risks to the medium term inflation outlook are still on the downside and given the fall in oil they see the risk of European inflation reaching a new low of 0.2% yoy in December. Inflation data aside, Draghi’s speech at a seminar organised by the Bank of Finland at 11.30am UKT is probably another key event to watch. Draghi is expected to talk about the European economy at the University of Helsinki after which there will be a Q&A session with the audience.

Staying on European affairs, we’ll briefly highlight more on European Commission President Juncker’s Investment plan for Europe. The long awaited plan to boost investment in the EU was presented to European Parliament yesterday and the focus was on the creation of a new institution called the European Fund for Strategic Investments (EFSI). The EFSI is to be funded using existing resources – EUR 5bn from the EIB and EUR 16bn of EU budget guarantees. Through leverage and co-financing this aims at mobilising a total of EUR315bn of investment into long-term projects and SME and mid-cap investment over 2015-17. The key differences to existing activities (EIB and EIF) are that the EFSI will increase leverage of the EU budget funds, will invest in riskier projects (providing subordinated debt and equity) and will come with technical assistance to facilitate private investment. Our European economists see the plan as a step in the right direction but they remain doubtful that this will represent a successful paradigm shift. Particularly they think credibility of the plan will be questioned but more importantly no new commitment of resources has also been announced so much still hinges on private sector financing.

What has been increasingly questioned by credit investors of late is the disbursement of Greece’s bailout programme. Following a marathon 24hour discussion in Paris, Greece and its EU/IMF lenders apparently failed to reconcile their differences over next year’s fiscal gap which is holding up the final review of the programme. Per the WSJ, international creditors are looking at extending Greece’s bailout program by up to 6 months but to get the extension the Greek government would have to formally request it by the end of next week. The discussions will move from Paris to Brussels ahead of the Eurogroup meeting on December 8th. There is also an emergency meeting this morning between Samaras and Vice President/Foreign Minister Venizelos. Greek as well as Spanish and Italian bonds were the clear underperformer yesterday amid the further strength in core government bond markets.

Indeed the 10yr Greek bond yield rose by 29bps to 8.059% whereas yields in Italy and Spain also rose 2bp and 5bp respectively. 10yr bunds, OATs and Gilts were down 1.3bp, 1.6bp and 3bp respectively. Staying in the region we had some notable ECB-speak yesterday. ECB’s vice-president Constancio suggested that the ECB will only be able to gauge in Q1 of next year the effect of current stimulus measures. Specially, he added that ‘we will have to consider buying other assets, including sovereign bonds in the secondary market, the bulkier and more liquid market of securities available’. As DB’s Saravelos highlighted it is worth noting that his comments also directly echoes the Draghi speech on the justification for QE namely that: even if the effects are smaller than the US doesn’t mean we shouldn’t be doing it and it is not the job of the ECB to deal with moral hazard. Constancio is also the vice president of the ECB, which confirms the ‘semi official’ position of the central bank. For the first time also was the modalities of the QE mentioned and it was explicit that it will be capital key weighted that there are no legal issues around it. These are all in line with our European colleagues who see Q1 2015 being the most likely time for the ECB to move to public QE. In other European markets yesterday, the Stoxx 600 closed flat although we did have the DAX (+0.6%) rally for its tenth consecutive day. The DAX is now around 16% above its mid-October lows but still a relative underperformer against US equities for the year.

Indeed the S&P 500 (+0.28%) posted a new record high yesterday despite a relatively soft round of data from the US. Durable goods came ahead of expectations (+0.4% mom vs. -0.6% mom expected) but the picture was more subdued once we strip out the defence and aircraft elements (1.3% mom reading vs +1.0% consensus), marking a second consecutive monthly decline. The initial jobless claims (+313k vs. +288k expected), personal spending (+0.2% vs. +0.3% expected), and pending home sales (-1.1% mom vs. +0.5% mom) were all softer across the board although new home sales saw an upward revision to last month’s reading. On the activity side, the Chicago PMI fell 5.4pts to 60.8 (consensus 63.0) but still remains at solidly strong levels. Finally the University of Michigan confidence reading came in below consensus at 88.8 but still at a 7-year high.

Quickly refreshing our screens this morning markets are a little mixed in Asia. The Nikkei (-0.7%) and TOPIX (-0.8%) are suffering from their second consecutive day of declines whereas Chinese equities are adding on to their recent gains. The Shanghai and Shenzhen Composites are up around three tenths of a percent this morning with the risk tone still benefiting from the PBOC easing theme. There were also signs of further liquidity support overnight with the PBOC refraining from selling repurchase agreements for the first time since July. The 7day repo rate in China fell as much as 10bps overnight in Shanghai. Asian credit is trading on a firmer footing overnight as recent supply is gradually being digested.

With US markets closed trading activity could well be on the low side today. Focus will be on the OPEC meeting today as well as European data releases this morning. Besides the aforementioned German CPI print and Draghi’s speech, we have the November unemployment print for Germany, GDP/CPI for Spain, sentiment reading for Italy, and ECB money supply stats to name a few.
Title: Re: Fracker Debt Bubble
Post by: Surly1 on November 27, 2014, 06:47:27 AM
Quote from: RE
When it goes into the 60s, it's not gonna be pleasant in North Dakota.

Which is why I think the Saudi's matter. Who is better able to sit out a period of $60 oil: the House of Saud, or a gaggle of cash flow-starved frackers facing both note payments and irate shareholders?
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 27, 2014, 06:53:17 AM
                                                    WTI 10yr
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 27, 2014, 06:57:50 AM
Hi Roamer,

Thanks for dropping in here - it's most refreshing.  As GO suggested - it's hard to beat "first hand, truthful information" on what is going on in Oilland.  You Da Man!

On top of this, I think GO has an itch to make some puts, and if these bets were to hit the jackpot...who knows - he might just give you a slice of the pie...and I don't mean pumpkin pie.  :icon_mrgreen:

Wishing a most enjoyable Thanksgiving for all Diners.
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 27, 2014, 08:54:35 AM
WTI Crude Crashes Below $70 For First Time Since June 2010 (http://www.zerohedge.com/news/2014-11-27/wti-crude-crashes-below-70-first-time-june-2010)

It's amusing reading El Vaquero spell out the ramifications to all the ZH retards in the comments.
Title: Re: Fracker Debt Bubble
Post by: azozeo on November 27, 2014, 09:36:13 AM
The ruble is tanking & Russians are freaking out .......

http://www.youtube.com/v/ZNSAZI8dBDw&list=UUpPGJXgbwBmkIp291W0PCMw&fs=1
Title: Re: The Oil Crash: it is happening now!
Post by: MKing on November 27, 2014, 09:43:32 AM
We hid the net energy decline for some time with credit bubbles.  This time though the consumer is truly tapped and maxed out and another credit bubble is unlikely to give the consumer anymore credit as the pathways from FED to Banks are nicely corrupted.  I do not see how we avoid energy descent at this point.

WestTexas from TOD said the same thing in 2006. If the web had been up and running longer through the beginning of the last oil based fear meme, there would be other examples.

For you, the issue is much more likely to be the boom and bust cycle of the industry. If it busts, and your experience is limited, you find yourself on the out pretty fast. I've been through one of those...no fun whatsoever. With time and experience, you will garner enough attention to be one of those who sticks around during the bust cycle, but be warned, those can be longer lived than the resource scarcity harpies would ever lead you to believe.1986 through 1999 comes to mind. Versus the mini boom of 1972-1981, the plateau of 1982-1986, the boom again from 2005-2008, slight slowdown in 2009 (that one took out hiring of petroleum engineers at the college level graduate level), the resurgence in 2009-2014...and the future? Who knows...certainly what is bad for the oil field tends to be good for the economy in terms of price, and surging demand is certainly good for the oil industry, but you are never quite sure when, during the game of musical chairs, the music will stop. But it will.

Service hands are notoriously expendable, and allow rapid decrease in labor costs, and the service companies will certainly utilize that ability. It comes with the territory, and if you hadn't been through one of these cycles yet, you should be prepared for it.
Title: Re: Fracker Debt Bubble
Post by: WHD on November 27, 2014, 09:52:11 AM
I believe the axe is about to start falling here in the Bakken where i am currently working on an oil rig.  A couple rigs are being laid down and old hands in the know are getting noticeably nervous. 

There are plenty of "environmentalists" who will celebrate this bubble popping.  Though i am environmentally minded i can not say i will be celebrating this bubble popping.  For i think this will be one of the more tumultuous periods in the beginnings of our net energy fall from the profound energy ascent of the oil age.  There are no ready made answers of the scale we need to avoid chaos in the "developed" western world let alone for the billions kept alive by oil produced grains and despite pondering this for many years my mind recoils at the profound mess we are entering.

How the earth, biosphere, ecosystems ever got reduced to "the environment" is a story of Western separation and alienation from nature, not unlike the cause of fracking. While I am still a little wild, I'm quite happy to see the fracking bubble pop, as fracking is based on such a panoply of lies; maybe now we can have an adult conversation about energy, in America.

Question is, how will Americans react, when it becomes more clear what an investor driven scam fracking has been, what a grotesque fabrication, the idea of Energy Independence in America, at current consumption? It might not be such an "adult" conversation, but a lot of finger pointing, deflecting responsibility, heaped up with another megaton/squared steaming pile of BS.

Though maybe it really will initiate a serious conversation about what needs to be done. A serious reckoning for the American arrangement, no matter what.  :-\

WHD
Title: Re: Fracker Debt Bubble
Post by: RE on November 27, 2014, 01:01:45 PM
I believe the axe is about to start falling here in the Bakken where i am currently working on an oil rig.  A couple rigs are being laid down and old hands in the know are getting noticeably nervous. 

There are plenty of "environmentalists" who will celebrate this bubble popping.  Though i am environmentally minded i can not say i will be celebrating this bubble popping.  For i think this will be one of the more tumultuous periods in the beginnings of our net energy fall from the profound energy ascent of the oil age.  There are no ready made answers of the scale we need to avoid chaos in the "developed" western world let alone for the billions kept alive by oil produced grains and despite pondering this for many years my mind recoils at the profound mess we are entering.

How the earth, biosphere, ecosystems ever got reduced to "the environment" is a story of Western separation and alienation from nature, not unlike the cause of fracking. While I am still a little wild, I'm quite happy to see the fracking bubble pop, as fracking is based on such a panoply of lies; maybe now we can have an adult conversation about energy, in America.

Question is, how will Americans react, when it becomes more clear what an investor driven scam fracking has been, what a grotesque fabrication, the idea of Energy Independence in America, at current consumption? It might not be such an "adult" conversation, but a lot of finger pointing, deflecting responsibility, heaped up with another megaton/squared steaming pile of BS.

Though maybe it really will initiate a serious conversation about what needs to be done. A serious reckoning for the American arrangement, no matter what.  :-\

WHD

Happy Thanksgiving Diners! :multiplespotting:

About the only reason I don't want to see the Fracking Bubble pop is that it may cost Roamer his job.  Otherwise, the sooner it ends, the sooner we get round to figuring out how to live a low per capita energy lifestyle.

Due to Demand Destruction, the end of Fracking won't mean immediate disappearance of gas, there's still a decent amount being produced from legacy fields.  OPEC just voted to keep up production, sending Oil Prices crashing further.  So we should still have a bit of time to work out transitions.

Anyhow, I gotta get my shit together to do my SNAP Card Gourmet Thanksgiving Special Episode to go with the mega-article I have ready for publication later today.  More later.

RE
Title: Re: The Oil Crash: it is happening now!
Post by: RE on November 27, 2014, 01:34:59 PM
Look out below!

(http://dubsism.files.wordpress.com/2010/08/wile-e-coyote-falling-off-cliff.jpg)

RE

WTI Crude Crashes Below $70 For First Time Since June 2010

Tyler Durden's picture





 

Houston, we have a problem...

 

Lowest since June 2010...

 

At $70/barrel, the US Shale industry "does not work"...

 

And don't expect help from the Saudis...

 
 
 
 

"Why should Saudi Arabia cut? The U.S. is a big producer too now. Should they cut?"

 

 

*  *  *

And the Russian Ruble is in freefall

5
 
 
 
 
Your rating: None Average: 5 (9 votes)
Title: Bye, Bye Frackers...
Post by: RE on November 27, 2014, 02:24:16 PM
Here they come to Sell em again...

http://www.youtube.com/v/WrxlVjZJawQ?feature=player_embedded

Short the living shit out of Halliburton and EOG tomorrow.

RE

The Sellside Chimes In On The Crude Crush: "This Will Reverberate For Years" (http://www.zerohedge.com/news/2014-11-27/sellside-chimes-crude-crush-will-reverberate-years)

Submitted by Tyler Durden on 11/27/2014 12:23 -0500

    Crude
    Market Share
    OPEC
    Saudi Arabia

The sell-side is worried...

SocGen's head of oil research Mike Wittner warns "this will reverberate for years"... (via Bloomberg)

    OPEC decision to keep output target is "unambiguously bearish,"

    "We are entering a new era for oil prices, where the market itself will manage supply, no longer Saudi Arabia and OPEC"

    "It's huge,” he says by phone from New York. “This is a signal that they’re throwing in the towel. The markets have changed for many years to come"

    "The change is that it's no longer Saudi Arabia and OPEC that are going to be managing the supply side of the market. It doesn’t sound like much, but that is so fundamental, it is hard to overstate”: Wittner by phone

    "This will reverberate for years," adding, it will "bring on lower prices and let the market do the job of throttling U.S. shale oil growth"

    U.S. shale output unlikely to contract for 1-2 yrs amid lower prices

Goldman warns another large leg lower in Brent oil prices to near $60/bbl would not be sustainable beyond a few months (absent significant demand weakness) as it would accelerate the rebalancing of the oil market with Canadian oil sands and US shale oil projects reaching their production variable costs

    The call on OPEC becomes the call on US shale

    Today, November 27, OPEC announced that it would maintain its production target at its level of 30 million barrels per day. The organization further commented that it would aim to adhere strictly to this quota, although past quotas have only been loosely implemented. Today’s decision came in line with our expectation and our view that it is not in OPEC’s interest to balance the market on its own but that US shale oil production should contribute as well, given its scalability. Further, today’s decision comforts us in our forecast for a large market surplus in 1H15.

    Potential for further price declines until evidence of a US production growth slowdown...

    While we continue to believe that WTI prices in a $70-$75/bbl range are sufficient to incentivize US producers to reduce capex, today’s price sell-off creates potential for further declines in oil prices. In particular, now that OPEC is aiming to maintain production and market share, prices could trade lower until evidence of a pull-back from US E&Ps, when they announce their 2015 capex guidance in January-February (and despite our expectation for an only modest build in 4Q14 inventories). The next OPEC meeting is scheduled for June 5.

    ...although prices at current levels likely lead to a balanced market by 2H15

    Ultimately, we expect US production growth will slow and that OPEC will implement moderate production cuts once this slowdown is apparent. Consequently, we reiterate our 2015 price forecast with Brent prices at $80-$85/bbl and WTI at $70-75/bbl. Importantly, we do not believe that it is in OPEC’s interest to push prices significantly and sustainably lower, and we forecast lower OPEC production starting from 2Q15, as the fiscal strain on non core-OPEC countries would be too large otherwise. Further, we believe another large leg lower in Brent oil prices to near $60/bbl would not be sustainable beyond a few months (absent significant demand weakness) as it would accelerate the rebalancing of the oil market with Canadian oil sands and US shale oil projects reaching their production variable costs.
Title: Re: The Oil Crash: it is happening now!
Post by: JoeP on November 27, 2014, 03:21:07 PM
We hid the net energy decline for some time with credit bubbles.  This time though the consumer is truly tapped and maxed out and another credit bubble is unlikely to give the consumer anymore credit as the pathways from FED to Banks are nicely corrupted.  I do not see how we avoid energy descent at this point.

WestTexas from TOD said the same thing in 2006. If the web had been up and running longer through the beginning of the last oil based fear meme, there would be other examples.

For you, the issue is much more likely to be the boom and bust cycle of the industry. If it busts, and your experience is limited, you find yourself on the out pretty fast. I've been through one of those...no fun whatsoever. With time and experience, you will garner enough attention to be one of those who sticks around during the bust cycle, but be warned, those can be longer lived than the resource scarcity harpies would ever lead you to believe.1986 through 1999 comes to mind. Versus the mini boom of 1972-1981, the plateau of 1982-1986, the boom again from 2005-2008, slight slowdown in 2009 (that one took out hiring of petroleum engineers at the college level graduate level), the resurgence in 2009-2014...and the future? Who knows...certainly what is bad for the oil field tends to be good for the economy in terms of price, and surging demand is certainly good for the oil industry, but you are never quite sure when, during the game of musical chairs, the music will stop. But it will.

Service hands are notoriously expendable, and allow rapid decrease in labor costs, and the service companies will certainly utilize that ability. It comes with the territory, and if you hadn't been through one of these cycles yet, you should be prepared for it.

Roamer - I think it's kinda nice to have a veteran oilpatch guy throwing out his two cents for you to consider. I think you're smart enough to know what to do with this information. Personally, I'm impressed that you're saving some money now...waiting for another opportunity down the road. You've got the smarts to do something completely different if you want to.  But I really admire that you're saving up a stash now at a relatively young age.  I didn't really start saving much until I was thirty one years old...and much of that was due to jumping jobs to a company that put a match of 25 percent of my salary in a retirement vehicle.  Of course, as the company grew over the years, it could not keep on doing this for everyone.  But it shore was nice while it lasted.   :icon_mrgreen:
Title: Re: Fracker Debt Bubble
Post by: RE on November 27, 2014, 05:04:24 PM
Normalcy Bias tells "veterans" that Booms always follow Busts, and you just need to "weather the storm".  Reminds me of Jimbo's favorite Pundits Strauss & Howe, with their "4th Turning" analysis.  If you believe that stuff, after we go through a World War here, in 20 years or so Homo Sapiens will be back on track climbing further up the hill of techno-progress and the NEW BOOM will take place as we fly our Starships to Betelgeuse and BEYOND!

Eventually, there is a final Bust and no Boom to follow.  Roamer tagged onto this last one, but even if another one does occur in the indefinite future, he won't be walking the earth anymore when it arrives.

There is no Boom that will follow this Bust, not in our lifetimes.  It is straight downhill from here.

RE


Title: Re: Fracker Debt Bubble
Post by: MKing on November 27, 2014, 06:46:21 PM
Eventually, there is a final Bust and no Boom to follow.
RE

Eventually. But this chart says that we have far more oil to produce, at prices we have almost already seen (these costs being in 2008 dollars I believe), and the people to produce this oil, some 7X more than has been consumed during the entire history of the human species to date, will require yet more boom and bust cycles. Just as it has before, so shall it continue to be for at LEAST the rest of your life. Without even breaking a sweat.

Roamer however has a longer expected lifespan, and just as those of us who made it through the 1986-1999 slowdown were BANKING on the turnaround, when it happened, it was quite reassuring...and profitable. Staying in when things were tough meant that our experience was highly sought out right from the beginning of the next cycle, and these cycles take years to ramp up because of personnel issues. And when they run their course...as they did towards the end of 1985....the sled ride down the mountain can be as life changing as the rocket ride up was.

But worrying about quantity has never been the issue in my lifetime, won't be in RE's, and probably not in Roamers either.

For those with an interest in knowing the facts of the matter, start at page 197, the beginning of Chapter 9, of the 2008 WEO report from the IEA. Excellent explanations, plenty of examples, discusses in a reasonable and layman oriented way the potential of CO2 EOR, again, has examples and discusses the changes in incremental recovery factor possible by such techniques.

Figure 9.10 on page 218 is the money shot. No peer that I have ever found in peak oil land.

(http://1.bp.blogspot.com/-DPfriKpTm4k/T2HbHkV5BlI/AAAAAAAAI2Q/-xNqtuGH-T4/s640/IEA_2008_CSIRO_2011.jpg)
Title: Re: The Oil Crash: it is happening now!
Post by: roamer on November 27, 2014, 09:06:06 PM
We hid the net energy decline for some time with credit bubbles.  This time though the consumer is truly tapped and maxed out and another credit bubble is unlikely to give the consumer anymore credit as the pathways from FED to Banks are nicely corrupted.  I do not see how we avoid energy descent at this point.

WestTexas from TOD said the same thing in 2006. If the web had been up and running longer through the beginning of the last oil based fear meme, there would be other examples.

For you, the issue is much more likely to be the boom and bust cycle of the industry. If it busts, and your experience is limited, you find yourself on the out pretty fast. I've been through one of those...no fun whatsoever. With time and experience, you will garner enough attention to be one of those who sticks around during the bust cycle, but be warned, those can be longer lived than the resource scarcity harpies would ever lead you to believe.1986 through 1999 comes to mind. Versus the mini boom of 1972-1981, the plateau of 1982-1986, the boom again from 2005-2008, slight slowdown in 2009 (that one took out hiring of petroleum engineers at the college level graduate level), the resurgence in 2009-2014...and the future? Who knows...certainly what is bad for the oil field tends to be good for the economy in terms of price, and surging demand is certainly good for the oil industry, but you are never quite sure when, during the game of musical chairs, the music will stop. But it will.

Service hands are notoriously expendable, and allow rapid decrease in labor costs, and the service companies will certainly utilize that ability. It comes with the territory, and if you hadn't been through one of these cycles yet, you should be prepared for it.

Sound advice from a career perspective MKing.  I've been paying attention to this scenario since i've started , so far i'm sitting in a decent position to weather the storm with current employer.  I'm on the low end of the pay scale and have more qualifications and so far a good track record.  Even working a fraction of the days i've been working would still get me ahead.  Also i could probably explore some entry field frac engineering positions  Thing is I have never had any intention of making a career of this.  My goal now remains the same as its been since the lights went on 10 years ago on the nature of our society.  I want a simple solar powered nearly ascetic lifestyle and if this goes bust i'll reevaluate my options to go forward.  I'm crazy enough i'd consider bootstrapping my solar off grid project from what i've saved so far.
Hi Roamer,

Thanks for dropping in here - it's most refreshing.  As GO suggested - it's hard to beat "first hand, truthful information" on what is going on in Oilland.  You Da Man!

On top of this, I think GO has an itch to make some puts, and if these bets were to hit the jackpot...who knows - he might just give you a slice of the pie...and I don't mean pumpkin pie.  :icon_mrgreen:

Wishing a most enjoyable Thanksgiving for all Diners.

JoeP, Unlike my previous role as a plant engineer i'm pretty much a peon in my current position in the fields.  The information you guys need to make puts is closely guarded. To pick the losing  developers I'd imagine you'd need to look at debt/equity ratios, lease areas and corresponding production.  Lots of blood in the service provider sector too.  All i can say is rigs are being quietly laid down.
Title: Re: The Oil Crash: it is happening now!
Post by: jdwheeler42 on November 27, 2014, 10:08:08 PM
The information you guys need to make puts is closely guarded. To pick the losing  developers I'd imagine you'd need to look at debt/equity ratios, lease areas and corresponding production.

Yes, and no.

The SEC basically requires all that pertinent information to be made available to all investors, in the prospectus.  (How deeply it is buried is entirely up to the company.)  On the other hand, the SEC also requires that that information be made available to all investors at the same time.  Until that time, yes, that information is closely guarded, under the insider trading regulations.

So, to the extent that it is possible, it is illegal, and to the extent that is legal, everyone can do it.  So really, the only ways to get an advantage are 1.) be less lazy than everyone else or 2.) change the rules in your favor.
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 27, 2014, 11:36:36 PM
Normalcy Bias tells "veterans" that Booms always follow Busts, and you just need to "weather the storm".  Reminds me of Jimbo's favorite Pundits Strauss & Howe, with their "4th Turning" analysis.  If you believe that stuff, after we go through a World War here, in 20 years or so Homo Sapiens will be back on track climbing further up the hill of techno-progress and the NEW BOOM will take place as we fly our Starships to Betelgeuse and BEYOND!

Eventually, there is a final Bust and no Boom to follow.  Roamer tagged onto this last one, but even if another one does occur in the indefinite future, he won't be walking the earth anymore when it arrives.

There is no Boom that will follow this Bust, not in our lifetimes.  It is straight downhill from here.
I think you are completely misinterpreting the whole "Fourth Turning" analysis -- of course, so might Strauss & Howe.

It is entirely possible to have future Booms following Busts in a generally declining environment.  The key is that the Bust has to be greater in magnitude that the subsequent Boom.  Or, to put it another way, after things get really bad, they may get better, but they will never be quite as good as they once were.  This leads to the Stairstep Decline that John Michael Greer predicts for our future.

On the other hand, while the 80 year peak-peak cycle is a good rule that works most of the time, there have been historical busts which have lasted an entire lifetime in themselves, so, really, any simplistic views of the future are likely to be wrong.
Title: Re: Fracker Debt Bubble
Post by: roamer on November 28, 2014, 01:46:34 AM
Good stuff in the comments on this thread: http://peakoilbarrel.com/bakken-production-choke-theory/#more-5301 (http://peakoilbarrel.com/bakken-production-choke-theory/#more-5301)


This guy nails it IMO:
Watcher says:
NOVEMBER 27, 2014 AT 12:38 PM
There are politics in this. It gets complex. Fiscally, a GOP Congress will ideologically oppose a subsidy to the uber capitalist industry of oil. But then their own members from deep red states will start asking for it. This will take a lot of time to unravel.

So the Fed is there, able to do something. But sooooo many senior banking people listening to their own analysts have been told shale is good at $40/barrel (who were speaking to investors they were trying to fleece). So if the Fed asks them, the Fed will be told there’s no need to act.

This equates to time passing. Add to it the fact that winter will camouflage everything happening in NoDak and you have further reason for delay.

There is yet another aspect to it all. The boom narrative . . . the facade of economic normalcy would be greatly damaged if the uber capitalist industry of shale gets a Fed or govt bailout. This will create some further reluctance and delay.
REPLY



How the hell will the FED backstop this ???
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 02:06:27 AM
Normalcy Bias tells "veterans" that Booms always follow Busts, and you just need to "weather the storm".  Reminds me of Jimbo's favorite Pundits Strauss & Howe, with their "4th Turning" analysis.  If you believe that stuff, after we go through a World War here, in 20 years or so Homo Sapiens will be back on track climbing further up the hill of techno-progress and the NEW BOOM will take place as we fly our Starships to Betelgeuse and BEYOND!

Eventually, there is a final Bust and no Boom to follow.  Roamer tagged onto this last one, but even if another one does occur in the indefinite future, he won't be walking the earth anymore when it arrives.

There is no Boom that will follow this Bust, not in our lifetimes.  It is straight downhill from here.
I think you are completely misinterpreting the whole "Fourth Turning" analysis -- of course, so might Strauss & Howe.

It is entirely possible to have future Booms following Busts in a generally declining environment.  The key is that the Bust has to be greater in magnitude that the subsequent Boom.  Or, to put it another way, after things get really bad, they may get better, but they will never be quite as good as they once were.  This leads to the Stairstep Decline that John Michael Greer predicts for our future.

On the other hand, while the 80 year peak-peak cycle is a good rule that works most of the time, there have been historical busts which have lasted an entire lifetime in themselves, so, really, any simplistic views of the future are likely to be wrong.

Fairly obviously, Extinction is a "Bust" you never get a new "Boom" out of, at least the species that went extinct doesn't.

I made the caveat that its unlikely Roamer will see a new "Boom" within his lifetime, that is not to say at some indefinite future time there could be a boom.  Certainly, if 99% of the population dies off, then finally rebounds to double or triple that number, you would have a "boom" of sorts.

If you want to look at this in Peak Oil terms, what I am saying is that never again will Homo Sapiens burn up as much per capita energy as we did at the turn of the millenium.  We are on the downhill slope now, and it's a one way trip.

(http://www.truthmove.org/workspace/photos-content/JS-Peak-Oil.gif)

RE
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 02:25:24 AM
How the hell will the FED backstop this ???

Not publicly.

The energy industry and the banking industry are siblings, like the Koch Brothers.  The TBTF banks can float more bond issues, which Da Fed can then buy up as "collateral" and hand the money over to the TBTF Banks.  That has been where we are at until now.

It is however unclear that the TBTF banks will continue doing this as it becomes ever more clear that it's not working.  That is the point we are at now and why they are backing off from further financing.

The big problem comes when it is generally recognizable that nothing Da Fed does can work, and many industries start going outta biz.  You can bail out a few "key men".  You can't bail out everyone.

RE

Title: Frackers Get HAMMERED!
Post by: RE on November 28, 2014, 04:46:24 AM
I hope you all took my advice and shorted the Frackers yesterday.  They are getting positively HAMMERED this morning.  :icon_sunny:  My Benchmark Company EOG Resources now down around 2.67% as of 4:35 EST on the futures market.  I am going to make a small fortune shorting this Dogshit.  :icon_mrgreen:

RE

OPEC's Crude Bloodbath Sends 10 Year To 2.20%, Energy Companies Tumble (http://www.zerohedge.com/news/2014-11-28/opecs-crude-bloodbath-sends-10-year-220-energy-companies-tumble)

Submitted by Tyler Durden on 11/28/2014 07:03 -0500

    Bond
    China
    Copper
    CPI
    Crude
    fixed
    France
    OPEC
    Price Action
    RANSquawk
    Unemployment

The biggest, and most market-moving, event overnight continues to be yesterday's shocking OPEC announcement, which is still reverberating across the energy space as markets largely ignore European and Japanese inflation data which is once again sliding back dangerously fast, or Italian unemployment which rose more than expected, and joined France in hitting a new record high. As a result European shares remain lower, close to intraday lows, with the oil & gas and industrials sectors underperforming and telco and travel outperforming as oil continues its decline. EU inflation slowed in Nov. to 0.3%. Italian and Swedish markets are the worst-performing larger bourses, Spanish the best. The euro is weaker against the dollar. And while US equity futures are largely unchanged even as, or perhaps because, the world is screaming economic slowdown, bonds are finally getting the message with U.S. 10yr bond yields falling to only 2.20% as Japanese yields also decline.

Some more detail from RanSquawk:

European equities enter the North American crossover in negative territory albeit off their worst levels. The sole catalyst for price action thus far has been the fallout of yesterday’s decision by OPEC to refrain from altering their output ceiling. More specifically, the energy sector has naturally been substantially weighed on by the ramifications of yesterday, with the top 10 laggards in the Stoxx 600 all being from the sector, with the FTSE 100 feeling the squeeze with BP and shell notably lower, with the two Co.’s accounting for just over 12% of the index. Nonetheless, airliners have provided stocks with some modest reprieve as the lower energy prices will benefit the sector, although the implications for airliners are less substantial than those of oil producers. Elsewhere, in fixed income markets, Bunds opened at fresh contract highs, although now reside in relatively modest territory after failing to make a break above the 153.00 level. One thing to be aware of looking ahead, is that the lower energy prices are likely to filter through to global inflation prospects and thus could have further considerations on central bank policies, notably the ECB, with this also coming in the backdrop of the heightened expectations of a sovereign QE programme.

Market Wrap

    S&P 500 futures down 0.3% to 2067.1
    Stoxx 600 down 0.5% to 345.7
    US 10Yr yield down 5bps to 2.2%
    German 10Yr yield up 0bps to 0.7%
    MSCI Asia Pacific up 0.1% to 140.9
    Gold spot down 0.8% to $1181.5/oz

Bulletin Headline Summary from RanSquawk and Bloomberg

    The OPEC oil-slide continues to cause further turmoil for oil producers and commodity currencies, while lower energy prices provide airline names with some reprieve.
    Looking ahead, today’s calendar is exceedingly thin with ECB’s Weidmann due on the speaker slate, although volumes are expected to be surprised by yesterday’s US Thanksgiving Holiday
    Treasuries head for weekly gain amid well-received 2Y and 5Y auctions and as oil prices slide after OPEC refrained from reducing output at meeting yesterday.
    OPEC’s decision to cede no ground to rival producers underscored the price war in the crude market and the challenge to U.S. shale drillers
    Euro-area inflation slowed in November to match a five-year low, prodding the ECB toward expanding its unprecedented stimulus program
    Draghi yesterday said the ECB is open to buying a wide variety of assets for further stimulus as German and Spanish inflation data highlighted the struggle to revive the euro-area economy
    David Cameron raised the prospect of Britain leaving the EU unless fellow leaders agree to let him restrict access to welfare payments for migrants
    Rating companies say defaults in China will spread as the central bank’s interest rate cut will do little to stop a wave of maturities from worsening record debt downgrades
    China asked state-owned companies to investigate risks associated with commodity trading, said people familiar with the matter, as the government seeks to avoid losses amid a price slump for raw materials
    Brazil’s economy expanded 0.1% in 3Q, less than forecast, as the world’s second biggest emerging market recovers from recession
    Brazil’s Finance Minister-designate Joaquim Levy pledged to adopt more rigorous fiscal discipline without providing details on how he will reduce the country’s debt levels
    Sovereign yields mostly lower. Asian stocks gain; European stocks,  U.S. equity-index futures fall. Brent crude falls; WTI reached $67.75 yday, lowest since May 2010; gold and copper lower

FX

In FX markets, the notable focus has been on commodity currencies with the NOK reaching a 5 year low against the EUR, while CAD has continued its OPEC-inspired losses, with USD/CAD steadily approaching the 1.1400 level; should we trade above 1.1400 in the pair then the 6th of November 2014 high comes in at 1.1443 to the upside. Furthermore, the RUB has also felt the squeeze of lower energy prices and earlier printed a fresh record low against the greenback, with the USD broadly stronger after breaking above the 88.00 level during Asia-Pacific trade, which subsequently saw USD/JPY break above 118.00 overnight. EUR was provided a modest uptick as Y/Y CPI came in-line with expectations at 0.3%, although was not as low as some participants had feared. Furthermore, today is the last trading day before the results of the Swiss national gold referendum with results due on Sunday.

COMMODITIES

In the energy complex, as to be expected, yesterday’s OPEC decision has continued to take centre-stage with energy prices continuing to plummet lower and seemingly unable to find a floor, with analysts at Barclay’s suggesting that Crude prices to drop another USD 10/bbl before new floor is discovered. Elsewhere in metals markets, a strong USD capped any potential pullback in prices and also weighed on metals with COMEX copper, spot gold and spot silver all slipping to their 1-week lows. Elsewhere, Spot iron ore prices rose to around USD 70/ton overnight, boosted by Dalian iron ore futures rising for their 3rd consecutive day as investors covered short positions
Title: Re: Fracker Debt Bubble
Post by: roamer on November 28, 2014, 05:08:50 AM
How the hell will the FED backstop this ???

Not publicly.

The energy industry and the banking industry are siblings, like the Koch Brothers.  The TBTF banks can float more bond issues, which Da Fed can then buy up as "collateral" and hand the money over to the TBTF Banks.  That has been where we are at until now.

It is however unclear that the TBTF banks will continue doing this as it becomes ever more clear that it's not working.  That is the point we are at now and why they are backing off from further financing.

The big problem comes when it is generally recognizable that nothing Da Fed does can work, and many industries start going outta biz.  You can bail out a few "key men".  You can't bail out everyone.

RE
That is my point they are out of moves it seems.  However i know better, I'm convinced that peak oil is well known and the credit fueled fracking  was an engineered temporary response, just as the next response is.
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 05:22:50 AM
How the hell will the FED backstop this ???

Not publicly.

The energy industry and the banking industry are siblings, like the Koch Brothers.  The TBTF banks can float more bond issues, which Da Fed can then buy up as "collateral" and hand the money over to the TBTF Banks.  That has been where we are at until now.

It is however unclear that the TBTF banks will continue doing this as it becomes ever more clear that it's not working.  That is the point we are at now and why they are backing off from further financing.

The big problem comes when it is generally recognizable that nothing Da Fed does can work, and many industries start going outta biz.  You can bail out a few "key men".  You can't bail out everyone.

RE
That is my point they are out of moves it seems.  However i know better, I'm convinced that peak oil is well known and the credit fueled fracking  was an engineered temporary response, just as the next response is.

Sadly, the next response is probably a shooting war with the Ruskies, since this is positively Hammering the Rouble also.  Ukrainian Hvrniya has lost about 50% of its value over the last few months, same bizness now going on with the Rouble.  Imagine if your paycheck was cut in half over a few months time WRT anything imported.  You can still pay your rent, but food prices go through the roof far as your budget is concerned.

Credit contracts from the periphery inward.  It will take longest to hit the center, but it will hit.  I don't think De Fed or ECB or BoJ or PBoC can make too much difference now in this process, but we shall see.

Short term here though, energy is going to get hammered.

RE
Title: Re: The Oil Crash: it is happening now!
Post by: MKing on November 28, 2014, 06:26:27 AM
Sound advice from a career perspective MKing.

I've been in and around the industry for a long time.

Quote from: Roamer
Thing is I have never had any intention of making a career of this.

Good for you. Oil is obsolete, and just doesn't know it yet. It will certainly be a valuable commodity for quite some time to come, but the days of the wildeyed and eternally optimistic wildcatter are over. It pays damn good, and you can collect a bundle when things are rocketing to the top of the mountain, but keeping clear WHY you are in the industry is probably a far better path than the one I ended up taking.

As my kids ask those fundamental questions about who and what they want to be as they reach adulthood, the only business I have discouraged them on is the oil business.

So sure, get while the getting is good, and then take the better jumping off point that provides and make something else of yourself in this world, because as oil extraction becomes more of a manufacturing process, as opposed to white elephant hunting, it will just become another manufacturing job, and we all know what can happen to those.

Quote from: Roamer
  My goal now remains the same as its been since the lights went on 10 years ago on the nature of our society.

Oh...the lights have been out far longer than that.

Quote from: Roamer
I want a simple solar powered nearly ascetic lifestyle and if this goes bust i'll reevaluate my options to go forward.  I'm crazy enough i'd consider bootstrapping my solar off grid project from what i've saved so far.

Good for you.

Quote from: Roamer
  All i can say is rigs are being quietly laid down.

Not that quietly. Nowadays, the things are equipped with GPS trackers, and those of us with subscriptions to the services that sell this kind of information are counting each and every one. Not just counting whether or not they are being laid down, but whether or not they are being moved.
Title: Re: Fracker Debt Bubble
Post by: MKing on November 28, 2014, 06:32:12 AM
However i know better, I'm convinced that peak oil is well known and the credit fueled fracking  was an engineered temporary response, just as the next response is.

Not all fracking is credit fueled, and certainly it was NOT just excess liquidity in the markets during the past 60 years that allowed it to become the better mousetrap. Separating that, from what the US independents have decided is the best way to try and grow their companies, are two entirely different things.
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 28, 2014, 07:47:15 AM
Fairly obviously, Extinction is a "Bust" you never get a new "Boom" out of, at least the species that went extinct doesn't.
Of course that is true, but predicting extinction is a little more difficult.  Look at how quickly the passenger pigeon went from millions to none, or how close the buffalo came to extinction and bounced back.  And, predicting the timing of extinction is considerably more difficult.
Quote
I made the caveat that its unlikely Roamer will see a new "Boom" within his lifetime, that is not to say at some indefinite future time there could be a boom.  Certainly, if 99% of the population dies off, then finally rebounds to double or triple that number, you would have a "boom" of sorts.
I love the graph you found, it makes my point.  Look at the "alternative energy spike".  That is the kind of boom I think would be quite possible in Roamer's lifetime.  It just requires a critical mass of influential people to have a modicum of intelligence.  Granted, unlikely, but definitely possible.

Of course, windmills and solar panels tend to last about 2-3 decades, so even if we do have the intelligence to use the last of our fossil fuel reserves to do a massive buildout, it is unlikely we will will have enough spare capacity to replace them all or even significantly, leading to another downward fall as they start failing.
Quote
If you want to look at this in Peak Oil terms, what I am saying is that never again will Homo Sapiens burn up as much per capita energy as we did at the turn of the millenium.  We are on the downhill slope now, and it's a one way trip.
You say that like it's a bad thing.  And, if we choose "conservation by other means", it is.  But there is so very much waste in the system that we Americans could easily cut 80% of our energy usage and still maintain 80% of our standard of living.  This is not just theoretical, people at places like Twin Oaks are actually doing it.
Quote
(http://www.truthmove.org/workspace/photos-content/JS-Peak-Oil.gif)
Title: How LOW can you GO?
Post by: RE on November 28, 2014, 08:02:40 AM
And the hits just keep on coming!  :icon_sunny:

SCHAUDENFREUDE!

 :multiplespotting:

RE

Copper & Crude Crash To 4 Year Lows

Tyler Durden's picture



 

With all eyes focused on the malls around America, we thought a glimpse at two of the most important commodities to the world economy would provide food for thought...

 

Copper...

 

And Crude...

 

are at 4-year lows...

But you can still get a bargain stock at record highs...

 

 

Title: Re: Fracker Debt Bubble
Post by: MKing on November 28, 2014, 11:13:36 AM
I bought a tank of gasoline in Oklahoma City about a week or two back. $2.39/gal for regular I believe.

Just checked that same station as of this morning...so far it has only dropped to $2.29.

But the real question is, can we get the average price down below $2.00 again for most folks? Certainly the special blend "gee do we like screwing our citizens" states of California or New York might never see those prices, but some of the more pro-growth oriented states might.

So in a month or two, maybe during an end of the year sale, would be a great time to sell an SUV and acquire a Prius or some such. Given time, that will reverse, but the question is how long?
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 28, 2014, 02:33:28 PM
Finally got the Volt. Picked up an unsold 2014 for 4K off the the sticker. I thought that was fairly reasonable, especially since I still got 48 months zero interest financing.

First impression...it's a lot like a Prius, but uses less gas. There don't seem to be a lot of those fast charge stations out in the burbs where I work, but there are plenty of them in town, including some free ones, like at Whole Foods Market. They require a CC with a chip to operate, even the free ones, which I don't have. Guess I'll either get one or get a card from ChargePoint, the company that puts in the public chargers.

It's no E350... :)  But $7500 in Federal Tax Credit and  a $2500 State rebate makes the car only slightly more expensive than a Toytoa Corolla to buy...and then there's all that gas savings. It's a no-brainer.

Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 28, 2014, 03:14:36 PM
Finally got the Volt. Picked up an unsold 2014 for 4K off the the sticker. I thought that was fairly reasonable, especially since I still got 48 months zero interest financing.

First impression...it's a lot like a Prius, but uses less gas. There don't seem to be a lot of those fast charge stations out in the burbs where I work, but there are plenty of them in town, including some free ones, like at Whole Foods Market. They require a CC with a chip to operate, even the free ones, which I don't have. Guess I'll either get one or get a card from ChargePoint, the company that puts in the public chargers.

It's no E350... :)  But $7500 in Federal Tax Credit and  a $2500 State rebate makes the car only slightly more expensive than a Toytoa Corolla to buy...and then there's all that gas savings. It's a no-brainer.

You will be giving thanks for all your savings and not remaining a gas guzzling turkey today.
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 03:18:47 PM
EOG Resources now down 7% to 86.72!  :icon_sunny:  At $65/barrel they're bleeding red ink like an Ebola victim in the Wood Chipper!

RE

Crude Carnage Continues After Close: WTI Now $65 Handle, Lowest Since 2009

Tyler Durden's picture



 

Not 'off the lows'

Big flush into WTI's close...

 

And Brent under $70... first time since May 2010

 

To 5 year lows...

 

Houston, we really  have a problem...

 

But it's priced in right?

 

Title: Re: Fracker Debt Bubble
Post by: Surly1 on November 28, 2014, 03:25:57 PM
Finally got the Volt. Picked up an unsold 2014 for 4K off the the sticker. I thought that was fairly reasonable, especially since I still got 48 months zero interest financing.

First impression...it's a lot like a Prius, but uses less gas. There don't seem to be a lot of those fast charge stations out in the burbs where I work, but there are plenty of them in town, including some free ones, like at Whole Foods Market. They require a CC with a chip to operate, even the free ones, which I don't have. Guess I'll either get one or get a card from ChargePoint, the company that puts in the public chargers.

It's no E350... :)  But $7500 in Federal Tax Credit and  a $2500 State rebate makes the car only slightly more expensive than a Toytoa Corolla to buy...and then there's all that gas savings. It's a no-brainer.

Good for you. Eddie!
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 03:52:16 PM
Finally got the Volt. Picked up an unsold 2014 for 4K off the the sticker. I thought that was fairly reasonable, especially since I still got 48 months zero interest financing.

First impression...it's a lot like a Prius, but uses less gas. There don't seem to be a lot of those fast charge stations out in the burbs where I work, but there are plenty of them in town, including some free ones, like at Whole Foods Market. They require a CC with a chip to operate, even the free ones, which I don't have. Guess I'll either get one or get a card from ChargePoint, the company that puts in the public chargers.

It's no E350... :)  But $7500 in Federal Tax Credit and  a $2500 State rebate makes the car only slightly more expensive than a Toytoa Corolla to buy...and then there's all that gas savings. It's a no-brainer.

Good for you. Eddie!

Sadly, the population of upper middle class Amerikans who can afford to buy Volts is shrinking by the day, besides the fact replacing the batteries for them is going to be quite difficult as this leg of the spin down progresses.

Economically speaking, the best thing to do is buy a Used Car for $3-4K, because even at $4/Gallon it costs way less than even a discount Volt.  The only reason to buy an EV is if you figure Gas will be unavailable, but if/when that occurs it won't be too safe to be driving your EV around.  They aren't any more efficient on using energy or in polluting less, the power off the grid mostly comes from fossil fuels or nukes, so really no "greener" than ICE.

RE
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 28, 2014, 04:35:45 PM
They aren't any more efficient on using energy or in polluting less, the power off the grid mostly comes from fossil fuels or nukes, so really no "greener" than ICE.


Actually they are more efficient, and they pollute significantly less, even factoring in fossil fuel power plants as part of the equation. Ask AG.

But any car, even electric, takes energy to run. So your point is well taken. When the grid goes down, I'm screwed.

But for me, today, a car like the Volt, which will use almost ALL grid power, on my commute, equals a huge savings in gas, even at todays deflating price at the pump. No 50 cent road tax at the pump for grid power, either. And the electricity consumed while recharging at the office is a business expense.

And in terms of cost, the only way you really come out ahead buying used vehicles is if you have a lot of good car availability. Here, the used car market is very tight, and people pay more buying used, after you figure in the inevitable repairs you're buying along with a used car. I'd bet on that. I just spent this afternoon installing four O2 sensors in my used truck. Cost $400. It'd been $800 if I took it to a shop. All parts and a all repairs now are getting more costly, too.

Title: Re: Fracker Debt Bubble
Post by: Eddie on November 28, 2014, 04:47:10 PM
Sadly, the population of upper middle class Amerikans who can afford to buy Volts is shrinking by the day,

Well, the upper middle class is definitely shrinking by the day.

 But owning a Volt does not require one to be upper middle class, or even middle, middle class. I know lots of people who aren't upper middle class who drive all kinds of more wasteful vehicles...SUV's, big pick-ups, Camaros, Corvettes. It's because they get sold a bill of goods by TV and internet ads, and they WANT those gas-guzzlers. Has nothing to do with rational thought. CO2? What's that?


Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 04:58:32 PM
They aren't any more efficient on using energy or in polluting less, the power off the grid mostly comes from fossil fuels or nukes, so really no "greener" than ICE.


Actually they are more efficient, and they pollute significantly less, even factoring in fossil fuel power plants as part of the equation. Ask AG.

But any car, even electric, takes energy to run. So your point is well taken. When the grid goes down, I'm screwed.

But for me, today, a car like the Volt, which will use almost ALL grid power, on my commute, equals a huge savings in gas, even at todays deflating price at the pump. No 50 cent road tax at the pump for grid power, either. And the electricity consumed while recharging at the office is a business expense.

And in terms of cost, the only way you really come out ahead buying used vehicles is if you have a lot of good car availability. Here, the used car market is very tight, and people pay more buying used, after you figure in the inevitable repairs you're buying along with a used car. I'd bet on that. I just spent this afternoon installing four O2 sensors in my used truck. Cost $400. It'd been $800 if I took it to a shop. All parts and a all repairs now are getting more costly, too.

When you factor in the depreciation on the batteries and the embedded energy in producing them, I highly doubt the EV is any more efficient a waster of energy than the ICE is, or less polluting.

Obviously, the used car market in your neighborhood is a factor, but for me, I bought my main Car, the 1989 Mazda MPV for $900.  That is the one I use most of the time, because it gets better gas mileage than the 2002 Ford Explorer SUV, which I picked up for $5000.  I got that one as backup because it was in like new condition but I only use it if the Mazda is not working for some reason.  I could do with just the Mazda though.

Anyhow, with my low monthly driving miles in the range of 300/month, it only costs around $80/month MOST to run the Mazda, with an initial cost of $900.  About the only repairs to it have been new tires and fixing it up after the gas siphoning issues, but you would need new tires and have repairs for an EV too I am sure, although obviously not a gas siphoning issue.  LOL.

So in the last 5 years, my Mazda has cost me a total of maybe $6000, and after 5 years with an EV, you would have to replace the battset, which by itself is double or triple the cost of that.

Now, if you drive a lot more than me (and you do), it makes slightly more economic sense to buy an EV, but not too much if you can find a good Used Car.  For the person who drives few miles though, the cost of an EV outta da box is just way too much money, and will never pay for itself.

RE
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 28, 2014, 05:21:16 PM
Normalcy Bias tells "veterans" that Booms always follow Busts, and you just need to "weather the storm".

I  do not see why you felt the need to tarnish my use of the word "veteran" in your comment. Look man, where I work there are many more in their fifties than thirties...at least in the offices in my five story and similar surrounding buildings.  If you have access to free, potentially beneficial information, I think you would be a nut to ignore it.  In fact, I am graded on this type of thing.  I make pretty good grades in this area.
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 28, 2014, 05:23:51 PM
Until someone does the math on O2 consumption and CO2 output on 200K miles as well as energy consumed in fracking, shipping and refining the liquid fuel used in the 25 yrs the MPV has run, Im not believing that the cost in energy to build a battery or two is just as bad.
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 05:27:54 PM
Until someone does the math on O2 consumption and CO2 output on 200K miles as well as energy consumed in fracking, shipping and refining the liquid fuel used in the 25 yrs the MPV has run, Im not believing that the cost in energy to build a battery or two is just as bad.

25 years of running the MPV would not take "a battery or two".  It would take replacing the whole Battset 4 or 5 times over, and then there are all the Fossil Fuels burned to produce the electricity to recharge those Battsets during their lifespan.

RE
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 05:35:10 PM
Normalcy Bias tells "veterans" that Booms always follow Busts, and you just need to "weather the storm".

I  do not see why you felt the need to tarnish my use of the word "veteran" in your comment. Look man, where I work there are many more in their fifties than thirties...at least in the offices in my five story and similar surrounding buildings.  If you have access to free, potentially beneficial information, I think you would be a nut to ignore it.  In fact, I am graded on this type of thing.  I make pretty good grades in this area.

I was just pointing out the Normalcy Bias of "veterans".

Obviously, there are more 50 year olds than 30 year olds working, the Unemployment Rate goes up as you go down the age ladder.  The younger you are, the later you got in on the Ponzi, and the most recent graduates are really screwed.

RE
Title: Re: Fracker Debt Bubble
Post by: MKing on November 28, 2014, 06:00:36 PM
Finally got the Volt. Picked up an unsold 2014 for 4K off the the sticker. I thought that was fairly reasonable, especially since I still got 48 months zero interest financing.

First impression...it's a lot like a Prius, but uses less gas. There don't seem to be a lot of those fast charge stations out in the burbs where I work, but there are plenty of them in town, including some free ones, like at Whole Foods Market.

Yep..one of the advantages has been locating the charging stations, and getting free fuel while out shopping. Did you get the federal and any state discounts? They were like an additional $13G on top of any discounts provided by the manufacturer, locally anyway. The state tax credit was nearly as big as the Fed tax credit.

Quote from: Eddie
They require a CC with a chip to operate, even the free ones, which I don't have. Guess I'll either get one or get a card from ChargePoint, the company that puts in the public chargers.

Well worth it. Although I imagine as gasoline prices continue to tank, all of the more fuel efficient cars are going to languish on lots. I am ashamed to admit that I have also purchased a new car, got rid of the pretty efficient roadtrip warrior machine, and bought an even more efficient one at year end closeout. I am a OpEx minimizing freak,always have been. Started in college, never got over it, the idea of traveling around town on electricity has been great, and now I can probably fill up my road warrior machine, drive 600 miles, and soon fill it up for like $25 or something. Ridiculous, gasoline should be taxed to $4/gal while the price is low, people wouldn't have noticed as much. Now they are going to SCREAM all over again when prices go back up after OPEC and Russia finish playing chicken with the US oil independents.

Quote from: Eddie
It's no E350... :)  But $7500 in Federal Tax Credit and  a $2500 State rebate makes the car only slightly more expensive than a Toytoa Corolla to buy...and then there's all that gas savings. It's a no-brainer.

Yep...$6G state credit here. Bring on the EV experience...once you've had electric, you won't want to go back! Let them burn gasoline, give me electricity or give me death!

Title: Re: Fracker Debt Bubble
Post by: roamer on November 28, 2014, 06:04:27 PM
They aren't any more efficient on using energy or in polluting less, the power off the grid mostly comes from fossil fuels or nukes, so really no "greener" than ICE.


Actually they are more efficient, and they pollute significantly less, even factoring in fossil fuel power plants as part of the equation. Ask AG.

But any car, even electric, takes energy to run. So your point is well taken. When the grid goes down, I'm screwed.

But for me, today, a car like the Volt, which will use almost ALL grid power, on my commute, equals a huge savings in gas, even at todays deflating price at the pump. No 50 cent road tax at the pump for grid power, either. And the electricity consumed while recharging at the office is a business expense.

And in terms of cost, the only way you really come out ahead buying used vehicles is if you have a lot of good car availability. Here, the used car market is very tight, and people pay more buying used, after you figure in the inevitable repairs you're buying along with a used car. I'd bet on that. I just spent this afternoon installing four O2 sensors in my used truck. Cost $400. It'd been $800 if I took it to a shop. All parts and a all repairs now are getting more costly, too.

When you factor in the depreciation on the batteries and the embedded energy in producing them, I highly doubt the EV is any more efficient a waster of energy than the ICE is, or less polluting.

Obviously, the used car market in your neighborhood is a factor, but for me, I bought my main Car, the 1989 Mazda MPV for $900.  That is the one I use most of the time, because it gets better gas mileage than the 2002 Ford Explorer SUV, which I picked up for $5000.  I got that one as backup because it was in like new condition but I only use it if the Mazda is not working for some reason.  I could do with just the Mazda though.

Anyhow, with my low monthly driving miles in the range of 300/month, it only costs around $80/month MOST to run the Mazda, with an initial cost of $900.  About the only repairs to it have been new tires and fixing it up after the gas siphoning issues, but you would need new tires and have repairs for an EV too I am sure, although obviously not a gas siphoning issue.  LOL.

So in the last 5 years, my Mazda has cost me a total of maybe $6000, and after 5 years with an EV, you would have to replace the battset, which by itself is double or triple the cost of that.

Now, if you drive a lot more than me (and you do), it makes slightly more economic sense to buy an EV, but not too much if you can find a good Used Car.  For the person who drives few miles though, the cost of an EV outta da box is just way too much money, and will never pay for itself.

RE

Overall EV lifecycle cost coupled with PV systems aren't horrid, they won't fuel our crazy BAU, but economies could get necessary transport done with them as EROEI have improved significantly over the last few years. The real issue though is the consumers are dead and few have the available dollars to invest and these systems require all capital upfront.  If we manage to roll out EV's it will be corporations rolling them out as on demand automated rentals, they are the only ones with the cash to do so.  We'd have to get used to the fact that we'll by in large be a nation of indefinite renters living on very low margins much more inline with the rest of the world. 

Of course to get to that point there will be much blood as all the businesses large and small which where devoted to oil fueled transport will have to radically change or die. 

At present too dollar is at heart a petrodollar and so much of the current world order is a result of this arrangement.  The shifts about to take place are epic and global in scope and its damn hard to know what order will come out on the other end.
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 06:16:19 PM
The real issue though is the consumers are dead and few have the available dollars to invest and these systems require all capital upfront.  If we manage to roll out EV's it will be corporations rolling them out as on demand automated rentals, they are the only ones with the cash to do so.  We'd have to get used to the fact that we'll by in large be a nation of indefinite renters living on very low margins much more inline with the rest of the world.

The only reason the corporations still have cash is that they are first in line on the credit bandwagon.  However, the credit will dry up for them as well here in due time.  More on this tonight after I record the Oil Price Crash Rant.  :icon_sunny:

RE
Title: Re: Fracker Debt Bubble
Post by: roamer on November 28, 2014, 06:17:04 PM

So in the last 5 years, my Mazda has cost me a total of maybe $6000, and after 5 years with an EV, you would have to replace the battset, which by itself is double or triple the cost of that.

Now, if you drive a lot more than me (and you do), it makes slightly more economic sense to buy an EV, but not too much if you can find a good Used Car.  For the person who drives few miles though, the cost of an EV outta da box is just way too much money, and will never pay for itself.

RE

Yeah my strategy has been the same, I crunched the numbers too and I've been driving a $750 Isuzu Trooper for the last 50,000 miles of my roaming and I'm still way ahead of where i'd been if i'd bought a $9000 fuel efficent car.  Of course it helps that i can wrench and am pretty good at low cost mcygver style fixes.  I've saved the thing with around 3-4 $40 fixes.  Not many people could've done those. 
Title: Re: Fracker Debt Bubble
Post by: MKing on November 28, 2014, 06:19:05 PM
The real issue though is the consumers are dead and few have the available dollars to invest and these systems require all capital upfront.  If we manage to roll out EV's it will be corporations rolling them out as on demand automated rentals, they are the only ones with the cash to do so.  We'd have to get used to the fact that we'll by in large be a nation of indefinite renters living on very low margins much more inline with the rest of the world.

The only reason the corporations still have cash is that they are first in line on the credit bandwagon.  However, the credit will dry up for them as well here in due time.  More on this tonight after I record the Oil Price Crash Rant.  :icon_sunny:

RE

Otherwise known as let the good times roll!!

(http://globalcarslist.com/data_images/gallery/01/ford-f-150-monster-truck/ford-f-150-monster-truck-05.jpg)
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 06:36:24 PM

So in the last 5 years, my Mazda has cost me a total of maybe $6000, and after 5 years with an EV, you would have to replace the battset, which by itself is double or triple the cost of that.

Now, if you drive a lot more than me (and you do), it makes slightly more economic sense to buy an EV, but not too much if you can find a good Used Car.  For the person who drives few miles though, the cost of an EV outta da box is just way too much money, and will never pay for itself.

RE

Yeah my strategy has been the same, I crunched the numbers too and I've been driving a $750 Isuzu Trooper for the last 50,000 miles of my roaming and I'm still way ahead of where i'd been if i'd bought a $9000 fuel efficent car.  Of course it helps that i can wrench and am pretty good at low cost mcygver style fixes.  I've saved the thing with around 3-4 $40 fixes.  Not many people could've done those.

I have a Used Car Good Fairy that watches over me.  :icon_sunny:

My one and only New Car was a Chevy Astro Van I bought while I was married.  I drove it for around 8 years and then it got stolen.  I was without a car for about a year, that is when I moved to Missouri.

I bought then a Toyota Tercel 4WD 1980s vintage for $1500, it needed a new transmission which cost another $1000.  It lasted me for a decade.  I then bought a Jeep Wagoneer LTD  for $3500 which had been in a little old lady's garage for most of its life, only 50K miles on it.  I still have that one, it is in the storage unit in MO.  I drove it about 5 years, no problems.

When I moved to Alaska, I bought a Toyota Pickup for $500 which lasted 2 years.  Then I bought the MPV for $900, had it 7 years now still going strong.

Besides the Astro, the TOTAL COST for all the vehicles I have driven for the past 30 years is under $12K. It would be under $10K if I did not buy the Ford Explorer I hardly ever drive for $5000 a few years ago. Repairs have been minimal in all cases.  The Toyota Pickup would have cost more to repair than the cost of the MPV, which is why I got rid of it, sold it to a guy who was a MacGuyver Mr. Fixit for $50 and I believe he drove it another couple of years.

I never should have bought the Astro Van new, that was my one Car Mistake over the last almost 40 years now of car driving (motorcycle before that).  Even that was not too bad a mistake since I did get around 8 years out of it before it got stolen.

RE
Title: Re: Fracker Debt Bubble
Post by: roamer on November 28, 2014, 07:00:54 PM
RE, Gotta admit too i get some odd twisted sense of pleasure at pulling into a walmart parking lot with a dragging exhaust and coming out with a can, two pipe clamps and a "custom hanger" and an hour later driving along.  A month ago i replaced all my brake pads at wal mart after turning down two $600+ quotes, my cost was $50.  Of course this type of behavior is systematically discouraged because it promotes not spending which promotes deflation.  The irony is that in the end having a society of clueless manipulated consumers is a far greater systemic danger than having a far more meager economy of independent and more self reliant producers. 
Title: Re: Fracker Debt Bubble
Post by: MKing on November 28, 2014, 07:30:08 PM
Besides the Astro, the TOTAL COST for all the vehicles I have driven for the past 30 years is under $12K.

Shit!!

I've purchased 38 automobiles over the years, new and used mixed, more than 1 million miles of total miles on them, and I think only 3 of them cost less than $12K.

Of course, it is a bit difficult to drive a heap at 140mph down the front straight of some racetrack and hope that some rust weakened part doesn't break under 0.9G cornering loads, let alone hitting a bump during those kinds of cornering loads.

Title: Re: Fracker Debt Bubble
Post by: MKing on November 28, 2014, 07:32:11 PM
Yeah my strategy has been the same, I crunched the numbers too and I've been driving a $750 Isuzu Trooper for the last 50,000 miles of my roaming and I'm still way ahead of where i'd been if i'd bought a $9000 fuel efficent car.   

I had a 1999 Trooper, was part of the ITOG forums way back when.  Et to perhaps? Was an excellent SUV, if a bit thirsty.

Always wanted a Vehicross, one of those unrealized dreams I guess, can't find one with reasonable miles on it to save my life now.
Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 08:56:04 PM
RE, Gotta admit too i get some odd twisted sense of pleasure at pulling into a walmart parking lot with a dragging exhaust and coming out with a can, two pipe clamps and a "custom hanger" and an hour later driving along.  A month ago i replaced all my brake pads at wal mart after turning down two $600+ quotes, my cost was $50.  Of course this type of behavior is systematically discouraged because it promotes not spending which promotes deflation.  The irony is that in the end having a society of clueless manipulated consumers is a far greater systemic danger than having a far more meager economy of independent and more self reliant producers.

The Toyota Pickup had a bigger problem than Brake Pads, according to the Shop guys it was about to fall off of it's suspension system from rust.  LOL.

The whole system is geared to make people keep buying cars, gotta have a new one every 3 years!  I had an Uncle who bought a new Caddy every 3 years from the time he retired from the Navy in 1958 until he died in the early 80s I think it was.  Every one of them was as immaculate the day he traded it in as the day he bought it.  This kind of moronic behavior is what kept the carz industry floating for the last 50 years.

(http://image.shutterstock.com/display_pic_with_logo/64551/64551,1204558235,2/stock-photo-a-lot-of-used-cars-in-the-junkyard-9993664.jpg)
If you don't get a lemon, most cars last at least 10 years, and 10 year old carz that are still on the road are not lemons.  It's a total waste of money and resources to be replacing carz like this all the time, as Steve likes to put it, it is purely Fashion.

Its absolutely unfathomable how many Junked carz there are these days, easily we could have lived the same lifestyle with 1/4 of the number produced over the years.  To produce each car takes GOBS of embedded energy, each time you get a new one you waste still more resources.

EVs are another Fashion here, but they won't have near the staying power of a 1989 Mazda.  10 years from now at the outside they will be still more rusting junk, with the only difference that they probably won't even make it to the Junkyards and just be sitting in the garages of abandoned McMansions around the world.

RE
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 28, 2014, 10:46:48 PM
you can also find thrown out chinese 5$ shoes and buy a roll of tape, use a foot of it to wind around a couple of times and get 1000 more miles out of them, total cost about 1$ or less if u pop the roll of tape in your pocket without paying. Buy 2nd hand clothes also, but lets not bitch about the state of the environment due to the maximum profit principle if we are going to follow it ourselves. I can change brake pads myself too, but i would rather have regenerative braking and if everyone else did the same s well as installing solar panels or simply ticking the box on your power bill to use renewable energy we would not have the peak hour pollution and 400 ppm CO2 already. Plenty of people are going to buy new cars every so often just like others are still going to buy new jeans or electronics every so often, they deserve praise for getting one thats polluting about as much as they would be walking.




Title: Re: Fracker Debt Bubble
Post by: RE on November 28, 2014, 10:51:55 PM
Plenty of people are going to buy new cars every so often just like others are still going to buy new jeans or electronics every so often

Not too often from here on in I would estimate.

RE
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 28, 2014, 11:48:13 PM
Plenty of people are going to buy new cars every so often just like others are still going to buy new jeans or electronics every so often

Not too often from here on in I would estimate.

RE

Conservartion by other means it is then, my point is we shouldnt piss on eddys parade when hes taking the most responsible path of personal transport.
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 12:20:14 AM
Conservartion by other means it is then, my point is we shouldnt piss on eddys parade when hes taking the most responsible path of personal transport.

We haven't determined that buying a Volt IS the most responsible pathway.

Economics SEZ he would be more responsible if he bought a Used Car, given the whole car scenario only lasts a short while longer anyhow.  Both Roamer and I found it to be MUCH more economical to buy used carz than energy efficient new ones.

RE
Title: Re: Fracker Debt Bubble
Post by: Surly1 on November 29, 2014, 04:25:52 AM
Conservartion by other means it is then, my point is we shouldnt piss on eddys parade when hes taking the most responsible path of personal transport.

We haven't determined that buying a Volt IS the most responsible pathway.

Economics SEZ he would be more responsible if he bought a Used Car, given the whole car scenario only lasts a short while longer anyhow.  Both Roamer and I found it to be MUCH more economical to buy used carz than energy efficient new ones.

RE

Until you've done a computation of cost per mile, you're pissing up a rope. Depends also on the planned life of the car.
I'm betting Eddie has done that.
Title: Re: Fracker Debt Bubble
Post by: Surly1 on November 29, 2014, 04:32:13 AM
RE, Gotta admit too i get some odd twisted sense of pleasure at pulling into a walmart parking lot with a dragging exhaust and coming out with a can, two pipe clamps and a "custom hanger" and an hour later driving along.  A month ago i replaced all my brake pads at wal mart after turning down two $600+ quotes, my cost was $50.  Of course this type of behavior is systematically discouraged because it promotes not spending which promotes deflation.  The irony is that in the end having a society of clueless manipulated consumers is a far greater systemic danger than having a far more meager economy of independent and more self reliant producers.

The Toyota Pickup had a bigger problem than Brake Pads, according to the Shop guys it was about to fall off of it's suspension system from rust.  LOL.

The whole system is geared to make people keep buying cars, gotta have a new one every 3 years!  I had an Uncle who bought a new Caddy every 3 years from the time he retired from the Navy in 1958 until he died in the early 80s I think it was.  Every one of them was as immaculate the day he traded it in as the day he bought it.  This kind of moronic behavior is what kept the carz industry floating for the last 50 years.

(http://image.shutterstock.com/display_pic_with_logo/64551/64551,1204558235,2/stock-photo-a-lot-of-used-cars-in-the-junkyard-9993664.jpg)
If you don't get a lemon, most cars last at least 10 years, and 10 year old carz that are still on the road are not lemons.  It's a total waste of money and resources to be replacing carz like this all the time, as Steve likes to put it, it is purely Fashion.

Its absolutely unfathomable how many Junked carz there are these days, easily we could have lived the same lifestyle with 1/4 of the number produced over the years.  To produce each car takes GOBS of embedded energy, each time you get a new one you waste still more resources.

EVs are another Fashion here, but they won't have near the staying power of a 1989 Mazda.  10 years from now at the outside they will be still more rusting junk, with the only difference that they probably won't even make it to the Junkyards and just be sitting in the garages of abandoned McMansions around the world.

RE

Why do you say that about EVs?

In any event, I'm betting the Volt will last longer than my 1971 Chevy Vega did.

The "planned obsolescence" of the auto industry extended to other sectors as well. Time was you could repair a toaster.... now you can barely repair an oven. And refrigerators routinely lasted for 30 years. Most of us know someone who still has a 50s-era Frigidaire in the basement still chilling the beer.
Title: Re: Fracker Debt Bubble/Juan Cole- Saudis Target U.S. Shale Oil, Iran, Iraq
Post by: Surly1 on November 29, 2014, 05:26:23 AM
Oil Price Fall: Saudi Arabia Targets U.S. Shale Oil, Iran, Iraq, Russia (http://www.truthdig.com/report/item/oil_price_fall_saudi_arabia_targets_us_shale_oil_iran_iraq_russia_2014112)
Posted on Nov 29, 2014


By Juan Cole (http://www.truthdig.com/juan_cole/)



(http://www.truthdig.com/images/eartothegrounduploads/oilworld_590.jpg)
Shutterstock


This post originally ran on Juan Cole’s Web page (http://www.juancole.com/2014/11/targets-shale-russia.html).

It is clear that among the major losers in the fall in the price of Brent crude petroleum from $115 a barrel last summer to about $75 a barrel today are Russia, Iraq and Iran.  Petroleum sales are 50% of Russia’s income, and are also central for Iran and Iraq.

But the big loser will likely be shale oil producers and prospectors in the US, who probably cannot make a profit if the price falls into the 60s.

The cause of the fall, by $40 a barrel, in petroleum prices since last summer is almost completely on the demand side.  Asian economies, especially China, are dramatically slowing, and won’t be requiring as much petroleum to fuel trucks, trains and cars to deliver people and goods around the country.  Most petroleum is used to fuel transport.  Some is used for heating or cooling, as in Saudi Arabia and Hawaii, but that practice is relatively rare.  US journalists seem to feel it obligatory to mention US shale oil production as a contributor to the price fall, since prices are a matter of supply and demand, and US supply has increased by a couple million barrels a day.  But frankly that is a minor increase in world terms– global production is roughly 90 million barrels a day.  Between Iran, Iraq (Kirkuk), Libya and Syria, enough oil has gone out of production to more than offset the additional American oil.  It isn’t that there is more oil being pumped, it is that the world doesn’t want it as much because of cooling economies.

The Russian and Iranian governments are said to be panicking  (http://rt.com/business/209579-opec-oil-supply-russia/), because both need high prices to support their bloated government budgets and popular subsidies.The value of the Russian ruble against the dollar has fallen 19% this fall.

The Iraqi government of Haydar al-Abadi will also have much less income with which to fight Daesh/ ISIL.

While the fall in petroleum prices is hurting government budgets in Russia and Iran, ironically it may actually help workers.  Iran’s economy has improved in the past year despite US sanctions on Iranian oil sales (http://www.al-monitor.com/pulse/originals/2014/10/economic-indicators-iran.html#), which have reduced exports from 2.5 mn bpd to 1.5 mn bpd in the past three years.

One silver lining for the Iranian economy of lower oil prices is that they will weaken the value of the riyal and make Iranian manufactures, handicrafts and agricultural produce cheaper to export.  This development will benefit millions of Iranians.  It is mainly the government, and recipients of government subsidies, who are hurt by the oil price fall.

Nor should it be assumed that reduced oil income will destabilize the ayatollahs in Tehran.  Saddam Hussein in 1990s Iraq faced much more severe oil sanctions, and the price fell steeply in 1997, but the Iraqi Baath elite cushioned themselves and survived handsomely until George W. Bush invaded and overthrew them.

Russian made goods may also benefit over time from the lower ruble and a smaller oil income.  Putin may become less powerful, but Russian factory workers may see a rise in income because more in the global South can afford to import their products.

As for North Dakota and other fracking states, some of their production may continue because of sunk costs in drilling and infrastructure.  But it is likely that new investment in fracked oil will dry up for the next year or so.

Saudi Arabia did not cause the oil price fall, though since 2011 it has been flooding the market to offset the decrease in Iranian exports because of US sanctions.  Riyadh, however, is the main geopolitical winner here, which is why the Saudis stopped the Organization of Petroleum Exporting Countries from reducing country production quotas.  (That step would have reduced supply and put up prices).  As it is, the Saudis can afford to wait as fracked oil is driven out of the market because too expensive, so that they regain their market share.

The Saudis must enjoy punishing Iran and Russia for defying them by propping up the Bashar al-Assad regime in Damascus and the Da’wa Shiite regime in Baghdad.

The lower oil prices are unlikely to hurt electric vehicles or plug-in hybrids, because they are still such a tiny part of the auto market that there is room for sales to grow a great deal.  And, even if US prices average out at $2.70 a gallon, that can’t actually compete with free fuel, which is what a lot of electric auto owners get, via their rooftop solar panels or subsidized parking in cities or at work.

Natural gas and petroleum are dead men walking– they are worthless but the markets just haven’t realized it yet.  By 2016, solar and wind will be grid parity everywhere in the US with coal and natural gas for heating and cooling buildings.  That means it will be as cheap or cheaper to build a solar or wind facility as to build a new coal plant (the latter won’t likely even be allowed because of anti-pollution laws finally being implemented by the Obama administration).

Because it is harder and more expensive to replace petroleum for transportation than to replace coal and natural gas for heating buildings, oil may have a longer run than the other hydrocarbons.  But as auto battery costs come down and as more and more buildings have solar panels or are supplied with electricity by wind, gasoline-driven autos will also, over the next 10-15 years, become uneconomical.  (Not to mention that Asian demand will revive and even possibly go into overdrive, as India, e.g. turns to automobiles from bicycles.)

That is, Saudi Arabia, Iran, Russia and North Dakota are all up the creek in the medium term.  But for the latter three, which have complex economies and in the case of Russia and Iran, sizeable populations, the economic benefit of inexpensive renewable electriicity will likely outweigh the loss of oil income.  Everywhere, renewables are likely to put money and power in the pockets of ordinary people and workers, and may spell a weakening of the oil-based rentier state.

Saudi Arabia should enjoy its brief moment of triumph.  Its business model is actually a dinosaur, as it that of the rivals it is punishing.

Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 07:19:02 AM
Finally got the Volt. Picked up an unsold 2014 for 4K off the the sticker. I thought that was fairly reasonable, especially since I still got 48 months zero interest financing.

First impression...it's a lot like a Prius, but uses less gas. There don't seem to be a lot of those fast charge stations out in the burbs where I work, but there are plenty of them in town, including some free ones, like at Whole Foods Market. They require a CC with a chip to operate, even the free ones, which I don't have. Guess I'll either get one or get a card from ChargePoint, the company that puts in the public chargers.

It's no E350... :)  But $7500 in Federal Tax Credit and  a $2500 State rebate makes the car only slightly more expensive than a Toytoa Corolla to buy...and then there's all that gas savings. It's a no-brainer.

I mentioned in a comment a few months ago that I would be looking to buy a new car next year. Eddie's info really got me thinking about buying a Volt.  Bad news - NC doesn't have a $2,500 rebate.  Not many states do, so that's a big plus for Eddie.  The good news is I found out the company I work for has 17 dual port EVSE and 2 single port EVSE in 9 locations spread around the campus.  Of the 97 "registered" plug-in EVs, 13 are Volts.  Employees get free charging but must limit charging time to 4 hours per charge.  So I guess this is a "plus" - but I don't think it comes close to being the plus that a $2,500 state rebate is. Still something for me to consider.  Thoughts anyone?
 
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 08:02:43 AM
Plenty of people are going to buy new cars every so often just like others are still going to buy new jeans or electronics every so often

Not too often from here on in I would estimate.

RE

Conservartion by other means it is then, my point is we shouldnt piss on eddys parade when hes taking the most responsible path of personal transport.

We should absolutely not. On this forum, with perhaps 5 regulars, we have two Chevy Volt owners. Undoubtedly the highest percentage of forum regulars anywhere on the net except the Volt forums themselves making such responsible choices.
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 08:07:59 AM
The good news is I found out the company I work for has 17 dual port EVSE and 2 single port EVSE in 9 locations spread around the campus.  Of the 97 "registered" plug-in EVs, 13 are Volts. 

The place I once worked had 2 Tesla's. Now THOSE are EV's!! But my Volt was the only one regularly plugged into the free fuel provided by the solar panel array.

Quote from: JoeP
Employees get free charging but must limit charging time to 4 hours per charge.  So I guess this is a "plus" - but I don't think it comes close to being the plus that a $2,500 state rebate is. Still something for me to consider.  Thoughts anyone?

Buy your Volt in Colorado for a $6000 tax credit. Might be worth becoming a resident for some period of time, or at least pretending to be a resident, worth $500/month for every month you can pretend to be a citizen.

Title: Re: Fracker Debt Bubble
Post by: roamer on November 29, 2014, 08:19:14 AM
That Juan Cole article Surly posted is rather brazenly optimistic on renewables.  Calling coal and oil dead men walking is ridiculous, solar hasn't yet cracked a single percent of our annual total energy supply.  That said I am optimistic that the overall energetics are improving with solar. I could see phenomenal exponential solar growth occuring when the right capital gets behind it and it seems to be doing that.

However I don't know how much collateral damage will be sustained during this oil rundown. Definitely going to be some blood and likely a drop or plateau in production possibly a precipitous drop if things crater far enough.  Still I'm going to be avoiding jumping on the full out doom bandwagon this time around.  I did that in 2008, thought i had a good read on the tea leaves and left a stable job and career to get on with post fossil fuel living.  Foolishly blew my savings helping Open Source Ecology put up a shop in the winter while i roughed it in a dirt floor smoke shack and shit in a 5 gallon bucket and got nothing to show for it.  Not going to happen to me this time around.  People are making money on both the greedy feeding frenzy of a boom and also the ruthless make it on the fear that sets in around the bottom.  I don't know how the upcoming shakedown will go down.  Preciptious drop off of fracking produced oil is a possibility also a possibility that it'll trigger a sizeable economic meltdown.  However its also likely that the big oil companies will quietly buy up reduced leases and that the in a year the price will rebound and they'll start producing again.  Our system is despite its massive JIT system far more resilient than i ever estimated.  Anyways here is to hoping cool calm observant heads prevail during this downswing.

Title: Re: Fracker Debt Bubble
Post by: roamer on November 29, 2014, 08:37:03 AM
Yeah my strategy has been the same, I crunched the numbers too and I've been driving a $750 Isuzu Trooper for the last 50,000 miles of my roaming and I'm still way ahead of where i'd been if i'd bought a $9000 fuel efficent car.   

I had a 1999 Trooper, was part of the ITOG forums way back when.  Et to perhaps? Was an excellent SUV, if a bit thirsty.

Always wanted a Vehicross, one of those unrealized dreams I guess, can't find one with reasonable miles on it to save my life now.

Thats funny mine is a 99 as well.  Yeah the 3.5's are thirsty and they didn't drill large enough drain holes in the pistons so they burn 1qt of oil/1000 miles, however its been phenomenally tough vehicle for me and i got to admit i'm kind of partial to it after all its gotten me through.  I've been in and out of being completely broke and have camped and lived out of it for periods.  I never had the money to properly maintain it and yet it has been quite robust.  The timing belt, intake manifold gasket (which i also changed in a parking lot) and front knuckles were the worst repairs i've had to do which really is pretty good.  I wished they had imported the diesels though, that would really be a great 4x4 platform.
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 29, 2014, 09:08:04 AM
The good news is I found out the company I work for has 17 dual port EVSE and 2 single port EVSE in 9 locations spread around the campus.  Of the 97 "registered" plug-in EVs, 13 are Volts.  Employees get free charging but must limit charging time to 4 hours per charge.  So I guess this is a "plus" - but I don't think it comes close to being the plus that a $2,500 state rebate is. Still something for me to consider.  Thoughts anyone?
I think Eddie made the right decision for his situation.  The most critical factors:

1. His daily commute was approximately equal to the range he could he on the plug-in charge alone.
2. There is a high demand for used vehicles in his area that drives the price up close to the price of new ones.
3. He has a fairly reliable, decent source of income which requires reliable transportation.

If all those apply, a new Volt may be a good idea for you, too.  But, for example, for an EV there is a huge difference between driving 40 miles 5 days a week and making a 200 mile trip once a week.  You really need to base your decision on your own situation.
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 09:20:31 AM
That Juan Cole article Surly posted is rather brazenly optimistic on renewables.  Calling coal and oil dead men walking is ridiculous, solar hasn't yet cracked a single percent of our annual total energy supply.

But for forward thinkers, those willing to put their money where their mouths are, it provides not only 20% of overall household energy supply but puts something close to that amount of fuel in our tanks as well.

From such small beginnings....

Quote from: Roamer
  That said I am optimistic that the overall energetics are improving with solar. I could see phenomenal exponential solar growth occuring when the right capital gets behind it and it seems to be doing that.

Thank you. Some of us, with access to people investing that capital, when we make the point that oil is obsolete, we see those quizzical looks in the audience. But then others, they come up afterwards, and the conversations and their plans for the future...are nothing but amazing.

Quote from: Roamer
However I don't know how much collateral damage will be sustained during this oil rundown.

Those of us who have been through these before, or even better yet lived through the entire aftermath, sure do.

Quote from: Roamer
Definitely going to be some blood and likely a drop or plateau in production possibly a precipitous drop if things crater far enough.  Still I'm going to be avoiding jumping on the full out doom bandwagon this time around.  I did that in 2008, thought i had a good read on the tea leaves and left a stable job and career to get on with post fossil fuel living.  Foolishly blew my savings helping Open Source Ecology put up a shop in the winter while i roughed it in a dirt floor smoke shack and shit in a 5 gallon bucket and got nothing to show for it.

Hell, even growing up in Appalachia wasn't that bad. Had a toilet at least, even if I had to haul water from the creek to flush it. But Doom has been proclaimed far more than it happens, I remember the end of the world during the Cold War years, the Population Bomb and how the world would end in pollution and death, the end of the world when Ronnie was elected, the good times and happiness after the fall of the wall, and then the this must be at least RE's second bandwagon by now and he has only been in the game a few years. You can't recycle doom fear without having the attention span of a goldfish. I fell for my first doom in the 70's, and have learned far more about it ever since.

Which is why it was so easy to spot 2008 as the next big buying opportunity.

Quote from: Roamer
  Not going to happen to me this time around. 

You are young. After you've seen 3 or 4 of these cycles, you won't even need to remind yourself any more than those pronouncing Doom have been wrong for all of human history. Oh sure, crash and burns here and there, civilizations come and go, but the human species just keeps marching on.

Quote from: Roamer
  I don't know how the upcoming shakedown will go down.  Preciptious drop off of fracking produced oil is a possibility also a possibility that it'll trigger a sizeable economic meltdown.

Price drop in 2008 dropped spudded wells per month in the Williston in half. Took about 6 months for oil production to decline. Created a temporary spike in completions, and a steadily building backlog after that. Showed up in all the production statistics. It will depend on how deep and hard a lesson the Saudi's decide to teach the American independents.

This originates from about February of 2013 when the Saudi's were in Washington asking some terribly suspicious questions of experts on this topic. Very, very specific questions. You could see in those questions the actions happening now.

They will run the board for as long as they wish. Just as they did in 1986, another wonderful learning experience to those of us in the Biz.

Quote from: Roamer
  However its also likely that the big oil companies will quietly buy up reduced leases and that the in a year the price will rebound and they'll start producing again.  Our system is despite its massive JIT system far more resilient than i ever estimated.  Anyways here is to hoping cool calm observant heads prevail during this downswing.

Unfortunately, service hands are the first to go during slowdowns. Also the first to get their jobs back when things pick back up. During the 1992 slowdown in the GOM, it required a 70% downsizing of some folks I was familiar with, but they picked most of the people they liked back up within 6 months.

Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 09:26:05 AM
The good news is I found out the company I work for has 17 dual port EVSE and 2 single port EVSE in 9 locations spread around the campus.  Of the 97 "registered" plug-in EVs, 13 are Volts.  Employees get free charging but must limit charging time to 4 hours per charge.  So I guess this is a "plus" - but I don't think it comes close to being the plus that a $2,500 state rebate is. Still something for me to consider.  Thoughts anyone?
I think Eddie made the right decision for his situation.  The most critical factors:

1. His daily commute was approximately equal to the range he could he on the plug-in charge alone.
2. There is a high demand for used vehicles in his area that drives the price up close to the price of new ones.
3. He has a fairly reliable, decent source of income which requires reliable transportation.

If all those apply, a new Volt may be a good idea for you, too.  But, for example, for an EV there is a huge difference between driving 40 miles 5 days a week and making a 200 mile trip once a week.  You really need to base your decision on your own situation.

2 & 3 apply. I think #1 applies as well.  My drive to work is 7.5 miles.  So the daily commute is 15 miles.  I go home for lunch a lot and then there are always appointments and errands that need to be handled that add to the driving.  My guess is I average about 25 miles a day.
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 09:27:36 AM
Yeah my strategy has been the same, I crunched the numbers too and I've been driving a $750 Isuzu Trooper for the last 50,000 miles of my roaming and I'm still way ahead of where i'd been if i'd bought a $9000 fuel efficent car.   

I had a 1999 Trooper, was part of the ITOG forums way back when.  Et to perhaps? Was an excellent SUV, if a bit thirsty.


Thats funny mine is a 99 as well.  Yeah the 3.5's are thirsty and they didn't drill large enough drain holes in the pistons so they burn 1qt of oil/1000 miles, however its been phenomenally tough vehicle for me and i got to admit i'm kind of partial to it after all its gotten me through.  I've been in and out of being completely broke and have camped and lived out of it for periods.  I never had the money to properly maintain it and yet it has been quite robust.  The timing belt, intake manifold gasket (which i also changed in a parking lot) and front knuckles were the worst repairs i've had to do which really is pretty good.  I wished they had imported the diesels though, that would really be a great 4x4 platform.

I've always wanted a diesel. Almost collected a Chevy Cruze diesel recently (highly discounted they are) to satiate that desire, but I just couldn't do it, even with those discounts. Collected yet another gas powered road warrior machine instead. But a diesel in that old Trooper would have been epic.

Used mine to tow an old pickup truck bed back and forth across the country towing sportbikes to racetracks. Don't think it ever achieved 20mpg but was reliable as a hammer, and great in the snow. The wife loved the AWD button. Was much easier to change oil on than a Montero Limited Sport I acquired later to replace it.
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 09:31:53 AM
The good news is I found out the company I work for has 17 dual port EVSE and 2 single port EVSE in 9 locations spread around the campus.  Of the 97 "registered" plug-in EVs, 13 are Volts.  Employees get free charging but must limit charging time to 4 hours per charge.  So I guess this is a "plus" - but I don't think it comes close to being the plus that a $2,500 state rebate is. Still something for me to consider.  Thoughts anyone?
I think Eddie made the right decision for his situation.  The most critical factors:

1. His daily commute was approximately equal to the range he could he on the plug-in charge alone.
2. There is a high demand for used vehicles in his area that drives the price up close to the price of new ones.
3. He has a fairly reliable, decent source of income which requires reliable transportation.

If all those apply, a new Volt may be a good idea for you, too.  But, for example, for an EV there is a huge difference between driving 40 miles 5 days a week and making a 200 mile trip once a week.  You really need to base your decision on your own situation.

Can't use the Volt for road trip warrioring for sure. Diesel VW's maybe, some Mazda's, the new Turbo Turd Ford (otherwise known as a 1.0L 3 cylinder Fiesta I have been forbidden from acquiring), hyrbids of various types, with gasoline being so much cheaper than diesel it really makes more sense than the diesels right now.
Title: Re: Fracker Debt Bubble
Post by: whd off the rez on November 29, 2014, 09:41:10 AM
I drive on average about 100 miles a day. The last year i put 30000 miles on a 95 voyager. It is now close to 150000. Who wants to venture an opinion about what i  should buy when this one craps out. They don't make the vehicle I want, a small diesel van or truck.

Whd
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 29, 2014, 10:11:06 AM
@JoeP

On one of those fast chargers on campus 4 hours a day will completely charge a Volt, so theoretically you might not have to use any grid power you're personally paying for, and almost no gas either. However, such a short commute puts you in a situation that makes any of the plug-in hybrids make sense, even the plug-in Prius, which only gets something like 13 miles on battery alone. That wasn't enough distance for my commute, but it would be for yours.

With the Volt, you can put the car in Mountain Mode when driving a longer trip, which makes it perform somewhat more like the non-plug-in hybrids, so that the gas engine puts power to the wheels all the time like a regular Prius.

I didn't know Texas even had the $2500 state rebate until I bought the car. That wasn't part of my calculations, just a nice bonus.

@WHD

Trucks are a problem, and if you can possibly live without one, you should. Consider building a lightweight trailer instead, that you could use to carry small loads if you need to.

The best cars for your situation would be a VW TDI diesel or a conventional Prius hybrid. Because the Prius uses the gas engine to keep the batteries topped off all the time, battery life for those cars is turning out to be really good. Our 2009 is still going strong on the first set with 150,000 miles.

Daughter #2 is looking at the Prius V. Not a bad choice for you. I'd even buy a Prius used. They appear to be bullet-proof.

I generally keep a car about ten years. I've kept the MB for five, and I did buy it used, with 30K on it, which turned out to be one of my better used car deals...but I've still had some minor repairs.


On the truck thing....the best solution, imho, is to have an all-electric small pickup, like one of those factory built ones they sold in CA, and just limit the amount of truck driving to the absolute minimum you can get away with. You can find them for $7500 to $10,000 with bad batteries, and then you have to decide on what batteries to re-equip with, which might be $5000 for NiMH's or as much as 10K for Li-Ion. But with Lithium batteries the range for the pick-up jumps up to about 150 miles, which is enough to make it practical.

Here's a place to see what's out there. I've also seen a lot of nice abandoned eV projects on CL.

Oops, forgot the link I was gonna post. Here it is.

http://www.evtradinpost.com (http://www.evtradinpost.com)

Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 10:34:53 AM

@WHD

The best cars for your situation would be a VW TDI diesel or a conventional Prius hybrid. Because the Prius uses the gas engine to keep the batteries topped off all the time, battery life for those cars is turning out to be really good. Our 2009 is still going strong on the first set with 150,000 miles.

Diesel is expensive. And while all of the Prii qualify as decent fuel mileage when on the engine alone, they are loud. For 20 hour hispeed cross country trips noise really begins to matter, wind noise, road noise, whatever. Prii have it, other cars do not. A Camry hybrid was perhaps my best combination ever of road warrior car and fuel mileage. Plus it was big, could take the entire family on vacations in it, has a Prius beat to hell when it comes to room, plus it has a much larger gas engine and acts much more like a normal car on the highway. And it was REAL quiet.

Quote from: Eddie
Daughter #2 is looking at the Prius V. Not a bad choice for you. I'd even buy a Prius used. They appear to be bullet-proof.

They are. Batteries are easily clearing the 300K mark. All this fear about batteries turned out to be ungrounded and just folks speaking from lack of experience. Or inability to google.

Title: Re: Fracker Debt Bubble
Post by: Eddie on November 29, 2014, 10:58:34 AM
Interesting article about pick-up trucks.

http://news.pickuptrucks.com/2014/08/its-time-for-truckmakers-to-reconsider-hybrid-pickups.html (http://news.pickuptrucks.com/2014/08/its-time-for-truckmakers-to-reconsider-hybrid-pickups.html)
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 11:28:11 AM
Interesting article on discretionary income from paying less for gas is already driving folks to buy gas guzzlers. Silly rabbits.

http://www.nbcnews.com/business/autos/pump-prices-tumble-gas-guzzlers-soar-fuel-sippers-slide-n248631 (http://www.nbcnews.com/business/autos/pump-prices-tumble-gas-guzzlers-soar-fuel-sippers-slide-n248631)
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 11:46:31 AM
Thanks for input JD and Eddie.  Very good information for me.  One thing I'm placing a premium on in my search for the next vehicle is comfort.  My wife drives the Prius when we don't carpool and I drive the guzzler. We do not get to carpool as often as we used to because the job I have now frequently involves staying later until a work issue is either resolved or has reached a certain phase and I don't like making her stay late because of this.  Then there are always appointments and errands we each have...blah blah blah. The guzzler is a Pacifica which is pretty comfortable - roomy with leather seats and it has power lumbar in the driver's seat.  Funny thing about the Prius is that it's a lot roomier than it looks.  And I think they make one now with power lumbar.  I'd really like to know what you think of the "comfort factor" of the Volt.   


Title: Re: Fracker Debt Bubble
Post by: Eddie on November 29, 2014, 12:44:08 PM
I'd give the Volt a 6 or 7 on a ten point comfort scale. It's tight on room, front seats are much narrower than my Mercedes. I did get leather seats, which are heated. Seats are more comfortable than my previous Volvo S40, which is the least comfortable car I've owned in recent history.

Volt only seats two in the back, but the 2016 is supposed to have a rear bench. It seems more cramped to me than the Prius, front and back. Nice cargo space in the rear, maybe slightly bigger than the Prius?
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 01:52:43 PM
I'd give the Volt a 6 or 7 on a ten point comfort scale. It's tight on room, front seats are much narrower than my Mercedes. I did get leather seats, which are heated. Seats are more comfortable than my previous Volvo S40, which is the least comfortable car I've owned in recent history.

Volt only seats two in the back, but the 2016 is supposed to have a rear bench. It seems more cramped to me than the Prius, front and back. Nice cargo space in the rear, maybe slightly bigger than the Prius?

How are you going to recharge at the office?  Run an extension cord out into the parking lot?

RE
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 02:04:50 PM
Thanks Eddie. For some reason I was thinking the Volt might have a higher comfort rating.  I guess it's looking like the plug-in Prius might be the best choice for me.  And I know, ya don't have to tell me, I just need to get off my ass and take it to the dealerships, then plop it down in both seats.  That's the only way I'll really know.  Not looking forward to all the salesmen yakkity yak involved in dat chit. 

Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 02:09:07 PM

How are you going to recharge at the office?  Run an extension cord out into the parking lot?

RE

RE - Did you miss this comment (http://www.doomsteaddiner.net/forum/index.php/topic,3164.msg60578.html#msg60578)?
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 02:11:17 PM

How are you going to recharge at the office?  Run an extension cord out into the parking lot?

RE

RE - Did you miss this comment (http://www.doomsteaddiner.net/forum/index.php/topic,3164.msg60578.html#msg60578)?

Not you, Eddie.  As I recall the parking lot where his Dental Office is located does not have charging stations.

RE
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 02:23:19 PM

How are you going to recharge at the office?  Run an extension cord out into the parking lot?

RE

RE - Did you miss this comment (http://www.doomsteaddiner.net/forum/index.php/topic,3164.msg60578.html#msg60578)?

Not you, Eddie.  As I recall the parking lot where his Dental Office is located does not have charging stations.

RE

I certainly will not try to speak for Eddie, but I think his strategy is to get a free recharge when he's shopping at Whole Foods or when he's downtown.
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 02:27:56 PM

How are you going to recharge at the office?  Run an extension cord out into the parking lot?

RE

RE - Did you miss this comment (http://www.doomsteaddiner.net/forum/index.php/topic,3164.msg60578.html#msg60578)?

Not you, Eddie.  As I recall the parking lot where his Dental Office is located does not have charging stations.

RE

I certainly will not try to speak for Eddie, but I think his strategy is to get a free recharge when he's shopping at Whole Foods or when he's downtown.

No, he mentioned that he would charge at the Office and it would be Tax Deductable.

RE
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 03:07:50 PM

How are you going to recharge at the office?  Run an extension cord out into the parking lot?

RE

RE - Did you miss this comment (http://www.doomsteaddiner.net/forum/index.php/topic,3164.msg60578.html#msg60578)?

Not you, Eddie.  As I recall the parking lot where his Dental Office is located does not have charging stations.

RE

I certainly will not try to speak for Eddie, but I think his strategy is to get a free recharge when he's shopping at Whole Foods or when he's downtown.

No, he mentioned that he would charge at the Office and it would be Tax Deductable.

RE

Try not to get drawn in to the Negative Waves I think are bouncing around in you head now about this EV stuff.  I was once drawn in by these waves on another matter, but Baby Doc healed me. Praise Da Doc Healer :icon_mrgreen:
Title: Re: Fracker Debt Bubble
Post by: WHD on November 29, 2014, 03:13:42 PM


Quote from: Eddie
Daughter #2 is looking at the Prius V. Not a bad choice for you. I'd even buy a Prius used. They appear to be bullet-proof.

They are. Batteries are easily clearing the 300K mark. All this fear about batteries turned out to be ungrounded and just folks speaking from lack of experience. Or inability to google.

Mking,

I wasn't going to publish this comment, but I did, to prove what bullshit you are full of, and why you are so often accused of being a liar.

Ten minutes of google searching, finds one article about EV taxis in SanFrancisco lasting 300,000 miles - an article from 2009. No further mention of that phenomena did I find. Every other link I looked at? No one suggesting much more than 100,000 miles, under OPTIMAL conditions like the moderate temps in San Fran, and even then, only running @70-85% capacity after 100,000.

Move the vehicle to Hot climates? Much fewer overall miles! Such batteries do not like heat.

Now, what about temps regularly in the 0F range? Better probably than long periods of 100F, perhaps, but sitting in the cold like that for 20% of it's life? Nothing anywhere near 300,000 for sure.

And of course, little mention yet, about what the cost of lithium-Ion batteries would be if we tried to fit them into 2 billion vehicles or whatever, globally.

Your friendly Admin,

WHD
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 29, 2014, 03:22:37 PM
I drive on average about 100 miles a day. The last year i put 30000 miles on a 95 voyager. It is now close to 150000. Who wants to venture an opinion about what i  should buy when this one craps out. They don't make the vehicle I want, a small diesel van or truck.

Whd

datsun 1200 (4cyl 1.2L) pickup, very economical 50mpg with largr wheels and simple, but very old now, u might get lucky. Daihatsu charade (3cyl 1.0L) the back hatch opens up high and lay the back seat flat is like a small van. 60mpg no problem, and very reliable. Or as eddy said u can use a small light trailer with an economical car.
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 29, 2014, 03:36:49 PM

@WHD

The best cars for your situation would be a VW TDI diesel or a conventional Prius hybrid. Because the Prius uses the gas engine to keep the batteries topped off all the time, battery life for those cars is turning out to be really good. Our 2009 is still going strong on the first set with 150,000 miles.

Diesel is expensive. And while all of the Prii qualify as decent fuel mileage when on the engine alone, they are loud. For 20 hour hispeed cross country trips noise really begins to matter, wind noise, road noise, whatever. Prii have it, other cars do not. A Camry hybrid was perhaps my best combination ever of road warrior car and fuel mileage. Plus it was big, could take the entire family on vacations in it, has a Prius beat to hell when it comes to room, plus it has a much larger gas engine and acts much more like a normal car on the highway. And it was REAL quiet.

Quote from: Eddie
Daughter #2 is looking at the Prius V. Not a bad choice for you. I'd even buy a Prius used. They appear to be bullet-proof.

They are. Batteries are easily clearing the 300K mark. All this fear about batteries turned out to be ungrounded and just folks speaking from lack of experience. Or inability to google.

diesel used to be about 15c/L cheaper than petrol and then somehow became 10c  /L more expensive here. I understand it requires less refining too. SO i t sounds like the same thing there, diesel costs more.

wrt batteries, I always think of my mobile phone battery. Im using one I bought in 07, a basic nokia for one of the kids to keep in touch, and have always gone back to it because with others the touch screens get broken in my pocket, and I have a new one sitting there but its a hassle to change all the fotos and numbers across. So dspite the ridicule it recieves I dont care and carry on. The original battery is still fine lasting 2-3 days and its about 8 yrs old.

Also the latest black solar panels are apparently a lot better performance in cloudy wintry (low light) conditions, than mine which are only a year old and already obsolete it seems.
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 29, 2014, 03:46:11 PM
Ten minutes of google searching, finds one article about EV taxis in SanFrancisco lasting 300,000 miles - an article from 2009. No further mention of that phenomena did I find. Every other link I looked at? No one suggesting much more than 100,000 miles, under OPTIMAL conditions like the moderate temps in San Fran, and even then, only running @70-85% capacity after 100,000.
It's worse than that, for plug-in hybrids, measuring battery life in terms of miles is ludicrous, unless you have some way of distinguishing which miles were driven on battery and which on gasoline.  Most batteries' lifetimes are measured in terms of discharge/recharge cycles.  Two figures I found for taxi use were 180 miles per day or 70000 miles per year, which translates to about 4 years for 300000 miles, or about 1500 charge cycles if once per day.
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 03:51:29 PM

I wasn't going to publish this comment, but I did, to prove what bullshit you are full of, and why you are so often accused of being a liar.

This of course is why I stopped reading the pending file.  Moriarty is a con man, a criminal who fleeces investors with bullshit.  It's well known now that the frackers overstate their recoverable NG and Oil Reserves in order to float their Bond Issues, and to do this they hire con men like Moriarty to shill for them.

Far as batteries and EVs go, the Li-I batteries are no different than the ones in your laptop, just bigger.  Anyone who regularly discharges the battery on his laptop knows that the batteries give out after 3-4 years, and this is with a much lower throughput and power draw for each cycle.  Besides that, manufacturing enough batteries to replace the current fleet of ICE would make China an even worse polluted sewer than it already is.  Far as temperatures go, anyone who has ever tried to start their car when the temp goes below zero knows there is much less power available from the battery.  Even if the battery lasts longer at low temps, its performance will not be very good in cold weather.

Finally, you have the economic issue, and you have to note that everyone here buying one of these vehicles has a high paying job and dropping $30K on a new vehicle is no big deal.  The percentage of the population with incomes to afford this kind of expenditure every 3-5 years gets smaller all the time.

EVs may stay on the road a bit longer than ICE vehicles, but not by much.  The road system itself is too costly to maintain and there will be too few people driving on those roads to tax on their usage.

RE
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 03:58:21 PM
  Moriarty is a con man, a criminal who fleeces investors with bullshit.  It's well known now that the frackers overstate their recoverable NG and Oil Reserves in order to float their Bond Issues, and to do this they hire con men like Moriarty to shill for them.

So I've been demoted from world class geochemist to con man. Well...don't tell anyone on the board of directors please. :icon_sunny:

Goodness knows what might happen to the Christmas bonus.
Title: Re: Fracker Debt Bubble
Post by: MKing on November 29, 2014, 04:03:37 PM

EVs may stay on the road a bit longer than ICE vehicles, but not by much.  The road system itself is too costly to maintain and there will be too few people driving on those roads to tax on their usage.

RE

Hopes and dreams RE, only hopes and dreams. Plus, it isn't even original. Anyone remember Mike pitching this topic to the zealots?

Starting on page 7.

http://www.coldtype.net/Assets.10/Pdfs/0110.Collapse.pdf (http://www.coldtype.net/Assets.10/Pdfs/0110.Collapse.pdf)

I could go find the video where he was talking about how they were being torn up already, and that would lead to the breakup of the US or whatnot (this was after he claimed the US would breakup because of Katrina in 2005), but videos are so...YouTubey.
Title: Re: Fracker Debt Bubble
Post by: knarf on November 29, 2014, 04:30:40 PM
Yea, i can just imagine the TPTB switch there their military arsenal to electric power. :) Just imagine the war planes and battle ships switching to electrical power to do their domination over the competition. Unless there is a mandate by our Goberment, the great FSoA, for all people to switch to electrical vehicles, it just ain't gonna happen. We are going to be slaves to fossil fuels until the bottom drops out of sustainable living. Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys. :)
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 04:43:07 PM

Finally, you have the economic issue, and you have to note that everyone here buying one of these vehicles has a high paying job and dropping $30K on a new vehicle is no big deal.  The percentage of the population with incomes to afford this kind of expenditure every 3-5 years gets smaller all the time.

RE

Last I checked, "everybody here buying" both stated they run a car ten years and then simply replace it. 
 
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 04:44:35 PM

Finally, you have the economic issue, and you have to note that everyone here buying one of these vehicles has a high paying job and dropping $30K on a new vehicle is no big deal.  The percentage of the population with incomes to afford this kind of expenditure every 3-5 years gets smaller all the time.

RE

Last I checked, "everybody here buying" both stated they run a car ten years and then simply replace it.

Eddie said he had his Mercedes for 5 years.

RE
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 04:51:03 PM
Yea, i can just imagine the TPTB switch there their military arsenal to electric power. :) Just imagine the war planes and battle ships switching to electrical power to do their domination over the competition. Unless there is a mandate by our Goberment, the great FSoA, for all people to switch to electrical vehicles, it just ain't gonna happen. We are going to be slaves to fossil fuels until the bottom drops out of sustainable living. Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys. :)

One thing nobody makes claims about is trying to fly airplanes using battery power.  The only way planes stay flying is if they make synthetic liquid fuels using electric power, but the number of people who could afford to fly would be vanishingly small.

The military of course will be the last to lose access to remaining fossil fuels, but they will end up just fighting over the remaining stuff, blowing up refineries of the enemy etc and accelerate the decline this way.

RE
Title: Re: Fracker Debt Bubble
Post by: knarf on November 29, 2014, 05:04:50 PM

Finally, you have the economic issue, and you have to note that everyone here buying one of these vehicles has a high paying job and dropping $30K on a new vehicle is no big deal.  The percentage of the population with incomes to afford this kind of expenditure every 3-5 years gets smaller all the time.

RE

Last I checked, "everybody here buying" both stated they run a car ten years and then simply replace it.


Yep, if they are lucky. 10 years is a little long for the "used car" to keep on truckin'. Every year you have to buy tires or a generator, or some other part/s that cost $1000, plus the gas and oil you have to keep up with. Just think of the growing poor population in this country. They can hardly afford a 1989 vehicle at this point. They EV is a bandaid on the fossil fuel hemorrhage.
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 05:06:15 PM
Yea, i can just imagine the TPTB switch there their military arsenal to electric power. :) Just imagine the war planes and battle ships switching to electrical power to do their domination over the competition. Unless there is a mandate by our Goberment, the great FSoA, for all people to switch to electrical vehicles, it just ain't gonna happen. We are going to be slaves to fossil fuels until the bottom drops out of sustainable living. Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys. :)

One thing nobody makes claims about is trying to fly airplanes using battery power.  The only way planes stay flying is if they make synthetic liquid fuels using electric power, but the number of people who could afford to fly would be vanishingly small.

The military of course will be the last to lose access to remaining fossil fuels, but they will end up just fighting over the remaining stuff, blowing up refineries of the enemy etc and accelerate the decline this way.

RE

My guess is "they" will always keep an extra large reserve of fuel set aside just special for the very important war planes. And they will always do this. It might keep on this way for god knows how many years without a real bump or hitch.

Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 29, 2014, 05:09:43 PM
Yea, i can just imagine the TPTB switch there their military arsenal to electric power. :) Just imagine the war planes and battle ships switching to electrical power to do their domination over the competition.
(http://geospatial.blogs.com/.a/6a00d83476d35153ef019b0092b3a5970c-320wi)
http://geospatial.blogs.com/geospatial/2013/11/massive-electrical-power-for-the-modern-navy.html (http://geospatial.blogs.com/geospatial/2013/11/massive-electrical-power-for-the-modern-navy.html)
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 29, 2014, 05:21:45 PM

Finally, you have the economic issue, and you have to note that everyone here buying one of these vehicles has a high paying job and dropping $30K on a new vehicle is no big deal.  The percentage of the population with incomes to afford this kind of expenditure every 3-5 years gets smaller all the time.

RE

Last I checked, "everybody here buying" both stated they run a car ten years and then simply replace it.


Yep, if they are lucky. 10 years is a little long for the "used car" to keep on truckin'. Every year you have to buy tires or a generator, or some other part/s that cost $1000, plus the gas and oil you have to keep up with. Just think of the growing poor population in this country. They can hardly afford a 1989 vehicle at this point. They EV is a bandaid on the fossil fuel hemorrhage.

Just for the record, I've never said the EV was more than a bandage.  Honestly speaking, I was a bit selfish in seeking Eddies opinion on EVs. Because I will be retiring the 10yr old Pacifica next year, I wanted an opinion. Not just an opinion, but a very good opinion. I got what I really wanted.
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 05:35:31 PM
Yea, i can just imagine the TPTB switch there their military arsenal to electric power. :) Just imagine the war planes and battle ships switching to electrical power to do their domination over the competition.
(http://geospatial.blogs.com/.a/6a00d83476d35153ef019b0092b3a5970c-320wi)
http://geospatial.blogs.com/geospatial/2013/11/massive-electrical-power-for-the-modern-navy.html (http://geospatial.blogs.com/geospatial/2013/11/massive-electrical-power-for-the-modern-navy.html)

You definitely can run ships on Electric power, but you can also run them on WIND power.  Ships can also burn Bunker Fuel, they don't even need refined oil really.

So the Navy is likely to keep running here the longest, but they won't be carrying aircraft on the ships.

Another interesting question is how long they will continue to be able to make high explosives, which take copious energy to produce.

RE
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 29, 2014, 05:37:15 PM
batteries are getting better all the time, building them is less polluting than fracking and deforesting over tar sand, they have electric and solar drones, the military will of course ration for civilian needs and go to war to control the remains. This is about being the change u want to see and personal pollution.
Title: Re: Fracker Debt Bubble
Post by: knarf on November 29, 2014, 06:17:26 PM
batteries are getting better all the time, building them is less polluting than fracking and deforesting over tar sand, they have electric and solar drones, the military will of course ration for civilian needs and go to war to control the remains. This is about being the change u want to see and personal pollution.

and yet we all still live in isolation and have no power when it comes to the collapse of multitudes of the earths bounty. So what if you personally feel good about some minimal action you would take to save our planet? It just makes the individual who has the means to think they are contributing to our future. But no one will rise up and STOP playing their imposed games and rules that TPTB blanket us with.
Title: Re: Fracker Debt Bubble
Post by: RE on November 29, 2014, 07:45:55 PM
batteries are getting better all the time, building them is less polluting than fracking and deforesting over tar sand, they have electric and solar drones, the military will of course ration for civilian needs and go to war to control the remains. This is about being the change u want to see and personal pollution.

and yet we all still live in isolation and have no power when it comes to the collapse of multitudes of the earths bounty. So what if you personally feel good about some minimal action you would take to save our planet? It just makes the individual who has the means to think they are contributing to our future. But no one will rise up and STOP playing their imposed games and rules that TPTB blanket us with.

I think EVs are kind of a religion, they give people hope for a Green future that still has techno-marvels to zip around in.  They may be marginally greener than ICE, but there is still a lot of waste and embedded energy that goes into their manufacture.  At best, perhaps they will provide a few more years of driving around, but fewer people all the time can afford to buy them.  The collapsing price of oil demonstrates just how far demand has fallen here, and the same people who can't afford gas to run their used cars can't afford the pricetag of an EV.

About the best aspect of an EV is that it might insulate you from temporary gas shortages for a while, but once the gas shortage is permanent they won't be of much help, too many things besides just driving around depend on the steady gas supply.  Convenience stores start going outta biz, people don't have jobz, the whole house of cards comes tumbling down.  This is all ongoing now, Europe and Japan ahead of here, but its all in evidence.

Far as our "leaders" are concerned, they really don't know what to do besides the fact if you do understand what is happening it would be political suicide to tell the truth.

Anyhow, if you got the money, go ahead and buy an EV.  It won't change the direction we are headed, but it won't make it any worse either.

RE
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 29, 2014, 10:03:38 PM
batteries are getting better all the time, building them is less polluting than fracking and deforesting over tar sand, they have electric and solar drones, the military will of course ration for civilian needs and go to war to control the remains. This is about being the change u want to see and personal pollution.



and yet we all still live in isolation and have no power when it comes to the collapse of multitudes of the earths bounty. So what if you personally feel good about some minimal action you would take to save our planet? It just makes the individual who has the means to think they are contributing to our future. But no one will rise up and STOP playing their imposed games and rules that TPTB blanket us with.

Sure knarf, its too late for most people to switch to EV to impact overall pollution so peak oil and current demand dtruction brings conservation by other means. Like eddie i would have bought an EV 4x4 pickup if one was available the last time i bought a new model vehicle which was last yr.

Anyone has to look at their own circumstances to how they can stop playing the game. Short of going deep into the bush somewhere, hunting, fishing and forraging etc, we have to use our brains to do the best we can. I have set something up that anyone can come to as long as they share a vision for a sustainable future, but in the now the rates need to be payed and putting kids through education because it cant be expected for everyone tojust drop their lives and expectations. So I have to drive and fly.... for now. I will get a horse later when i dont have to do that. But for now to just stop playing altogether would get u bk and jailed.

Title: Re: Fracker Debt Bubble
Post by: Surly1 on November 30, 2014, 05:29:16 AM

The military of course will be the last to lose access to remaining fossil fuels, but they will end up just fighting over the remaining stuff, blowing up refineries of the enemy etc and accelerate the decline this way.

RE

My guess is "they" will always keep an extra large reserve of fuel set aside just special for the very important war planes. And they will always do this. It might keep on this way for god knows how many years without a real bump or hitch.

After all, that's what the BAM is FOR.

Our BAM will have access to the best and most of everything, while the citizenry it purports to "defend" fights each other over the last rat to cook over a dung fire.
Title: Re: Fracker Debt Bubble
Post by: knarf on November 30, 2014, 06:19:35 AM
REAL Doom, no matter form it takes, is no picnic.
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 07:42:02 AM
Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys.

My next door neighbor has a Corvette and it sits under a cover in his garage 99% of the time.  When he occasionally peels the cover off and takes it for a spin - I see this as a legitimate "big toy" in use.  I don't see how a vehicle that is used to get to and from work, run errands, make appointments, and travel on vacations can be described a "big toy". 
Title: Re: Fracker Debt Bubble
Post by: MKing on November 30, 2014, 08:08:47 AM
Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys.

My next door neighbor has a Corvette and it sits under a cover in his garage 99% of the time.  When he occasionally peels the cover off and takes it for a spin - I see this as a legitimate "big toy" in use. 

Does he take it to the track? Now THERE is some use for a Corvette. Not something you can do with some clunker minivan with rusting suspension parts and bad brakes either.

Mazda RX8s, Miatas, fast motorcycles, I think Eddie mentioned having a nice fast boat as well, it is nice to see that collapse is still so far away these kinds of things are quite common in America.

Quote from: JoeP
I don't see how a vehicle that is used to get to and from work, run errands, make appointments, and travel on vacations can be described a "big toy".

EVs aren't big toys. Mine gets used to do all the same commuting around town that would otherwise be using obsolete liquid fuels, worse yet IMPORTED liquid fuels. Support your local economy and energy production industries, use home grown and manufactured fuels! EVs should be mandated I think, for the 75% of Americans of that have commuting distances less than the range of even partial EVs like the Volt. If you've got a Leaf? Probably can cover 90% of America.

Not a big toy in sight, just solid personal peak oil solutions for those of us who don't like going to the jihadie support stores and handing over our hard earned cash. And of course we can't talk about that 33.8% of my fuel coming from either the panels on my roof or the local windfarms. Better yet, there is some other significant fraction I get FREE at local department stores and the solar arrays at work. Free fuel is a strong fringe benefit of work nowadays, the Feds should be subsidizing these things everywhere, the best way being by taxing crude oil to a solid $150/bbl or so. That should keep the current transition in motion quite nicely.
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 30, 2014, 08:22:53 AM
Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys. :)


Unfortunately, I still live a BAU life that involves lots of driving. For the moment, eV makes good sense for a number of reasons. A better solution would be to live and work in the same village, but I made some choices long ago that are difficult to change. I do have some big toys, but I don't consider the Volt to be a toy.

As far as my Benz, I've owned it five years so far, but anticipate owning it for several more years. I'll keep it until the repair bills get too high to make it worthwhile. That's almost always the reason I get rid of a car. Not just to have one that smells new.

Living where I do, I believe eV will be a way to keep mobile and to make a sustainable lifestyle on the stead possible into the future, when petroleum might not be available. It's about changing to more resilient systems.


Title: Re: Fracker Debt Bubble
Post by: MKing on November 30, 2014, 09:08:16 AM
Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys. :)


Unfortunately, I still live a BAU life that involves lots of driving.

Unfortunately? The wife complaining about her lifestyle, as compared to living at the hunting cabin and being forced to slopthe hogs in the morning, milk the cows, tend to the weeds in the garden? Oh...I don't think it is near as "unfortunate" as the word implies, is it Eddie?


Quote from: Eddie
For the moment, eV makes good sense for a number of reasons. A better solution would be to live and work in the same village, but I made some choices long ago that are difficult to change. I do have some big toys, but I don't consider the Volt to be a toy.

Neither do the rest of us Volt owners, who just LOVE not coughing up hard earned dough at the extortion stores.

As I have explained before, it will require the slow but steady progress of generational change to finish this transition to a new and better transport system, just as it required generational change to negate the ridiculous anti-gay and anti-weed attitudes in America.

Quote from: Eddie
As far as my Benz, I've owned it five years so far, but anticipate owning it for several more years. I'll keep it until the repair bills get too high to make it worthwhile. That's almost always the reason I get rid of a car. Not just to have one that smells new.

New smell is overrated as the reason to buy a car. About as silly as basing the decision on NPV, cars are all about EMOTION. Otherwise it makes far more sense to bicycle.

Quote from: Eddie
Living where I do, I believe eV will be a way to keep mobile and to make a sustainable lifestyle on the stead possible into the future, when petroleum might not be available. It's about changing to more resilient systems.

So how does the Harley and speed boat fit in? Thinking about dropping in electric power systems into those, to have a little fun with, when all the gasoline vanishes?  :icon_scratch:
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 30, 2014, 09:11:08 AM
A better solution would be to live and work in the same village, but I made some choices long ago that are difficult to change.
I respectfully disagree!  Living and working in the same village might have been a better choice in the past, but it makes no sense now putting a lot of time and effort into something that you anticipate to be a temporary solution.  If you're planning on ending up at the Toothstead, it's far better to buy the EV and focus on developing the Toothstead than making some intermediate move which will shorten your commute but distract you from your eventual goal.
Title: Re: Fracker Debt Bubble
Post by: knarf on November 30, 2014, 11:42:15 AM
Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys. :)


Unfortunately, I still live a BAU life that involves lots of driving. For the moment, eV makes good sense for a number of reasons. A better solution would be to live and work in the same village, but I made some choices long ago that are difficult to change. I do have some big toys, but I don't consider the Volt to be a toy.

As far as my Benz, I've owned it five years so far, but anticipate owning it for several more years. I'll keep it until the repair bills get too high to make it worthwhile. That's almost always the reason I get rid of a car. Not just to have one that smells new.

Living where I do, I believe eV will be a way to keep mobile and to make a sustainable lifestyle on the stead possible into the future, when petroleum might not be available. It's about changing to more resilient systems.

" Glad some people can afford to buy the new electrical vehicles, sounds like more big toys for BIG little boys. :)" Should be "Little boys with BIG toys!" Ha!

I know what your doing Eddie, and glad you are making progress to simplify your life....cuduos!!!!

As far as the guy with Corvette spending 99% of his time on his car, i'd stay away from that fellow. :)
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 30, 2014, 12:00:13 PM
So how does the Harley and speed boat fit in? Thinking about dropping in electric power systems into those, to have a little fun with, when all the gasoline vanishes?  :icon_scratch:

The Harley has a dead battery. :) But in fairness, it is fuel injected and gets 45 mpg. Not a horrible vehicle, except for all those cars trying to take you out.

The Donzi was an indulgence, but I didn't pay a lot for it, and I don't burn much gas in it these days, either. The idea at the time was that it would be my last toy, and a toy that would last...also FI, and a single engine of relatively modest displacement (for someone of my gasoline-fueled heritage, anyway.) 

 I have other fossil fuel toys too, that I got a long time ago. I tend to hang on to things. Helps to be in the storage business (my second job).

Lately my favorite toy is my little sailboat, which I've owned for a long time. It has an electric outboard, and I keep it on a lift, so it's easy to take out now. Over the years, I've spent many more hours on the water under wind power than I have power boating. But if you didn't know me, well then, you might not know that about me, and you might jump to a lot of conclusions.

Living and working in the same village might have been a better choice in the past, but it makes no sense now putting a lot of time and effort into something that you anticipate to be a temporary solution.  If you're planning on ending up at the Toothstead, it's far better to buy the EV and focus on developing the Toothstead than making some intermediate move which will shorten your commute but distract you from your eventual goal.

I could probably do both things, but I go along to get along, with my wife, with my kids....and so I commute when I don't really have to do that.

What I feel is my highest priority now, is to get a working partner to live on the stead and help me build the things that need to get built, keep an eye on things, and keep the food growing experiments progressing. I really have to find someone soon.
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 30, 2014, 12:17:21 PM
This beauty has been on the local CL for a couple of weeks. It has NiMH's, which are still hanging in there after 15 years. A new set of NiMH's would only be about 5K, bringing the cost of owning an all-electric pick-up (that I could charge off solar PV or the grid) to less than 20K. People I talk to that know more about these vehicles than I do say they should last 600,000 miles or so.

A little more radical than buying a Volt, but probably a better vehicle ultimately.

http://austin.craigslist.org/cto/4761565733.html (http://austin.craigslist.org/cto/4761565733.html)
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 30, 2014, 12:24:00 PM
What I feel is my highest priority now, is to get a working partner to live on the stead and help me build the things that need to get built, keep an eye on things, and keep the food growing experiments progressing. I really have to find someone soon.
You might want to try The Survival Podcast, they have a forum and a huge listener base.  They're the ones who sold 1000 seats for a Permaculture course in a little over 2 hours.  Also, the forums at Permies.com is another place to ask around, again a pretty large and active readership.

Both have projects of their own going, in West Virginia and Montana, respectively, but you may find someone who enjoys your climate much better.
Title: Re: Fracker Debt Bubble
Post by: MKing on November 30, 2014, 01:26:03 PM
Quote from: MKing
So how does the Harley and speed boat fit in? Thinking about dropping in electric power systems into those, to have a little fun with, when all the gasoline vanishes?  :icon_scratch:

The Harley has a dead battery. :) But in fairness, it is fuel injected and gets 45 mpg. Not a horrible vehicle, except for all those cars trying to take you out.

View it as a challenge!! Myself, dodging incompetently driven cages using 49ccs of SCREAMING POWER is nearly as much fun as doing 170mph down the front straight at VIR 1 foot away from some guy doing the same thing. The scooter on the street is probably more lethal as well.

But the irony in all of this is that my Volt uses far less gasoline than my 49cc powered scooter does. It only gets 100 miles per gallon of gasoline. The Volt can do 300, with just a little help from "that other fuel".  :icon_mrgreen:

Quote from: Eddie
I have other fossil fuel toys too, that I got a long time ago. I tend to hang on to things. Helps to be in the storage business (my second job).

Good for you!! We keep hearing about all this collapsing and whatnot, it is nice to know that with decreasing unemployment, regulars like Roamer can find high paying employment in an industry that will around longer than any of us will live, you can run a couple of for profit businesses well enough to afford fossil fuel powered gadgets, and I can continue to hire young people with advanced college degrees who themselves are advancing their careers through the experience they gain with the organization. And obviously buy cars to commute in, pay taxes so America can continue to afford moochers, etc etc. Stock market has been a solid profit center for 5 years now, doesn't hurt that the consumer has spare cash in their pocket from the drop in fuel prices, I mean, it is difficult to see the collapse for the all the good times BAU chugging down the train tracks!!

Quote from: Eddie
Lately my favorite toy is my little sailboat, which I've owned for a long time. It has an electric outboard, and I keep it on a lift, so it's easy to take out now. Over the years, I've spent many more hours on the water under wind power than I have power boating. But if you didn't know me, well then, you might not know that about me, and you might jump to a lot of conclusions.

I am in the "raise the boy right" phase. This summer he will have his permit, but won't be working for his own $$. I am seriously considering taking all, or most of, next summer off to finish up the "camping in different environments" Appalachian hick badges. Any camping recommendations on Bay of Fundy? Cape Breton Highlands? Newfoundland? I would have time to hit maritime tours and museums, Mt Washington, maybe do the Michigan UP and Isle Royale NP coming back across the country, and still make it to Hyder Alaska, camping near Mt Robson, the Cascades and Olympic NP. Not much of an "on the water" guy here, I go for forests and mountains.

Quote from: Eddie
What I feel is my highest priority now, is to get a working partner to live on the stead and help me build the things that need to get built, keep an eye on things, and keep the food growing experiments progressing. I really have to find someone soon.

You live pretty close to Mexican border, there are more Mexican workers in the Utica gas fields of Ohio than I ever would have imagined. You can't find some guest workers to turn the Toothstead into a real live working texas cattle ranch and vegetable garden for a slice of the profits? Or food?
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 30, 2014, 02:13:59 PM
What I feel is my highest priority now, is to get a working partner to live on the stead and help me build the things that need to get built, keep an eye on things, and keep the food growing experiments progressing. I really have to find someone soon.
You might want to try The Survival Podcast, they have a forum and a huge listener base.  They're the ones who sold 1000 seats for a Permaculture course in a little over 2 hours.  Also, the forums at Permies.com is another place to ask around, again a pretty large and active readership.

Both have projects of their own going, in West Virginia and Montana, respectively, but you may find someone who enjoys your climate much better.

U can get help from "woofers" thats the WWF not Hulk Hogan and co, World Wildlife Foundation. They love to come from everseas and help to satisfy getting a visa. Funny story... when my neighbor introduced them I figured that WWF was short for Will Work for Food.
Title: Re: Fracker Debt Bubble
Post by: azozeo on November 30, 2014, 02:36:22 PM
An excerpt from Porter Stansberry

http://www.youtube.com/v/Fa2wxN5cx14&fs=1
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 02:43:32 PM

As far as the guy with Corvette spending 99% of his time on his car, i'd stay away from that fellow. :)

Not sure how in the world you came up with that so I guess I'll have to spell it out for you. "under a cover" means he puts a cover over the car and it just sits in his garage while he is on business trips to China, India, Brazil, etc.  When he's home and gets the itch to play with this "toy", he removes the cover and off he goes for a little joyride. 

Scanning works OK for gathering newz, not so much for commentary. 
 
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 30, 2014, 03:15:17 PM
U can get help from "woofers" thats the WWF not Hulk Hogan and co, World Wildlife Foundation. They love to come from everseas and help to satisfy getting a visa. Funny story... when my neighbor introduced them I figured that WWF was short for Will Work for Food.
It's WWOOFers, which stands for Willing Workers On Organic Farms.  I considered them for about two seconds before deciding the typical WWOOFer would be a really bad fit for what Eddie has in mind, for two reasons:

1.  They are generally motivated by knowledge.  They come to work to learn the skills.  This means they are looking for instruction, which means they expect daily interaction.  WHD, LD, or I might be able to fulfill this requirement if one of us wanted to host a WWOOFer, but Eddie could not do so as a full-time dentist.

2. They are generally looking for organic farms.  As in, places that make enough produce to generate a living wage for the farmer.  None of us fits that category, except perhaps a few of the occasional posters like funkyspec.

However, there are 3 caveats:

A. The above represent the typical WWOOFer.  There is always the possibility you could get lucky.  I would just make sure they knew up front exactly what they were getting into so expectations can be similar.

B.  People "graduating" from the WWOOF program generally are looking to manage their own farm at some point, and if they don't feel they are quite ready, they might see Eddie's place as an opportunity to get some experience managing a property without having quite as much responsibility.

C.  Once Eddie does have a manager in place, if he needs more help, WWOOFers might make a good addition.
Title: Re: Fracker Debt Bubble
Post by: RE on November 30, 2014, 03:23:03 PM
It's WWOOFers, which stands for Willing Workings On Organic Farms.

I thought it was World Wide Opportunities on Organic Farms?

What Eddie needs to do is get a revenue stream going from the place so he can pay the manager.  Maybe raising Organic Chickens for the local market or restaraunts?

RE
Title: Re: Fracker Debt Bubble
Post by: knarf on November 30, 2014, 03:24:40 PM

As far as the guy with Corvette spending 99% of his time on his car, i'd stay away from that fellow. :)

Not sure how in the world you came up with that so I guess I'll have to spell it out for you. "under a cover" means he puts a cover over the car and it just sits in his garage while he is on business trips to China, India, Brazil, etc.  When he's home and gets the itch to play with this "toy", he removes the cover and off he goes for a little joyride.

Scanning works OK for gathering newz, not so much for commentary.


Sounds like a real jet setter, who has a big expensive toy!  Thanx for the spelling lesson....but i would still stay far away from that dude! A fossil fuel addict :)  Commentators just spill their subjective crap on people......it is worthless, much more totally boring except for their own bandwagon followers.  I guess you like to follow the crowd that makes you feel important. HA!
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on November 30, 2014, 04:03:34 PM
I thought it was World Wide Opportunities on Organic Farms?
LOL... that's the International version  ::)
Quote
What Eddie needs to do is get a revenue stream going from the place so he can pay the manager.  Maybe raising Organic Chickens for the local market or restaraunts?
It's a chicken-and-egg problem (pun intended).... do you get the help to generate the revenue, or do you generate the revenue to get the help?  In Eddie's case, I see his own personal time as being the limiting factor, which indicates to me that he needs someone who already has the experience and has the time.  That said, you bring up an excellent point, whoever he does hire should be able to come up with a plan on how he will generate his own salary.  Eddie is already providing the land and housing, and some equipment, that should be more than enough for a competent permaculture-type manager to generate a living wage for himself.  (And to be clear, while I say "he" because the physical demands of the job are more likely to appeal to a man, there are plenty of women who are more than capable.)
Title: Re: Fracker Debt Bubble
Post by: RE on November 30, 2014, 04:19:55 PM
I thought it was World Wide Opportunities on Organic Farms?
LOL... that's the International version  ::)
Quote
What Eddie needs to do is get a revenue stream going from the place so he can pay the manager.  Maybe raising Organic Chickens for the local market or restaraunts?
It's a chicken-and-egg problem (pun intended).... do you get the help to generate the revenue, or do you generate the revenue to get the help?  In Eddie's case, I see his own personal time as being the limiting factor, which indicates to me that he needs someone who already has the experience and has the time.  That said, you bring up an excellent point, whoever he does hire should be able to come up with a plan on how he will generate his own salary.  Eddie is already providing the land and housing, and some equipment, that should be more than enough for a competent permaculture-type manager to generate a living wage for himself.  (And to be clear, while I say "he" because the physical demands of the job are more likely to appeal to a man, there are plenty of women who are more than capable.)

What he needs to find is an experienced designer with a PDC who can develop the plan for the property and then get the revenue stream operational.

Eddie working in Austin could find the restaraunts and markets to sell the produce at.  The Designer would work at the Toothstead and every couple of weeks Eddie could drive out in his Electric Pickup Truck to get the latest fresh food and bring it back to Austin.

I have no idea where he might find such a person though.  ::)

RE
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 04:23:33 PM

As far as the guy with Corvette spending 99% of his time on his car, i'd stay away from that fellow. :)

Not sure how in the world you came up with that so I guess I'll have to spell it out for you. "under a cover" means he puts a cover over the car and it just sits in his garage while he is on business trips to China, India, Brazil, etc.  When he's home and gets the itch to play with this "toy", he removes the cover and off he goes for a little joyride.

Scanning works OK for gathering newz, not so much for commentary.


Sounds like a real jet setter, who has a big expensive toy!  Thanx for the spelling lesson....but i would still stay far away from that dude! A fossil fuel addict :)  Commentators just spill their subjective crap on people......it is worthless, much more totally boring except for their own bandwagon followers.  I guess you like to follow the crowd that makes you feel important. HA!

When you know you ARE important, you really don't need a crowd like that, you've got your own crowd looking at you. Trying to be more like you. This is how it works for me anyways. Far as followers goes, I'd say your head is WAY UP RE's bunghole right now.
 
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 04:40:08 PM

Commentators just spill their subjective crap on people......it is worthless, much more totally boring except for their own bandwagon followers.

Are you saying RE should retire the forum?  I get it, he should just publish knarves newz. 
 
 
Title: Re: Fracker Debt Bubble
Post by: knarf on November 30, 2014, 05:03:36 PM
This discussion was about the Fracker debt bubble. It slowly turned into a discussion about ev's. You started making this personal when I said the Ev's are just a band-aid for the fossil fuel conglomerate. Just for your own info, i do not do any commentary, i leave that up to people who think they have something to say. Your commentary on where my head is, and what I think RE or and other commentator writes is your own perverted compartments of your thinking. As far as I am concerned you are a waste of my time, and I will not engage with you any longer. There is a very big picture to be gleaned from what information we can find, and i choose not to draw conclusions about what is happening, or where we are headed. But I know that won't make sense to you, so this is the last I will engage with you.
Title: Re: Fracker Debt Bubble
Post by: RE on November 30, 2014, 05:10:10 PM

Commentators just spill their subjective crap on people......it is worthless, much more totally boring except for their own bandwagon followers.
Are you saying RE should retire the forum?  I get it, he should just publish knarves newz. 

I don't think Knarf is talking about the typical commenter, I think he is talking about commenters who monopolize a forum or the commentary on somebody ELSE'S Blog, aka Trolls.  Said Troll wishes to pitch his spin, which is contrary to the spin of the blog or forum.  I should know, because for years I was one of those Trolls on Peak Oil, Market Ticker and TBP.  :icon_mrgreen:

At a certain point, if you got that much to say on a subject, you have to set up your own Blog and/or Forum, which of course is what I did, first setting up Reverse Engineering on Yahoo Groups, then setting up the Diner.  So now instead of being an annoying Troll, I am Admin.  :icon_sunny:

Moriarty is an Imbecile, he can't figure out this simple problem and keeps Trolling the site here.  I finally dropped him on Ignore, but the other Admins occassionally still post some of his stuff.

I occassionally toy with the idea of shutting down the forum and just sticking with the Blog, but there are a lot of people here I enjoy chatting with, and it provides a spot to put up Newz stories which I don't want to clog up the Blog with.  So we march on, to another Day in Doom.  :icon_sunny:

RE
Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on November 30, 2014, 05:19:51 PM

Commentators just spill their subjective crap on people......it is worthless, much more totally boring except for their own bandwagon followers.

Are you saying RE should retire the forum?  I get it, he should just publish knarves newz. 
 

As Kdog pointed out in the 'where have all the doomers gone' topic, and the fact we have an alexa rank of 99.99% lurkers, it might be downright dangerous posting about doom. Many remaining posters have lived already most of their life and dont have dependents dont give a dam what happens to them now. The ones still keeping up a spirit of community anyway dont deserve a kick in the nuts imo.

I stand corrected on the WOOFFer acronym then. The people on my neighbors place are a couple 20 somethings and the transportable house they took over was disused for decades and in very bad condition, I would not have stayed in it and the owners themselves rented a house while building one on the property rather than use that, but these guys fixed it up. They doubled the number of self shearing sheep with lambs and generally trying to do self sufficiency. I dont see them as knowing nothing but enjoying working it out together with the owner and having a free reign to some extent to do what they want. They dont have to be payed, just fed. If I was one I would be happy to learn from established practices as well as learn by trial and error, like letting chickens free roam and all killed by predators. I dont think they are into it in the first place if they never held a hammer or shovel. It might just be more useful than a useless university degree.
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 05:22:44 PM
As  far as I am concerned you are a waste of my time, and I will not engage with you any longer.

Great! I mean if you were not capable of detecting what the so complincated linguistics of what a car "under cover" ACTUALLY MEANS...well, good luck to you my friend. But I think you are waste of MY TIME...not the other.
 
Title: Re: Fracker Debt Bubble
Post by: knarf on November 30, 2014, 05:38:07 PM

Commentators just spill their subjective crap on people......it is worthless, much more totally boring except for their own bandwagon followers.
Are you saying RE should retire the forum?  I get it, he should just publish knarves newz. 

I don't think Knarf is talking about the typical commenter, I think he is talking about commenters who monopolize a forum or the commentary on somebody ELSE'S Blog, aka Trolls.  Said Troll wishes to pitch his spin, which is contrary to the spin of the blog or forum.  I should know, because for years I was one of those Trolls on Peak Oil, Market Ticker and TBP.  :icon_mrgreen:

At a certain point, if you got that much to say on a subject, you have to set up your own Blog and/or Forum, which of course is what I did, first setting up Reverse Engineering on Yahoo Groups, then setting up the Diner.  So now instead of being an annoying Troll, I am Admin.  :icon_sunny:

Moriarty is an Imbecile, he can't figure out this simple problem and keeps Trolling the site here.  I finally dropped him on Ignore, but the other Admins occassionally still post some of his stuff.

I occassionally toy with the idea of shutting down the forum and just sticking with the Blog, but there are a lot of people here I enjoy chatting with, and it provides a spot to put up Newz stories which I don't want to clog up the Blog with.  So we march on, to another Day in Doom.  :icon_sunny:

RE

 Yes, very well spoken. I have little concern with what the 10,000 commentators on the internet Think. But this particular web page and forum represent people who seem to care about how the world is turning. I choose to present the newz that I can find that informs the readers and visitors of the meme's that are circulating. My choice. No one else's. Trolls come to on here to get what they want, and to disrupt the overall views the world and our country is at, and is heading. I am very happy just issuing the newz, and when people make some mistakes while commenting, i appreciate the restraint that mature people exhibit. It takes understanding and patience to discuss the matters that are so important to our world today.
Title: Re: Fracker Debt Bubble
Post by: RE on November 30, 2014, 05:48:10 PM

 Yes, very well spoken. I have little concern with what the 10,000 commentators on the internet Think. But this particular web page and forum represent people who seem to care about how the world is turning.

This is true for the most part.  However, the nature of discussion forums is that Contrarians ALWAYS show up, arguments escalate and the whole deal becomes a sewer.  I have tried all sorts of ways to manage this, but some folks are so persistent at making a nuisiance of themselves that nothing short of an outright ban will stop them.

It's always a challenge.  ::)

RE
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 06:08:22 PM

"when people make some mistakes while commenting, i appreciate the restraint that mature people exhibit. It takes understanding and patience to discuss the matters that are so important to our world today.""


I think an example of a big mistake is where you you do not come close to realizing why run of the mill folks own a corvette...for recreation or pleasure.
 
Because if you can afford it, why not?  It's not my style, but his vette is very nice, white exterior with medium brown leather interior. He upgraded 1.5 years ago from an older red vette.  I really like the new one he owns now.
 

 
Title: Re: Fracker Debt Bubble
Post by: RE on November 30, 2014, 06:22:23 PM
I think an example of a big mistake is where you you do not come close to realizing why run of the mill folks own a corvette...for recreation or pleasure.

"Run of the mill" folks DON'T own Corvettes.

Quote
Chevrolet has radically altered almost everything about the new Corvette Stingray, except the price. The American automaker has announced the base Corvette Stingray coupe will ring in at $51,995, while the Stingray convertible carries a sticker price of $56,995.

Add to this the fact about nobody who buys a Vette buys the base model, so ring it in here around $60K new.  If you can find a used one that hasn't been wrecked in a high speed crash, you'll still pay 5 figures for it.

The Base Sticker Price is right at the yearly median income for FSoA residents, before taxes.  This means the average J6P needs his entire wages for a year to buy one of these toys.  Even making $100K a year, this is a completely insane way to spend your paycheck.

Expensive Sports Carz are a SYMBOL to show other people (mainly women) how rich you are.  "Run of the Mill" people don't buy them.

RE
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 06:30:36 PM
Sorry bout that RE, I should have qualified "run of mill" with "people that started out as run of the mill..." My mistake. I hope you accept my apology.
 
Title: Re: Fracker Debt Bubble
Post by: RE on November 30, 2014, 06:40:09 PM
Sorry bout that RE, I should have qualified "run of mill" with "people that started out as run of the mill..." My mistake. I hope you accept my apology.

The psychology of people who start out life poor but later get rich is well known, and a big part of it is conspicuous consumption and flaunting the wealth, which is what Corvettes are all about.

Apology accepted.

RE
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 30, 2014, 07:21:54 PM
Corvettes and loaded Camaros are 70K plus now. When I bought the Volt, the showroom had several of both. Hard to believe so many people do buy those cars who don't really have the money to pay for them...not without making the kind of sacrifices they really should not be making. But advertising still works. People still watch TV. So it goes.

I engaged in a little shameless retail therapy myself today. I bought a BB gun.


(http://www.gamousa.com/images/rifles/product_silent_stalker_whisper.jpg)
Title: Re: Fracker Debt Bubble
Post by: JoeP on November 30, 2014, 07:48:52 PM
Sorry bout that RE, I should have qualified "run of mill" with "people that started out as run of the mill..." My mistake. I hope you accept my apology.

The psychology of people who start out life poor but later get rich is well known, and a big part of it is conspicuous consumption and flaunting the wealth, which is what Corvettes are all about.

Apology accepted.

RE

Possibly another "psychological" setback is they feel they sooo much deserve these toys.  Well, Mr. Corvette was recently caught cheating on his wife while on a biz trip in Canada.  I think he's gonna lose the vette and much moar.
 
Title: Re: Fracker Debt Bubble
Post by: Eddie on November 30, 2014, 08:14:52 PM
Not effective on zombies,

No? It'll take out a pig.

http://www.youtube.com/v/tZeyMf74sIk&fs=1
Title: Re: Fracker Debt Bubble
Post by: roamer on November 30, 2014, 08:24:18 PM
Best analysis i have seen on fracking bubble so far http://fractionalflow.com/2014/10/31/growth-in-global-total-debt-sustained-a-high-oil-price-and-delayed-the-bakken-red-queen/#more-887 (http://fractionalflow.com/2014/10/31/growth-in-global-total-debt-sustained-a-high-oil-price-and-delayed-the-bakken-red-queen/#more-887)

Title: Re: Fracker Debt Bubble
Post by: RE on November 30, 2014, 08:49:42 PM
Best analysis i have seen on fracking bubble so far http://fractionalflow.com/2014/10/31/growth-in-global-total-debt-sustained-a-high-oil-price-and-delayed-the-bakken-red-queen/#more-887 (http://fractionalflow.com/2014/10/31/growth-in-global-total-debt-sustained-a-high-oil-price-and-delayed-the-bakken-red-queen/#more-887)

This is a good one.

Did you read the Drilling Deeper (http://www.postcarbon.org/drilling-deeper/) report?

We'll have the Podcast with David Hughes up later tonight.

RE
Title: Re: Fracker Debt Bubble
Post by: roamer on November 30, 2014, 09:08:04 PM
Toss these numbers around your mind well production cost 9.5 Mill +-.75 mill, 4-5 year cumulative production values of 170,000 barrels of oil, total EUR of ~300,000 barrels.  Wellhead prices are roughly $15/barrel less than WTI prices.  That puts 4-5 year breakeven prices right around $60 or $75 per barrel WTI prices ignoring interest.    Almost all these operators financed with debt.

Clearly these north dakota tight oil is getting murdered right now, so badly it makes one wonder how existing production will continue once these guys go under.  The debt will have to be wiped away one way or another, perhaps it could be done by direct FED bailout as a national interest scheme, or indirectly by inflating the dollar again, but i doubt it. 
Title: Re: Fracker Debt Bubble
Post by: Surly1 on December 01, 2014, 02:43:04 AM
Not effective on zombies,

No? It'll take out a pig.

http://www.youtube.com/v/tZeyMf74sIk&fs=1

Impressive display. Lots of implications for that pellet rifle.
Title: Re: Fracker Debt Bubble
Post by: Eddie on December 01, 2014, 08:03:30 AM
One more OT and I'll let this thread be about fracking and collapse.

Any camping recommendations on Bay of Fundy? Cape Breton Highlands? Newfoundland? I would have time to hit maritime tours and museums, Mt Washington, maybe do the Michigan UP and Isle Royale NP coming back across the country, and still make it to Hyder Alaska, camping near Mt Robson, the Cascades and Olympic NP. Not much of an "on the water" guy here, I go for forests and mountains.

Those are all places I always wanted to go but never have, so far. Right now BC is high on my list of vacation destinations. I am planning a trip up there that will require bear spray and a kayak..
Title: Re: Fracker Debt Bubble
Post by: MKing on December 01, 2014, 11:32:16 AM
Well, maybe I can provide some for you after this coming summer.
Title: Frack-o-nomics become Fucked-o-nomics
Post by: RE on December 16, 2014, 11:22:58 PM
They are Puking Blood out there in Fracker-land.  :icon_sunny:

(http://m.artician.com/pu/KH7C7Y57UWKIC3FFLJLLTYIYZQD37FU6.preview.jpeg)

RE

Great Unwind of Oil-and-Gas Junk Bonds to Defund Fracking Boom

testosteronepit's picture



 

Wolf Richter   [url=http://www.wolfstreet.com]www.wolfstreet.com[/url]   [url=http://www.amazon.com/author/wolfrichter]www.amazon.com/author/wolfrichter[/url]

The price of oil plunged once again off the chart on Monday and early Tuesday. At one point, West Texas Intermediate traded below $54 per barrel, though it soon bounced off. Crude is down nearly 50% since June. And over-indebted energy companies with cash flows that range from increasingly uncertain to completely demolished are suddenly contemplating just how deep the abyss might be.

The below-investment-grade bonds these risky companies issued with enormous hoopla and hype to fund the shale revolution and offshore drilling projects, lovingly dubbed “junk bonds,” had been sold to investors on the premise that oil would sell for ever increasing prices in the future, with the understanding that this might allow the company to make interest payments on time and raise new debt to pay off the old debt when it matures.

Even the still uncertain economics of fracking – the expense of drilling coupled with the horrendous decline rates – or the potential environmental consequences and subsequent backlash were elegantly shrugged off on Wall Street, given the ever increasing price of oil.

And investors loved the slightly higher yields these bonds offered in an era when the Fed and other central banks have conspired to expunge yield from the system with the express purpose of pushing investors ever further out into riskier and riskier bets. Investors, driven to near insanity by these central-bank policies, went for the junk bonds with gusto, and it turned into a feeding frenzy that pushed yields down even further, encouraging companies to issue more and more junk at lower and lower yields.

Now the price of oil has plunged by nearly half. None of the equations work any longer. Sure, oil companies have hedged some of their production at much higher prices, and few are fully exposed, at least not yet, to the wrath of the oil-price collapse. But some of their production is already exposed, and in the future more and more of their production will be exposed.

Then what? The answer hovering in the room for junk bond investors, which includes conservative-sounding bond funds that people have in their retirement portfolios: default. A very unappetizing thought.

So investors are losing their appetite for oil and gas junk bonds. As they dump this suddenly crappy-looking paper and as they unwind this once magnificent bubble, prices drop and yields soar. This chart by S&P Capital IQ’s HighYieldBond.com shows just how rapid the decline has been: in July, energy junk bonds (red line) were still trading above 105 cents on the dollar, outperforming overall junk bonds (blue line) during the peak of the junk-bond bubble. Then the Great Unwind set in:

US-junk-bonds-energy-v-ex-energy

During these times of turmoil in the oil patch and on Wall Street, scores of bond issues become illiquid, and “price discovery” sets in where buyers and sellers are so far apart that no trades take place. And if forced selling sets in, prices collapse entirely. It’s brutal out there.

It’s a big market: energy junk bonds make up over 15% of the $1.3 trillion high-yield market. The rout has started to drag on the overall junk-bond bubble, and junk bonds ex-energy are now also declining.

At the riskiest and erstwhile frothiest end of the overall junk-bond market, it’s getting outright ugly: the effective yield index for bonds rated CCC or lower jumped from the record junk-bond-bubble low of 7.94% in late June to 11.72% on Monday. An increase of nearly 50% in funding cost for companies in that category. Here is a two-year chart with that beautiful spike :

US-Junk-bonds-CCC-2014-12-15

Junk bonds provided $1.3 trillion in funding to risky companies of all stripes, some of which are in terrible shape and likely to default in the near future. But oil drillers saw their revenue model suddenly cut in half, and this scares investors.

They know their favorite junk bonds get in trouble for two reasons:

Leery investors see this, and they try to bail out of the riskiest end of the market, or they start demanding much higher yields to be enticed back in. In the process, they effectively turn off the cheap-money spigot these companies have become addicted to, and must have access to in order to survive. If this process continues, investors are effectively defunding parts of the fracking industry, precipitating the very events they’re so scared of.

The plunge in the price of oil is good for consumers, and so Wall Street promises a big boost to US GDP. But what have these folks been smoking? Read…   This Is Why the Oil-Price Crash Will Maul the US Economy

Title: Re: Frack-o-nomics become Fucked-o-nomics
Post by: MKing on December 17, 2014, 07:03:34 AM
They are Puking Blood out there in Fracker-land.  :icon_sunny:

Interesting...when amateurs make claims that can't be seen by those professionally involved...haven't seen any blood yet...but then...I've been through this more than once, and am not an ignorant blogger with zero experience in either shepherding businesses through these kinds of cycles, field experience, economic experience, or any of those things some of us have and worse yet, have succeeded with, versus those who have none..and have never done...anything really....  :icon_sunny: :icon_sunny:

But I will be sure to tell everyone if I have to go job hunting for lack of work.  :emthup:
Title: Blood Puking at Halliburton and EOG
Post by: RE on December 17, 2014, 12:34:57 PM
More layoffs confirmed at Duncan Halliburton (http://www.kswo.com/story/10558361/more-layoffs-confirmed-at-duncan-halliburton)

Posted: Jun 18, 2009 2:27 PM PDT

DUNCAN, Okla. - The rumors have been confirmed, once again, Halliburton in Duncan will layoff employees in the wake of U.S. economic troubles.

When workers arrived for their shifts Thursday, they were greeted with the bad news. And just as in round one, police were on the premises to "keep the peace".

Corporate offices again would not confirm the number of people laid off, but one former worker says it could be at least 50 to 100. You would not know anything was wrong from the outside of Halliburton that anything had happened, but Bradley Jennings knew.

"There's a lot of tension in the air out there. It's real stressful. Kind of a day to day basis type of thing," said Jennings.

Ever since rumors of layoffs have been circulating at work, Jennings and other workers have been on edge.

"I didn't sleep much, I can put it to you like that. It was really stressful."

Jennings worked at the company for 4 years, and has been out of commission for 6 months due to back surgery. He just returned 2 weeks ago. Now he finds himself out of work once again.

"My boss just walked up...it's time to go. So we walked up front and went to a little meeting and out the door I went."

Halliburton told their employees the company has to adjust to the economic changes.

"They just said that the work load had decreased so they had to down size the work force to equal up to the workload."

Everyone's job is on the line according to Jennings, even the "higher-ups". He says they were all asked to take a lower paying position, or...

"Here's another job offer, if you don't like your other option is to leave and take the pension."

Despite the layoffs and reduced operations over the years, Halliburton is still one of the biggest employers in Duncan. Jennings says if the company folds, so will the city.

"There's so many people employed at Halliburton. If Halliburton goes out completely then so many people are going to have to move to find work. The other small businesses are going to struggle to make it."

Jennings says he will pursue other options.

"As far as everything else, I am going to try and go back to school and do something different."

Halliburton had this to say in a statement:

"We're working hard to minimize the impact to our work force and some initiatives that already have been implemented this year include a freeze on annual salary adjustments as well as a pay cut for our executives."

They also say they have notified all employees who are eligible for bonuses; they will not be getting them until they can give everyone annual raises.

The Red River Technology Center is hosting a question and answer session on Thursday June 25, at 10 a.m. Employees who were laid off will be able to find out what they need to do in order to get back into the work force.


Halliburton lays off 1,000 employees in Eastern Hemisphere (http://fuelfix.com/blog/2014/12/11/halliburton-lays-off-1000-employees-in-eastern-hemisphere/)

HOUSTON — Oil field giant Halliburton said Thursday it is laying off about 1,000 employees across multiple regions in the Eastern Hemisphere, effective immediately, a day after a company executive said it expects a $75 million restructuring charge in the fourth quarter.

The announcement comes as oil prices have plummeted in recent months. U.S. benchmark crude West Texas Intermediate fell below $60 for the first time in five years on Thursday.

“The decision to eliminate jobs is never easy,” Halliburton spokeswoman Emily Mir said in an emailed statement. “Our talented workforce is the foundation of everything we accomplish, and we place the highest value on the commitment and hard work that our employees dedicate to building our company. Yet, we believe these job eliminations are necessary in order to work through this market environment.”

Mir added the layoffs were unrelated to Halliburton’s proposed $35 billion acquisition of Houston-based oil field services firm Baker Hughes.

Halliburton chief financial officer Mark McCollum had told investors Wednesday that as oil prices have fallen, the Middle East “seems to be the nexus of our current woes in terms of dropping prices and production,” and that in the Eastern Hemisphere, “we are starting to see headwinds in the Europe, Africa and Caspian regions.”

McCollum said the company expects $75 million in restructuring charges, which are one-time costs related to severance pay and other items, in the fourth quarter related to staff cuts and reduction of some operational activity.

He said the impact of falling crude prices has impacted the company more in international markets than in North America.

On Wednesday, BP executives told investors the company expects $1 billion in restructuring charges over the next year.  Oil field service company Schlumberger had said last week it expects $200 million in charges related to layoffs associated with retiring some seismic vessels.

Halliburton has about 30,000 employees across the Eastern Hemisphere, out of approximately 80,000 globally.


Layoffs Hit The Canadian Oilpatch As EOG Bails On Calgary (http://oilpro.com/post/8943/layoffs-hit-canadian-oilpatch-eog-bails-maple-leaf)

Leading US independent EOG Resources is exiting most of its Canada operations and laying off more than 150 employees and contractors.

The news of EOG's exit from Canada does not come as a big surprise as EOG's leading US shale position is its core value proposition and the reason its business is highly respected both within the industry and among outsiders alike.

Late-Monday afternoon, EOG announced that it is selling the majority of its Canadian assets for $410mm. While EOG did not name the buyers, sources indicate the western Canadian assets are going to Calgary-based Canadian Natural Resources while EOG's southwestern Manitoba assets are being sold to Winnipeg-based Tundra Oil and Gas.

In connection with the asset sale, sources say the company is closing its Calgary headquarters office and laying off 150 people. EOG has not commented on the layoffs. It is unclear how many of these jobs (if any) will be reinstated by the buyers of EOG's assets.

A former EOG Canada employee told the Calgary Herald: “Everyone at the Calgary office has been told they won’t have a job by the New Year … the guys that used to report to me have all been told they’re done. Most have exited. I’ve been doing references for different employees probably since October.”

Regarding the divestiture of its Canadian operations, EOG CEO Bill Thomas had this to say: “This decision is consistent with EOG’s focus on its outstanding US crude oil opportunities. We plan to reinvest some of the proceeds in these high-return assets, while retaining our position in the Horn River Basin and other exploration areas.”
Title: Re: Blood Puking at Halliburton and EOG
Post by: MKing on December 17, 2014, 12:43:22 PM
More layoffs confirmed at Duncan Halliburton (http://www.kswo.com/story/10558361/more-layoffs-confirmed-at-duncan-halliburton)

Posted: Jun 18, 2009 2:27 PM PDT

DUNCAN, Okla. - The rumors have been confirmed, once again, Halliburton in Duncan will layoff employees in the wake of U.S. economic troubles.

But it isn't U.S. economic troubles causing the issue, the consumer LOVES lower gasoline prices. It is the standard service company business model. You don't think there will be a consolidation happening now that Halliburton and Baker are going to become one big happy family? AND Saudi Arabia has decided to scare Iraq and Russia, and if they happen to knock off a few US independents as well, it's all good?

Like I said...the blogosphere and their zero experience with cycles in the business is looking one way..while those of us in are looking at this merger and crossing our fingers.

Service companies NOT merging are the first to cut personnel...service companies merging and Saudi Arabia doing the same thing it has done before is guaranteed to cause layoffs...perfect opportunity to rearrange field offices as a matter of fact. Been there and done that.

How about you Roamer, the time is approaching when there are going to be spare service hands, and the service companies lay people off in an instant, it goes with the job. You got any plans on trying to shift to work in the gas plays, or take the severance and go with the electro-agro-wilderness construction scheme?
Title: Re: Fracker Debt Bubble
Post by: agelbert on December 17, 2014, 06:28:35 PM
Mking says,
Quote
But I will be sure to tell everyone if I have to go job hunting for lack of work.

Right. Excuse me if I don't hold my breath waiting for your royal highness to be  candid with readers about your personal difficulties. Puffery and arrogance don't get along with truth and honesty.  :icon_sunny: :icon_sunny: :icon_sunny:

Sell SLB, Mking! If you don't, you will have your ass handed to you. They've already lost 10 billion from their 110 billion market cap in less than a year. Lose that dirty dog or just buy more and get screwed. It's up to you, "genius".  8)

The Schlumberger Walking DEAD: Watch as this 100 billion dollar polluting beast turns into ZIP in the next THREE YEARS. Enjoy the ride, Mking.

(http://www.createaforum.com/gallery/renewablerevolution/3-280914153654.gif)



Quote


Schlumberger N.V. (Schlumberger), incorporated on November 6, 1956, is the supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry. The Company’s segments include Reservoir Characterization Group, which consists of the principal technologies involved in finding and defining hydrocarbon deposits; Drilling Group, which consists of the principal technologies involved in the drilling and positioning of oil and gas wells, and Production Group consists of the principal technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Subsea, Water Services, Carbon Services and the Schlumberger Production Management field production projects. (http://www.createaforum.com/gallery/renewablerevolution/3-070814193155.png)



Reservoir Characterization Group


Reservoir Characterization Group consists of the principal Technologies involved in finding and defining hydrocarbon resources. These include WesternGeco, Wireline, Testing Services, Schlumberger Information Solutions and PetroTechnical Services. WesternGeco is the geophysical services company, providing worldwide reservoir imaging, monitoring and development services. WesternGeco offers the industry’s multiclient data library. Wireline provides the information necessary to evaluate subsurface formation rocks and fluids to plan and monitor well construction, and to monitor and evaluate well production. Wireline offers both openhole and cased-hole services, including wireline perforating. (http://www.createaforum.com/gallery/renewablerevolution/3-070814193155.png)

Testing Services provides exploration and production pressure and flow-rate measurement services both at the surface and downhole. The Technology also provides tubing-conveyed perforating services. Schlumberger Information Solutions provides software, consulting, information management and information technology (IT) infrastructure services that support core oil and gas industry operational processes. Schlumberger Information Solutions provides software, consulting, information management and IT infrastructure services that support core oil and gas industry operational processes. PetroTechnical Services supplies interpretation and integration of all exploration and production data types, as well as expert consulting services for reservoir characterization, field development planning production enhancement and multi-disciplinary reservoir and production solutions.(http://www.createaforum.com/gallery/renewablerevolution/3-070814193155.png) PetroTechnical Services also provides industry petrotechnical training solutions.


Drilling Group


Drilling Group consists of the principal Technologies involved in the drilling and positioning of oil and gas wells and consists of Bits & Advanced Technologies, M-I SWACO, Geoservices, Drilling & Measurements, PathFinder, Drilling Tools & Remedial Services, Dynamic Pressure Management and Integrated Project Management well construction projects. (http://www.createaforum.com/gallery/renewablerevolution/3-070814193155.png)Bits & Advanced Technologies designs, manufactures and markets roller cone and fixed cutter drill bits for all environments. The drill bits include designs for market segments where faster penetration rates. The technologies leverage modeling and simulation software for the design of application-specific bits and cutting structures.


M-I SWACO is the supplier of drilling fluid systems engineered to improve drilling performance by anticipating fluids-related problems, fluid systems and specialty equipment designed to optimize wellbore productivity and production technology solutions formulated to maximize production rates.  (http://www.createaforum.com/gallery/renewablerevolution/3-070814193155.png)  The Technology also includes environmental solutions   (http://www.pic4ever.com/images/ugly004.gif)that safely manage waste volumes generated in both drilling and production operations. Geoservices supplies mud logging services for geological and drilling surveillance. Drilling & Measurements and PathFinder provide directional-drilling, measurement-while-drilling and logging-while-drilling services for all well profiles, as well as engineering support. Drilling Tools & Remedial provides a range of bottom hole assembly drilling tools, borehole enlargement technologies and impact tools, as well as a collection of tubulars and tubular services for oil and gas drilling operations. Dynamic Pressure Management consolidates managed pressure drilling and underbalanced drilling into a single provider of engineered solutions for pressure drilling services.


Production Group


Production Group consists of the principal Technologies involved in the lifetime production of oil and gas reservoirs and includes Well Services, Completions, Artificial Lift, Well Intervention, Subsea, Water Services, Carbon Services and Schlumberger Production Management field production projects. Well Services provides services used during oil and gas well drilling and completion as well as those used to maintain optimal production throughout the life of a well. The services include pressure pumping, well cementing and stimulation operations as well as intervention activities.   (http://www.freesmileys.org/emoticons/emoticon-object-015.gif)
Completions supplies well completion services and equipment that include packers, safety valves, sand control technology as well as a range of intelligent   ;)well completions technology and equipment. Artificial Lift provides production equipment and optimization services using electrical submersible pumps and gas lift equipment, as well as surface horizontal pumping systems.


Well Intervention develops coiled tubing equipment and services and provides slickline services for downhole mechanical well intervention, reservoir monitoring and downhole data acquisition. Subsea offers solutions that are designed to improve reservoir recovery optimize production and maximize production uptime of subsea assets. Water Services specializes in the development, management and environmental protection of water resources. (http://www.desismileys.com/smileys/desismileys_2932.gif) Carbon Services provides geological storage solutions, including storage site characterization for carbon dioxide

My advice to you is to SELL, Mking.  :icon_mrgreen:

El Que No Oye Consejo, No Llega a Viejo.

The translation is this: He who does not listen to advice does not make it to old age. (it rhymes in Spanish! :icon_sunny:)



Title: Re: Fracker Debt Bubble
Post by: MKing on December 17, 2014, 08:34:30 PM
Mking says,
Quote
But I will be sure to tell everyone if I have to go job hunting for lack of work.

Right. Excuse me if I don't hold my breath waiting for your royal highness to be  candid with readers about your personal difficulties.

I could regale you for hours about personal difficulties. Trials and tribulations, some won, some lost. I didn't go from hillbilly to world class geoscientist without them.

And just as when I was called a troll and liar, and it turned out I was a world class industry professional, I certainly have been candid in everything except announcing my identity.

Quote from: agelbert
Puffery and arrogance don't get along with truth and honesty.  :icon_sunny: :icon_sunny: :icon_sunny:

Those of us who are world class, when we write science papers or give presentations to a national conference of professionals, it isn't called puffery or arrogance. I understand it comes across that way here, and I don't damp it down certainly, when faced with amateur buffoonery of the blogosphere.

Did you even listen to RE's "interview" of Hughes? I spent so much time laughing the first time through the Hughes interview, and not at his answers but the mind boggling amateur nature of the questioning, that I needed to listen a second time for informational value.

Call it what you like, but that is completely honest, and you, and the interviewers, don't even know WHY.

Quote from: agelbert
   
Sell SLB, Mking! If you don't, you will have your ass handed to you. They've already lost 10 billion from their 110 billion market cap in less than a year. Lose that dirty dog or just buy more and get screwed. It's up to you, "genius".  8)

The Schlumberger Walking DEAD: Watch as this 100 billion dollar polluting beast turns into ZIP in the next THREE YEARS. Enjoy the ride, Mking.


My advice to you is to SELL, Mking.  :icon_mrgreen:

And your investing advice in MY world is worth what…exactly…Anthony?
Title: Re: Fracker Debt Bubble
Post by: RE on December 17, 2014, 11:24:16 PM
Mking says,
Quote
But I will be sure to tell everyone if I have to go job hunting for lack of work.

Right. Excuse me if I don't hold my breath waiting for your royal highness to be  candid with readers about your personal difficulties. Puffery and arrogance don't get along with truth and honesty.  :icon_sunny: :icon_sunny: :icon_sunny:

I doubt Moriarty is personally hurting very much here yet, the Criminals at the top of these organizations simply dish out the pain to the lower levels.

However, he is full of shit if he makes the case that his industry isn't coughing blood at the moment, blood being a metaphor for bleeding red ink out their accountant's eyeballs.  Mergers and Acquisitons like Halliburton-Baker Hughes come about when an industry is shrinking, same bizness occurred in Banking in 2008, as numerous smaller players were swallowed up by the TBTF Banks.

EVERYBODY KNOWS credit is drying up for these companies, it's not the Bloggers reporting it, it's Bloomberg, the WSJ, Forbes, Biz Insider etc.

Besides being Criminally Insane, Moriarty is a Pathological Liar, he has demonstrated that repeatedly on these pages.  Reading his shit is like doing an interview with Hannibal the Cannibal.

(http://ttcritic.files.wordpress.com/2010/10/silence2.jpg)

Compared to Moriarty, Hannibal Lecter was Mother Teresa.  LOL.

It's toxic, so I no longer read it.  However, some of the other Admins continue to publish it periodically.

Everybody is laying off workers and selling assets if they can find a Greater Fool to offload onto.  It will take a while yet before it all shakes out and the Perp Walks for the Capos start.

RE
Title: Re: Fracker Debt Bubble
Post by: azozeo on December 18, 2014, 03:49:02 AM
Mking says,
Quote
But I will be sure to tell everyone if I have to go job hunting for lack of work.

Right. Excuse me if I don't hold my breath waiting for your royal highness to be  candid with readers about your personal difficulties.

I could regale you for hours about personal difficulties. Trials and tribulations, some won, some lost. I didn't go from hillbilly to world class geoscientist without them.

And just as when I was called a troll and liar, and it turned out I was a world class industry professional, I certainly have been candid in everything except announcing my identity.

Quote from: agelbert
Puffery and arrogance don't get along with truth and honesty.  :icon_sunny: :icon_sunny: :icon_sunny:

Those of us who are world class, when we write science papers or give presentations to a national conference of professionals, it isn't called puffery or arrogance. I understand it comes across that way here, and I don't damp it down certainly, when faced with amateur buffoonery of the blogosphere.

Did you even listen to RE's "interview" of Hughes? I spent so much time laughing the first time through the Hughes interview, and not at his answers but the mind boggling amateur nature of the questioning, that I needed to listen a second time for informational value.

Call it what you like, but that is completely honest, and you, and the interviewers, don't even know WHY.

Quote from: agelbert
   
Sell SLB, Mking! If you don't, you will have your ass handed to you. They've already lost 10 billion from their 110 billion market cap in less than a year. Lose that dirty dog or just buy more and get screwed. It's up to you, "genius".  8)

The Schlumberger Walking DEAD: Watch as this 100 billion dollar polluting beast turns into ZIP in the next THREE YEARS. Enjoy the ride, Mking.


My advice to you is to SELL, Mking.  :icon_mrgreen:

And your investing advice in MY world is worth what…exactly…Anthony?

http://www.youtube.com/v/C_Kh7nLplWo&fs=1
Title: Re: Fracker Debt Bubble
Post by: azozeo on December 18, 2014, 03:54:13 AM
Mking says,
Quote
But I will be sure to tell everyone if I have to go job hunting for lack of work.

Right. Excuse me if I don't hold my breath waiting for your royal highness to be  candid with readers about your personal difficulties.

I could regale you for hours about personal difficulties. Trials and tribulations, some won, some lost. I didn't go from hillbilly to world class geoscientist without them.

And just as when I was called a troll and liar, and it turned out I was a world class industry professional, I certainly have been candid in everything except announcing my identity.

Quote from: agelbert
Puffery and arrogance don't get along with truth and honesty.  :icon_sunny: :icon_sunny: :icon_sunny:

Those of us who are world class, when we write science papers or give presentations to a national conference of professionals, it isn't called puffery or arrogance. I understand it comes across that way here, and I don't damp it down certainly, when faced with amateur buffoonery of the blogosphere.

Did you even listen to RE's "interview" of Hughes? I spent so much time laughing the first time through the Hughes interview, and not at his answers but the mind boggling amateur nature of the questioning, that I needed to listen a second time for informational value.

Call it what you like, but that is completely honest, and you, and the interviewers, don't even know WHY.

Quote from: agelbert
   
Sell SLB, Mking! If you don't, you will have your ass handed to you. They've already lost 10 billion from their 110 billion market cap in less than a year. Lose that dirty dog or just buy more and get screwed. It's up to you, "genius".  8)

The Schlumberger Walking DEAD: Watch as this 100 billion dollar polluting beast turns into ZIP in the next THREE YEARS. Enjoy the ride, Mking.


My advice to you is to SELL, Mking.  :icon_mrgreen:

And your investing advice in MY world is worth what…exactly…Anthony?

http://www.youtube.com/v/KTwnwbG9YLE&fs=1
Title: Re: Fracker Debt Bubble
Post by: RE on December 18, 2014, 04:06:47 AM
I didn't go from hillbilly to world class geoscientist without them.

You remain a WORLD CLASS JACKASS from your Hillbilly days to today.

Once a Jackass, always a Jackass.  Some folks can never escape their upbringing.

RE
Title: Re: Fracker Debt Bubble
Post by: azozeo on December 18, 2014, 04:22:34 AM
Mking says,
Quote
But I will be sure to tell everyone if I have to go job hunting for lack of work.

Right. Excuse me if I don't hold my breath waiting for your royal highness to be  candid with readers about your personal difficulties.

I could regale you for hours about personal difficulties. Trials and tribulations, some won, some lost. I didn't go from hillbilly to world class geoscientist without them.

And just as when I was called a troll and liar, and it turned out I was a world class industry professional, I certainly have been candid in everything except announcing my identity.

Quote from: agelbert
Puffery and arrogance don't get along with truth and honesty.  :icon_sunny: :icon_sunny: :icon_sunny:

Those of us who are world class, when we write science papers or give presentations to a national conference of professionals, it isn't called puffery or arrogance. I understand it comes across that way here, and I don't damp it down certainly, when faced with amateur buffoonery of the blogosphere.

Did you even listen to RE's "interview" of Hughes? I spent so much time laughing the first time through the Hughes interview, and not at his answers but the mind boggling amateur nature of the questioning, that I needed to listen a second time for informational value.

Call it what you like, but that is completely honest, and you, and the interviewers, don't even know WHY.

Quote from: agelbert
   
Sell SLB, Mking! If you don't, you will have your ass handed to you. They've already lost 10 billion from their 110 billion market cap in less than a year. Lose that dirty dog or just buy more and get screwed. It's up to you, "genius".  8)

The Schlumberger Walking DEAD: Watch as this 100 billion dollar polluting beast turns into ZIP in the next THREE YEARS. Enjoy the ride, Mking.


My advice to you is to SELL, Mking.  :icon_mrgreen:

And your investing advice in MY world is worth what…exactly…Anthony?

What part of "Possession is 9/10 of the law" do you not understand ?
Numbers on a screen or digits on a piece of paper is not in "your" possession.
It's in the 1st Bank of Piracy's possession.
When you deposit fiat currency in the bank it's in the bank's possession.
Spend some time researching or reading the banks "fine print".......
This shit goes back to Nathaniel Rothschild days & even before most likely.
Your entrusting a bunch of psychopathic pirates to watch/guard your hard earned assets.
That is a hillbilly mindset. Didn't you learn anything from the 2008/9 financial bubble.
Evidently you didn't get burned bad enough to wise up.
These cats are laughing their asses off at the sheeple one more time.
Title: Re: Fracker Debt Bubble
Post by: azozeo on December 18, 2014, 04:39:38 AM
http://www.youtube.com/v/q9gnBe37k34&fs=1
Title: Re: Fracker Debt Bubble
Post by: MKing on December 18, 2014, 08:28:46 AM

EVERYBODY KNOWS credit is drying up for these companies, it's not the Bloggers reporting it, it's Bloomberg, the WSJ, Forbes, Biz Insider etc.


Do you even understand the DIFFERENCE between drilling companies, service companies, integrated production companies, small private independents, promotional based developers, mom and pop operators? ANY of it?

Or does the shallow nature of your understanding really stop at wiki and the MSM?
Title: Re: Fracker Debt Bubble
Post by: MKing on December 18, 2014, 08:53:03 AM
What part of "Possession is 9/10 of the law" do you not understand ?

Point #1: A rhetorical question, or are you really as stupid as your belief in what created the Andes would indicate?

Quote from: azozeo
 
Numbers on a screen or digits on a piece of paper is not in "your" possession.

See point #1.

Quote from: azozeo
It's in the 1st Bank of Piracy's possession.

What does that mean? Are you inebriated, or are we back to Point #1?

Quote from: azozeo
When you deposit fiat currency in the bank it's in the bank's possession.

Statement of fact. The beauty being, when they give it back to me, they give me back more!! If you want this wondrous thing to happen to you, put your money in a bank too!

Quote from: azozeo
This shit goes back to Nathaniel Rothschild days & even before most likely.

Admittedly, I've only noticed since I opened my first savings account when I was 8. Only bank in my county to make it through the Great Depression, so they can be trusted.

Quote from: azozeo
Your entrusting a bunch of psychopathic pirates to watch/guard your hard earned assets.

No I didn't. I entrusted..some of it anyway...to Joe. Neither psychotic nor a pirate, we went out to lunch once while he was trying to sell me one of the bank's services or another. Nice guy, but a banker nonetheless.

Quote from: azozeo
That is a hillbilly mindset. Didn't you learn anything from the 2008/9 financial bubble.

Are you KIDDING? I made a MINT after the herd all sold out of the market. You buy when there is blood in the streets Azozeo, and the 2008/2009 crash was the best buying opportunity in 20+ years. Don't they teach you ANYTHING on the reservation? Has the Arizona heat fried your synapses?

Quote from: azozeo
Evidently you didn't get burned bad enough to wise up.

"Making a mint" isn't usually how people describe getting burned. So please, bring on the next crash in the markets, two opportunities in a generation to make a killing is better than 1.

Quote from: azozeo
These cats are laughing their asses off at the sheeple one more time.

I certainly do. The sooner the sheeple flee the market in fear, the sooner I can get started on the creation of the next "mint".
Title: Re: Fracker Debt Bubble
Post by: azozeo on December 18, 2014, 11:02:56 AM
An old market adage says: Past performance is not indicative of future results. Live it, learn it, use it....
This ain't your grandpa's stock market bubba.
I'll give you directions to the homeless shelter near you.
Mking you got Tootsie pop (or poop) in your case, written all over you.
Title: Re: Fracker Debt Bubble
Post by: MKing on December 18, 2014, 11:50:03 AM
An old market adage says: Past performance is not indicative of future results. Live it, learn it, use it....

Always. When the sheeple run, supported by the likes of the blogosphere, make a mint by betting against the ignorance of both.

Quote from: azozeo
This ain't your grandpa's stock market bubba.

Grandpa's market sucked, slow steady growth is fine for those faint of heart. I was referring to the stock crash of 2008, you know, the one that doomers were thinking was the end of the world? Volatility is the key my friend, and that is where the opportunity is.

Quote from: azozoe
I'll give you directions to the homeless shelter near you.

Been there, done that. You'll have to try other fears...like going back to the farm, growing my own food, hunting for meat because I can't get it otherwise for the family? Welcome to the world I was raised on. Big deal. You might terrorize suburbanites, soccer moms, Indians on the reservation dependent upon government, or Alaskan apartment dwellers with that reality, but I wasn't born in the big city, and have never been limited by their intellectual, physical, and cultural deficiencies.

Quote from: azozoe
Mking you got Tootsie pop (or poop) in your case, written all over you.

who bets against your particular herd mentality, and thank you very, very much for representing them to the benefit of the critical thinkers of the world... :icon_sunny: :icon_sunny:
Title: Re: Fracker Debt Bubble
Post by: agelbert on December 18, 2014, 01:41:15 PM
And THANK YOU, Mking, for showing, once again, what a logic challenged "genius" you are. 

Enjoy the ride:

 (http://www.createaforum.com/gallery/renewablerevolution/3-161214184005.gif)
Title: Re: Fracker Debt Bubble
Post by: MKing on December 18, 2014, 01:45:34 PM
And THANK YOU, Mking, for showing, once again, what a logic challenged "genius" you are. 

Never said I was a genius. Never even claimed to be world class until RE labeled me as such, knowing who I am and all.

But you are welcome for all those fossil fuels we in industry provide you with Anthony. We couldn't drill, complete, refine or distribute those fuels you demand without your endless financial support.

God Bless you and everyone like you Anthony.

 :emthup: :emthup:

Title: Re: Fracker Debt Bubble
Post by: azozeo on December 18, 2014, 02:02:01 PM
An old market adage says: Past performance is not indicative of future results. Live it, learn it, use it....

Always. When the sheeple run, supported by the likes of the blogosphere, make a mint by betting against the ignorance of both.

Quote from: azozeo
This ain't your grandpa's stock market bubba.

Grandpa's market sucked, slow steady growth is fine for those faint of heart. I was referring to the stock crash of 2008, you know, the one that doomers were thinking was the end of the world? Volatility is the key my friend, and that is where the opportunity is.

Quote from: azozoe
I'll give you directions to the homeless shelter near you.

Been there, done that. You'll have to try other fears...like going back to the farm, growing my own food, hunting for meat because I can't get it otherwise for the family? Welcome to the world I was raised on. Big deal. You might terrorize suburbanites, soccer moms, Indians on the reservation dependent upon government, or Alaskan apartment dwellers with that reality, but I wasn't born in the big city, and have never been limited by their intellectual, physical, and cultural deficiencies.

Quote from: azozoe
Mking you got Tootsie pop (or poop) in your case, written all over you.

who bets against your particular herd mentality, and thank you very, very much for representing them to the benefit of the critical thinkers of the world... :icon_sunny: :icon_sunny:

Son,
You don't have the stamina, cahones, or where with all to get in your plastic wind up chevy
and drive off into the sunset & go live off the land as though you were still 13 yrs. old.
I saw your picture & you will be dead within 72-90 hrs. of this feat.
Title: Re: Fracker Debt Bubble
Post by: MKing on December 18, 2014, 04:09:59 PM
Son,
You don't have the stamina, cahones, or where with all to get in your plastic wind up chevy
and drive off into the sunset & go live off the land as though you were still 13 yrs. old.

There is a difference between not being capable, and choosing NOT to live that way anymore.

And my father was a murderous drunk, and you ain't him because even he wasn't dumb enough to fall for the star under our feet, hallucinations on the origins of the Andes, or the rest of your near incoherent delusions.

Quote from: azozeo
I saw your picture & you will be dead within 72-90 hrs. of this feat.

Of course you haven't seen my picture.  :icon_sunny:
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on December 18, 2014, 09:42:48 PM
An old market adage says: Past performance is not indicative of future results. Live it, learn it, use it....
Always. When the sheeple run, supported by the likes of the blogosphere, make a mint by betting against the ignorance of both.
Or, more simply MKing, you could just go with "Buy low, sell high"  :D
Title: Re: Fracker Debt Bubble
Post by: RE on December 18, 2014, 10:20:31 PM
An old market adage says: Past performance is not indicative of future results. Live it, learn it, use it....
Always. When the sheeple run, supported by the likes of the blogosphere, make a mint by betting against the ignorance of both.
Or, more simply MKing, you could just go with "Buy low, sell high"  :D

Far as Oil and NG Leases go, it's "Buy High, Sell it for whatever you can still get for it"

RE
Title: Re: Fracker Debt Bubble
Post by: azozeo on December 19, 2014, 02:04:54 AM
When I called Mking out on going off into the sunset to live off the land, I
included myself in this as well. We've all been "conditioned" in the matrix
for toooooooo long. The human mind plays tricks on us. Case in point,
I posted a blog here, about the Uke's loosing power during there recent cold
snap & they were dropping like flies after 72-90 hours of no power. Besides
if the system goes south who the f@&# wants to live like a caveman for the
rest of their days on this planet. I'd rather die & not have to endure the hardships anyway.
Life isn't that precious to me. I've had a good ride & made & lost oodles of dough.
Personally after doing my research I don't believe this will happen (the matrix going south)
like a hollywood movie scenario. I believe like Ugo Bardi says in one of his videos that the
changes coming will be subtle & constant. "The slooooow grind" .....
I'd rather make a buck in the precious metals market by crushing, leaching & smelting, than
having to chase a buck at the world's largest casino named Wall St.
Title: The END of the BEGINNING
Post by: RE on December 19, 2014, 02:35:41 AM
Besides if the system goes south who the f@&# wants to live like a caveman for the
rest of their days on this planet.

That's a valid perspective, but actually if I was younger and healthier I'd LOVE to try living like a Caveman!  As it is here these days, I will be in the First Wave of Dead People once the spin down hits the First World countries, but I write from the perspective of myself at around age 30 or so, when I still could have pulled off life out in the Bush.

However, I do not think "Caveman Living" is the necessary alternative, at least within the next century or so.  It's going to be a Scavenging Paradigm I think during this period, and some systems will be kept running, notably local solar systems, local hydro systems, various permaculture and hydroponics solutions on a local level, etc.

IMHO, the paradigm we developed on the SUN Board  :icon_sunny: (private), remains the best alternative.  Develop an Intentional Community of like minded people with knowledge of alternative systems for food production and energy collection.  Situate said community as far as is reasonable from the current Big Shities with enough people to PROTECT & DEFEND it.  REPUDIATE money of any kind, and develop a GIFT Economy.  Live to serve others in your tribe, repudiate wealth collection and GREED.  Conserve the KNOWLEDGE that has been gained here on the trip up the ladder, and USE IT WELL, to preserve the Environment you depend on.

And then my own not generally agreed with Orkin Man perspective, which is to TERMINATE WITH EXTREME PREJUDICE every last person who will not live a selfless life and devote himself or herself to service of the community and divest of all personal wealth.

http://www.youtube.com/v/lo5BBHtn4tM?feature=player_detailpage

I won't be alive to see the outcome of this.  It does appear more likely now though that I will see the END OF THE BEGINNING.

(https://s-media-cache-ak0.pinimg.com/736x/02/a9/52/02a952f9872366cb3a51823cb979c47c.jpg)

I write for the younger people who still would like to see their children grow up, and who want to try to BUILD A BETTER TOMORROW.  It is IMHO still possible, just not a whole lot of people will make it through the ZERO POINT to do that.  Only the most well informed and most prepared stand even a small chance of this.

THEY ARE THE DINERS.

RE
Title: Re: Fracker Debt Bubble
Post by: jdwheeler42 on December 19, 2014, 03:44:23 AM
Case in point,
I posted a blog here, about the Uke's loosing power during there recent cold
snap & they were dropping like flies after 72-90 hours of no power. Besides
if the system goes south who the f@&# wants to live like a caveman for the
rest of their days on this planet. I'd rather die & not have to endure the hardships anyway.
My big thing is, I don't want to die in 72-90 hours IF the power is coming back on eventually.  I don't mind toughing it out for a couple weeks.  Once I run out of my migraine meds (several months), however, I really don't want to stick around anymore, especially since I figure that'll be about the time the nuclear power plants start melting down from neglect.

That reminds me, the other day I happened to catch a show on Discovery called "Naked and Afraid".  I had heard about it before and thought it sounded hokey, but when I watched it I thought it was the best survival show I've seen on television.  These people are experts on survival who really think they do want to live like cavemen, and they generally can't seem to make it the 3 weeks.
Title: Temporary Disruption Survival
Post by: RE on December 19, 2014, 04:19:00 AM
You gotta be REALLY poorly prepped if you are gonna croak inside 3 days because the grid goes down and services get shut in.

Let's say Mt Redoubt BLOWS here and drops a solid 3" ashfall over a week.  I can't leave the digs.  The NG, the Electric and the Water all get cut off.  I am trapped in the Digs, can't leave.

Heat:  Not too big an issue, I will just layer up with the whole panoply of stuff for hanging out outside in Sub-Zero temps, but besides that I got a few months worth of propane and a Mr. Buddy Heater that is safe to use indoors (it shuts down if the carbon monoxide level goes to high).  Besides that, I'll probably spend 90% of the time hibernating inside my -40F Sleeping Bag and just exiting to cook up some food for an hour or so each day.

Water in the jugs lasts a month or so, after that I would have to go over to the Creek or melt some snow.  Can use gas from the Bugout machines for this.  Gotta boil if I am going to use it to drink, collect firewood for this.

There is NO FUCKING WAY I could die because of the power getting cut off inside a month at least, just from lack of stuff to keep me alive or freezing.  The fact OTHER people might attack me and invade the digs to get my preps of course could end with a quick death, but my option there is to offer to SHARE all my preps with the first couple of Zombies who arrive to help defend the Prep Store.

If you don't have enough preps to make it for even 3 lousy days when the lights go out, you don't DESERVE to live!  LOL.

RE
Title: Re: Fracker Debt Bubble
Post by: Eddie on December 19, 2014, 08:12:54 AM
I won't even have to break out my grain mill for the first month. Then it might turn ugly.
Title: Re: Fracker Debt Bubble
Post by: Surly1 on December 19, 2014, 08:28:12 AM

I saw your picture & you will be dead within 72-90 hrs. of this feat.

Of course you haven't seen my picture.  :icon_sunny:

Of course we have:

(http://26.media.tumblr.com/tumblr_lenza7OU5K1qap0t6o1_400.jpg)
Title: Re: The END of the BEGINNING
Post by: Petty Tyrant on December 19, 2014, 03:42:17 PM


I write for the younger people who still would like to see their children grow up, and who want to try to BUILD A BETTER TOMORROW.  It is IMHO still possible, just not a whole lot of people will make it through the ZERO POINT to do that.  Only the most well informed and most prepared stand even a small chance of this.

THEY ARE THE DINERS.

RE

This is true. Im not steading for myself, I could easily piss away everything living it up if I only was concerned with myself and the rest of my life. We are setting the foundation for a future community that can carry on long after Im gone. No reason it needs to be hardship and drudgery, I call the current materialistic cubicle cramped, treadmill slavery and drudgery. Hunting, fishing, gardening, watching fruit and vegetables grow, training, teaching, singing, dancing, playing music, feasting and celebrating. That future looks like fun.
Title: Re: The END of the BEGINNING
Post by: jdwheeler42 on December 19, 2014, 11:25:35 PM
No reason it needs to be hardship and drudgery, I call the current materialistic cubicle cramped, treadmill slavery and drudgery. Hunting, fishing, gardening, watching fruit and vegetables grow, training, teaching, singing, dancing, playing music, feasting and celebrating. That future looks like fun.
:emthup: :emthup: :emthup: :emthup: :emthup:
Title: Re: The END of the BEGINNING
Post by: MKing on December 20, 2014, 06:37:01 AM
No reason it needs to be hardship and drudgery, I call the current materialistic cubicle cramped, treadmill slavery and drudgery. Hunting, fishing, gardening, watching fruit and vegetables grow, training, teaching, singing, dancing, playing music, feasting and celebrating. That future looks like fun.
:emthup: :emthup: :emthup: :emthup: :emthup:

I remember the hunting and fishing part being pretty fun. The hauling water during the winter, working in the fields, planting the garden, digging, defeathering the damn chickens for diner, chopping and hauling wood, not so much.

What always surprises me about the "wanna be Amish" angle is how many people lament for the lifestyle who have never experienced it. They think country folk sit around on the porch reading Shakespeare to each other or something, debating who's version of the unified field theory is best, picking up crochet on the side, waiting for the evening feasting and celebrating and snake handling ceremony.

I like the perception of all the singing and celebrating though....I don't remember much of that after a bad hunt..more like hunger. Don't remember being happy at wrecking a raccoon hide while trapping either when I had to expend a single 22LR round to kill the thing because the baseball bat just wasn't doing it. Didn't sing much (but then I'm not a singer type),there weren't grand gala's at the Grange often, maybe during weddings. There were books around, which was good because ultimately they were the ticket to getting out. Science fiction at first, stories of as far away as possible. Taught myself to speed type at 9, and put myself through school in part by typing papers for $1/page for the Saudi students I also was tutoring to make some extra cash.

If the "back to the land" lifestyle was as Bob says it is, I could almost be convinced to go back, dragging the wife and kids with me. Maybe "back to land" is a happier place in his state than where I actually lived it. Like, "back to the land" in Missouri is jim dandy great, does the Shakespeare thing, as opposed to the hillbilly's farther east?
Title: Re: The END of the BEGINNING
Post by: Petty Tyrant on December 20, 2014, 04:31:38 PM

If the "back to the land" lifestyle was as Bob says it is, I could almost be convinced to go back, dragging the wife and kids with me. Maybe "back to land" is a happier place in his state than where I actually lived it.

Well in this anglosphere vassal state of uncle sam its probably similar to the beautiful surrounds  where u grew up. I dont want amish, I want amplifiers and speakers and LED lights  and power tools running from solar panels. Since Ive been here Ive had to spend a lot of time at airports and on airplanes and I gather u do that too. U dont mind it wheras I hate it because of the pollution and boredom, same deal in reverse for farm life I guess. True enough skinning and gutting animals isnt much fun, so I still buy from the butcher for now, but Im sure it would be easy if I were hungry.
Title: Re: The END of the BEGINNING
Post by: MKing on December 20, 2014, 04:54:37 PM
I dont want amish, I want amplifiers and speakers and LED lights  and power tools running from solar panels.

Well, I know that is possible because I've had coworkers who lived off grid. Now, the battery system they required to do that was substantial. Panels and a grid to sell spare capacity to is one thing, but batteries to store it are something else altogether in terms of cost.

Quote from: Uncle Bob
Since Ive been here Ive had to spend a lot of time at airports and on airplanes and I gather u do that too.

I haven't been in an airport since October, 2011. But I travel quite a bit, yes.

Quote from: Uncle Bob
U dont mind it wheras I hate it because of the pollution and boredom, same deal in reverse for farm life I guess.

I certainly am not a fan of flying and the cattle car mentality of it.

Quote from: Uncle Bob
True enough skinning and gutting animals isnt much fun, so I still buy from the butcher for now, but Im sure it would be easy if I were hungry.

Lots of things related to food are easier when you are hungry. A lesson learned early and never forgotten. My job as a father is to teach the children the basics of such lessons without actually cutting off their food supply to make sure it takes properly.

Title: Re: The END of the BEGINNING
Post by: Petty Tyrant on December 21, 2014, 12:29:57 PM

I have batteries, started with 12V and then went to 24V, is more efficient. Cost about 3-4K, but its not necessary, I could get away with 2 truck batteries costing about 300$ total and use  the generators for any bigger needs , a 750w 2 stroke and a 5KVA 4 stroke that dont get used. Could also cook with gas or wood instead of electric.

with 2 truck batteries I could also use a 300w inverter instead of the 3000w inverter that takes a lot of power on its own.
Title: NG on the Skids: Frackers can't catch a break here
Post by: RE on December 23, 2014, 01:14:32 PM
Next up in crashing Energy prices, NG!

RE

First Oil, now US Natural Gas Plunges off the Chart, “Negative Igniter” for New Debt Crisis

testosteronepit's picture



 

Wolf Richter   [url=http://www.wolfstreet.com]www.wolfstreet.com[/url]   [url=http://www.amazon.com/author/wolfrichter]www.amazon.com/author/wolfrichter[/url]

Friday, natural gas futures plunged 6%. Monday morning, when folks were thinking about the beautiful Santa Rally, NG futures plunged nearly 10% to $3.12 per million Btu, the lowest since January 10, 2013. But the crazy day had just begun. NG bounced off and jumped nearly 4%, only to give up much of it later. Tuesday morning, as I’m finishing this up, NG continues to decline, now at $3.11/mmBtu. Down 30% from a month ago.

NG demand peaks when the heating season starts. It’s a bet on the weather. Our gurus forecast warmer than normal temperatures across the country, so prices plunged. Or shorts piled into the pre-holiday session with exaggerated effect to make a quick buck.

Here is what this 30-day, 30% plunge looks like (each bar = 5 hours):

US-Nat-Gas-Nov_23--Dec_22-2014

Whatever the cause, NG has traded below the cost of production of many wells for years. That lofty $4.40/mmBtu on the left side in the chart above is still below the cost of production for many wells. The price simply fell from bad to terrible.

To make the equation work, drillers have shifted from shale formations that produce mostly “dry” natural gas to formations that also produce a lot of liquids, such as oil, natural gasoline, propane, butane, or ethane that were fetching a much higher price. Thus, they’d be immune to the low price of NG. They pitched this strategy to investors to attract ever more money and keep the fracking treadmill going.

Much of this new money was in form of junk debt. Now energy companies account for over 15% of the Barclays U.S. Corporate High-Yield Bond Index – up from less than 5% in 2005.

But there is no respite for the American oil patch. The price of oil has plunged 50% since June, the price of propane is down 50% since its recent high in mid-September, and natural gasoline is down 32% since recent high in mid-November. None of the fancy charts natural gas drillers have shown to investors work at these prices.

It’s showing up everywhere. Take Samson Resources. As is typical in that space, there is a Wall Street angle to it. One of the largest closely-held exploration and production companies, Samson was acquired for $7.2 billion in 2011 by private-equity firms KKR, Itochu Corp., Crestview Partners, and NGP Energy Capital Management. They ponied up $4.1 billion. For the rest of the acquisition costs, they loaded up the company with $3.6 billion in new debt. In addition to the interest expense on this debt, Samson is paying “management fees” to these PE firms, starting at $20 million per year and increasing by 5% every year.

KKR is famous for leading the largest LBO in history in 2007 at the cusp of the Financial Crisis. The buyout of a Texas utility, now called Energy Future Holdings Corp., was a bet that NG prices would rise forevermore, thus giving the coal-focused utility a leg up. But NG prices soon collapsed. And in April 2014, the company filed for bankruptcy.

Now KKR is stuck with Samson. Being focused on NG, the company is another bet that NG prices would rise forevermore. But in 2011, they went on to collapse further. In 2014 through September, the company lost $471 million, the Wall Street Journal reported, bringing the total loss since acquisition to over $3 billion. This is what happens when the cost of production exceeds the price of NG for years.

Samson has used up almost all of its available credit. In order to stay afloat a while longer, it is selling off a good part of its oil-and-gas fields in Oklahoma, North Dakota, Wyoming, and Colorado. It’s shedding workers. Production will decline with the asset sales – the reverse of what investors in its bonds had been promised.

Samson’s junk bonds have been eviscerated. In early August, the $2.25 billion of 9.75% bonds due in 2020 still traded at 103.5 cents on the dollar. By December 1, they were down to 56 cents on the dollar. Now they trade for 43.5 cents on the dollar. They’d plunged 58% in four months.

The collapse of oil and gas prices hasn’t rubbed off on the enthusiasm that PE firms portray in order to attract new money from pension funds and the like. “We see this as a real opportunity,” explained KKR co-founder Henry Kravis at a conference in November.

KKR, Apollo Global Management, Carlyle, Warburg Pincus, Blackstone and many other PE firms traipsed all over the oil patch, buying or investing in E&P companies, stripping out whatever equity was in them, and loading them up with piles of what was not long ago very cheap junk bonds and even more toxic leveraged loans.This is how Wall Street fired up the fracking boom.

PE firms gathered over $100 billion in their energy funds since 2011. The nine publicly traded E&P companies that represent the largest holdings have cost PE firms at least $12.7 billion, the Wall Street Journal figured. This doesn’t include their losses on the smaller holdings. Nor does it include losses from companies like Samson that are not publicly traded. And it doesn’t include losses pocketed by bondholders and leveraged loan holders or all the millions of stockholders out there.

Undeterred, Blackstone is raising its second energy-focused fund; it has a $4.5 billion target, Bloomberg reported. The plunge in oil and gas prices “has not created a lot of difficulties for us,” CEO Schwarzman explained at a conference on December 10. KKR’s Kravis said at the same conference that he welcomed the collapse as an opportunity. Carlyle co-CEO Rubenstein expected the next 5 to 10 years to be “one of the greatest times” to invest in the oil patch.

The problem?

“If you have an asset you already own, it’s probably going to go down in value,” Rubenstein admitted. But if you’ve got money to invest, in Carlyle’s case about $7 billion, “it’s a great time to buy.” They all agree: opportunities will be bountiful for those folks who refused to believe the hype about fracking over the past few years and who haven’t sunk their money into energy companies. Or those who got out in time.

Timing?

Not for a while, says Oaktree Capital, the world’s biggest distressed-debt investor. Co-chairman Howard Marks told clients in a December 18 letter, obtained by Bloomberg, that the plunge in oil and gas prices could trigger a new debt crisis.

“We knew great buying opportunities wouldn’t arrive until a negative ‘igniter’ caused the tide to go out, exposing the debt’s weaknesses,” he wrote. “The current oil crisis is an example of something with the potential to grow into that role.”

Last time that “negative igniter,” as Marks calls it, was housing. Once the effects began cascading to other sectors, it blew up the financial system. This time, the “negative igniter” could be the outgrowth of the shale revolution. And as was the case before the housing collapse, financial firms are already lining up to profit from it.

The Fed giveth, the Fed taketh away. What’s going to crash next? Read… Oil Price Crash Triggered by the Fed? Amazing Chart

Title: Re: NG on the Skids: Frackers can't catch a break here
Post by: MKing on December 23, 2014, 01:34:20 PM
Samson has used up almost all of its available credit. In order to stay afloat a while longer, it is selling off a good part of its oil-and-gas fields in Oklahoma, North Dakota, Wyoming, and Colorado.

Ah yes....and those of us who have been through this before are just waiting......

(http://2summers.files.wordpress.com/2011/05/lion-feeding.jpg)
Title: Bye, Bye, Miss Arctic Oil Pie
Post by: RE on December 23, 2014, 08:12:32 PM
There is some Good Newz here...

RE

If Shell Backs Out, Arctic Oil Off The Table For Years

Tyler Durden's picture





 

Submitted by Nick Cunningham via OilPrice.com,

The next several months may be pivotal for the future of oil development in the Arctic.

While Russia has proceeded with oil drilling in its Arctic territory, the U.S. has been much slower to do so. The push in the U.S. Arctic has been led by Royal Dutch Shell, a campaign that has been riddled with mistakes, mishaps, and wasted money.

Nearly $6 billion has been spent thus far on Shell’s Arctic program, with little success to date. Now, 2015 could prove to be a make or break year for the Arctic. Shell may make a decision on drilling in the Chukchi and Beaufort Seas by March 2015. If it declines to continue to pour money into the far north, it may indefinitely put Arctic oil development on ice (pun intended).

The crossroads comes at an awful time for Shell. Oil prices, hovering around $60 per barrel, are far too low to justify Arctic investments. To be sure, offshore drilling depends on long-term fundamentals – any oil from the Arctic wouldn’t begin flowing from wells until several years from now. That means that weak prices in the short-term shouldn’t affect major investment decisions.

Unfortunately, they often do. Just this week Chevron put its Arctic plans on hold “indefinitely,” citing “the level of economic uncertainty in the industry.” Chevron had spent $103 million on a tract in the Beaufort Sea in Canadian waters, but weak oil prices have Chevron narrowing its aspirations.

This development is illustrative of the predicament facing major oil companies. They need to spend billions of dollars now to realize oil output sometime next decade. However, they also must conserve cash in the interim. Oil companies across the world are slashing spending in order to shore up profitability.

And Arctic oil is expensive oil, some of the most expensive in the world. It is on the upper end of where prices need to be in order to be profitable. By some estimates, oil prices would need to be in the range of $80 to $90 per barrel for Arctic oil to breakeven; other estimates say as high as $110 per barrel.

That means that even before the oil price drop, Arctic oil development looked tenuous. Statoil and ConocoPhillips had already scrapped their plans to drill in the Arctic, even when oil prices were nearly double where they are now, because of high costs. And when oil prices drop, these marginal projects get the ax.

Shell is now the only one left standing, still mulling its next move. Shell’s CFO said during a conference call on October 30 that the company is “planning and hoping” to drill in the Arctic in 2015.

Despite Shell’s perseverance, it is facing some significant obstacles, several of which, are out of the company’s control.

Shell is awaiting a court decision on the 2012 approval by the federal government of Shell’s oil spill response plan, which environmental groups have sued to invalidate. There are other regulatory hurdles as well. The Bureau of Ocean Energy Management still has to approve Shell’s drilling plans. And BOEM also has to finalize the revised environmental assessment, one that revised upwards the chances of an oil spill, potentially complicating regulatory approvals. These events must be completed before Shell can begin drilling.

The bureaucratic mess threatens to push Shell’s development plans past the expiration date for many of its leases. Seeing the writing on the wall, Shell earlier this year asked for a five-year extension on its leases, many of which begin expiring in 2017.

“Despite Shell’s best efforts and demonstrated diligence, circumstances beyond Shell’s control have prevented, and are continuing to prevent, Shell from completing even the first exploration well in either area,” Shell’s Vice President in Alaska, Peter Slaiby, wrote in a letter to regulators on July 10, 2014.

The obstacles are piling up.

According to Platts, a decision on whether or not Shell plans to proceed with drilling in 2015 will be made by March. And if they turn their back on drilling, it could mean closing the doors on the Arctic for years to come.

Title: $33 Oil?
Post by: RE on December 23, 2014, 08:21:05 PM
EVERYBODY has a fucking opinion here!  $20? $40?  How about $33?  ::)

It will sell for $33 if the buyers have $33 for it.  Until TPTB figures out how to get $33 into the hands of the customers to buy said Oil at this price, it can't be supported.

RE

Natural Gas Suggests $33 Oil

Tyler Durden's picture



 

Submitted by Lance Roberts via STA Wealth Management,

Title: Re: $33 Oil?
Post by: MKing on December 23, 2014, 08:24:59 PM
EVERYBODY has a fucking opinion here!  $20? $40?  How about $33?  ::)

It will sell for $33 if the buyers have $33 for it.  Until TPTB figures out how to get $33 into the hands of the customers to buy said Oil at this price, it can't be supported.

RE

Buyers buyers everywhere.

http://www.star-telegram.com/news/local/article4879821.html (http://www.star-telegram.com/news/local/article4879821.html)

Only a fool would forget what happened in 1986. Those of us who participated in it never will.

Title: Re: Fracker Debt Bubble
Post by: agelbert on December 23, 2014, 10:33:02 PM
Tyler Durden still thinks fossil fuels are not poison for the planet. He still pictures them as "valuable", irreplaceable and "cheap" resources. Consequently, he labors under the belief that they are subject to the vagaries of supply and demand. That is SO yesterday!

As to oil going to $33 and natural gas tanking too, that's what happens when people figure out they are, not only being sold POISON, but the profits of those sales are used to buy the fucking government(s) too! :emthdown:

Although I admit that, because there are still a lot of morons out there that think fossil fuels are IT as far as cheap energy, it is not the total picture, there is a large amount of "Demand REJECTION" that bean counters see as "Demand Destruction" that is flying under the radar of the Tyler Durdens of this world.

I find it unusual that this, usually, fairly astute fellow doesn't believe big oil is deliberately dropping prices to regain energy market share. Has he said anything about that?

The "demand REJECTION" (many people aren't buying them because they don't LIKE them, not because of the cost) and the big oil price war is what this is all about.

We will see who is right.  ;D

 
Title: Re: Fracker Debt Bubble
Post by: agelbert on December 24, 2014, 04:02:39 PM
Right after MKing rants about "Buyers, Buyers EVERYWHERE!", this bit of REALITY CHECK news comes out:

Oil slides, Brent tests $60 as data shows glut building
http://finance.yahoo.com/news/brent-drops-towards-61-dollar-024615970.html (http://finance.yahoo.com/news/brent-drops-towards-61-dollar-024615970.html)  (http://www.pic4ever.com/images/ugly004.gif)

Hey MKing, Lions DON'T kill for profit over planet; they do it to EAT and then STOP. You and your kind are NOT ANYTHING like Lions!
Title: Re: Fracker Debt Bubble
Post by: RE on December 24, 2014, 04:30:24 PM
Right after MKing rants about "Buyers, Buyers EVERYWHERE!", this bit of REALITY CHECK news comes out:

Moriarty is a delusional, criminally insane sociopath and pathological liar.  Don't waste your time reading his nonsense.

RE
Title: Re: Fracker Debt Bubble
Post by: RE on December 24, 2014, 04:40:46 PM
"Buyers Everywhere".   ::)

yah, OK, I buy that.

RE

The Dangerous Economics of Shale Oil

Tyler Durden's picture



 

Submitted by Dave Fairtex via Peak Prosperity.com,

For years, we've been warning here at PeakProsperity.com that the economics of the US 'shale revolution' were suspect. Namely, that they've only been made possible by the new era of 'expensive' oil (an average oil price of between $80-$100 per barrel). We've argued that many players in the shale industry simply wouldn't be able to operate profitably at lower prices.

Well, with oil prices now suddenly sub-$60 per barrel, we're about to find out.

Using the traditional corporate income statement, it is difficult to determine if shale drilling companies make money. There are a lot of moving parts, some deliberate obfuscation at some companies, and the massive decline rates make analysis difficult – since so much of reported profitability depends on assumptions made regarding depreciation and depletion.

So, can shale oil be profitable? If so, at what price? And under what conditions?

I try to deconstruct all this here.

Technology

A shale well consists of a vertical shaft that drives down into the earth to get to the right geological layer where the oil is located. Then the shaft bends 90 degrees, and extends horizontally 5000-10000 feet. It is in the horizontal section where the magic takes place. At intervals along the horizontal section, the “frac stages” happen, each of which fracture the surrounding rock to release the oil locked inside the rock.

Constructing a shale well happens in two stages. First both the vertical and horizontal sections of the well are drilled, and that costs around $4 million taking perhaps 20 days. Then, the well is “completed” - this is where the frac stages are placed. Each frac stage costs around $70k, and there are often 20-30 frac stages per well. The entire completion process costs around $4M. Once completed, the well starts producing oil and gas.

The initial production (IP) of a new well is a critical number for estimating the total amount of oil likely to be produced over the lifetime of the well (“Estimated Ultimate Recovery” = EUR), along with the expected decline rate. While the EUR is a theoretical number and assumes a recovery time of 10-30 years, from a practical standpoint, companies need to recoup the costs of drilling the well within 3 years.

Shale drilling has dramatically improved over the past five years. Horizontal lengths have doubled, upgraded drill rigs result in fewer breakdowns and faster drilling speeds, pad drilling has eliminated the downtime required to move the drill.

Today's wells (vs wells drilled in 2008-2011) have horizontal sections twice as long, with three times more frac stages, with closer frac groupings, and the wells are drilled in about half the time. This results in wells that produce about twice as much, and take half the time to drill. However at the same time, many of the best spots have already been drilled, so the significant improvements in drilling efficiency have only been able to increase per-well production by a modest amount – perhaps 7%.

Regions, Geography, Decline Rates

There are three primary geographical regions where shale oil drilling takes place: Bakken, Eagle Ford, and the Permian Basin. Total production in these three areas: 4.6 mbpd, or 92% of shale-region oil production in the US. Shale regions provide all the growth in US domestic oil production.

Of these three areas, Bakken and Eagle Ford are the most productive oil shale areas, and of these two regions, I've selected the Bakken for a more detailed analysis.

Decline Rates

The decline rate of shale is the defining characteristic of a shale well, and a shale region. Decline rates vary by region. On average, the Eagle Ford region has a 62% decline rate, the Bakken region overall has a 54% rate, and the Permian region (many wells there are not horizontal wells) declines at a 33% rate.

Individual wells decline more rapidly, and most steeply in their first year of production: Bakken wells decline at a 72% rate for the first year, and then more slowly in the following years. Many Permian wells are vertical wells, and so their decline rates are much more gradual, accounting for the slower Permian region decline rate.

If a well's IP (initial production) is 1000 bbl/day, a 72% well decline rate means that one year later, that well will only be producing 280 bbl/day. With the IP=1000, the first year production is 205k bbls, and the EUR (lifetime theoretical) is 650k bbls. Here is a look at changes in the decline rates of the different regions over time. [source: http://www.eia.gov/petroleum/drilling/]

Drilling Rights

In order to acquire the right to drill on a particular patch of land, the drilling company must purchase these rights from the landowner, and/or another drilling company that has already bought the rights. In the most productive areas such as the Bakken shale, rights are expensive, with recent transactions priced around $10k per acre.

After a fair amount of experimentation, drillers have determined they can put from 1-3 wells on one square mile before the wells start interfering with each other. There are 640 acres per square mile, therefore drilling rights are about $6.4M/square mile. This makes land costs to be around $2M-$6M per well.

Before you can drill, you have to get the rights. Typically, you go into debt in order to buy the rights, then you start drilling to recoup your investment and pay the interest costs on all that debt. Maybe you can even sell those rights to someone else for a profit. That's the ponzi aspect of shale: buying land rights with junk bond financing for $2000/acre, and selling those right off to an unsuspecting oil major for $10,000/acre.

Rights only last from 5-10 years. Failure to drill = wasted money.

Shale Economics

To understand the economics of shale, we view company performance through the lens of accounting. A good accountant is a historian, honestly assessing the success or failure of a particular venture. (A bad accountant – at Enron, for example – is a fiction writer).

So first, some accounting terms:

All right, armed with your new degree in shale accounting, let's look at a simple fictional example. The hypothetical One-Well Shale Company obtains property for $10k/acre, then drills and completes a Bakken shale well costing $9M, with an IP of 500 bbl/day, 1st year production: 102k bbl, decline rate 72%. Further, we assume an eventual 3 wells per square mile, and an oil price of $99/bbl.

The income statement shows that with honest accounting, we are barely profitable just looking at the 3-year P&L statement. The price I selected wasn't an accident – I searched for the break-even price and found it at around $99/bbl. 

However, will this well at $99/bbl ever make back its drilling costs? It won't, since in the following years, the “fixed costs” for the company will be a heavier and heavier burden on the well whose production declines every year. Likely, $99/bbl is even too low. We can call it a “best case scenario” - only if we assume One Well Shale sells the well to someone else for $986k (the remaining depreciation) at the end of year 3.

What's more, companies have already spent huge sums accumulating land, on which they've drilled a relatively smaller number of wells, so this “One-Well” shale company is definitely fictional. Take OAS, which has 468 wells in production (45k bbl/day = 98 bbl/well) and 779 square miles of land they've bought for $1.8 billion. That's only 0.6 wells per square mile. However, they've already spent the money for the land, so from a “cash flow basis”, they don't really count the land cost when answering the question: “do I want to drill a well here or not.” At this point, money to buy the land is gone, so from a corporate survival standpoint, all they ask is, “if I drop a well, will it pay me back in 3 years?” And in the current environment, they probably only look at year 1 when making this analysis.

But from an overall economic analysis of shale profitability over the longer term, land cost really is an important factor, so we include it in our accounting. If we were to be hard-nosed, we would probably assume a “wells per sq mile” of 0.6, since that's the “actual debt burden” on the real drillers like OAS.

Now lets drop the oil price to $55/bbl and see what happens to One-Well Shale.

Its a sea of red ink. Clearly this well loses money. It cost $9M to drill, and we get back $2M in EBITDA at the end of year 1, the best year for the well. By the end of year 3, EBITDA is negative. It is definitely not worthwhile to drill this well, not even if we assume the land is free.

This represents the average well in the Bakken. At current prices, the average well loses money, no matter how you slice it. So how will this affect capex budgets in 2015? Here's one data point from OAS, a company for whom 100% of their production comes from the Bakken: they are cutting their capex budget in half, choosing only to drill in their better properties. [Source: an awesome, detailed, fact-filled investor document that Google located for me – one wonders if they meant to release it to the public: http://www.oasispetroleum.com/wp-content/uploads/2014/12/2014-12-OAS-IR-PresentationvFINAL.pdf]

Hedging

Shale producers don't want to expose themselves to bouncing oil prices – they have fixed costs, and so they'd prefer to have fixed revenues too. So they typically engage in oil price hedging to eliminate one big variable from their business plan. One-Well Shale certainly had big problems when oil dropped to $55/bbl; if One-Well had engaged in hedging, it might have been able to ride out the low prices at least for a time.

There are many types of hedges available – our friendly banking establishment stands ready to provide all sorts of financial tools to shale companies to help them out. For a fee, of course. I'll start with the simple ones, and gradually get more complicated.

When you look at the company hedge book, which they report in their 10-Q, understanding just what sort of coverage they have is quite important. Swaps provide perfect coverage, while 3-way collars only protect against a fraction of the drop we've just experienced. And its important to match up the number of barrels of coverage to the oil production, to see the percentage of coverage the company has in place. A survey of shale companies shows a range of from 20-60% coverage, at an oil price of about 90.

Looking at our favorite Bakken company OAS, we see their hedge book below, helpfully provided in their investor document. It looks complicated. So we just look for key words: first, what type of hedges? Swaps, puts, & 2-way collars. Great, that's 100% coverage. Second, how much production do they represent? 1H 2015: 32k bbl day, and 2H 2015: 15k bbl/day. Let's assume OAS keeps production steady at 45k bbl/day. That's a 71% coverage for 1H 2015, and a 33% coverage for 2H 2015 at “around” $90/bbl. Looks like they'll be mostly ok for 1H 2015, but for 2H 2015 they will definitely be losing money if oil stays at $55/bbl.

Hedges can be cashed in at any time. A company with a trader as a CEO, or one that needs to raise cash to stay in business today might well decide to “go naked” and take their chances with market oil prices and close out their positions. One company did this just recently. CLR sold their entire hedge book in Q3 2014, raking in a cool $420 million. They did this (from what I can tell) when oil was trading at about $77 – about $20/bbl too early. They left $500 million on the table. Maybe more. And now they're fully exposed to $55 oil. Factoid: $420 million will fund one month of 3Q capex at CLR.

Shale History & Accumulated Debt

One-Well Shale's “honest income statement” shows that 2014 shale technology is economical at $100 oil, assuming “average well production” - an IP of 500 is average in the Bakken.

Of course, shale companies must survive today, with oil at $55/bbl. Let's assume OAS gets serious, and drills only in their really hot areas. Viewed through the One Well Shale P&L statement, if I set the IP=750, and I set the oil price to $87/bbl, cash flow is $9M in the first year and a 3-year ROI of 67%. Through 1H 2015, OAS will be all right if they can just drill their best opportunities, and rely on their hedge book to keep them afloat.

That's not the the same thing as asking if the wells they drill will be “profitable long term” since that $87/bbl price obtained via hedges will only last through 1H 2015. Once the hedges run out, those IP=750 wells will be just barely above break-even (after 3 years!) at $55/bbl. But for the moment, OAS can stay above water.

I'm deliberately avoiding the question of how long-lived the shale resource is. I am just answering the question: what is the break-even oil price for drilling a Bakken shale well. The answer is, with an average well (IP=500) at a company with an average cost structure is long-term break-even at about $99/bbl, best case, assuming 3 wells per square mile and a property cost of $10k/acre.

Bottom line: the average US shale oil well is uneconomical even with hedging in place, since most hedging is around $90/bbl and the break-even is $99/bbl.

The Risk We Now Face

In Part 2: The Destruction That Awaits, we delve into the important question of the longevity of shale oil supply. The projections we can make from the latest data are quite frightening.

As is the massive impact today's oil prices will have on the shale industry should they persist. Simply put, if oil prices stay at $55/bbl, we will eventually lose the vast bulk of US shale oil production, simply because perhaps 3/4 of even Bakken shale is just not economical at that price.

And this prediction assumes the economy continues along as it has for the past several years. Should there be a serious economic contraction and/or a tightening of the credit markets, and the declines hit harder, many fewer shale drillers will be able to find any sort of funding, property sales will be fewer and for lower prices, and a lot more shale drillers will go bankrupt – and recoveries on those bankruptcies will be lower. Knock-on effects will hose the banks providing credit lines, vendors that provided services to companies and were not paid, and pension (and bond) funds that bought the junk bonds that are now worth pennies on the dollar. All of this will simply worsen the carnage to the shale sector.

Click here to access Part 2 of this report (free executive summary; enrollment required for full access)

Title: Re: Fracker Debt Bubble
Post by: MKing on December 24, 2014, 05:17:11 PM
Right after MKing rants about "Buyers, Buyers EVERYWHERE!", this bit of REALITY CHECK news comes out:

Oil slides, Brent tests $60 as data shows glut building
http://finance.yahoo.com/news/brent-drops-towards-61-dollar-024615970.html (http://finance.yahoo.com/news/brent-drops-towards-61-dollar-024615970.html)  (http://www.pic4ever.com/images/ugly004.gif)

Hey MKing, Lions DON'T kill for profit over planet; they do it to EAT and then STOP. You and your kind are NOT ANYTHING like Lions!

Oh Anthony come on. There is a business model that I have participated in, and watched it function well enough that I had made it a personal investing model. You wait for bust of the boom/bust cycle, and buy your production and infrastructure, and wait for the prices to come back. This works because those who drive cars that require liquid fuels can be counted on to keep doing what they do, polluting the atmosphere, driving hither and thither, without a care in the world.

And when the price does recover, the value of what you have the ground increases substantially, and you work over those properties, always watching the commodities markets, stockpiling reserves for the day when you can do it again.

So you keep polluting the planet because you refuse to change behavior, and people I know will continue to not fear the downturn but salivate in anticipation of it, and those of us who CAN change our behavior will do so to participate in the transition, while profiting from smart stewardship of a resource that consumers DEMAND...and industry has the experience to provide. To you. Your friends and neighbors. All those other people you know who talk about saving the world but can be counted on, nay, not just counted on, but can be BANKED on to continue their evil crude consuming ways. Keep up the good work Anthony!! There are many of us counting on you!
Title: Re: Fracker Debt Bubble
Post by: MKing on December 24, 2014, 05:26:09 PM
Did you do yet more voluminous posting on this topic because you haven't a damn clue on your own how to do this kind of project economics, or are you looking for someone who does this for a living to comment on the pieces that make sense and are reasonable, and those that aren't?

So you can erase it?
Title: Re: Fracker Debt Bubble
Post by: agelbert on December 24, 2014, 07:51:27 PM
(http://www.createaforum.com/gallery/renewablerevolution/3-241214222735.gif)
I wonder. Does MKing look at charts like the above and read them upside down?  :icon_mrgreen:
DEMAND REJECTION is in FULL SWING!  :emthup:  :icon_sunny:



Tyler Durden DOES NOT UNDERSTAND NEGAWATTS as a MAJOR source of DEMAND REJECTION because the "energy experts" (outside of RMI) do not "see" them in the GDP numbers. It's part of the STUPID GDP "math" that doesn't show what the REAL economy is doing and what the REAL demand, or lack of it, for energy IS!


Quote
Micropower now produces about one-fourth of the world’s total electricity:  Low- and no-carbon micropower, which includes renewables minus big hydro, plus cogeneration, now produces one-fourth of the world’s electricity. When you add big hydro and nuclear to the mix, micropower produced half the world’s electricity in 2013.

Photovoltaic power worldwide is scaling even faster than cellphones:
For the last 14 years, global solar PV production has grown faster than 41 percent per year. The amount of solar power installed worldwide is now over 140 GW.

Renewable energy is cheaper than fossil fuels:
The cost of solar and wind power has plummeted so much in the past five years that utility-scale renewable generation is now cost competitive with, and in some markets cheaper than, coal and natural gas, even without subsidies.

Efficient transportation beats out the fracking revolution: Between 2004 and 2013 the decrease in driving in the U.S. along with more-efficient vehicles displaced twice as many oil imports than the U.S. fracking revolution and the consequent rise in domestic oil output.

Efficiency beats out natural gas: In 2012, energy efficiency displaced nearly twice as much domestically burned coal as expanded natural gas use did. In fact, lower consumption due to 1974–2010 increases in energy efficiency was the largest single energy resource across the 11 IEA member countries’ aggregate total final consumption—bigger than oil, or than all other sources combined.

Universities are striving for carbon neutrality: Since 2007, the American Colleges and Universities Presidents’ Climate Commitment has encouraged almost 700 colleges and universities to commit to achieving carbon neutrality. A few small colleges have already achieved carbon neutrality, most recently Colby College in Maine.

There are more U.S. jobs in the solar industry than in coal mining:
In 2013 the U.S. Bureau of Labor Statistics estimated 80,030 jobs for all occupations within the coal-mining industry. Meanwhile, the Solar Foundation’s National Solar Jobs Census 2013, stated that the solar industry employed 142,698 Americans.

Renewable Energy PROVEN to be CHEAPER than Fossil Fuels and other facts on Greenhouse Gas Emissions and Energy (http://renewablerevolution.createaforum.com/renewables/the-big-picture-of-renewable-energy-growth/msg2440/#msg2440)
Title: Fracker Debt Bubble:WTI down to $52
Post by: RE on December 29, 2014, 04:45:10 PM
Baker Hughes-Halliburton has acquired Balance Sheet Ebola.  The accountants are pissing red ink at this point.

RE

WTI Hits $52 Handle As US Rig Count Tumbles To 8-Month Lows

Tyler Durden's picture



 

Just as T. Boone Pickens warned "watch the rig counts" last week, so the Baker Hughes rig countjust collapsed for the 3rd week in a row to 8-month lows. This is the fastest 3-week drop since mid-2009. Crude prices were already weak but the news has flushed WTI to a $52 handle (not seen in the front-month contract since May 2009)

 

Rig count is tumbling...

 

Some context for the surge in US rig count...

 

And while the drop in Canadian rig count sounds impressive - it's the worst since 2009 - it's much more seasonal

 

WTI Hits A $52 handle!!

 

And then there's this...

 

Title: Fracker Debt Bubble:Oil-Bust Contagion Hits Hedge Funds, Supplier Layoffs Begin
Post by: RE on December 31, 2014, 02:32:57 AM
Yup, those Low, Low Prices Every Day for Gas are just GREAT!  ::)

RE

Oil-Bust Contagion Hits Hedge Funds, Supplier Layoffs Begin (http://wolfstreet.com/2014/12/30/oil-bust-contagion-hits-hedge-funds-supplier-layoffs-begin/)
by Wolf Richter • December 30, 2014   

Toxic mix of financial engineering and oil-price collapse.

It started a few weeks ago. I’d hear from guys here or there in the oil patch who’d just been laid off. That contrasts with the prior anecdotes of hiring binges. A trickle of anecdotal evidence that something has changed, but not enough to pin down credible trends. Then suddenly, something happens – and it turns out that the trends might be worse and might be developing faster than imagined.

Afterhours Monday, between the holidays during a shortened workweek when everyone was supposed be on vacation and when no one was supposed to pay attention, Civeo, which provides workforce accommodations for oil fields and mines in Canada, Australia, and the US announced its Initial 2015 Operating Guidance. And what it said about the oil industry was a doozie.

Civeo is one of the many peculiar creations of Wall Street’s financial engineering shops. When it was still a unit of Oil States International, David Einhorn’s hedge fund Greenlight Capital and Barry Rosenstein’s Jana Partners clamored vociferously for a spinoff, because spinoffs were the new hot thing to make a quick buck. So by early June, Civeo was spun off. It had over 4,000 employees and housed over 20,000 “guests,” as it said on its website. The price of oil was above $100 a barrel. It was the absolute peak of the junk-bond bubble, particularly the energy junk-bond and IPO bubble. Nothing could go wrong.

The shares surged from $22 to $28 by mid-June. Wall Street talked about a 50% upside. In August, when Einhorn let it be known that his hedge fund had acquired a stake, the stock jumped 11% afterhours. Now he was clamoring for the conversion of Civeo into a REIT. But the price of oil was already declining, and shares had backed off to the $25 range, when Civeo announced on September 29 that it would not convert to a REIT but instead move its headquarters to Canada. Over the next two days, its shares crashed 54% to $11.61.

But Greenlight didn’t get caught with its pants down, Forbes reported:

    An Oct. 9 filing with the Securities and Exchange Commission shows that Greenlight Capital was a large seller of Civeo stock heading into the company’s announcement that a REIT conversion would be unworkable. Between Aug. 13 and Friday, Sept. 26, Greenlight Capital sold 1.65 million Civeo shares at an average price of $25.25, trimming its stake by 25%.

After the crash, Einhorn “made some smartly-timed trades to increase his clout,” as Forbes described it, paying an average price of $12.55 a share and raising its stake to 9.9%, which made his hedge fund the third-largest shareholder, behind Jana Partners and Fidelity. And now he wanted to oust the CEO, push the company to take on yet more debt, and embark on an “aggressive program” to send this money to shareholders via dividends.

The excitement lasted only briefly before shares got caught in the maelstrom of the plunging price of oil.

And yesterday afterhours when Civeo announced a dose of reality about the oil patch, the stock plunged. During regular trading today, it plunged further, closing at $3.93, down 52.5% for the day, and down 82% since it was spun off six months ago.

Civeo was one among a number of impeccably-timed energy spinoffs that cost gullible buyers of the new shares a large part of their investment in just a few months. Other success stories in 2014 include North Atlantic Drilling, spun off from deepwater drilling company Seadrill in January; its shares are down 80%. Or Paragon Offshore, an offshore driller spun off from Noble in early August; its shares are down 84%. Wall Street engineering at its finest.

So in its Initial 2015 Operating Guidance, Civeo said that the plunge in the price of oil and its projected persistence caused “major oil companies” to slash their 2015 capital budgets. Particularly hard hit were the development and expansion plans of oil-sands operators, a “major driver” of Civeo’s business in Canada.

Just how bad is it in Canada? Baker Hughes’ latest rig count, released on Monday, shows that US drillers reduced their rigs that are drilling for oil by 37, to 1,499, while increasing gas rigs by 2 to 340. But in Canada, oil rigs plunged by half from 190 to 94; and gas rigs dropped by 19% from 201 to 162. The Canadians aren’t dilly-dallying around. According to Civeo, tar-sands operators have been just as aggressive as drillers in cutting operating costs and capital expenditures.

Going into 2015, Civeo has about 35% to 40% of its lodge rooms contracted in Canada, “down from over 75%” a year ago. That’s down by about half!

In an all-out effort to cut its operating costs, it has been slashing headcount, in its Canadian operations by 30% and in its US operations by 45%. It’s closing facilities and is going after capital expenditures with a big axe, chopping them from $260-$280 million in 2014 to $75-$80 million for 2015. That would amount to a cut of about 70%!

And it said that it would likely muck up its income statement and balance sheet with write-offs of various assets, including goodwill, that it is carrying at inflated values.

So, given these consequences of the plunging price of oil that coincided with the consequences of Wall Street engineering, it would suspend its dividend and other forms of “returning capital to shareholders” and would instead try to deal with its debt. In other words, it’s trying to hang on.

Civeo is a thermometer into jobs in the oil and gas industry whose erstwhile boundless boom was funded to a large part by debt. It pushed the economy forward through big capital expenditures and massive job creation. Now capital expenditures are being cut with mindboggling speeds, and the job-creation machine has shifted into reverse. The effects will ripple through other industries.

We already heard from Texas on Monday, where the oil price plunge is starting to permeate the suppliers to the oil and gas industry. The Dallas Fed’s Texas Manufacturing Outlook Survey mentioned some of the anxieties in its Comments. An executive in Fabricated Metal Manufacturing lamented, “The drop in crude oil prices is going to make things ugly … quickly.”

An executive in Machinery Manufacturing complained that a lower rig count would “reduce the market for our products.” An executive in Chemical Manufacturing worried about the adverse impact on margins. An executive in Electrical Equipment, Appliance, and Component Manufacturing saw that low oil prices would “negatively affect our business.” Even an executive in Wood Product Manufacturing worried “about the service sector.”

What Civeo is doing, other companies in the oil patch have already started to do, or will do soon: cutting capital expenditures not with a scalpel but with an axe while slashing headcount and other operating expenses. These companies gorged on debt during the greatest credit bubble in US history. The Fed encouraged them to. Investors closed their eyes and held their noses and handed them the money. Wall Street made sure they did. And now that debt sits on their shoulders and will have to be dealt with, even as the price of oil has plunged by half. It’s going to be very, very tough.

And there’s no respite for the American oil patch and its investors. Read…  First Oil, now US Natural Gas Plunges off the Chart, “Negative Igniter” for New Debt Crisis
Title: Re: Fracker Debt Bubble:Oil-Bust Contagion Hits Hedge Funds, Supplier Layoffs Begin
Post by: MKing on December 31, 2014, 06:47:08 AM
Yup, those Low, Low Prices Every Day for Gas are just GREAT!  ::)

RE


What Civeo is doing, other companies in the oil patch have already started to do, or will do soon: cutting capital expenditures not with a scalpel but with an axe while slashing headcount and other operating expenses. These companies gorged on debt during the greatest credit bubble in US history. The Fed encouraged them to. Investors closed their eyes and held their noses and handed them the money. Wall Street made sure they did. And now that debt sits on their shoulders and will have to be dealt with, even as the price of oil has plunged by half. It’s going to be very, very tough.

And there’s no respite for the American oil patch and its investors. Read…  First Oil, now US Natural Gas Plunges off the Chart, “Negative Igniter” for New Debt Crisis

Ah yes..I do love the smell of napalm and fear in the morning. As the sheep flee, you first determine direction. As the speed of the sheep fleeing increases you force yourself slowly upcurrent, keeping an eye out. As the bulk of the sheep have passed, you pick up your pace slightly, knowing that there are others about doing the same, looking for whatever the sheep have behind, that one thing that they couldn't take with them, that asset that has been stored underground for millions of years, and will go nowhere if there aren't any sheep around to dig it up.

And when you finally find it, it will cost you pennies on the dollar, as the single sheep left behind to guard it would rather have a ham sandwich and a pat on the back and some encouragement to run off and join his friends. After all, while he might be braver than the other sheep...he is still a sheep.

So you provide the ham sandwich and the pat on the back, perhaps a few words of encouragement on his non-sheep like courage, allowing him to run off and do what he really wants to go, what his nature understands, what the core of his being had been screaming at him since his friends first ran.

But at the end of the day fundamentals matter and he, after all, was still a sheep. And the success of long term oil producers is based on the fact that they, are not.






Title: Fracker Debt Bubble: Low Prices Lead to Layoffs
Post by: RE on January 03, 2015, 12:16:56 AM
Who Cooda Node?  ::)

RE

Low Prices Lead To Layoffs In The Oil Patch (http://www.zerohedge.com/news/2015-01-02/low-prices-lead-layoffs-oil-patch)

Submitted by Tyler Durden on 01/02/2015 12:26 -0500
 

Submitted by Nick Cunningham via OilPrice.com,

Crude oil is set to close out a shocking year with a fresh five-year price low in the final days of 2014, falling more than 50 percent from their June highs.

The decline continues to bedevil the markets. Sensing a rally was in order, speculators had dumped money into energy stocks throughout the month of December, hoping to buy up positions at basement prices. But Bloomberg reports that long positions in West Texas Intermediate declined by the most since August for the week ending on December 23, an indication that the markets have lost confidence in a swift rebound for oil prices.

This portends a longer period of low oil prices, and with that, a cutback in drilling and job losses in the U.S. oil patch. Baker Hughes reported that the rig count took another significant hit in the week ending on December 29, falling by 35 to a total of 1,840 oil and gas rigs in operation. Across the country, exploration companies are slashing their capital expenditures for the coming year to reflect the poor price environment.

That is going to have an impact on employment. In a recent example, American Eagle Energy, a small oil producer in North Dakota, decided to call off drilling entirely until oil prices rebound.

Less drilling will not only lead to a loss of jobs for oil workers, but the services that pop up around drilling sites – restaurants, bars, construction, and more – are feeling the slowdown as well.

In one example recently reported by Bloomberg, a private club in Williston, North Dakota has been shuttered because it failed to pay rent. “The Bakken Club,” which offered exclusive services including fine dining, airport shuttling, and corporate events, was a place where “like-minded individuals can further their business relationships.” Memberships ranged from $5000 to $25,000. Unfortunately for The Bakken Club, such lavish living becomes harder to maintain when oil prices crash.

But it won’t just be the profligate that feel the brunt of a depressed oil market. Civeo, a Houston-based company that builds lodging for oil workers, announced on December 29 that it would cut its workforce by 45 percent because of lower demand for “man camp” trailers.

According to an assessment from the Federal Reserve Bank of Dallas, an estimated 250,000 jobs across eight U.S. states could be lost in 2015 if oil prices don’t rise. More than 50 percent of those job losses would occur in Texas, which leads the nation in oil production.

There are some early signs that a slowdown in drilling could spread to the manufacturing sector in Texas. Companies have sprung up during the shale boom to build metal, machinery, pipes, electrical equipment, chemicals, and other support services. But with the drilling climate taking a turn for the worse, manufactures are starting to feel the chill as well.

The Dallas Fed reported a decline in new orders in a key manufacturing survey. One executive at a metal manufacturing company said in the survey, “the drop in crude oil prices is going to make things ugly… quickly.” Another company that manufactures machinery told the Dallas Fed, “Low oil prices will drive reductions in U.S. drilling rigs, which will in turn reduce the market for our products.”

The sentiment was similar for a chemical manufacturer, who said “lower oil prices will adversely impact margins. Energy volatility will cause our customers to keep inventories tight.”

States like Texas, North Dakota, Oklahoma, and Louisiana have seen their economies boom over the last few years as oil production surged. But the sector is now deflating, leaving gashes in employment rolls and state budgets.

With such extensive dependence on oil for prosperity in these states, the pain will mount if oil prices stay low.
Title: Re: Fracker Debt Bubble: Low Prices Lead to Layoffs
Post by: MKing on January 03, 2015, 07:34:16 AM
Crude oil is set to close out a shocking year with a fresh five-year price low in the final days of 2014, falling more than 50 percent from their June highs.

This portends a longer period of low oil prices, and with that, a cutback in drilling and job losses in the U.S. oil patch. Baker

Less drilling will not only lead to a loss of jobs for oil workers, but the services that pop up around drilling sites – restaurants, bars, construction, and more – are feeling the slowdown as well.

Unfortunately for The Bakken Club, such lavish living becomes harder to maintain when oil prices crash.

But it won’t just be the profligate that feel the brunt of a depressed oil market. Civeo, a Houston-based company that builds lodging for oil workers, announced on December 29 that it would cut its workforce by 45 percent because of lower demand for “man camp” trailers.

More than 50 percent of those job losses would occur in Texas, which leads the nation in oil production.

But with the drilling climate taking a turn for the worse, manufactures are starting to feel the chill as well.

States like Texas, North Dakota, Oklahoma, and Louisiana have seen their economies boom over the last few years as oil production surged. But the sector is now deflating, leaving gashes in employment rolls and state budgets.

With such extensive dependence on oil for prosperity in these states, the pain will mount if oil prices stay low.

I can't quite....smell...the napalm...yet. This is still too much in the speculative realm, the dead and dying don't litter the streets, bleeding out into the sewers. We haven't even gotten to the cuts in wages to the survivors, the youth who rushed into the gap, not knowing their future as the canyon fodder in this industry, so rich in tradition at seperating the wheat from the chaff in such moments as this. The wholesale abandonment of that elixir stored underground, the crushing of hopes and dreams as those who choose the way of the fast buck and easy money realize that the tale of the grasshopper and squirrel applies in the oil field as well.

Those of us with grey hair, who have been here many times before, understand that to truly understand this business, you must see, and survive, this lesson, to ever be useful to the industry, and thereby remain capable of delivering to the consumers the products they covet to the exclusion of nearly everything else.

http://www.freerepublic.com/focus/f-chat/2176589/posts (http://www.freerepublic.com/focus/f-chat/2176589/posts)
Title: Re: Fracker Debt Bubble
Post by: g on January 05, 2015, 01:07:16 AM
Logging on this evening to check prices and to my utter amazement oil continues to crash with forecasts of sub zero weather for much of the US this week.

Oil currently is 51.78 minus almost another buck. The relentlessness of this decline and lack of a relief rally thus far is truly amazing.

If we fail to get a relief rally this week we could well enter panic mode and it most likely will affect all markets. the system, in my view, cannot handle a drop in this particular major commodity, in such a compressed period of time, without major financial repercussions. 

This no longer has the look of Saudi's to me, but perhaps severe economic distress or perhaps the dreaded derivatives time bomb has gone off. I certainly don't know, but feel quite certain if it doesn't stop crashing this week enormous financial problems will appear and spread rapidly. I am talking problems far from the fracking bubble, which is no doubt a folly that has past.

 When looking at he chart below, it is well to ponder that we are looking at a chart of OIL, not soybeans or cotton.


                                                 (http://stockcharts.com/def/servlet/SharpChartv05.ServletDriver?chart=$wtic,pltcdanrbo[pa][d][f1!3!!!4!20]&pnf=y)
Title: Re: Fracker Debt Bubble
Post by: RE on January 05, 2015, 02:22:02 AM
Logging on this evening to check prices and to my utter amazement oil continues to crash with forecasts of sub zero weather for much of the US this week.

Oil Futures?  HERE THEY COME TO SELL 'EM AGAIN!  :icon_mrgreen:

http://www.youtube.com/v/1mC4tu1NhUA?feature=player_detailpage

Never can pass up an opportunity to drop on Ben Lichtenstein! lol.

CALL ALAN!



"this will blow people out in a big way like you won't believe"

roflmaopimp


RE
Title: Re: Fracker Debt Bubble
Post by: g on January 05, 2015, 05:40:46 AM
Oil now down 1.83 to 50.87  :o :o
Title: Re: Fracker Debt Bubble
Post by: MKing on January 05, 2015, 05:50:24 AM
Logging on this evening to check prices and to my utter amazement oil continues to crash with forecasts of sub zero weather for much of the US this week.

Oil currently is 51.78 minus almost another buck. The relentlessness of this decline and lack of a relief rally thus far is truly amazing.

Not so sure about that. I recall the spring of 1986 being an elevator straight DOWN..but that could be partially perspective...after all it was an early education in the industry.

And price isn't what I am watching right now.

For those who aren't familiar with the basic game of oil field economics, it is quite easy. All these inflation/deflation arguments are just ridiculous, amateurs reacting the way they THINK industry professionals would. Please.

Here is the key that everyone needs to know, to the ENTIRE industry. There are only 3 things that matter, and a single equation.

( PRICE  X  QUANTITY) / COST

Memorize this....for it is the unified field theory of oil or natural gas production.

Now...price I can do nothing about in a global market, the industry sells a commodity and the price is the price. So we don't sweat that one. The other is quantity. Folks, once you've sunk the money to drill a well I have news...you get what you get. We might hope for a PUD coming in at 500,000 barrels...but we also plan for getting 50,000, or 800,000. We might try and fiddle with that answer, do a recompletion perhaps, but ultimately in the oil field, Mother Nature gives you what she gives you.

Which leaves the single metric that we CAN do something about. We are RUTHLESS when it comes to cost...those overpriced service providers...we HAMMER them into the ground during times like this. We cut to the bone, we slash and burn, we Ghengis Khan on everything we can find that costs us a nickel.

Some time ago I mentioned that the price drop wasn't what some of us were looking at...but the merger on the service side. Because any hint of monopoly there can cause us to lose control over the one metric we DO have control over, and that can make industry jumpy, not those other two, only one of which appears to have the fascination of market watchers...as opposed to oil folks.

Just a tip.

Quote from: Golden Oxen
If we fail to get a relief rally this week we could well enter panic mode and it most likely will affect all markets. the system, in my view, cannot handle a drop in this particular major commodity, in such a compressed period of time, without major financial repercussions. 

While the sheep are moving, they haven't moved enough yet for me GO. But I'm getting my boots on, preparing to go on walkabout to see what I can see.

Quote from: Golden Oxen
This no longer has the look of Saudi's to me, but perhaps severe economic distress or perhaps the dreaded derivatives time bomb has gone off. I certainly don't know, but feel quite certain if it doesn't stop crashing this week enormous financial problems will appear and spread rapidly. I am talking problems far from the fracking bubble, which is no doubt a folly that has past.

Not a chance. Upon recovery of price, for whatever reasons, the service companies will be right back at pumping water and sand. And the cool thing is...it probably won't cost as much has it did earlier this year.  :emthup:

Now, the company name signing the ticket might be different for a given well or acre...but that is because the sheep are sheep.

Title: Re: Fracker Debt Bubble
Post by: Eddie on January 05, 2015, 06:55:44 AM
Martin Armstrong is predicting 32 bucks before it's over. Yes, the margin calls will start to affect the broader markets before long.

Not exactly like 2008, so far, but then we didn't have QE to prop up equities.
Title: Re: Fracker Debt Bubble
Post by: g on January 05, 2015, 07:42:15 AM
Markets crashing Dow own over 200 in first hour. Was afraid of this when I saw the oil price this morning.

Not a good start to what could be quite a year.   :-\
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 05, 2015, 07:46:26 AM
Lest we forget:

http://www.macrotrends.net/1453/crude-oil-vs-the-s-p-500 (http://www.macrotrends.net/1453/crude-oil-vs-the-s-p-500)
Title: Re: Fracker Debt Bubble
Post by: MKing on January 05, 2015, 07:53:18 AM
Martin Armstrong is predicting 32 bucks before it's over. Yes, the margin calls will start to affect the broader markets before long.

Not exactly like 2008, so far, but then we didn't have QE to prop up equities.

And another comment of note....recently while speaking to a Saudi economist on his take from inside the country, one thing he mentioned in terms of certain OPEC countries have an advantage over others is this...their holdings are more diversified now. So let us say you have a diversified economy like the US, versus a one trick pony like Russia. Oil cost go either way...lets say high...and Russia is flying high!! Whereas in America, higher oil costs help operators, sure, they are like pigs with wings, but the consumer, they are retrenching, buying Volts like you and I Eddie, watching dollars. So we have one part of the economy strong, another not as strong. Reverse the price, drop it, and suddenly Russia, being a one trick pony, is in immediate trouble, talking about multiple years of recession, their currency tanking, it is just bad news everywhere. But in the US? Those who invested in operators taking a hit will themselves take a hit...but at the SAME time...those who use the commodity are now lifted, things are cheaper to build, transport is cheaper, people loosen up the travel pursestrings and suddenly hotels and tourist locations are doing better, bigger, more profitable cars are sold:

http://www.usatoday.com/story/money/cars/2015/01/05/auto-sales-2014/21154809/ (http://www.usatoday.com/story/money/cars/2015/01/05/auto-sales-2014/21154809/)

and one side of the economy is lifted while the other hurts. But the diversified nature of our economy, versus Russia's, is what matters, and why those wanting to pretend we are hurt like Russia is hurting because of lower prices are wrong. A portion of the economy is hurting...not...like Russia..the ENTIRE economy. So the stock market is weighted towards energy? GOOD. It SHOULD BE. It means the market understands the value of paying attention to what consumers DEMAND...which is the ability to flick a switch and have lights come on. Energy is certainly important, and anyone who knows anything about it also understands it is cyclical. Peak oilers don't know this obviously, but they have already been discredited and no one is really talking about them anymore anyway, now that ma and pa are out buying pickup trucks and paying less for gasoline than I did in 1986 (on a real basis). Can't beat that, and might I recommend that this upcoming summer might be a FINE time for a roadtrip of epic proportions?

Who here is with me!! We're all gonna die, sitting around moping about how terrible things are is no way to use the time we have left on this wonderful planet, let us all commit to a summer of road tripping to those places we have never seen before! Most of us are OLD, we're all going to DIE, but we don't have to suck up to the teat of Doom as though it is our only option, ...nay! I say we venture forth!! Who here is for Inuvik!! Goose Bay! Deadhorse! Great Bear Lake? Great Slave Lake? That crater in Canada, in Quebec on the way to Cartwright!! Key West! The bottom of the Grand Canyon! Come on!!

Once upon a time the Vikings set forth in little open boats across great seas, knowing as we do that one day we shall die, but what defines us and makes us what we are is how we live!! Cowering in some hovel or sitting in comfort on our couch as our remaining days flow past like water past a river bank is not what humans of character and substance were meant to do...we were meant to LIVE!! LOVE!! Venture forth and SEE!

<sigh>

Well....whaddaya say Eddie, where you headed this summer? Most of the fuddy duddy's here are just plan stuck in their pessimism, me, I'm a fan of North America, every little corner, I know you like the Caribbean. You've got a business to run, but obviously get to escape and live on occasion, and I've got some saved up leave, enough to take the summer off and do something epic. Gas prices this low are like a bolt of lightening from Thor to my Viking side telling me it might be time to use it in a way that my son will remember for the rest of his life. How man times do we get advance notice that we can do that for our children?
Title: Re: Fracker Debt Bubble
Post by: g on January 05, 2015, 08:42:37 AM
Oil breaks under 50 moments ago.    ::) ::) :-\
Title: Re: Fracker Debt Bubble
Post by: MKing on January 05, 2015, 09:01:14 AM
Oil breaks under 50 moments ago.    ::) ::) :-\

My favorite graphic that captures the American sentiment on the issue!!

(http://my2bucks.files.wordpress.com/2008/08/pricefalling.jpg)
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 05, 2015, 09:22:52 AM
Those who invested in operators taking a hit will themselves take a hit...but at the SAME time...those who use the commodity are now lifted, things are cheaper to build, transport is cheaper, people loosen up the travel pursestrings and suddenly hotels and tourist locations are doing better, bigger, more profitable cars are sold:

I don't buy this logic. The lost jobs in oil and gas (and the drag on the equity markets) will more than offset any consumer dividend. jmho. And also the tax losses for states like Texas.

The new (idiot) state comptroller was crowing this shit on page one of the paper on Sunday. I call bullshit. We'll see.

Well....whaddaya say Eddie, where you headed this summer?

I want to go up to BC, but i haven't bought the tickets yet. I don't take driving trips. I can't afford the time off work. Much cheaper to fly, all things considered. I will go somewhere. No chance of completely erasing my ample carbon footprint.





Title: Re: Fracker Debt Bubble
Post by: Eddie on January 05, 2015, 10:00:35 AM
I'm also going up to Utah for training five times this year. For some reason I thought it'd be good to get 80 hours of CE this year. Not sure what i was thinking. Maybe i'll get to ski a couple of more days.
Title: Re: Fracker Debt Bubble
Post by: g on January 05, 2015, 10:34:00 AM
Oil breaks under 50 moments ago.    ::) ::) :-\

My favorite graphic that captures the American sentiment on the issue!!

(http://my2bucks.files.wordpress.com/2008/08/pricefalling.jpg)

Agreed MKing, if it were a slow gradual decline

The speed and severity of the decline in a commodity of such significance to the world economy and the interconnected financial system is what causes me to be alarmed.

I am not one of those who thinks high oil prices are bad for the US and low oil prices bad as well. It is the Violence of said moves that causes me great consternation.

If this had come about in  an orderly fashion over a 24 to 36 month frame I would be cheering as you are, but this sort of  collapse appears more a bad omen to me. Of course my fears and analysis of the situation could well be wrong.

As an expert in this field of petroleum doesn't this crash, seemingly out of nowhere, alarm or puzzle you somewhat, especially in the middle of winter?

Title: Re: Fracker Debt Bubble
Post by: MKing on January 05, 2015, 11:36:48 AM
Those who invested in operators taking a hit will themselves take a hit...but at the SAME time...those who use the commodity are now lifted, things are cheaper to build, transport is cheaper, people loosen up the travel pursestrings and suddenly hotels and tourist locations are doing better, bigger, more profitable cars are sold:

I don't buy this logic. The lost jobs in oil and gas (and the drag on the equity markets) will more than offset any consumer dividend. jmho. And also the tax losses for states like Texas.

It is called diversification, a common investment strategy to mitigate volatility. And it happens in the economics of these calculations as well. What happens to road trip tourism when gas prices drop? It increases. This can then lead to increases in tourist dollars spent near Yellowstone this coming summer. The Missouri Breaks. The Adirondacks. More taxes than last year will be collected in Montana, Wyoming, New York.

Correspondingly, a restaurant in west Texas will go bust as rigs are laid down, roustabouts stop eating there. Less taxes will be collected in Texas. Unemployment could spike. Fewer tax dollars from the sale of equipment and services will come in. Texas suffers stagnate economic growth perhaps.

A redistribution takes place. Some states are happy. Some are not. But the net effect on the country could be a wash. Depends on which sector of the economy is producing best, or most, and how that then flows out into the whole.

Quote from: Eddie
The new (idiot) state comptroller was crowing this shit on page one of the paper on Sunday. I call bullshit. We'll see.

Bullshit on what? When they lay down rigs in Texas, if they lay down enough, I can assure you..and him...that Texas will notice, somehow, someway. They did in the Haynesville when this happened, Louisiana is not unique in how these causal relationships work.

Quote from: Eddie
Well....whaddaya say Eddie, where you headed this summer?

I want to go up to BC, but i haven't bought the tickets yet. I don't take driving trips. I can't afford the time off work. Much cheaper to fly, all things considered. I will go somewhere. No chance of completely erasing my ample carbon footprint.

Hey, when the Sierra Club flies their lobbyists to Washington to tell everyone ELSE to stop creating a carbon footprint, do you think they worry about it in the least? Nope. Nor do the lawyers when they show up in those black SUVs, heaven forbid they bicycle around the Capital. Carbon footprint only matters when you are trying to use it as a hammer against other folks, not much more.

I might try BC again. Bay of Fundy is still the top possibility. With this amazing increase in American discretionary spending now possible because of what is really a HUGE tax cut to consumers, it might be worth it to put the time into exploring those corners of America.

And I don't fly much, the passage of time is to be appreciated in my quality of life metrics. If I had more time I would walk or bicycle instead of  motoring down a lonely country road surrounded by Kansas wheat or a twisty mountain road in eastern Kentucky.   
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 05, 2015, 11:52:43 AM
Bullshit on what?

Bullshit on the meme that a 50% drop in the price of oil is in any way positive for Texans, or the U.S. economy. Diversification? What a load of crap! Pure spin.

Hey, when the Sierra Club flies their lobbyists to Washington to tell everyone ELSE to stop creating a carbon footprint, do you think they worry about it in the least? Nope. Nor do the lawyers when they show up in those black SUVs, heaven forbid they bicycle around the Capital. Carbon footprint only matters when you are trying to use it as a hammer against other folks, not much more.

Get thee behind me Satan.

And I don't fly much, the passage of time is to be appreciated in my quality of life metrics.

Try self employment, and losing 5-10K in gross for every vacation day that doesn't fall on a weekend or a holiday. I enjoy the passage of time too, but it's an expensive pursuit.



Title: Re: Fracker Debt Bubble
Post by: MKing on January 05, 2015, 02:41:13 PM
(http://my2bucks.files.wordpress.com/2008/08/pricefalling.jpg)

Agreed MKing, if it were a slow gradual decline
[/quote]

The market in its wonders is sometimes slow, and sometimes fast, but at least it produces wonders!

Quote from: Golden Oxen
The speed and severity of the decline in a commodity of such significance to the world economy and the interconnected financial system is what causes me to be alarmed.

GO!!! Alarmed! Who? You!

Look at it this way...you can today buy FAR more oil with your gold then before...that should make you happy...the value of gold has won through in the end!

Quote from: Golden Oxen
I am not one of those who thinks high oil prices are bad for the US and low oil prices bad as well. It is the Violence of said moves that causes me great consternation.

In volatility there is opportunity. As it is today, and was yesterday.

Quote from: Golden Oxen
If this had come about in  an orderly fashion over a 24 to 36 month frame I would be cheering as you are, but this sort of  collapse appears more a bad omen to me. Of course my fears and analysis of the situation could well be wrong.

I'm not much of an omen guy, being more fundamental and structurally based.  Dropping oil prices or rolling dem bones, what really matters GO is your health, and the amount of amazement you can conjure up each morning, looking forward to the wonders of the new day. Until such time as....you don't.

Quote from: Golden Oxen
As an expert in this field of petroleum doesn't this crash, seemingly out of nowhere, alarm or puzzle you somewhat, especially in the middle of winter?

No. It irritates me, yes. Because right  now everyone is running around, rerunning their reserve numbers, trying to figure out how much of their PDNPs and PUDs  they are going to have to pull back, having many meetings to decide if within any single writedown they should also get rid of any dirty laundry they accumulated during the boom (and take my word for it, they will), sorting through the personnel that they pitch overboard that they really wish they hadn't hired in the first place (but are now being provided with an opportunity to correct such mistakes) and so on and so forth. It is the oil business. It is not for the faint of heart and never has been.

It is disconcerting the first time....just as someone's first parachute jump probably is. But then you realize that the chute works, and for the adrenaline junkies in the group, well, you can only think...let's go back for more! Now, this isn't QUITE that way, because for some, the chute doesn't open, but that first leap out of the plane is pretty exciting!!

Those of us who have done this before...are just doing it again. And at the EXACT same time...we are beginning to glance upstream of the fleeing sheep, maybe even glancing at the other non-sheep doing the same, each of us betting that even if we can't take advantage of the sheep, we might just be able to take advantage of the other watchers.

Looked like the market dropped today as well, probably being hit by selloffs in energy companies.
Title: Re: Fracker Debt Bubble
Post by: MKing on January 05, 2015, 02:46:51 PM
Bullshit on what?

Bullshit on the meme that a 50% drop in the price of oil is in any way positive for Texans, or the U.S. economy. Diversification? What a load of crap! Pure spin.

I was around when this happened in 1986. I don't know about your economic path from 1986 into the new century, but I can assure you that for the country, it worked out pretty well.

So no, not spin...historical precedent.

Quote from: Eddie
Hey, when the Sierra Club flies their lobbyists to Washington to tell everyone ELSE to stop creating a carbon footprint, do you think they worry about it in the least? Nope. Nor do the lawyers when they show up in those black SUVs, heaven forbid they bicycle around the Capital. Carbon footprint only matters when you are trying to use it as a hammer against other folks, not much more.

Get thee behind me Satan.


Oh please. I'm going to tell people I treat my carbon footprint the same way Al Gore does...after jetting around the world a couple dozen times, I'm going to send some laborer in the Amazon to plant a few trees for me, to offset my transgressions. If you feel that bad about your carbon footprint, you too can be as pious as Al Gore.

And still get to enjoy your life, guilt free!!

Quote from: Eddie
And I don't fly much, the passage of time is to be appreciated in my quality of life metrics.

Try self employment, and losing 5-10K in gross for every vacation day that doesn't fall on a weekend or a holiday. I enjoy the passage of time too, but it's an expensive pursuit.

Oh, I was self employed once, and I know exactly what you mean. For every day I didn't work, I didn't get paid. That only lasted about 2 years though, then I decided that the risk adjusted value of my time worked better in a different configuration.

Ever thought about expansion, finding a fresh faced young man or lady to keep the drills whining and Novocaine flowing while you utilized the speedboat, traveled the country by Harley, kicked back and enjoyed your spoils..just a little more?

Title: Re: Fracker Debt Bubble
Post by: g on January 05, 2015, 10:48:56 PM
Quote
Quote from: Golden Oxen

    The speed and severity of the decline in a commodity of such significance to the world economy and the interconnected financial system is what causes me to be alarmed.


GO!!! Alarmed! Who? You!

Look at it this way...you can today buy FAR more oil with your gold then before...that should make you happy...the value of gold has won through in the end!

See what I mean Surly. MKing isn't all bad, there is a wonderful side to him which appears every blue moon.

What a wonderful thing to say about my true love MKing, thanks for the thought and keen factual observation.

                                         
                                                         
Yes MKing, Gold Is Holding Well, So Far
Yes MKing, Gold Is Holding Well, So Far


                           
Title: Fracker Ebola Spreading Exponentially
Post by: RE on January 05, 2015, 11:29:29 PM
The Ebola Zombies in the Energy Biz are squirting still more Red Ink out their Eyeballs.

(http://farm3.static.flickr.com/2921/14799218783_cbebaa27b1.jpg)

RE

Jeff Gundlach: "If Oil Drops To $40 The Geopolitical Consequences Could Be Terrifying"

Tyler Durden's picture



 

In a recent interview with FuW, DoubleLine's Jeff Gundlach explained his concerns about the oil market not being "unequivocally good" for everyone...

Question: The crash in the oil market is already causing jitters in the financial markets around the globe. What is your take on that?

 

Gundlach: Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying.

What would that mean for stocks?

Gundlach is right historically...

Large and rapid rises and falls in the price of crude oil have correlated oddly strongly with major geopolitical and economic crisis across the globe. Whether driven by problems for oil exporters or oil importers, the 'difference this time' is that, thanks to central bank largesse, money flows faster than ever and everything is more tightly coupled with that flow.

 

 

So is the 45% YoY drop in oil prices about to 'cause' contagion risk concerns for the world?

*  * *

Of course Gundlach is not alone in this rational concern...

"In its November 14, 2014 Daily Observations ("The Implications of $75 Oil for the US Economy"), the highly respected hedge fund Bridgewater Associates, LP confirmed that lower oil prices will have a negative impact on the economy.

 

After an initial transitory positive impact on GDP, Bridgewater explains that lower oil investment and production will lead to a drag on real growth of 0.5% of GDP.

 

The firm noted that over the past few years, oil production and investment have been adding about 0.5% to nominal GDP growth but that if oil

levels out at $75 per barrel, this would shift to something like -0.7% over the next year, creating a material hit to income growth of 1-1.5%."

 

-- Mike Lewitt, The Credit Strategist

Source: Bloomberg

Title: Re: Fracker Debt Bubble
Post by: g on January 05, 2015, 11:57:21 PM
Why the author thinks forty dollars is such a magic number puzzles me.

It appears that we have much damage to the oil sector already, and much more to appear shortly, especially amongst the frackers.

My view is that 50 is a as good as 40 to cause the endless flow of red ink and end of the fracking boom.
Title: Re: Fracker Debt Bubble
Post by: g on January 06, 2015, 12:07:45 AM
Uh OH, have been up watching the markets since midnight. Oil tried a feeble rally attempt for hours but couldn't hold on and just broke to new lows down about 50 cents to 49.60.

Looking for a rally soon from the projected sub zero blast heading our way, but who knows? This oil collapse seems to be breeding on itself and taking on a life all it's own.

The markets are definitely spooked finally from all of this, and a  continued oil price drop will cause much havoc at this point.
Title: Re: Fracker Debt Bubble
Post by: Surly1 on January 06, 2015, 12:56:51 AM
Uh OH, have been up watching the markets since midnight. Oil tried a feeble rally attempt for hours but couldn't hold on and just broke to new lows down about 50 cents to 49.60.

Looking for a rally soon from the projected sub zero blast heading our way, but who knows? This oil collapse seems to be breeding on itself and taking on a life all it's own.

The markets are definitely spooked finally from all of this, and a  continued oil price drop will cause much havoc at this point.

You ARE up late, GO. For me, it's early.

Whether 50, 40 or 20 is the magic number, it seems to me that it favors those who can hold out longest, with cash reserves to pay the bills and with proven reserves with relatively low cost of production. Meaning the Saudis. Meanwhile, oil continues to be left in shales or in the ground awaiting extraction. MKing will tell you these things are cyclical, while facile, it is true. Sine waves abound through nature.

Meanwhile I am struck by what Jeff Thomas observed:

Quote
Since that time, the US has had the ability to back off on armaments and to strengthen itself economically, to become even more powerful as the world’s present empire. But, of course, that’s not what they did. Instead, they went headlong in the direction of becoming a more highly armed, more fascist state.

and...

Quote
Only a decade or two ago, the US had visions of creating a world in which it was the undisputed leader, with the other powers acting as lesser players, beholden to the US.
But, incredibly, the US has trashed its own economy, driven productivity away (via the world’s highest corporate taxation), and created a level of debt that is far too large to ever repay. To add to this, they have invaded country after country.
What on Earth made them think that the BRICS would take this lying down?

The arrogance of the PNAC crowd, to be sure, of which the Cheneys, Rumsfelds and Kagans are just the most visible cohort, and who execute the plans of an unelected Washington consensus who "create their own reality." Indeed.

I reminded of something that I read recently, about the true purpose of the thousand odd military bases overseas is to ensure that are able to require the rest of the world to keep the dollar as the reserve currency, thus exporting our debt around the world. Which is why I watch the reporting on what the BRICS nations are up to, because it's pretty clear that, led by Russia and Putin, they have absolutely no intention of taking this lying down. And the outcomes will only affect those whose assets and savings are denominated in dollars.

 And then, after the spate of demand destruction has resulted in supply destruction, what will the game board look like then?

Title: Re: Fracker Debt Bubble
Post by: Surly1 on January 06, 2015, 01:17:22 AM
See what I mean Surly. MKing isn't all bad, there is a wonderful side to him which appears every blue moon.

 I appreciate the humor of your statement, but must disagree. MKing IS all bad. Having seen a more substantial example of his "body of work," for me the jury is in.

Guilty.

(http://www.acme.com/jef/satan/satan_med.gif)
Title: Re: Fracker Debt Bubble
Post by: g on January 06, 2015, 06:45:50 AM
Tell me I'm seeing things. Oil crashing again after yesterdays pummeling?

Down over a buck with a 48.90 handle.

This is getting out of hand and will lead to big trouble.

Ilargi over at TAE posted a very interesting article on it yesterday, he is predicting war and all sorts of horrible repurcussions from it.

Brief excerpt and link provided below.

  There’s not an oil major or minor or a producing country left that makes a profit at these prices, and there’s no sign anywhere to be seen that the drop will stop. If this keeps going, someday soon somebody’s going to go to war. Maybe domestically, maybe across a border, but it’ll happen.

There are dozens of regimes out there for whom oil prices have become a huge threat to their powers, their status, their lives, and there are dozens of others waiting in the wings, eager to take over. The move is just too big not to lead to bloodshed.


http://feedproxy.google.com/~r/theautomaticearth/OCyb/~3/YfvzX237q2o/ (http://feedproxy.google.com/~r/theautomaticearth/OCyb/~3/YfvzX237q2o/)  :-\


Title: Re: Fracker Debt Bubble
Post by: Eddie on January 06, 2015, 07:40:10 AM
There’s not an oil major or minor or a producing country left that makes a profit at these prices, and there’s no sign anywhere to be seen that the drop will stop. If this keeps going, someday soon somebody’s going to go to war. Maybe domestically, maybe across a border, but it’ll happen.

War has been ongoing for more than ten years, over these oil fields. Things might heat up more, if that's possible, but the war already started a while back.
Title: Re: Fracker Ebola Spreading Exponentially
Post by: MKing on January 06, 2015, 08:18:58 AM
The Ebola Zombies in the Energy Biz are squirting still more Red Ink out their Eyeballs.

Not even close. Yet. Was no one really paying attention in 1986? I suppose not. Those of us that lived through it still recall it well, and not as fondly as it looks in hindsight.

Jeff Gundlach: \If Oil Drops To $40 The Geopolitical Consequences Could Be Terrifying\

Gotta love the standard title hyperbole though. Oil goes up...DOOM!! Oil goes down...DOOM!!

Gotta love it when folks make it this obvious that REGARDLESS of the event...the result is...DOOM!

So we bankrupt some of those who didn't get their risk adjusted value right. Bankers and oil companies. Standard problems of the oilfield being victim of its own success. The upside is much wider spread than the downside...because the downside effects a small group, whereas the upside (lower prices) flow out to literally everyone.

And these guys as well of course.

(http://images.sodahead.com/polls/000187852/polls_gas_prices_cartoon_1713_268088_poll_xlarge.jpeg)
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 06, 2015, 09:03:17 AM
if these bloggers were any good at honest analysis, they would be doing it for a living, work at some big economic think tank like IEA, or BLS, or Citigroup or someone. But they don't.


I agree there's too  much hyperbole in the blogosphere, but I disagree that there is no decent analysis there. The only decent analysis we can read is there. The think tanks have two kinds of analysis. The insider kind that goes to the overlords, and a different spiel for public consumption.
Title: Re: Fracker Debt Bubble
Post by: MKing on January 06, 2015, 09:45:05 AM
if these bloggers were any good at honest analysis, they would be doing it for a living, work at some big economic think tank like IEA, or BLS, or Citigroup or someone. But they don't.


I agree there's too  much hyperbole in the blogosphere, but I disagree that there is no decent analysis there.

As a scientist, you might understand that my definition of "analysis" might be quite a bit different than yours. Bloggers consider what they do analysis. To many, a single chart, showing a trend over the past 6 months in the market, constitutes "analysis"...apparently...because there is a chart involved. They all appear to do this, RE and Steve in Virginia just love that triangle thing, yet they censor the X-axis to make sure no one asks about all the other times oil prices crashed, and why that idea only seems applicable to now. Explaining something more inclusive than just some hand waving about what has happened today is headed towards analysis, they call those folks economists and in their analysis you see just such things. Hamilton springs to mind. But bloggers? I can admit to reading what Stockman says on occasion, obviously he wasn't a blogger first. Others with experience first, who took up blogging next, they might have some value because they have some experience. But with anything economic, I think you START with the grain of salt, and go from there.

Quote from: Eddie
The only decent analysis we can read is there.

Not true at all. Unlike bloggers, some of the macro economic work of the big think tanks is quite excellent, and encompasses ideas INCLUDING all the past events in their analysis as well. Why? Because they understand a bigger world than those just following minute market movements and pretending they lead to big consequences. Worse yet, they seem ignorant of the idea that most of this has happened before...or they don't WANT to think that this...because it means now they have to explain what REALLY matters...why is this time DIFFERENT. It is a common Doom problem in general...folks have some favorite metric, and configure it to cause a doom. The problem being, that metric has done that thing before...and doom wasn't the result. A grain of salt, a deep breath, a fundamental understanding that there is very little NEW in the world, all would go a long way towards better analysis...regardless of source. But the blogosphere has far more of this, whatever THIS is, than analysis.

What is it they say about the Tyler Durdin character? He has accurately predicted 2 of his last claimed 39 recessions?

Quote from: Eddie
The think tanks have two kinds of analysis. The insider kind that goes to the overlords, and a different spiel for public consumption.

Then stick with the sources and analysis paid for by the public, and given to everyone. There is tons of macroeconomic work that goes into things like this, and YOU paid for it, so YOU are the overlord. Pick your interest.

http://www.eia.gov/forecasts/steo/analysis.cfm (http://www.eia.gov/forecasts/steo/analysis.cfm)
Title: Re: Fracker Debt Bubble
Post by: g on January 06, 2015, 09:57:38 AM
Ilargi over at TAE posted a very interesting article on it yesterday, he is predicting war and all sorts of horrible repurcussions from it.

Of course. Because what matters are any event that can be claimed to cause horrible repercussions. When oil prices were going up, it was all peak oil, all the time. Now that it is headed the other way, we can't just stop creating blog entries, right? We have to come up with more red meat to throw in front of the crowd...so...we pretend we didn't claim that the world was ending when prices increased, and hope our audience forgets, and spew out doom based on prices going down.

The point being...the world is ALWAYS ending....a blogger just needs some current event...nearly ANY current event...to pin the idea on. It really is just that easy. Their readers aren't looking for analytic work, they are looking for entertainment to reinforce a given bias...let us face it, if these bloggers were any good at honest analysis, they would be doing it for a living, work at some big economic think tank like IEA, or BLS, or Citigroup or someone. But they don't.

I tend to agree more with you on the merits of Ilargi and his views, than those of JHK.

Have had a few go rounds with Ilargi myself and find him to be a very dogmatic inflexible person; still someone with some worthwhile observations and views to be considered at times.  He seems sincere, but sees just about everything in negative terms.

No big deal, the lord made us all different.
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 06, 2015, 11:00:53 AM
Then stick with the sources and analysis paid for by the public, and given to everyone. There is tons of macroeconomic work that goes into things like this, and YOU paid for it, so YOU are the overlord. Pick your interest.

http://www.eia.gov/forecasts/steo/analysis.cfm (http://www.eia.gov/forecasts/steo/analysis.cfm)


Let me get this right. I should put faith in reports made by government bureaucrats?

I read some stuff from the link. Didn't notice anything about a predicted 50% drop in oil price in late 2014. They left that news out.

Steve, on the other hand, called it two years ago, to the month. That's not a bad call for a non-scientist who tries to cherry pick the data.
Title: Re: Fracker Debt Bubble
Post by: RE on January 06, 2015, 02:10:39 PM
Then stick with the sources and analysis paid for by the public, and given to everyone. There is tons of macroeconomic work that goes into things like this, and YOU paid for it, so YOU are the overlord. Pick your interest.

http://www.eia.gov/forecasts/steo/analysis.cfm (http://www.eia.gov/forecasts/steo/analysis.cfm)


Let me get this right. I should put faith in reports made by government bureaucrats?

I read some stuff from the link. Didn't notice anything about a predicted 50% drop in oil price in late 2014. They left that news out.

Steve, on the other hand, called it two years ago, to the month. That's not a bad call for a non-scientist who tries to cherry pick the data.

You are wasting your time with this Clown Eddie.  He won't even admit there is a price crash in energy ongoing.  He'll just tell you it's all cyclical and then drop on silly propaganda cartoons about how great low gas prices are for consumers.  Then he'll regale you with a story about how he survived the contraction in the 80s by living in his car while he went to a trade school to learn rocks for jocks.After that he'll tell you how he knows Da Goobermint figures are correct because he gave Dan Yergin a blowjob at the last Energy Conference.  After that he will tell you how nobody is worried in the least about the falling stock value of his company, that they are well hedged and lean and mean, yadda yadda, same lines he pitches to the investors.

RE
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 06, 2015, 02:51:30 PM
You and Surly are never around when I'm trying to waste time at work. Got to talk to somebody, or I might be forced to catch up on my paperwork.

 I'm taking GO's lead and trying to show a lot of tolerance and human kindness. We're going to make this forum into a gentlemen's club, but without the strippers.
Title: Re: Fracker Ebola Spreading Exponentially
Post by: jdwheeler42 on January 06, 2015, 08:16:58 PM
Gotta love the standard title hyperbole though. Oil goes up...DOOM!! Oil goes down...DOOM!!

Gotta love it when folks make it this obvious that REGARDLESS of the event...the result is...DOOM!
So tell me, MKing, would you rather I put your feet in liquid nitrogen or your hands in liquid iron?
Title: First Fracker Goes Tits Up!
Post by: RE on January 07, 2015, 03:23:06 PM
This will be entertaining.  :icon_sunny:

RE

The First Shale Casualty: WBH Energy Files For Bankruptcy; Many More Coming

Tyler Durden's picture



 

"There are too many ugly balance sheets," warns one energy industry analyst, adding simply that "the group is not positioned for this downturn." While the mainstream media continues to chant the happy-clappy side of lower oil prices, spewing various 'statistics' about how the down-side of low oil prices is 'contained' and the huge colossal massive tax cut means 'everything is awesome' for America, the data - and now actions - do not bear this out. Macro data has done nothing but disappoint and now, we have the first casualty of the shale oil leverage debacle as WSJ reports, on Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money. There are many more to come...

 

In December we illustrated the problem names (in the publicly traded markets) among the most-levered energy companies in America...

 

 

And now, as The Wall Street Journal reports, the bankruptcies have begun as financing costs are not just prohibitive, there is no liquiidty available at any price for many...

American oil and gas companies have gone heavily into debt during the energy boom, increasing their borrowings by 55% since 2010, to almost $200 billion.

 

Their need to service that debt helps explain why U.S. producers plan to continue pumping oil even as crude trades for less than $50 a barrel, down 55% since last June.

 

But signs of strain are building in the oil patch, where revenue growth hasn’t kept pace with borrowing. On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money and citing debt of between $10 million and $50 million. Neither the Austin-based company nor its lawyers responded to requests for comment.

 

Energy analysts warn defaults could be coming. “The group is not positioned for this downturn,” said Daniel Katzenberg, an analyst at Robert W. Baird & Co. “There are too many ugly balance sheets.”

 

...

 

In 2010, U.S. companies focused on producing oil and gas had $128 billion in combined total debt, according to financial data collected by S&P Capital IQ.

 

As of their latest quarter, such companies had $199 billion of combined total debt.

 

 

Before crude prices began falling, U.S. oil and gas producers were able to acquire leases and drill wells even if that meant outspending their incomes. Debt was used to bridge the cash shortfall so that companies could develop oil fields in Texas, North Dakota and newer locations including Colorado.

Now that is coming back to bite.

The upshot of cash conservation and higher borrowing costs will be less money spent on producing oil and natural gas. Concho Resources Inc. said late Monday that it was cutting its capital spending budget by a third, to $2 billion.

*  *  *

And the credit market knows it...

 

And here is the bankruptcy filing in question in all its glory:

Title: Re: Fracker Debt Bubble
Post by: Eddie on January 07, 2015, 04:47:11 PM
Dear Admin,

This  is to inform you that some members of the Diner Forum might find the term "Tits Up" to be vulgar and offensive. We respectfully suggest you change your wording to reflect the long tradition of sensitivity and political correctness we've tried so hard to promote here at the Forum, in the interest of being fully inclusive and maintaining diversity among the commenters.

We respectfully suggest you might henceforth use the term "Mammary Glands Skyward" as an alternative, in future instances of dramatically over-leveraged wildcatters going absolutely and completely busted financially...if of course, such eventualities were to occur, which is not certain, but likely enough to consider what language should be considered at that time.
Title: Re: Fracker Debt Bubble
Post by: MKing on January 07, 2015, 04:58:30 PM
Dear Admin,

This  is to inform you that some members of the Diner Forum might find the term "Tits Up" to be vulgar and offensive. We respectfully suggest you change your wording to reflect the long tradition of sensitivity and political correctness we've tried so hard to promote here at the Forum, in the interest of being fully inclusive and maintaining diversity among the commenters.

Lucky you weren't censored for daring to question the sensitivities of others. Get with the program..comply or else Eddie, your membership in the group that is actually DOING something about your fossil fuel usage won't save you.

Just nod vigorously….it is all that is required….

Title: Re: Fracker Debt Bubble
Post by: RE on January 07, 2015, 05:00:28 PM
Dear Admin,

This  is to inform you that some members of the Diner Forum might find the term "Tits Up" to be vulgar and offensive. We respectfully suggest you change your wording to reflect the long tradition of sensitivity and political correctness we've tried so hard to promote here at the Forum, in the interest of being fully inclusive and maintaining diversity among the commenters.

We respectfully suggest you might henceforth use the term "Mammary Glands Skyward" as an alternative, in future instances of dramatically over-leveraged wildcatters going absolutely and completely busted financially...if of course, such eventualities were to occur, which is not certain, but likely enough to consider what language should be considered at that time.

How about Positive Geotropic Ta-Tas?  :icon_mrgreen:

RE
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 07, 2015, 05:28:00 PM
Just nod vigorously….it is all that is required….

I missed your stuff that Surly must have deep-sixed before I got up this morning. So yeah,it's been an MK free day for me here at the old Forum. Not sure how I made it through without your voice crying out in the wilderness.

I nod when I agree, and try to be civil when I don't...but that's just me. I call 'em exactly the way I see 'em, and I'm happy for you to do the same, as long you don't act like a shit. Sorry, but I'm real skeptical about the public benevolence of the richest corporations in the world, how careful they are to protect the environment and so forth.

I'm extremely dubious about the economic and the environmental effects of fracking, and I'm an advocate for water conservation. I'll listen to what you say, but so far I'm not convinced. Sorry.

Title: Re: Fracker Debt Bubble
Post by: agelbert on January 07, 2015, 06:41:35 PM
Eddie said,
Quote
We respectfully suggest you might henceforth use the term "Mammary Glands Skyward" as an alternative, in future instances of dramatically over-leveraged wildcatters going absolutely and completely busted financially...if of course, such eventualities were to occur, which is not certain, but likely enough to consider what language should be considered at that time.
  :icon_mrgreen:

Good one! I wish to add to your learned discourse and erudite advice that said admin may wish to describe the "utility" of frackers in the following fashion: Frackers are as useless as "Mammary Glands on a boar hog".  (http://www.pic4ever.com/images/4fvfcja.gif)
 
Title: Re: Fracker Debt Bubble
Post by: MKing on January 07, 2015, 08:29:18 PM

I'm extremely dubious about the economic and the environmental effects of fracking, and I'm an advocate for water conservation. I'll listen to what you say, but so far I'm not convinced. Sorry.

Your belief isn't what matters to those who use this particular oil field completion technique, what matters is your behavior not changing, regardless of what you believe. Be it tires on the Volt, the occasional fillup, natural gas to create your electricity or heat your home or business, the industry only cares about your continued support and use of their product through your greenbacks. Believe whatever you wish, but for the love of pete, DON'T change your behavior.

Did you feel that earthquake today? It made the nightly news, along with the idea of wastewater injection wells. Now THAT looks to be quite an interesting issue from the societal cost/benefit angle.

Title: Re: Fracker Debt Bubble
Post by: Petty Tyrant on January 07, 2015, 09:49:50 PM
Just nod vigorously….it is all that is required….

I missed your stuff that Surly must have deep-sixed before I got up this morning. So yeah,it's been an MK free day for me here at the old Forum. Not sure how I made it through without your voice crying out in the wilderness.

I nod when I agree, and try to be civil when I don't...but that's just me. I call 'em exactly the way I see 'em, and I'm happy for you to do the same, as long you don't act like a shit. Sorry, but I'm real skeptical about the public benevolence of the richest corporations in the world, how careful they are to protect the environment and so forth.

I'm extremely dubious about the economic and the environmental effects of fracking, and I'm an advocate for water conservation. I'll listen to what you say, but so far I'm not convinced. Sorry.

https://www.youtube.com/watch?v=C0GCf7T0agM (https://www.youtube.com/watch?v=C0GCf7T0agM)
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 08, 2015, 07:16:58 AM
Your belief isn't what matters to those who use this particular oil field completion technique, what matters is your behavior not changing, regardless of what you believe. Be it tires on the Volt, the occasional fillup, natural gas to create your electricity or heat your home or business, the industry only cares about your continued support and use of their product through your greenbacks. Believe whatever you wish, but for the love of pete, DON'T change your behavior.

I don't disagree. It is consumer demand that drives the whole thing. But my behavior is changing, as fast as I can change it without pulling the rug out from underneath my whole way of life.

 I have a warehouse I'm filling with PV's, and I intend to be net zero a soon as i can make it practical.

As much as I love burning through energy, the time for that kind of behavior is past.
Title: Re: Fracker Debt Bubble
Post by: MKing on January 08, 2015, 07:26:46 AM
Your belief isn't what matters to those who use this particular oil field completion technique, what matters is your behavior not changing, regardless of what you believe. Be it tires on the Volt, the occasional fillup, natural gas to create your electricity or heat your home or business, the industry only cares about your continued support and use of their product through your greenbacks. Believe whatever you wish, but for the love of pete, DON'T change your behavior.

I don't disagree. It is consumer demand that drives the whole thing. But my behavior is changing, as fast as I can change it without pulling the rug out from underneath my whole way of life.

And there you go. Welcome to the transition, exactly as an economist would say it happens. Same here I might add, except it is against the posting rules for me to discuss it.

The flavor of this debate never seems to include personal decisions and responsibility though, it is always down with frackers!!! followed by...now someone give me some of that cheap natural gas to heat my house....

Quote from: Eddie
I have a warehouse I'm filling with PV's, and I intend to be net zero a soon as i can make it practical.

Make a plan and work it. I like it. My number is 33%, sounds like you are headed for a much higher one. I haven't considered upping my PV%, I like the way the ones I have work, but I am also a transition member of the "insulate the piss out of it" group, the "live close to work" group, and the "live in a state that places a high priority on utility scale renewable power generation" group.

Quote from: Eddie
As much as I love burning through energy, the time for that kind of behavior is past.

Not at all. If you are interested in one of those perspectives that energy scarcity folks love to hate, but the idea utterly makes perfect sense, try this book on...you'll get a kick out of how it makes mincemeat of such an argument.

http://www.tech-pundit.com/the-bottomless-well/ (http://www.tech-pundit.com/the-bottomless-well/)
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 08, 2015, 08:05:04 AM
Not at all. If you are interested in one of those perspectives that energy scarcity folks love to hate, but the idea utterly makes perfect sense, try this book on...you'll get a kick out of how it makes mincemeat of such an argument.

Sure, I'll look. But you don't seem to be getting that ample current supply doesn't solve anything. It actually makes it worse.

Even if i believed everything I've heard you say, and there weren't a supply problem, and fracking didn't cause any problems, the increased use of fossil fuels worldwide will only exacerbate our population overshoot and pollute the air and water until we don't have anything left to breathe or drink.

It doesn't even matter if it doesn't happen here. It will happen in China and India. It's already happening as we speak.

And the other problem is that the large energy surplus is what fuels war on the planet. Most of our resources, more than half, goes to the war machine, which has no payback whatsoever. It's just burned up. Doesn't create food or jobs or provide medical care. It's pure waste.
Title: Re: Fracker Debt Bubble
Post by: MKing on January 08, 2015, 08:45:42 AM
Not at all. If you are interested in one of those perspectives that energy scarcity folks love to hate, but the idea utterly makes perfect sense, try this book on...you'll get a kick out of how it makes mincemeat of such an argument.

Sure, I'll look. But you don't seem to be getting that ample current supply doesn't solve anything. It actually makes it worse.

The book isn't about ample supply. It is about the concept of wasting energy to achieve a given end, and comparing the value of that end (and accompanying waste) to what happened if you DIDN'T waste energy.

Call it almost a anti-EROEI argument. Great thinking material, which means you won't ever see it spoken about on resource scarcity blogs.

Quote from: Eddie
Even if i believed everything I've heard you say, and there weren't a supply problem, and fracking didn't cause any problems, the increased use of fossil fuels worldwide will only exacerbate our population overshoot and pollute the air and water until we don't have anything left to breathe or drink.

Depends really. Carrying capacity is a flexible number, so certainly we can't even discuss "overshoot" until that is more established, and that is dependent on things as simple as how many poor folks do you assume will ultimately live like Americans, as opposed to their countrymen...and will they eat as much meat? Those two issues have far more to do with long term macro economic issues, pollution and population than whether or not we produce 90 million barrels a day of oil 20 years from now...or 95.

Have you ever noticed how all the quoted blogs around here spend all their time watching markets and whatnot, and ignoring such basic ideas as this, the REAL fundamentals of resource scarcity and pollution questions? Big-Ag is far more polluting than Big-Oil, but for some reason Big-Oil gets hung out to dry, and Big-Ag the pass. Maybe it is because when Big-Oil has a boobo, it is dramatic and involves black goo and fire, whereas with big ag you just end up with this industrial waste water zone called the Mississippi river and dead zones in the GOM.

Quote from: Eddie
And the other problem is that the large energy surplus is what fuels war on the planet.

Right. So during an era of scarcity, such as the gasoline scare of 1916 perhaps....WWI wasn't grinding out dead bodies by the millions.

And when Napoleon took maybe 700,000 soldiers east into Russia in 1812, and came back with 27,000 (making claims of what "losing" a war in Iraq, Vietnam or Afghanistan look downright silly), it was because...he had these high density energy sources like gasoline to help him out?

Yeah..somehow I don't think if crude disappeared tomorrow it would stop people from killing each other. We do it too naturally under all kinds of circumstances, it didn't begin happening only after Drake found oil in Pennsylvania.

Quote from: Eddie

Most of our resources, more than half, goes to the war machine, which has no payback whatsoever. It's just burned up. Doesn't create food or jobs or provide medical care. It's pure waste.

Not quite. Name the last time one of Santa Ana's ancestors swept through your town and claimed your wide or daughters as playtoys for his troops. A military exists for a reason, and you have benefited substantially from having a better one than any other country in the history of our species.
Title: Re: Fracker Debt Bubble
Post by: RE on January 08, 2015, 03:17:00 PM
And you thought the interest charges on your Credit Card debt were high!

Now, why would anybody even extend another loan that won't be paid back?  Simple, the banksters take home enormous closing fees and they are loaning out other people's money.

RE

How Bad Is It For Shale Companies: The Cost Of Resolute Energy's New Second-Lien Debt: 25%!

Tyler Durden's picture



 

Over the weekend, we saw the first casualty of low oil prices as WBH Energy went into bankruptcy. Today, Bloomberg reports,Resolute Energy Corp. has been forced by low oil prices to borrow at distressed levels. The Denver-based company, which we previously highlighted as having a 4.5x Debt/EBITDA (there are a lot higher), managed to procure a new $150 million 2nd term loan from Highbridge Capital (mostly used to roll old debt). The cost of funding: 11% coupon plus 5% upfront all adding up for a. At that cost of funding, it is no wonder that Resolute's bonds remain, to borrow a Charlie Evans phrase, catastrophically priced.

Current 5Y Resolute bond yields are hovering between 32% and 27%...

 

As Bloomberg reports,

Highbridge Capital Management funds committed to lend $142 million of the $150 million second-lien term loan.The same individual who signed the credit agreement on behalf of Highbridge also signed for the other two named lenders, indicating that Highbridge-managed funds may have underwritten the entire deal.

 

Highbridge is an alternative investment management firm owned by JP Morgan Asset Management. 

 

Resolute Energy's $150 million second-lien term loan was priced to pay interest of Libor plus 10 percent, with a 1 percent Libor floor, ensuring that lenders would receive at least an 11 percent coupon in addition to a 5 percent upfront fee. Since Resolute received $134 million of net proceeds, the loan may also have priced at a discount to further increase the yield. If Resolute repays the loan early, it's obligated to include additional payments to ensure that the lenders receive at least 125 percent of their invested capital.

 

The company used net proceeds of $134 million to pay down its borrowing-base revolving credit facility. As the size of the borrowing base was reduced by $95 million to $330 million, the new loan increased Resolute's total liquidity by about $40 million to $60 million.

*  *  *

In other words - to assuage fears, Shale companies must pay at least 25% to get funding - an entirely abhorrent cost of capital (unless oil suddenly rips to $300/bbl <sarc>)

Here's what Highbridge will own if it all goes pear-shaped...

*  *  *

Of course, there are a lot more to come if funding costs remain at these levels of extreme. In December we illustrated the problem names (in the publicly traded markets) among the most-levered energy companies in America...

 

*  *  *

So for everyone worried about rising rates - don't! Because for the engine of US economic growth - The Shale Industry - rates have already risen to extremes that simply make everything non-economic...

Title: Re: Fracker Debt Bubble
Post by: MKing on January 08, 2015, 05:18:29 PM
I have a warehouse I'm filling with PV's, and I intend to be net zero a soon as i can make it practical.

A warehouse just for you? Or trying to corner the market? You do realize that these things have been getting cheaper as of late, right?
Title: Re: Fracker Debt Bubble
Post by: Eddie on January 09, 2015, 09:50:59 AM

A warehouse just for you?

Just for me. (It's not a huge warehouse.)  I want to not have to pay any utility bills at all. Period.

However, I don't think PV's are a bad thing to have stockpiled. Prices won't keep going down forever.

There's new tariffs on Chinese PV's, (driving up the price of all PV's) and besides, I hear enough horror stories about the poor chink quality to steer clear of them. The best panels are made in America, by Solarworld. The panels keep getting bigger, and the durability has improved, but the basic tech is not changing much now.

You can get deals sometimes on whole pallets, but the price for retail PV's is stuck in the range of eighty cents to a dollar (per watt) for high quality product.

You also need all the other stuff. Charge controller and inverters. Lots of them if you intend to build a big project. Expensive wire too.

I'll probably grid tie the house, but go off-grid at the farm.
Title: The Fracker-Wall Street Con Game
Post by: RE on January 15, 2015, 02:02:04 AM
Fraud on STEROIDS.

RE

How Wall Street Drove the Oil & Gas Drilling Boom That’s Turning into a Disaster

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Wall Street spent years hyping, propagating, and funding the oil and gas drilling boom in the US. It handled the bonds and loans issued by often junk-rated companies. It instigated the waves of mergers & acquisitions, profiting every step along the way – advisory fees, bridge loans, syndication of loans, underwriting of bonds, etc. At the very tippy-top of the market, it pushed in the opposite direction and instigated spinoffs, creating independent publicly-traded companies that didn’t have a chance and cost unsuspecting investors in their shares and junk bonds a barrel of money. It orchestrated a series of similarly misbegotten energy IPOs.

Wall Street made money off the entire spectrum of companies associated directly or indirectly with oil and gas. It was one heck of a party.

The money had to keep flowing. Fracking is a capital intensive treadmill for companies that spend a lot more on drilling and completing wells than they get in cash from their production. Barclays estimated that larger drillers outspent their cash flows by 112% and smaller to midsize companies by a breathtaking 157%. The hole had to be filled with new money, or else the music would stop.

Wall Street hyped these junk bonds, leveraged loans, or new shares and pushed them into the hands of investors that had been bamboozled by the Fed into thinking that it had removed all risks from the equation. Investors closed their eyes and bought these nearly risk-free securities that are now decomposing before their very eyes.

But it didn’t matter to Wall Street because investment banking revenues were soaring, and because private equity firms where attracting a tsunami of money for their energy funds, and they all extracted their fees, and everyone got big bonuses, and to heck with the rest.

The money came from all directions, from TBTF banks, from local and regional banks, from PE firms, overseas investors, pension funds, hedge funds, mutual funds, and individual investors.

But here are the top 10 banks, according to DealBook, that in 2014 extracted the most investment-banking revenues from the oil and gas sector, or rather from its investors. Bailed-out and still troubled Citi was the king of the hill, obtaining $492 million in IB revenues from the oil and gas sector, representing 11.8% of its total IB revenues. Together, the ten skimmed off $3.52 billion last year.

US-Investment-Banks-oil-gas-revenues-2014

And these $3.52 billion in investment-banking revenues were extracted all year even as West Texas Intermediate had been doing this since June:

US-WTI-06-2014-01-12-2015

WTI plunged 58% since June to $45.26 per barrel as I’m writing this. The bloodletting simply doesn’t want to stop.

Then the other shoe dropped. Natural gas had been in recovery mode, after having gotten demolished for years, as production keeps soaring despite a price that’s below the cost of production at most wells. By mid-November, going into the winter, it was trading at $4.65 per million Btu when this happened:

US-NatGas_06-2014_01-12-2015

The price of natural gas plunged 40% in seven weeks to $2.82 per million Btu.

Despite the crashing energy stocks, mauled junk bonds, and beaten-down leveraged loans – all of which began to crimp Wall Street’s style – these 10 investment banks were still able to yank $3.5 billion from the sector and its bleeding investors. That’s true art.

The US is the world’s largest producer of hydrocarbon fuels – oil, natural gas, and associated liquids such as natural gasoline, condensate, and propane. So the broad price collapse will inflict more losses in the US than in any other country. But the US has a vast and diversified economy, so the losses won’t be felt like they’re being felt in Venezuela or Russia.

But they will be felt. The oil bust in the 1980s devastated the oil patch economy. It took down numerous local and regional banks as the losses were cascading through the system. The FDIC was busy auctioning off homes and office buildings. Businesses shut down. People left to find jobs somewhere else. This time around, Wall Street got involved in the boom up to its ears. And Wall Street is going to struggle with the aftermath.

Nearly 15% of Well Fargo’s IB revenues were from the oil and gas sector; Canadian Scotiabank got nearly 35% of its IB revenues from the sector. A good part of these revenues are drying up as new funding activities are hitting reality. There will be defaults. And banks will lose their shirts on deals that soured before they could shuffle them off as planned to unsuspecting Fed-blinded investors.

Despite Fed assurances that it had abolished all risks and that investors should no longer be rewarded with yield for taking risks it had abolished, investors find themselves suddenly confronted with terrible risks – for example, loans they considered nearly risk free because they were collateralized by oil. And losses are mounting.

Energy loans account for 2% of Wells Fargo’s loan portfolio; so any losses are unlikely to sink the bank though they could do some serious damage given the magnitude of Wells Fargo’s loan portfolio. Local and regional banks in the oil patch are more at risk. DealBook cites MidSouth Bank, in Lafayette, Louisiana. Of the loans on its books, 20% are to oil and gas companies. This is what happened to banks in Texas and Oklahoma during the last oil bust. But CEO Rusty Cloutier said what all CEOs in this situation have to say: “We are not panicking.”

Last time this happened in the oil patch, the stock market crashed. “Going to be a painful period of time,” is how Texas Gov. Rick Perry explained the situation. Read…  This Is Just the Beginning of the Great American Oil Bust 

Title: Fracker Strangulation
Post by: RE on January 18, 2015, 12:46:45 AM
Moriarty Sez:

http://www.youtube.com/v/rSjK2Oqrgic?feature=player_detailpage

RE

These Two Charts Show the True Fiasco of US Oil & Gas

Rig count for oil and for gas: two separate fiascos

Oil-and-gas exploration and production companies in the US have announced cutbacks of 30%, 40%, or 50% and beyond in operating budgets and capital expenditures. They want to survive in an environment of plunging oil and gas prices, and hence plunging revenues. They loaded up on debt, and that debt is now exacting its pound of flesh.

These companies lease drilling rigs from oil-field services companies, such as Halliburton. When the going gets tough and they run out of borrowed money, they stop leasing rigs, and they try to get out from under the rigs that they have already contracted for. It’s a slow process. But it has begun.

The number of rigs drilling for oil in the US dropped another 55 in the latest week to 1,366, the lowest since October 2013, down 15.1% from the peak in the second week of October last year, when 1,609 rigs were drilling for oil.

The rig count had already dropped by 61 in the prior week, the largest week-to-week drop in Baker Hughes’ data series going back to 1987. In percentage terms (-4.12%), it had been the largest drop since the Financial Crisis.

In both weeks combined, the rig count plunged by 116, or 7.8%. The last time it started plunging like this for two weeks was in December 2007 (also down 7.8%, ironically), at the cusp of the stock market crash.

The standouts:

California lost 4 active oil and gas rigs in the latest week, bringing the rig count to 18 (including 1 offshore), from 45 rigs (including 2 offshore) reported on November 21. In those eight weeks, the rig count plunged 60%! Drilling is coming to a halt in California.

North Dakota, second largest oil-producing state, lost another 6 rigs in the latest week, to 156 active rigs. Down 13.3% in five weeks.

Texas, the largest oil-producing state, got hit the hardest, not in percentage terms – that honor belongs to California – but in number of rigs that have been evaporating: 44 in the latest week. The oil and gas rig count is now at 766, the lowest since March 2011. That’s down 15.4% from the peak of 905 rigs reported on November 21.

This is what drilling activity looks like across the US:

US-rig-count_1988_2015-01-16=oil

As I wrote a few days ago in This Is Just the Beginning of the Great American Oil Bust:

Estimates vary widely as to how far the rig cutting will go. Barclays’ analyst Anderson estimated that at least 500 rigs could be idled in the American oil patch by the end of the year. Raymond James analyst Praveen Narra said that his firm estimated that up to 850 rigs could be idled this year. If 60% are idled, as was the case during the Financial Crisis, it would mean that 965 rigs would be taken out of service.

Over the last 10 years, the oil and gas business in the US has become huge, and the unwind will be huge as well.

Rigs drilling for natural gas follow a different pattern. The rig count collapsed years ago as the price of natural gas fell below the cost of production, after a phenomenal no-holds-barred fracking boom in the years before the financial crisis, which culminated in August 2008 when over 1,600 gas rigs were active. This resulted in a “gas glut” that killed prices, pushing them below the cost of production.

The rig count collapsed in two phases, first during the financial crisis, and then after a sucker rally, during the “gas glut.” It has turned into a true fiasco for the industry and increasingly for its investors:

US-rig-count_1988_2015-01-16=gas

But why is production still rising after this kind of plunge in drilling activity?

There are a number of reasons, but one stands out: Numerous of these newly drilled and completed or partially completed wells couldn’t be hooked up to pipelines because the growth of the pipeline infrastructure hadn’t kept up with the drilling boom. These wells – by some estimates, 1,300 in the Marcellus alone – just sat there, waiting for the pipeline. Over the last two years, pipeline infrastructure has reached these wells, and despite the plunge in drilling activity, “production” – which is counted when natural gas reaches a trading hub, not when the well is drilled – has soared in 2014.

So the rig count for natural gas dropped 19 in the latest reporting week, to 310, matching the low of June 2014, levels not seen since May 1993! Yet, in the overall fiasco that natural gas drillers are facing, this is just another minor downtick, and barely visible on the chart.

And now, years of wondrous Wall-Street engineering dissolve in reality. Read…   Money Dries Up for Oil & Gas, Layoffs Spread, Write-Offs Start

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  1 comment for “These Two Charts Show the True Fiasco of US Oil & Gas

  1.  
    Michael Gorback
    January 18, 2015 at 1:02 am

    Then we get a bump up in unemployment, a drop in GDP and QE4?

    So we’ll end up with Romney running for president, the euro tanking, Grexit in the news every day and a round of QE- this is some Kafkaesque nightmare like the movie Groundhog Day where we re-live 2012 over and over.

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Title: Fracker Debt Bubble: Baker-Hughes Whacks Another 7000 Jobs
Post by: RE on January 20, 2015, 11:25:15 PM
"Unambiguously Good"   ::)

RE

 

First Schlumberger Fires 9,000; Now Baker Hughes Unleashes 7,000 More Layoffs

Tyler Durden's picture



 

Another day, another unambiguously bad announcement from America's bettered energy sector which are bolting down ahead of the crude storm, and firing thousands. Last week it was Schlumberger which announced it would fire 9000, today it is Baker Hughes which just warned it too will hand out about 7000 pink slips in the first quarter. And as a reminder, when it comes to comp: each Baker Hughes job is equivalent to about 10 waiter and bartender jobs, which have been the basis of this "recovery."

What happens next? If indeed confused, then please reread "Houston, You Have A Problem" - Texas Is Headed For A Recession Due To Oil Crash, and promptly thereafter "Which States Stand To Lose The Most From The Crude Collapse."

Title: Fracker Debt Bubble: Oil Drillers are going to DIE!
Post by: RE on January 25, 2015, 12:16:18 AM
http://www.youtube.com/v/ofmosyzS3MM?feature=player_detailpage

RE

 

"Oil Drillers Are Going To Die" In Q2, Conway Mackenzie Warns "Expect Outright Liquidations"

Tyler Durden's picture



 

"The second quarter is going to be devastating for the service companies," warns Conway Mackenzie - the largest U.S. restructuring firm - adding that, despite slashing thousands of jobs, delaying (or scrapping) billions in capex amid the prolonged rout in oil prices, "there are certainly companies that are going to die." As Bloomberg reports, oil drillers will begin collapsing under the weight of lower crude prices during the second quarter and energy explorers who employ them will shortly follow with oilfield-service providers are facing a "double-whammy." As we noted here, there are more than a few candidates for this 'death' list as it appears increasingly clear that what was considered an "unambiguously good" narrative for the nation is anything but...

 

As Bloomberg reports,

Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy.

 

Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter, Young said Thursday.

 

“The second quarter is going to be devastating for the service companies,” Young said in a telephone interview from Houston. “There are certainly companies that are going to die.”

 

Oilfield-service providers are facing a “double-whammy,” he said. Even as oil companies are demanding 20 percent to 30 percent price reductions, they’re also extending wait times before paying their bills, enlarging cash-flow gaps for the drilling and equipment firms, he said.

 

...

 

The amount of projected 2015 oil and natural gas output a company has hedged is a strong indicator of whether they’ll be able to pay their bills, he said. Another important metric is how much is drawn on revolver loans, Young said.

 

“I’m telling them they really have to keep an eye on this stuff and you’ve got to be the squeaky wheel,” he said. “You’ve got to start filing liens if you see a company starting to go down.”

*  *  *

Wondering who is top of the list? As we detailed previously, there are plenty...

Readers will be most interested in the "restructuring/bankruptcy" option, most applicable for Group 4, because these are the names which,  all else equal, will file for bankruptcy first.

This is what Goldman's Jason Gilbert has to say:

We believe oil market weakness presents H&Y E&P management teams with difficult decisions. For certain stronger companies, the challenge may be one of deciding if and when to high grade the portfolio through M&A. For some weaker companies, the decisions may be more stressful, with many lower-quality names being forced to consider (1) selling themselves, (2) restructuring/filing for bankruptcy protection, and/or (3) bolstering liquidity through asset sales and/or second lien debt issuance.

 

We have created a 2x2 matrix, shown in Exhibit 1, where we classify E&Ps according to both asset quality and balance sheet strength. In Exhibit 2, we provide the backup data on each company that justifies its classification in the chart below.

The matrix in question:

 

Group 4: Weak balance sheet/weak assets

This group includes companies with leverage above 2.5x and assets we rate “B-“ or lower. Names we highlight are Approach Resources (NC), Exco Resources (NC), Goodrich Petroleum (NC), Halcon Resources (IL), Magnum Hunter (NC), Midstates Petroleum (NC), Rex Energy (NC), Sabine Oil & Gas (U), Samson Investment (NC), Sandridge Energy (IL), and Swift Energy (U).

 

We view management teams in this group as facing the most difficult decisions. Given the general lack of “core” assets, we believe strategic interest from a larger acquirer is less likely than for Group 3. Furthermore, with the bonds in this group generally trading below $80, we believe 101% change of control provisions act as de facto “poison pills” for acquirers. 

 

Given high leverage and the lack of strategic interest, we believe many companies will need to seek alternative sources of capital. While the options here will vary case by case, we note that most of these names have secured debt baskets that can be used to bolster liquidity. Based on the phone calls we receive, investor interest in this type of security remains high, which suggests to us we will see robust second-lien issuance as soon as the conclusion of 1Q earnings. The bottom line is that, for now, we think investors should tread lightly in this group, despite the average bond yield of 19% (excluding obviously distressed names Swift Energy, Samson Investment, and Sabine Oil & Gas).

*  *  *

As Conway McKenzie's John Young concludes:

"When I saw WTI hit $65, I thought we’re going to be really busy with restructurings,” Young said. “When it hit the $40s, I knew we were looking at outright liquidations."

Title: Bye Bye, Frackers...
Post by: RE on February 01, 2015, 10:41:15 PM
THE PAHHHTY IS OVAHHHH!

http://www.youtube.com/v/OFPkbQaoBEc?feature=player_detailpage

RE

When "Rumor Becomes Reality" - This Is The Devastation Across The US Oil Patch

Tyler Durden's picture



 

"This is going to hurt, no question," fears a landowner in Santa Barbara with a dozen oil wells. Layoffs are "kind of like a death in the family," exclaims a geophysicist in the Permian Basin. Houstonians were hoping for a hiccup, says one restauranteir, but now "they're getting more cautious." As WSJ reports, rumor is becoming reality across America as "unambiguously good" news of low oil prices turns from a trickle to a deluge of job losses and insecurity. Cutbacks aren’t yet reflected in broad data on employment, home sales or tax collections. But fallout is beginning to affect people, starting with the legions working as suppliers to the energy industry.

 

The pain is just starting...

 

As The Wall Street Journal reports,

Trouble has been looming over the oil patch since crude prices began falling last summer, from over $100 a barrel to under $50 today. But only now are the long-feared effects of a bust starting to ripple through the complex energy ecosystem, affecting Houston executives, California landowners and oil old-timers in Oklahoma.

Chevron is not alone in mass layoffs...

Eric Herschap is chief operations officer at Exclusive Energy Services LLC, a private company in Orange Grove, Texas, that offers services, including equipment rentals, to exploration companies.

His customers are demanding price cuts of 15% to 25%, and Exclusive offers additional discounts beyond that, he says.

 

So the company laid off 10 of its 45 employees and is cutting bonuses for those who remain.

 

Mr. Herschap says his brightest engineers are now fielding phone calls from customers with technical questions.

 

Nonenergy companies that rely on roughnecks are also pulling in their horns.

Laredo, the company that closed its Dallas office, said it was laying off 75 employees, about 20% of the workforce at the company, which has a stock-market value of about $1.3 billion.

“While it is a necessary step due to the substantial drop in commodity prices and the resultant reduction in the company’s drilling activities, we do not take such actions lightly,” it said.

 

Mr. Silver, the geophysicist, says that after living through oil busts, he has saved for the bad times and could retire—though he doesn’t want to.

 

“Probably the scariest thing out there is all of a sudden being without health insurance,” Mr. Silver says. “Just being thrown in the marketplace, that’s tough.”

Danny and Kim Gallo moved from Connecticut to tiny Runge, Texas, last February to open Boom Town Food Trucks to serve the Eagle Ford Shale.

But the company operates just one truck and a kitchen in a trailer at the moment, and the Gallos, who have backgrounds in the hospitality industry, have decided against adding another truck for a while.

 

“You’re sitting there and saying, ‘Wow, did we miss the party?’” says Mr. Gallo, whose most expensive item is an $11 double chorizo burger.

 

Fancier establishments that cater to energy executives are taking action, too. Steve Zimmerman has owned a restaurant and boutique hotel in Houston for decades and remembers the oil crash of 1986. Back then, he began offering an “Oil Barrel Special,” a multicourse meal with a price pegged to the (falling) cost of crude.

 

This month, he resurrected the special in an effort to attract customers while showing that he feels their pain.

 

Menus like escargot, salmon and bread pudding are on offer for about $50, depending on the closing price of West Texas Intermediate.

 

As oil prices started to fall, Houstonians were hoping for a hiccup, he says. Now, “they’re getting more cautious.”

*  *  *

Not 'unambiguously good' at all!!

Title: Re: Fracker Debt Bubble
Post by: RE on February 02, 2015, 05:05:17 AM
Can U Spell O-V-A-H?

RE

10% Of US Refining Capacity Offline After US Oil Workers Stage Largest National Strike Since 1980

Tyler Durden's picture



 

It's not exactly the same as if Wall Street were to unionize and demand higher wages, but when US energy workers - supposedly the best paid profession away from those who BTFD or BTFATH for a living - go on strike, it is time to pay attention, which is precisely what happened yesterday afternoon, when US union leaders launched a large-scale strike at nine refineries after failing to agree on a new national contract with major oil companies. It marks the first nationwide walkout since 1980 and impacts plants that together account for more than 10% of US refining capacity. The United Steelworkers Union (USW) began the strike on Sunday, after their current contract expired and no deal was reached despite five proposals.

As quoted by the BBC, USW International Vice President of Administration Tom Conway said in a statement that it "had no choice. This industry is the richest in the world and can afford to make the changes we offered in bargaining," 

Of course this is precisely what Saudi Arabia was hoping for, because unless crude prices soar, these "rich" energy companies will have no choice but to engage in pink-slipping many of these workers in the coming months, leading to a permanent mothballing of numerous facilities around the US, which in turn will dramatically reduce supply, finally leading to an organic increase in oil prices. Just as the Saudis had envisioned, however at a cost of hundreds of thousands of best-paid US jobs.

More:

 
 

"The problem is that oil companies are too greedy to make a positive change in the workplace and they continue to value production and profit over health and safety, workers and the community."

 

Royal Dutch Shell, the lead industry negotiator, said it "hopes to resume negotiations as early as possible".

 

The move comes at a tough time for oil companies, which have been cutting costs and reining in spending following a collapse in crude prices.

 

A large part of this is due to an increase in oil volumes extracted from shale formations, adding to a global supply glut.

 

USW said it represents workers at 65 US refineries that produce approximately 64% of the oil in the US.

 

The union has been renegotiating a three-year national contract since 21 January. The latest offer was the fifth proposal rejected by the union.

 

It wants to double the size of the annual pay increases from the previous agreement, increased healthcare coverage and reduced use of non-union contract workers.  

Good luck with those wage hike demands at a time when the majors are crushing executive management by halting stock buybacks.

Here are some more details on the strike from Bloomberg:

United Steelworkers union continues strike at 7 oil refineries and 2 other sites that began Sunday after failing to agree on labor contract renewal. Co. contingency plans in effect to keep most plants running. Union ready for more talks w/ lead co. negotiator Shell this wk.

Strike includes Lyondell, Marathon, Shell, Tesoro plants; full list below (co; location; b/d refining capacity)

Combined capacity for 7 refineries listed above ~1.8m b/d, or ~10% of U.S. operable capacity, according to data compiled by Bloomberg

More U.S. refineries standing by to join those already on strike

Strike note rescinded at TSO’s Mandan, N.D. refinery (70k b/d)

Local USW at BP Whiting agreed to rolling 24-hr extension

Some cos. yday said operations normal at refineries affected by USW notice, including: Shell Deer Park, Exxon Beaumont, LyondellBasell Houston

* * *

Expect more sudden and dramatic short squeeze in oil today as this information trickles down through the momentum-igniting algos that, much more than actual supply and demand, determine the price of the black gold.

Title: Re: Fracker Debt Bubble
Post by: agelbert on February 02, 2015, 01:43:02 PM
RE said, THE PAHHHTY IS OVAHHHH!
(http://www.pic4ever.com/images/47b20s0.gif)  (http://www.pic4ever.com/images/128fs318181.gif)(http://www.desismileys.com/smileys/desismileys_0293.gif)(http://images.zaazu.com/img/cheers-cheers-champagne-wine-smiley-emoticon-000183-large.gif)(http://www.pic4ever.com/images/za4.gif)
Title: It's the DEMAND, Stupid!
Post by: RE on February 05, 2015, 02:24:40 AM
When are these folks going to grasp that you can't keep selling something when the customers are tapped out on credit access?  ::)

Steve dropped in a comment on this one, I left it in.

RE

Oil Plunges, Inventories Soar to Record, Glut Gets Worse (http://wolfstreet.com/2015/02/04/oil-rally-brutally-crushed-inventories-soar-to-record-production-rises-no-respite-in-sight/)

by Wolf Richter • February 4, 2015   

Crude oil had rallied 20% in three days, with West Texas Intermediate jumping $9 a barrel since Friday morning, from $44.51 a barrel to $53.56 at its peak on Tuesday. “Bull market” was what we read Tuesday night. The trigger had been the Baker Hughes report of active rigs drilling for oil in the US, which had plummeted by the most ever during the latest week. It caused a bout of short covering that accelerated the gains. It was a truly phenomenal rally!

But the weekly rig count hasn’t dropped nearly enough to make a dent into production. It’s down 24% from its peak in October. During the last oil bust, it had dropped 60%. It’s way too soon to tell what impact it will have because for now, production of oil is still rising [my post from Friday… Oil Price Soars, Rig Count Plunges Worst Ever, But Bloodletting Just Beginning].

And that phenomenal three-day 20% rally imploded today when it came in contact with another reality: rising production, slack demand, and soaring crude oil inventories in the US.

The Energy Information Administration reported that these inventories (excluding the Strategic Petroleum Reserve) rose by another 6.3 million barrels last week to 413.1 million barrels – the highest level in the weekly data going back to 1982. Note the increasingly scary upward trajectory that is making a mockery of the 5-year range and seasonal fluctuations:

(http://wolfstreet.com/wp-content/uploads/2015/02/US-crude-oil-stocks-2015-02-04.png)

And there is still no respite in sight.

Oil production in the US is still increasing and now runs at a multi-decade high of 9.2 million barrels a day. But demand for petroleum products, such as gasoline, dropped last week, according to the EIA, and so gasoline inventories jumped by 2.3 million barrels. Disappointed analysts, who’d hoped for a drop of 300,000 barrels, blamed the winter weather in the East that had kept people from driving (though in California, the weather has been gorgeous). And inventories of distillate, such as heating oil and diesel, rose by 1.8 million barrels. Analysts had hoped for a drop of 2.2 million barrels.

In response to this ugly data, WTI plunged $4.50 per barrel, or 8.5%, to $48.54 as I’m writing this. It gave up half of the phenomenal three-day rally in a single day.

Macquarie Research explained it this way:

    In our experience, oil markets rarely exhibit V-shaped recoveries and we would be surprised if an oversupply situation as severe as the current one was resolved this soon. In fact, our balances indicate the absolute oversupply is set to become more severe heading into 2Q15.

Those hoping for a quick end to the oil glut in the US, and elsewhere in the world, may be disappointed because there is another principle at work – and that principle has already kicked in.

As the price has crashed, oil companies aren’t going to just exit the industry. Producing oil is what they do, and they’re not going to switch to selling diapers online. They’re going to continue to produce oil, and in order to survive in this brutal pricing environment, they have to adjust in a myriad ways.

“Efficiency and innovation, when price falls, it accelerates, because necessity is the mother of invention,” Michael Masters, CEO of Masters Capital Management, explained to FT Alphaville on Monday, in the middle of the three-day rally. “Even if the investment only spits out quarters, or even nickels, you don’t turn it off.”

Crude has been overvalued for over five years, he said. “Whenever the return on capital is in the high double digits, that’s not sustainable in nature.” And the industry has gotten fat during those years.

Now, the fat is getting trimmed off. To survive, companies are cutting operating costs and capital expenditures, and they’re shifting the remaining funds to the most productive plays, and they’re pushing 20% or even 30% price concessions on their suppliers, and the damage spreads in all directions, but they’ll keep producing oil, maybe more of it than before, but more efficiently.

This is where American firms excel: using ingenuity to survive. The exploration and production sector has been through this before. And those whose debts overwhelm them – and there will be a slew of them – will default and restructure, wiping out stockholders and perhaps junior debt holders, and those who hold the senior debt will own the company, minus much of the debt. The groundwork is already being done, as private equity firms and hedge funds offer credit to teetering oil companies at exorbitant rates, with an eye on the assets in case of default. [read… “Vulture” Investors Descend on the Oil Patch].

And these restructured companies will continue to produce oil, even if the price drops further.

So Masters said that, “in our view, production will not decrease but increase,” and that increased production “will be around a lot longer than people are forecasting right now.”

After the industry goes through its adjustment process, focused on running highly efficient operations, it can still scrape by with oil at $45 a barrel, he estimated, which would keep production flowing and the glut intact. And the market has to appreciate that possibility.

What ratings agency Fitch and the Bank of Canada had warned about has come to pass. Read…  Canada Mauled by Oil Bust, Job Losses Pile Up – Housing Bubble, Banks at Risk


    steve from virginia
    February 4, 2015 at 8:53 pm

    These oil companies were losing money @ $100/barrel. Somehow they will make a profit @ $50?

    “To survive, companies are cutting operating costs and capital expenditures, and they’re shifting the remaining funds to the most productive plays, and they’re pushing 20% or even 30% price concessions on their suppliers, and the damage spreads in all directions, but they’ll keep producing oil, maybe more of it than before, but more efficiently.”

    And make up their losses with volume! The hope-and-prayer is that fresh loans will pick up the slack … until the good times return.

    But they aren’t coming back. What doesn’t change is the return on consumption … which is a negative number. No matter how much efficiency can be wrung out of the extraction side, nothing changes on the side that really loses money, the automobile- wasting of energy side.

    Our cars have bankrupted us to the point we cannot afford to bid for oil any more. Our banks will not lend to us, they need to lend to the drillers even though the same drillers need to sell their oil products to us in order to retire these loans. We haven’t figured out what to do with the oil other than burn it up for nothing. We need loans like the drillers; because we are insolvent we cannot borrow.

    It isn’t just the drillers’ overhead costs that spread in all directions. The (non)exchange of money for gasoline at filling stations millions of times per day determines the worth of money. Ordinary monetary policy as determined by finance and central banks becomes irrelevant, interest rates no longer matter. Currencies — particularly the US dollar — become hard and are hoarded, the dollar becomes the last-best chance at petroleum. The outcome is a steady deterioration in efficiency of consumption by way of dollar preference: no matter how low the price of oil falls it never is low enough to finance consumption
Title: Re: Fracker Debt Bubble
Post by: agelbert on February 05, 2015, 12:38:16 PM
Ahem. My dear fellow,what you are observing is a head fake gone awry. (http://www.coh2.org/images/Smileys/huhsign.gif)

You see, Big Oil figured WRONGLY that if they gamed the price lower on the partially true premise that tanking economies destroy demand, thereby increasing supply and causing lower prices  (see Zero Hedge, TBP and Mking economics world view  ;D), we-the-dumb-fucks would all go out and buy SUVs, among other "usual" activities the fossil fuelers have gamed us into doing for about a century.

(http://www.createaforum.com/gallery/renewablerevolution/3-260115151805.png)

But their "too clever by  a half" ruse did not figure DEMAND REJECTION (from renewable energy) into their profit over people and planet calculus; an error of judgement that will help ensure their bankruptcy. Boo hoo.

Renewable energy= (http://www.createaforum.com/gallery/renewablerevolution/3-301014181553.gif)                                (http://www.freesmileys.org/smileys/smiley-scared002.gif)=Fossil Fuelers
(http://www.freesmileys.org/smileys/smiley-forum/popcorn.gif)

(http://[url=http://www.createaforum.com/gallery/renewablerevolution/3-260115193430.png]http://www.createaforum.com/gallery/renewablerevolution/3-260115193430.png[/url])


Title: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: RE on February 08, 2015, 05:31:14 PM
While Professor Moriarty does little besides Bloviate on his own importance, Art Berman actually addresses the issues Moriarty studiously avoids and hides from, in his deep cowardice and lack of factual underpinning to his propaganda.

RE

Arthur Berman: Why Today's Shale Era Is The Retirement Party For Oil Production (http://www.zerohedge.com/news/2015-02-08/arthur-berman-why-todays-shale-era-retirement-party-oil-production)

Submitted by Tyler Durden on 02/08/2015 15:45 -0500

Submitted by Adam Taggart via Peak Prosperity,

As we've written about often here at PeakProsperity.com, much of what's been 'sold' to us about the US shale oil revolution is massively over-hyped. The amount of commercially-recoverable shale oil is much less than touted, returns much less net energy than the petroleum our economy was built around, and is extremely unprofitable to extract for most drillers at today's lower oil price.

To separate the hype from reality, our podcast guest is Arthur Berman, a geological consultant with 34 years of experience in petroleum exploration and production.

Berman sees the recent US oil production boost from shale drilling as short-lived and somewhat desperate; a kind of last hurrah before the lights get turned out:

    The EIA looks at the US tight oil plays and they see maybe five years before things start to fall off. I think it is less, but I am not going to split hairs. The point is that what we found is expensive and we have got a few years -- not decades -- of it.

 
    So when we start hearing people pounding the table about how the United States should lift the ban on crude oil exports, well that is another topic if we are just talking about free trade and regulation, but what in the world is a country like ours doing still importing 5  million barrels of crude oil a day and we have got maybe 2 years of supply from tight oil? What are we thinking about when we claim we're going to export oil? That is just a dumb idea. It is like borrowing money from a bankrupt person.

    I'll tell you what they're thinking about: the companies are thinking it is easier for them just to sell the oil directly overseas than it is to go through all the hassle of having to blend it with heavier oil and refine it here in the US and then go sell it overseas, as they have to do today.

    Anyways, I think you just have to be realistic. Let’s give ourselves credit for ingenuity. We have done something that a few years ago probably almost no one thought was possible. But let’s also be realistic: this is the most mature petroleum province on earth. We are squeezing blood from a stone and as long as prices are high, we will squeeze a little more. And that’s it.

    I like to talk about these shale plays as not a revolution, but a retirement party. I mean, you know, this is the kind of bittersweet celebration you have when you are almost out the door and are going to sit around the house and watch Duck Dynasty whatever for your remaining days. It's not really cause for a celebration. It is cause for some sobering concerns and taking stock about what does the future have in store for us as a country, as a world?

Click the play button below to listen to Chris' interview with Arthur Berman (55m:44s):

http://www.youtube.com/v/5tOVp1vSeVA?feature=player_embedded
Title: Re: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: azozeo on February 08, 2015, 07:43:26 PM

While Professor Moriarty does little besides Bloviate on his own importance, Art Berman actually addresses the issues Moriarty studiously avoids and hides from, in his deep cowardice and lack of factual underpinning to his propaganda.

RE



http://www.youtube.com/v/i9SSOWORzw4&fs=1
Title: Re: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: MKing on February 08, 2015, 07:55:57 PM

While Professor Moriarty does little besides Bloviate on his own importance, Art Berman actually addresses the issues Moriarty studiously avoids and hides from, in his deep cowardice and lack of factual underpinning to his propaganda.

RE

I have been in the room on multiple occasions where Art said things that were factually incorrect, and in one case he was actually corrected by the person who's organization's results he misrepresented. The quality of sources are important. Anyone else who has seen this guy in person, and understand his subject matter well enough to know when he says something that is inaccurate?
Title: Re: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: WHD on February 08, 2015, 08:41:14 PM

While Professor Moriarty does little besides Bloviate on his own importance, Art Berman actually addresses the issues Moriarty studiously avoids and hides from, in his deep cowardice and lack of factual underpinning to his propaganda.

RE

I have been in the room on multiple occasions where Art said things that were factually incorrect, and in one case he was actually corrected by the person who's organization's results he misrepresented. The quality of sources are important. Anyone else who has seen this guy in person, and understand his subject matter well enough to know when he says something that is inaccurate?

Actually, Art just discussed his take on the fracking situation. MKing, in his ever repetitive ways, carved up Berman behind his back with a knife, slandering his character. MKing, care to debate Art, or are you content to merely slander the man without evidence?

WHD
Title: Re: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: RE on February 08, 2015, 08:46:04 PM
Actually, Art just discussed his take on the fracking situation. MKing, in his ever repetitive ways, carved up Berman behind his back with a knife, slandering his character. MKing, care to debate Art, or are you content to merely slander the man without evidence?

Typical Moriarty.  He implies somebody is a liar, claims an occassion he was present at that nobody else can verify as evidence, and doesn't even say what Art was supposedly lying about.

This type of posting should not be going up.  It's just character assassination with no evidence at all.

RE
Title: Re: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: WHD on February 08, 2015, 09:02:04 PM
Actually, Art just discussed his take on the fracking situation. MKing, in his ever repetitive ways, carved up Berman behind his back with a knife, slandering his character. MKing, care to debate Art, or are you content to merely slander the man without evidence?

Typical Moriarty.  He implies somebody is a liar, claims an occassion he was present at that nobody else can verify as evidence, and doesn't even say what Art was supposedly lying about.

This type of posting should not be going up.  It's just character assassination with no evidence at all.

RE

I let it through as I see it as MKing destroying whatever meager character he has left, in the mind of anyone here.

WHD


Title: Re: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: RE on February 08, 2015, 09:36:20 PM

I let it through as I see it as MKing destroying whatever meager character he has left, in the mind of anyone here.


Moriarty's Credibility and Character descended to the Negative Imaginary Numbers around the time he suggested the Japanese deserved to be Nuked at Hiroshima and Nagasaki.  It is overkill to have him demonstrate what an asshole he is over and over again.

If he drops on attributable quotes from Berman and can demonstrate that those quotes are false, publish it.  If he just calls him a liar and doesn't do a damn thing to demonstrate that, shit can it.  DNF.  :icon_sunny:

(http://www.doomsteaddiner.net/blog/wp-content/uploads/2013/08/trash.gif)

RE
Title: Re: Art Berman Carves Moriarty Up Like Thanksgiving Turkey
Post by: MKing on February 09, 2015, 07:54:16 AM

While Professor Moriarty does little besides Bloviate on his own importance, Art Berman actually addresses the issues Moriarty studiously avoids and hides from, in his deep cowardice and lack of factual underpinning to his propaganda.

RE

I have been in the room on multiple occasions where Art said things that were factually incorrect, and in one case he was actually corrected by the person who's organization's results he misrepresented. The quality of sources are important. Anyone else who has seen this guy in person, and understand his subject matter well enough to know when he says something that is inaccurate?

Actually, Art just discussed his take on the fracking situation.

"Just"? Are you truly not aware of Art's past claims? How in the world can you judge the quality of an opinion without understanding past claims that have been born out, or refuted, by reality and results?

Quote from: WHD
MKing, care to debate Art, or are you content to merely slander the man without evidence?

WHD

Slander the man? Without evidence? Oh my goodness, you don't understand, when someone makes a factual error, it isn't slander to point it out. One example in question was Art's claim that Elf Aquitaine drilled the first horizontal well in the early 80's. I can probably come up with the notes, time and date he made the claim (April 2011 SIPES if I recall), as a fair number of us in the audience were doing.

I have my own upcoming speech at a petroleum club coming up here in a bit, you can bet I am not going to assemble a "claim you know something and get it wrong because you don't" talk!!  Do you know how EMBARRASSING that is? Sorry...I'll stick to understanding the history (having participated in it), the experience in having done it in the field (having done it in the field) and the expertise in having applied those successfully to generate meatspace results. :icon_sunny: :icon_sunny:

For those who weren't there, and don't understand the history, and wouldn't normally take a world class professional's word for it because blogosphere specialists are just so much more knowledgeable, we can stick to providing information they are familiar with, from those who specialize in collecting statistics and analyzing data and such.

http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/drilling_sideways_well_technology/pdf/tr0565.pdf (http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/drilling_sideways_well_technology/pdf/tr0565.pdf)
Title: Re: Fracker Debt Bubble
Post by: MKing on February 09, 2015, 08:41:03 AM
William, if you are REALLY interested in accuracy, or lack thereof, check out the Berman video at about the 41:20 Mark. Chris asks him a question, and Berman demonstrates he doesn't understand how the folks who estimate things like shale gas production do it. With that hint, I will leave it to you to discover what particular he has demonstrated he DOESN'T know in his answer.
Title: Re: Fracker Debt Bubble - MKing on Notice
Post by: WHD on February 09, 2015, 08:56:19 PM
William, if you are REALLY interested in accuracy, or lack thereof, check out the Berman video at about the 41:20 Mark. Chris asks him a question, and Berman demonstrates he doesn't understand how the folks who estimate things like shale gas production do it. With that hint, I will leave it to you to discover what particular he has demonstrated he DOESN'T know in his answer.

What Art Berman claims is that the EIA used a production forecast method in estimating future production of natural gas, based on prior production growth. Then he went on to offer other studies which used different methods, which came up with different results, less optimistic. If you want to demonstrate, with actual evidence, that what Art claims about EIA methods, are in fact false as you claim, then the next arrogant piss-ant character assassination comment you have pending will be published, and then I will deconstruct that for our reading audience.

WHD   
Title: Re: Fracker Debt Bubble -Pump & Pray method
Post by: azozeo on February 10, 2015, 04:40:57 PM
http://www.youtube.com/v/RgjWEd2Yops&fs=1
Title: Another 6500 Halliburton Frackers Hit the UE Lines
Post by: RE on February 11, 2015, 02:39:38 AM
At least Roamer is still employed...

RE

Halliburton To Cut Up To 6,500 Jobs As Crude Carnages To Crucial $50 Level

Tyler Durden's picture





 

But everything was supposed to be fixed?

WTI is tumbling down 5%, nearing the crucial $50 level...

 

As The Houston Business Journal reports,

 
 

Houston-based Halliburton Co. (NYSE: HAL) confirmed it will cut anywhere from 5,000 to nearly 6,500 jobs companywide because of slumping oil prices and the resulting decline in oil and gas exploration and production.

 

Halliburton said Feb. 10 it will cut 6.5 percent to 8 percent of its global headcount. The company reported having about 80,000 global employees last year, including 8,600 in the Houston region.

 

In a new email to employees, Halliburton Chairman and CEO Dave Lesar stated that no one is immune.

 

"We value every employee we have, but unfortunately we are faced with the difficult reality that reductions are necessary to work through this challenging market environment," Halliburton spokeswoman Emily Mir said in an email response. "The impact will be across all areas of Halliburton's operations."

And this won't help...

Title: The Fracking Bust Hits Home
Post by: RE on February 17, 2015, 11:54:10 PM

The Fracking Bust Hits Home

Never before has drilling for oil collapsed this far this fast.

The word “boom” can never be thought of as a stand-alone concept that everyone loves, particularly governments because they get to rake in the big bucks. It’s always attached to its miserable twin that no one wants to see, the “bust.” They come invariably in cycles, one after the other. You can’t have one without the other. It’s just a question of time. And in the world of fracking, it’s no different.

The fracking-for-oil boom started in 2005, collapsed by 60% during the Financial Crisis when money ran out, but got going in earnest after the Fed had begun spreading its newly created money around the land. From the trough in May 2009 to its peak in October 2014, rigs drilling for oil, as measured by Baker Hughes’ weekly rig count, soared from 180 to 1,609: multiplied by a factor of 9 in five years! And oil production soared along with it, to reach 9.2 million barrels a day in January.

That’s what real booms look like. They’re fed by limitless low-cost money – exuberant investors that buy the riskiest IPOs, junk bonds, leveraged loans, and CLOs usually indirectly without knowing it via their bond funds, stock funds, leveraged-loan funds, by being part of a public pension system that invests in private equity firms that invest in the boom…. You get the idea.

That’s how much of the American shale-oil revolution was funded.

Production soared for five years and eventually outpaced sluggish demand. Crap happened on the world scene, and suddenly the fracking boom, the biggest no-brainer in the history of mankind, turned into a terrible bust.

On the drilling side, the bust began in mid-October last year, after the price had been plunging for over three months. At that time, 1,609 rigs were actively drilling for oil, according to Baker Hughes. Since then, week after week, drillers were idling rigs as fast as they could.

In the latest reporting week, drillers idled another 84 rigs, the second biggest weekly cut ever, after idling 83 and 94 rigs in the two prior weeks. Only 1056 rigs are still drilling for oil, down 443 for the seven reporting weeks so far this year and down 553 – or 34%! – from the peak in October.

Never before has the rig count plunged this fast this far:

US-rig-count_1988_2015-02-13=oil

What if the fracking bust, on a percentage basis, does what it did during the Financial Crisis when the oil rig count collapsed by 60% from peak to trough? It would take the rig count down to 642!

During the financial crisis, it was a very brief but violent dip with an instant V-shaped recovery. But regular oil busts in the past have taken years to work through their problems. And rather than plunging production, we’re still seeing record-breaking production.

When will production level off?

The natural gas fiasco has shown that a price that falls below the cost of production is no incentive to cut production for the industry as a whole, as long as it gets new money to drill into the ground. The Fed’s boundless liquidity and its interest-rate repression have seen to it. But the emphasis is on producing more with less – and paper over the losses.

The number of rigs drilling for natural gas in the last reporting week fell by 14 to 300, the lowest since May 1993, having collapsed by 81% since 2008:

US-rig-count_1988_2015-02-13=gas

But natural gas production is still soaring from record to record. And the price destruction continues to this day.

Companies like Samson Resources that have focused on dry-gas production are now barely hanging on. Samson has lost over $3 billion since it was acquired in 2011 by a group of private-equity firms led by KKR, which has now written down its investment to 5 cents on the dollar. But Samson is still drilling for gas! [read… Money Dries Up for Oil & Gas, Layoffs Spread, Write-Offs Start].

So if natural gas is the model, the production of oil isn’t going to slow down anytime soon. But if there is no V-shaped recovery of the price of oil, the exploration-and-production sector and its suppliers will be in a world of hurt, possibly for years.

The pain is already hitting Houston, the corporate epicenter of the American oil boom. Projects are being put on hold, “and everyone is waiting for the other shoe to drop,” an engineer in the energy sector said. “Not pushing the panic button by any means” is how the Texas banking regulator phrased it. But it’s looming in front of everyone. Read… Oil Bust Hits Office Construction Boom, Banks, Suppliers – But Hey, “So Far” No Apocalypse

Title: Re: Fracker Debt Bubble
Post by: JoeP on February 19, 2015, 07:41:22 AM
Jeremy Grantham's views on the oil glut, Saudi decisions, and the uniqueness of U.S. fracking:

Why Were We So Surprised? (http://www.doomsteaddiner.net/forum/MGalleryItem.php?id=2729)
 
 
Title: Re: Fracker Debt Bubble
Post by: Palloy on February 22, 2015, 05:06:10 PM
Somehow I doubt that it was as a result of protesters - more likely that it was as a result of Chevron not seeing sufficient profits,
after pre-exploration hype proved unfounded after real exploration.

http://rt.com/news/234603-chevron-quits-fracking-romania/ (http://rt.com/news/234603-chevron-quits-fracking-romania/)
Chevron ditches last European fracking project in Romania
February 23, 2015

US energy giant Chevron is terminating its operations in Romania due to poor exploration results and prolonged protests by environmentalists.The withdrawal from this fracking project will mark the end of the company’s shale gas exploration in Europe.

Because of falling oil prices and underwhelming results in Europe, Chevron is now switching its focus to home soil. Last month, the company announced it was halting it projects in Poland, and terminated shale-gas agreements in Lithuania and Ukraine.

“That leaves Romania, where we are in the process of relinquishing our concession interests,” a Chevron spokesman told the Wall Street Journal, without specifying why it was relinquishing its interest in the country. The markets, meanwhile, are waiting for Chevron’s official announcement.

While the US Energy Information Administration had previously estimated that Romania could potentially recover enough gas to cover domestic demand for more than a century, the exploration failures resulted in the country’s prime minister, Victor Ponta, saying last year that it looks like Romania “does not have shale gas.”

Globally, Chevron’s 2014 failure rate stood at 30 percent, as compared to 18 percent in 2013, according to Bloomberg. Sixteen of the 53 wells the company drilled were found to have had no commercially viable quantities of oil or natural gas.
In other parts of Europe, such as Germany and France, fracking is under a moratorium, while the UK’s pursuit of the energy source is bound by strict regulations.Chevron recently announced that it is cutting on capital and exploratory investments in 2015 by 13 percent to $35 billion.

The oil giant’s decision to quit is seen as a major victory for activists, who have adamantly stood against the controversial practice over the years, often clashing with police.

Fracking, the process of hydraulic fracturing and horizontal drilling on land, is much more expensive than drilling from an average water-based oil rig. Over the past several years, however, it has become relatively cheap and efficient. Energy companies, eager to get in on the riches of the American oil boom, jumped on every opportunity to make a buck, despite potential environmental costs.

Analysts believe that shale needs to sell at $60-100 per barrel to break even on the billions of debt accrued by the energy companies, but plummeting oil prices are putting pressure on shale exploration. Chevron's quest for shale riches and its subsequent problems in Europe will also be shared by market players. Exxon Mobil and Total, for example, have also quit their shale projects in eastern Europe.

Title: Oil's "Surprise" Collapse: It's The Demand, Stupid
Post by: RE on February 22, 2015, 07:08:27 PM
This article will be no surprise to Diners, where we have been arguing for quite some time that the price problem for Oil comes not from the Supply end, but from DEMAND DESTRUCTION.

Batting 1000 here on the Diner.  :icon_sunny:

RE

 

Oil's "Surprise" Collapse: It's The Demand, Stupid

Tyler Durden's picture



 

Submitted by Jeffrey Snider via Alhambra Investment Partners,

Crude oil futures have been quite volatile of late, particularly in the front months where even the slightest changes in expectations of whatever factor (rig counts, CEO comments, etc.) send WTI surging or tumbling by turn. Despite that, however, the outer years on the curve have seen not just more stability but a steady downward pressure of late. I think a lot of that has to do with futures investors reconciling actual contango options with the idea that demand is far more of not just a problem, but a longer-term problem.

At the front end, rig counts have gained most attention but only as they relate to the surge in inventory. The US is overflowing with oil and production remains at a record high, but the two of those factors together don’t actually count as much in terms of price as is made out by most commentary. It is far too difficult for many to discount the entire economics professions’ complete dedication to the US “booming” economy in order to see a huge demand problem in oil prices; far easier to simply repeat the words “record supply” and leave it at that.

ABOOK Feb 2015 Crude WTI Futures

If you actually view the futures curve of late, the curves of recent days has crossed in the outer years. In other words, where prices have moved around at the shorter end, out at the long end the curve has shifted significantly downward regardless of short term pricing. That relates to both contango, as noted above, but also I believe growing recognition that supply is overwrought and demand is what may be impaired – perhaps more permanently than anyone thought possible only a few months ago.

In order to believe that crude prices are solely a supply problem you simultaneously have to believe that futures investors are all stupid. This is not to say that they are never wrong, but in this case it would mean that they cannot even perform basic tasks of financial discounting in order to set an orderly and clearing market price. That is the only way you can look at “record supply”, which is clearly the case, and think it has anything much to do with the collapse in oil prices (latest monthly figures through November 2014).

ABOOK Feb 2015 Crude Production US

US domestic supply has been rising precipitously since July 2011! And it has done so in a remarkably stable fashion, nearly a straight line to match even the S&P 500 in slope. In other words, “record supply” has been a continuous facet of oil markets for almost four years now and the trend in the level of production should not surprise anyone let alone futures investors. If anyone was surprised by the level of crude oil production heading into 2015, enough to sell, sell and sell to the tune of an almost 60% price drop, they had to be utterly incompetent especially as futures prices are supposed to be the purest form of discounting future considerations. The supply part of the equation is decidedly easy and clear.

What is driving prices now is the record buildup in crude stocks, which has only recently become problematic.

ABOOK Feb 2015 Crude Stocks US

Each weekly release of the US EIA estimates of crude inventory has been market-moving in January and February, to both fuel rebounds and kick off erosion in prices, because the amount of building inventory is immense.

ABOOK Feb 2015 Crude Inventory

Given the cumulative assessments here, it seems far more likely that if some variable has changed, and done so dramatically, it is not a “surprise” surge in crude supply but rather a sudden and sharp drop in demand that had reasonably matched growing supply until only more recently. The nature of futures markets being what they are, imperfect as they may be, it is even likely that investors there took financial cues in the “rising dollar” to mean that the probability of demand matching supply was falling. The heightened illiquidity into October and then December simply confirmed growing financial problems which would reflect in far lower probabilities of economic stability.

In other words, futures markets assume that supply may be a problem but only because now, all of sudden, demand, including US demand, will no longer keep up. The fact that such an imbalance created a nearly 60% collapse in price speaks to the growing probability of any economic shortfall occurring as well as the far more important and greater discounting of its severity and/or duration. It bears overstating that these kinds of price movements only occur during severe economic dislocations of a global scale.

Either all futures market participants are comically inept or demand is the variable that shifted hard. Those are the only two possibilities.

Title: Re: Fracker Debt Bubble
Post by: RE on March 03, 2015, 04:51:12 PM
Brilliant plan here by Chesapeake and EOG, cap the wells and wait for the price to rebound!  Unfortunately, capped wells produce no revenue, so how do you service all that debt you have?  Answer, roll it over with more debt which the TBTF Banks will issue because they can't afford for you to go belly up.  Criminals.

RE


Could Oil Prices Plummet A Second Time? (http://www.zerohedge.com/news/2015-03-03/could-oil-prices-plummet-second-time)

Submitted by Tyler Durden on 03/03/2015 13:20 -0500


Submitted by Nick Cunningham via OilPrice.com,

Are oil prices heading for a double dip?

The surge in shale production has produced a temporary glut in supplies causing oil prices to experience a massive bust. After tanking to a low of $44 per barrel in January, falling rig counts and enormous reductions in exploration budgets have fueled speculation that the market will correct sometime later this year.

However, there is a possibility that the recent rise to $51 for WTI and $60 for Brent may only be temporary. In fact, several trends are conspiring to force prices down for a second time.

Drillers are consciously deciding to delay the completion of their wells, holding off in hopes that oil prices will rebound, according to E&E’s EnergyWire. The decision to put well completions on hold could provide a critical boost to the ultimate profitability of many projects. Higher oil prices in the months ahead will provide companies with more money for each barrel sold. But also, with the bulk of a given shale well’s lifetime production coming within the first year or two, it becomes all the more important to bring a well online when oil prices are favorable. With prices still depressed – WTI is hovering just above $50 per barrel – drillers are waiting for sunnier days.

Yet another reason to wait is the possibility that costs for well completions will decline. Oil and gas companies often contract out well completions to third parties, and those companies will face pressure to cut their fees in order to keep business. That works in favor of producers who put their projects on hold for the time being. Well completions can make up as much as three-quarters of the total project cost.

Several prominent shale drillers have confirmed they are undertaking such a wait-and-see strategy. EOG Resources, one of the biggest Texas shale drillers, announced its plans in late February to hold off on completions. Chesapeake Energy and Continental Resources have now followed suit.

"We're intentionally holding production back in 2015, because we believe it's the prudent thing to do," Doug Lawler, Chesapeake's CEO, said in a conference call. Chesapeake has said it may delay completing as many as 100 wells. EOG has 200 wells awaiting completion, a backlog that will intentionally rise to about 350 this year.

As the industry clears out that queue of wells awaiting completion, a rush of new supplies could come online, pushing WTI prices down once again.

Even with well completions being suspended, supplies continue to build. The latest EIA data shows that oil stocks in the United States climbed to 434 million barrels, the highest levels in storage in over 80 years. “My gut feeling is that the oil price could see a double bottom,” Jason Kenney, an analyst with Banco Santaander SA said in a Bloomberg interview. “We’ve got too much inventory.” Bloomberg noted that Kenney has a good track record of predicting price swings in the past. Even though rig counts have declined significantly, output has so far proved resilient.

Finally, there is some evidence that the ability to move excess oil into storage may run into trouble if production does not decline. Storage tanks are starting to fill, raising the possibility that a glut could worsen. There is a great deal of uncertainty around how quickly this might happen. The EIA sought to clarify, noting that the markets have confused some of its storage figures – some oil supplies in the EIA’s weekly inventory data is actually sitting in pipelines and at well sites, meaning there is more storage capacity available than many news outlets had originally thought. An EIA analyst recently told Bloomberg that overall storage capacity is only at about 60 percent, and “[w]e still have a way to go before we can consider ourselves to be full,” Rob Merriam, EIA’s head of petroleum statistics said. It would take a few months of strong inventory builds to fill up the remaining storage, perhaps an unlikely scenario, especially if production starts to take a hit. But if storage tanks did start to fill up, prices would dive once again and companies would have to shut in wells and cut back on production.

Rig counts are at six year lows, forcing oil prices up on speculation that supply reductions will soon relieve the oil glut. But a double dip cannot be ruled out.
Title: Re: Fracker Debt Bubble
Post by: Surly1 on March 04, 2015, 02:33:37 AM
Brilliant plan here by Chesapeake and EOG, cap the wells and wait for the price to rebound!  Unfortunately, capped wells produce no revenue, so how do you service all that debt you have?  Answer, roll it over with more debt which the TBTF Banks will issue because they can't afford for you to go belly up.  Criminals.

RE
Could Oil Prices Plummet A Second Time? (http://www.zerohedge.com/news/2015-03-03/could-oil-prices-plummet-second-time)

In fairness, if you were in their shoes, what would you do?  Continue to pump, and lose six bucks a barrel?
 And of course the banks will the debt over. What else would they do?
Title: Re: Fracker Debt Bubble
Post by: RE on March 04, 2015, 02:54:15 AM

In fairness, if you were in their shoes, what would you do?  Continue to pump, and lose six bucks a barrel?
 And of course the banks will the debt over. What else would they do?

I'm NOT in their shoes.

I'm also entertained watching the TBTF Banks throw more good money after bad.

Nothing lasts forever, not even jackass stupidity like this from the jackasses who run companies like this.

When it goes down, it will be EPIC.

RE
Title: Re: Fracker Debt Bubble
Post by: RE on March 05, 2015, 03:44:20 PM
Pop goes the Bubble.

(https://kahmaal.files.wordpress.com/2012/10/bubble2.jpg)

RE

 

Shale Company Defaults On $175 MM In Bonds Without Making A Single Interest Payment

Tyler Durden's picture



 

Update: And just to prove that people are indeed, idiots, moments ago this hits:

We set the odds at 75% that not even odd coupon payment will be made in this case either.

* * * * *

It was just this past June when a report on Seeking Alpha quizzically asked, "Can American Eagle Energy Corporation Fly High Like An Eagle Over The Next Months?"

 

The answer, it turns out, is no.

According to a Bloomberg report, the Colorado oil producer, whose stock is now trading at a very sub-eagle $0.20, or about $6MM in market cap (the stock was at $6.00 when the Seeking Alpha report came out) has announced it will not make even one coupon payment on its bonds issued less than seven months ago.

Bloomberg reports that after raising $175 million in a junk-bond offering, American Eagle Energy Corp. said Monday that it wouldn’t make its first interest payment on the debt. And instead of fulfilling its naive bondholders dreams that they will collect an 11% annual coupon for the next 5 years and then get repaid in full, the company hired bankruptcy advisers, Canaccord Genuity and Seaport, to negotiate a restructuring plan with the bondholders. Said bondholders now have two options: give the company more time to try to become profitable (i.e., hope that oil somehow soars from here) or push it into default, and become the new equity holders following a debt for equity.

None of this should be a surprise to anyone, and certainly not our readers, whom we warned on October 14 that "If The Oil Plunge Continues, "Now May Be A Time To Panic" For US Shale Companies." We should have added bondholders of shale companies to the list of panickees.

“American Eagle Energy’s small scale and relatively high drilling costs made it the one of the first victims of the drop in energy prices,” said Spencer Cutter, a credit analyst at Bloomberg Intelligence. “It was also unfortunate that oil prices dropped so much soon after the bond was issued, causing it to skip its first-ever interest on the debt.”

It won't be the last. Recall that just over a month ago we laid out a matrix created by Goldman showing which shale companies will be the next to pop. AEE wasn't even on the list:

 

As for AEE, its existing shareholders are now wiped out, while the yield-scrambling debt investors instead of pocketing a solid 11% yield for 5 years are now looking at an 80% loss - the $175MM 11%s of 2019 were trading at 20 cents of par at last check.

And since the company won't have any cash to repay anyone, the bondholders will end up with the equity, the problem is that this is equity in a company which even post restructuring, will be unviable absent oil returning back to the $80+ ballpark (the first-lien debt trades at 40 cents on the dollar).

 
 

Marty Beskow, a spokesman at American Eagle Energy, didn’t respond to e-mailed messages and telephone calls seeking comment. Scott Davidson, a spokesman at Canaccord, and Tanya Alvear, a spokeswoman at Seaport Global, declined to comment.

It is somewhat ironic that Canaccord was also one of the bond deal underwriters...

 
 

The Littleton, Colorado-based company stopped drilling in
 November and suspended its 2015 capital plan because of the drop in oil
 prices, according to a statement Monday. West Texas Intermediate crude,
 the U.S. benchmark, traded near $51 a barrel on Thursday, down from more
 than $107 in June.

What is perhaps most odd is that American Eagle Energy actually had downside oil hedges: the only problem, they were not nearly enough!

 
 

The driller’s financial problems became apparent to lenders in December when its ability to borrow on a revolving line of credit, which was initially as much as $60 million, was canceled, according to a company statement on Dec. 31. To raise cash, American Eagle Energy closed out hedge positions that protected it from falling oil prices, raising $13 million that represented 414,000 barrels of oil at an average of $89.59 each, according to a Dec. 31 filing.

The company was insolvent 2 months later.

And since AEE is effectively in default without making a single coupon payment, all those bond traders who were alive in a happier and far less centrally-controlled time and recall the infamous case of Movie Gallery, which was the last such instance to issue debt only to go bankrupt without making even one payment (Goldman was the underwriter) can raise a toast to happier times and recall how that snowy day in early 2007 during the Movie Gallery roadshow which coincided with the peak of the last credit bubble, was the true harbinger (before even the subprime blow up) of the financial system collapse that would ensue just over a year later.

The question now is: is American Eagle Energy this generation's Movie Gallery?

Title: Re: Fracker Debt Bubble
Post by: Palloy on March 06, 2015, 07:01:32 PM
Here is another time lag that has been hiding the bleedin' obvious:

http://www.zerohedge.com/news/2015-03-06/ep-writedowns-loom-reserves-overvalued-60 (http://www.zerohedge.com/news/2015-03-06/ep-writedowns-loom-reserves-overvalued-60)
E&P Writedowns Loom As Reserves Overvalued By 60%
Tyler Durden
3/06/2015

In principle, investors should be able to look to SEC filings for reliable information on publicly traded companies. As Bloomberg reports however, the commission’s rules on how drillers are required to value their reserves is effectively forcing companies to overstate the value of their O&G businesses by nearly two-thirds.

Via Bloomberg:

    The U.S. Securities and Exchange Commission requires drillers to calculate the value of their oil reserves every year using average prices from the first trading days in each of the previous 12 months. Because oil didn’t start its freefall to about $45 till after the OPEC meeting in late November, companies in their latest regulatory filings used $95 a barrel to figure out how much oil they could profitably produce and what it’s worth. Of the 12 days that went into the fourth-quarter average, crude was above $90 a barrel on 10 of them.

Continental Resources (who reminded Bloomberg that it’s “just following the rules like everyone else”), reported the following data on proved reserves early last month:

    PDP reserves increased 21% from year-end 2013 to 490 MMBoe at December 31, 2014. The Company had 2,994 gross (1,565 net) proved undeveloped (PUD) locations at year-end 2014. The Bakken accounted for 82% of PUD locations at year-end. Continental's year-end 2014 proved reserves had a net present value discounted at 10% (PV-10) of $22.8 billion, a 13% increase over PV-10 of $20.2 billion for year-end 2013 proved reserves.

As it turns out, the PV of the company’s proved reserves using current depressed oil prices is nearly $9 billion less, as outlined in the company’s 10-K:

    Commodity prices have decreased significantly in recent months. Holding all other factors constant, if commodity prices used in our year-end reserve estimates were decreased by $40.00 per Bbl for crude oil and $1.00 per Mcf for natural gas, thereby approximating the pricing environment existing in February 2015, our PV-10 at December 31, 2014 could decrease by approximately $13.8 billion, or 61%.

For its annual report, Continental used a price of $94.99/Bbl to estimate its proved reserves and noted that for every $10 decrease in the price of crude, PV-10 drops by a whopping $3.2 billion.

Of course this backward looking accounting only compounds the problem investors face when attempting to value shale companies. As we’ve noted previously, the industry runs what is effectively a two-tiered bookkeeping system whereby companies can, with impunity, inflate the value of their reserves in order to lure investors while reporting a far lower figure to the SEC.

(http://[url=http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/03/ShaleBoom_0.jpg]http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/03/ShaleBoom_0.jpg[/url])

*  *  *

The key takeaways here are: 1) when Q1 results start to roll in for E&P companies, we should expect to see massive writedowns across the board as industry balance sheets will no longer benefit from calculating PV-10 based on prices the market hasn’t seen in months, and 2) investors face a virtually insurmountable task when it comes to evaluating E&P companies as management is allowed to make up its own figures in investor presentations while the SEC mandates the use of months’ old prices for the purposes of calculating future cash flow. Fortunately, the SEC is on top of it.

Via Bloomberg:

    There are no current plans to revisit or modify SEC reporting rules, Erin Stattel, an SEC spokeswoman, said in an e-mail. She declined to comment further.


Title: Re: Fracker Debt Bubble
Post by: RE on March 11, 2015, 02:20:04 PM
Not looking good in Frackerland.

RE

If You're An Oil Worker Who Lives Here, Move!

Tyler Durden's picture



 

As crude prices drop back to cycle lows, breaking the back of the stability-meme, we thought a quick reminder of the world's major energy projects that are completely FUBAR given the current prices, record production, and record inventories...

Goldman maps the places "Not To Be"...

 

and here is Citi's massive cost curve expectations for all IOC projects...

click images for large legible version

Title: When Boom Turns to Bust
Post by: RE on March 11, 2015, 05:43:08 PM
This is the situation while they are still pumping.  Wait till all the rigs start shutting down and 80% of the local population in the Man Camps gets Pink Slipped.  :o

RE

Drugs, Prostitution, Violence Plague Oil Boom Towns Gone Bust

Tyler Durden's picture



 

With crude prices reeling from the effects of geopolitical wrangling and surging production, it’s a tough time to be a resident of an oil boom town. Although drilling in areas like North Dakota’s Bakken oil patch has generated hefty revenues for once quiet communities, it’s also led to an increase in crime. As the Washington Post noted last year, “the arrival of highly paid oil workers living in sprawling ‘man camps’ with limited spending opportunities has led to a crime wave -- including murders, aggravated assaults, rapes, human trafficking and robberies -- fueled by a huge market for illegal drugs, primarily heroin and methamphetamine.” 

While this would be a rather undesirable situation under any circumstances, collapsing crude prices are beginning to leave some towns cash-strapped, which means less resources to dedicate to things like deterring crime. Meanwhile, production isn’t slowing down, which means boom town populations aren’t declining alongside revenues. According to NPR, this dynamic is leaving some communities with a combination of decaying infrastructure, less money for public schools, and inadequate manpower to combat sharply higher crime rates. This comes as monthly expenses like rent skyrocket in the face of surging demand. 

Via NPR:

 
 

What happens when the price of oil tanks and suddenly you're faced with a whole lot less money to deal with your town's explosive growth?

 

If you're 52-year-old Rick Norby, you lose a lot of sleep.

 

"I haven't slept since I became mayor," he says. "I really ain't kidding you."

 

When Norby became mayor of Sidney, Mont., oil prices were about $100 a barrel. A year later, they've fallen to roughly half that. Yet oil production has continued to churn right along. 

 

"All the action is still happening," says Norby, who has lived here all his life. "We haven't seen a slowdown one bit in anything."

 

The problem is Norby figures he'll get about $600,000 less in tax revenue from oil production to deal with all this. That's a big deal when your whole budget is $11 million and your town now has a major highway running right through it…

 

The money coming from the oil boom pays for fundamental services that are stretched thin. Sidney is looking for $30 million to build a new truck bypass. A new $70 million water treatment plant is also needed.

 

Around town, there are little one-bedroom houses with a half dozen oil workers living in them. The population has nearly doubled since 2010. The police department struggles to keep pace with even routine patrols. Since 2010 when the oil boom began in earnest, DUI arrests are up 300 percent. Felony assaults are up twice that much… 

One teacher quoted by NPR says he “never considered” oil would fall below $70 barrel. He’s probably not alone there, as it seems likely that quite a lot of people (and E&P executives) didn’t think such a thing could happen either, that is until the bankruptcies started to pile up and until shale companies began to stage Movie Gallery encores, defaulting on their debt before making a single payment. In any event, crude did indeed fall below $70 and then it fell some more, and now, as we explained Tuesday, prices may head still lower in June when a lack of storage capacity forces each incremental barrel straight to market. 

So what does this mean for America’s oil boom towns? Assuming Sidney, Montana is a good analog for what’s playing out across the country’s top oil producing communities, nothing good, as the follow graphic from NPR vividly illustrates: 

Sydney is just 45 miles south of Bainville, Montana, the subject of a National Geographic piece which told a similar story: 

 
 

"If you wish for this oil, be careful what you wish for, because life as you know it is done," said Ken Norgaard, road department supervisor for Roosevelt County, the vast and sparsely populated county of rolling farmland that includes Bainville…

 

The K-12 Bainville School faces similar challenges. The influx of oil workers has pushed rent for run-down mobile homes to upwards of $2,500 a month. Teachers, whose salaries start at $33,000, can't afford housing. At the same time, student enrollment has more than doubled to 165 since 2009.

 

"We have had to get creative," said school superintendent Renee Rasmussen, who graduated from the school in 1973, one of a class of ten. In the past few years, Rasmussen said, the school bought 13 homes to house many of its teachers...

 

Bainville's population has doubled since 2010 to about 450, and will likely double again in the next couple of years…

 

Among the changes in Bainville, none has locals on edge like the increase in crime. In 2012, two Colorado men looking for work in the oil field allegedly killed a popular math teacher in nearby Sidney, Montana, and buried her body along a highway outside Williston. Soon after, Roosevelt County bought a new file cabinet to store the rush of concealed-weapon applications…

 

The FBI has warned that Mexican drug cartels are trafficking drugs to the area, targeting the large paychecks of the mostly young men who work in the Bakken. Felony drug arrests in Roosevelt County rose from 4 to 28 from 2008 to 2012, according to Sheriff Freedom Crawford. Crawford said methamphetamine is the biggest drug problem the county faces, followed by illegal painkillers. But a bigger problem, he said, is the increase in alcohol-fueled fistfights. From 2008 to 2012, assault arrests nearly doubled, to 173.

According to the Montana Board of Crime Control, “offenses [in the Primary Bakken Region] were up 84%, arrestees were up 90%, and incidents increased 76% in 2012 compared to 2009,” and while these numbers looked a bit better in 2013, “the five-year trend shows an overall increase of offenses (29%), incidents (19%), and arrestees (58%).” 

Similarly, an academic study conducted by researchers from the University of North Dakota shows that in the oil producing counties of Montana and North Dakota, both violent crime and property crime rose in the post-boom years while crime fell markedly in non-producing counties: 

…and here’s what the change in offenses looks like graphically… 

From the report

 
 

Prior research has demonstrated that calls for service, arrests, and traffic accidents increased substantially between 2005 and 2011 in oil producing counties in the Bakken region. Interviews with police officers and sheriff’s deputies in these counties revealed that they are overworked and stretched thin which is similar to the findings reported in Canadian boomtown research. Those perceptions about crime and disorder are shared by the staff members of human service agencies who are often tasked with responding to those who were victimized and the media has echoed these perceptions. The analyses conducted in this study revealed that UCR index crimes increased between 2006 and 2012 in oil impacted Montana and North Dakota counties, while in the matching sample of counties the number of crimes decreased during the same era. 

Meanwhile, things have gotten bad enough in Williston, North Dakota that the FBI has moved to town. 

Via The Hill

 
 

The FBI said it will establish an office in North Dakota’s oil country to address an uptick in criminal activity related to the dramatically increased oil production of recent years.

 

The Williston, N.D., office will be a “resident agency” of the FBI’s Minneapolis division when it is fully staffed later this year, the bureau said Thursday

 

Local officials and North Dakota’s congressional delegation have been asking for more than a year for the FBI to establish a presence in Williston to respond to the spike in crimes like drug and human trafficking that has accompanied the thousands of new workers related to the Bakken oil shale region.

 

“The office in Williston is a welcomed addition to our presence in North Dakota,” Richard Thornton, special agent in charge of the Minneapolis division that oversees the Williston office, said in a statement.

 

“The opening of this office is in response to the unprecedented growth in population and economic activity associated with the oil exploration and production in the Bakken region and the corresponding increase in criminal activity,” he said. “The FBI will be in a better position to effectively address these issues in this region of North Dakota through this new office.”

And so while crime in the region has been on the rise for some time, coping with slumping oil revenue is a relatively new development. In the end, the Mayor Norbys of the world are unfortunately dealing with powers well beyond their control, what with all of the “ancillary diplomatic benefits” that can accrue from ensuring that oil prices stay low for as long as is necessary to achieve one’s geopolitical agenda. We can only hope that the disparity between the resources needed to ensure stability in the nation's boom towns and the revenues that are available in the wake of sliding crude prices doesn't become so vast as to transform these areas into the new Wild West.

Title: Re: Fracker Debt Bubble
Post by: RE on March 17, 2015, 09:18:10 AM
Wolf Richter confirms what Tom Lewis wrote a while back regarding the revaluations coming in April that will play havoc with many Fracker Balance Sheets.

RE

Junk-Rated Oil & Gas Companies in a “Liquidity Death Spiral” (http://wolfstreet.com/2015/03/15/liquidity-death-spiral-junk-bonds-oil-gas-energy-companies-reserves-redetermination/)

by Wolf Richter • March 15, 2015   

    On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however.

    Behind the façade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly. Steep drops in the US rig count have been a key driver of the price rebound. Yet US supply so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations.

So said the International Energy Agency in its Oil Market Report on Friday. West Texas Intermediate plunged over 4% to $45 a barrel.

The boom in US oil production will continue “to defy expectations” and wreak havoc on the price of oil until the power behind the boom dries up: money borrowed from yield-chasing investors driven to near insanity by the Fed’s interest rate repression. But that money isn’t drying up yet – except at the margins.

Companies have raked in 14% more money from high-grade bond sales so far this year than over the same period in 2014, according to LCD. And in 2014 at this time, they were 27% ahead of the same period in 2013. You get the idea.

Even energy companies got to top off their money reservoirs. Among high-grade issuers over just the last few days were BP Capital, Valero Energy, Sempra Energy, Noble, and Helmerich & Payne. They’re all furiously bringing in liquidity before it gets more expensive.

In the junk-bond market, bond-fund managers are chasing yield with gusto. Last week alone, pro-forma junk bond issuance “ballooned to $16.48 billion, the largest weekly tally in two years,” the LCD HY Weekly reported. Year-to-date, $79.2 billion in junk bonds have been sold, 36% more than in the same period last year.

But despite this drunken investor enthusiasm, the bottom of the energy sector – junk-rated smaller companies – is falling out.

Standard & Poor’s rates 170 bond issuers that are engaged in oil and gas exploration & production, oil field services, and contract drilling. Of them, 81% are junk rated – many of them deep junk. The oil bust is now picking off the smaller junk-rated companies, one after the other, three of them so far in March.

On March 3, offshore oil-and-gas contractor CalDive that in 2013 still had 1,550 employees filed for bankruptcy. It’s focused on maintaining offshore production platforms. But some projects were suspended last year, and lenders shut off the spigot.

On March 8, Dune Energy filed for bankruptcy in Austin, TX, after its merger with Eos Petro collapsed. It listed $144 million in debt. Dune said that it received $10 million Debtor in Possession financing, on the condition that the company puts itself up for auction.

On March 9, BPZ Resources traipsed to the courthouse in Houston to file for bankruptcy, four days after I’d written about its travails; it had skipped a $60 million payment to its bondholders [read… “Default Monday”: Oil & Gas Companies Face Their Creditors].

And more companies are “in the pipeline to be restructured,” LCD reported. They all face the same issues: low oil and gas prices, newly skittish bond investors, and banks that have their eyes riveted on the revolving lines of credit with which these companies fund their capital expenditures. Being forever cash-flow negative, these companies periodically issue bonds and use the proceeds to pay down their revolver when it approaches the limit. In many cases, the bank uses the value of the company’s oil and gas reserves to determine that limit.

If the prices of oil and gas are high, those reserves have a high value. It those prices plunge, the borrowing base for their revolving lines of credit plunges. S&P Capital IQ explained it this way in its report, “Waiting for the Spring… Will it Recoil”:

    Typically, banks do their credit facility redeterminations in April and November with one random redetermination if needed. With oil prices plummeting, we expect banks to lower their price decks, which will then lead to lower reserves and thus, reduced borrowing-base availability.

April is coming up soon. These companies would then have to issue bonds to pay down their credit lines. But with bond fund managers losing their appetite for junk-rated oil & gas bonds, and with shares nearly worthless, these companies are blocked from the capital markets and can neither pay back the banks nor fund their cash-flow negative operations. For many companies, according to S&P Capital IQ, these redeterminations of their credit facilities could lead to a “liquidity death spiral.”

Alan Holtz, Managing Director in AlixPartners’ Turnaround and Restructuring group told LCD in an interview:

    We are already starting to see companies that on the one hand are trying to work out their operational problems and are looking for financing or a way out through the capital markets, while on the other hand are preparing for the events of contingency planning or bankruptcy.

Look at BPZ Resources. It wasn’t able to raise more money and ended up filing for bankruptcy. “I think that is going to be a pattern for many other companies out there as well,” Holtz said.

When it trickled out on Tuesday that Hercules Offshore, which I last wrote about on March 3, had retained Lazard to explore options for its capital structure, its bonds plunged as low as 28 cents on the dollar. By Friday, its stock closed at $0.41 a share.

When Midstates Petroleum announced that it had hired an interim CEO and put a restructuring specialist on its board of directors, its bonds got knocked down, and its shares plummeted 33% during the week, closing at $0.77 a share on Friday.

When news emerged that Walter Energy hired legal counsel Paul Weiss to explore restructuring options, its first-lien notes – whose investors thought they’d see a reasonable recovery in case of bankruptcy – dropped to 64.5 cents on the dollar by Thursday. Its stock plunged 63% during the week to close at $0.33 a share on Friday.

Numerous other oil and gas companies are heading down that path as the oil bust is working its way from smaller more vulnerable companies to larger ones. In the process, stockholders get wiped out. Bondholders get to fight with other creditors over the scraps. But restructuring firms are licking their chops, after a Fed-induced dry spell that had lasted for years.

There is a sliver of hope, or false hope, on the way. The oil industry, it seems, has been lobbying the government. And the government has given in. It was announced Friday afternoon when consumers aren’t supposed to pay attention. Read… US Government Plans to Bail out Oil Industry, Consumers to Pay
Title: Re: Fracker Debt Bubble
Post by: Eddie on March 17, 2015, 09:29:46 AM
I expect taxpayers will get to contribute (further) to softening the landing a bit too, for the poor oil companies. Before it's over.
Title: Re: Fracker Debt Bubble
Post by: MKing on March 17, 2015, 09:36:38 AM
Sounds pretty good, the market working it out just the way it is supposed to. Thank you for providing updates on BAU working as it is designed.
Title: Re: Fracker Debt Bubble
Post by: MKing on March 17, 2015, 09:38:31 AM
I expect taxpayers will get to contribute (further) to softening the landing a bit too, for the poor oil companies. Before it's over.

One of the few industries that GovCo generally allows to fail, as opposed to banks. You see plenty of bankers moving back and forth between government executive ranks and industry, but you don't see many oil men. The government doesn't pay very well, and doesn't drill wells or doing exploratory development, not much of a need for oil guys. Unless you watch the movie Armageddon one too many times.
Title: Re: Fracker Debt Bubble
Post by: Eddie on March 17, 2015, 10:48:50 AM
One of the few industries that GovCo generally allows to fail, as opposed to banks. You see plenty of bankers moving back and forth between government executive ranks and industry, but you don't see many oil men. The government doesn't pay very well, and doesn't drill wells or doing exploratory development, not much of a need for oil guys. Unless you watch the movie Armageddon one too many times.


Well, the government might have let some oil companies fail, but they're doing their best to prevent it, to the tune of about a half a trillion dollars in tax breaks, so far.

1916    The petroleum industry takes off as Americans' love affair with the automobile begins. A new tax provision allows oil companies to write off dry holes as well as all "intangible drilling costs" in their first year of exploration. Over the next 15 years, oil and gas subsidies will average $1.9 billion a year in today's dollars.
1926    Congress approves the "depletion allowance," which lets oil producers deduct more than a quarter of their gross revenues. Texas Sen. Tom Connally, who sponsored the break, later admits, "We could have taken a 5 or 10 percent figure, but we grabbed 27.5 percent because we were not only hogs but the odd figure made it appear as though it was scientifically arrived at."
1937    Treasury Secretary Henry Morgenthau calls the depletion allowance "perhaps the most glaring loophole" in the tax code. President Franklin D. Roosevelt urges Congress to close it and other tax-evasion methods "so widespread and so amazing, both in their boldness and their ingenuity, that further action without delay seems imperative."
1947    Natural gas drillers in Kansas first experiment with hydraulic fracturing, or fracking, but the technology won't be widely used until the federal government backs its development in the 1970s.
1950    President Harry S. Truman unsuccessfully prods Congress to end the depletion allowance.
1957    Asked about the depletion allowance, President Dwight Eisenhower replies, "I am not prepared to say it is evil because, while we do find, I assume, that a number of rich men take advantage of it unfairly, there must certainly be an incentive in this country if we are going to continue the exploration for gas and oil that is so important to our economy."
1960    Presidential candidates John F. Kennedy and Richard Nixon debate the depletion allowance. Kennedy says he's willing to review and close the "loophole." Nixon counters, "I favor the present depletion allowance. I favor it not because I want to make a lot of oilmen rich, but because I want to make America rich."
1969    Congress cuts the depletion allowance deduction from 27.5 to 23 percent, over the objections of the president of Gulf Oil, who calls it "a cornerstone, a major part of the foundation on which the industry has built its house. To dismantle it in whole or in part could very well jeopardize that whole structure and, to a serious degree, the economy dependent upon it." President Nixon says the tax break is "in the national interest" because Mideast oil supplies could be cut off "in the event of a world conflict."
1974    With the OPEC oil embargo and energy crisis at full tilt, Nixon vows to do "everything in my power to prevent the big oil companies and other major energy producers from making an unconscionable profit out of this crisis."
President Gerald Ford authorizes the creation of the Energy Research and Development Administration to oversee energy R&D. Over the next five years, federal spending on fossil fuel research jumps tenfold to $1.4 billion.
1975    Ford almost vetoes but then signs a tax bill that repeals the depletion allowance for large companies. It remains in place for smaller, independent drillers.
1975-77    The Department of Energy oversees the first successful applications of large-scale fracking to extract oil and gas.
1977    President Jimmy Carter praises Sen. Russell Long of oil-rich Louisiana for voting "to do away with the oil depletion allowance, which was a very courageous thing to do."
1978    Carter signs a "gas guzzler" tax on new cars that don't meet federal mileage standards.
1979    Carter installs solar panels on the White House roof. President Ronald Reagan removes them in 1986.
1980    Carter signs a $228 billion tax on oil companies' windfall profits as well as a tax credit to encourage the development of shale and tar oil, coalbed methane, and other unconventional fossil fuels.
1985    President Reagan takes aim at federal tax breaks. Oil and gas is one of few industries to emerge unscathed from the "showdown at Gucci Gulch." He fails to convince Congress to kill the depletion allowance for most oil wells.
1988    As oil prices sink, Congress repeals the windfall profits tax.
1990    A bill signed by President George H.W. Bush doubles the gas guzzler tax and increases gasoline excise taxes. It also establishes a new tax credit for retrofitting existing oil wells to boost production, expands the tax credit for unconventional oil production, and loosens the depletion allowance.
1992    The Energy Policy Act establishes tax credits for renewable energy production and introduces tax deductions for cars powered by electricity and alternative fuels.
1995    President Bill Clinton signs the Deep Water Royalty Relief Act, letting oil companies drill in federal waters without paying any royalties. More than 1,000 leases omit a promised price trigger, costing billions.
1999    Clinton extends the loosened rules for the depletion allowance.
2001    President George W. Bush and first lady Laura Bush claim a $733 depletion allowance on their income taxes.
2004    The American Jobs Creation Act extends a tax break to oil companies for not shipping domestic jobs overseas.
2005    With oil prices on the rise, President George W. Bush states, "With $55 [a barrel] oil, we don't need incentives to oil and gas companies to explore." But a few months later, he signs the Energy Policy Act, which expands the depletion allowance to apply to more drillers. It also lets companies write off exploration costs over two years instead of one.
2006    Rep. John Larson (D-Conn.) introduces the Oil Subsidy Elimination Act, which could end many of Big Oil's most lucrative tax breaks. It never gets out of committee.
2007    Illinois Sen. Barack Obama introduces the Oil sense (Subsidy Elimination for New Strategies on Energy) Act, which would repeal the depletion allowance and suspend royalty-free leases in the Gulf of Mexico. The bill dies in the Democratic-controlled Senate Finance Committee. A House bill that would have expanded tax credits for renewable energy and energy conservation also dies.
2008    Annual tax subsidies for renewable energy shoot past those for oil and gas.
2009    President Obama's stimulus package includes $90 billion for energy efficiency and renewable-energy projects, including wind and solar electricity generation, fuel cells, and electric vehicles.
2010    The Simpson-Bowles deficit reduction plan proposes modifying or eliminating all tax expenditures and raising the gas tax by 15 cents. Former Fed chairman Alan Greenspan likewise suggests that "oil and gas depletion allowances could be restructured" as direct subsidies.
2011    House Speaker John Boehner tells abc News, "I don't think the big oil companies need to have the oil depletion allowances." Asked if oil subsidies should be cut, he answers, "They ought to be paying their fair share." His spokesman clarifies: "The Speaker made clear in the interview that raising taxes was a non-starter, and he's told the president that. He simply wasn't going to take the bait and fall into the trap of defending 'Big Oil' companies."
Executives of the big five oil companies testify before Congress about their tax breaks. In their defense, Sen. Orrin Hatch (R-Utah) calls the hearing "a dog and pony show" and displays a photograph of a dog sitting on a pony.
A national survey finds that 7 in 10 Americans (including nearly 7 in 10 Republicans) oppose fossil fuel subsidies.
2012    Sen. Bob Menendez (D-N.J.) introduces the Repeal Big Oil Tax Subsidies Act, which would end $2.4 billion in tax breaks for the big five oil companies. Obama challenges Congress to "eliminate this oil industry giveaway right away." Unable to get filibuster-proof support, it dies.
Mitt Romney says oil subsidies go "largely to small companies, to drilling operators and so forth." He says he'd consider cutting them—if tax rates were slashed first.
The American Petroleum Institute launches a $3 million postelection media blitz, including ads that warn seven Democratic senators up for reelection in 2014 against touching the industry's tax breaks: "American energy—not higher taxes on energy—will create jobs."
2013    Despite talk of everything being "on the table," oil's tax perks survive the fiscal-cliff negotiations.
Congressional Democrats introduce five bills targeting tax giveaways for oil and gas companies. Their death is all but assured, especially in the Republican-controlled House.
In April, Obama introduces his 2014 budget, which includes $23 billion for renewable energy and energy efficiency over 10 years and permanent tax cuts for renewable power generation. It also would end "inefficient fossil fuel subsidies." In contrast, the gop budget proposed by Wisconsin Rep. Paul Ryan targets "federal intervention and corporate-welfare spending" by cutting subsidies for renewables. Tax breaks for oil are left untouched.


http://www.motherjones.com/politics/2014/04/oil-subsidies-energy-timeline (http://www.motherjones.com/politics/2014/04/oil-subsidies-energy-timeline)



Title: Re: Fracker Debt Bubble
Post by: RE on March 17, 2015, 01:09:26 PM
One of the few industries that GovCo generally allows to fail, as opposed to banks. You see plenty of bankers moving back and forth between government executive ranks and industry, but you don't see many oil men. The government doesn't pay very well, and doesn't drill wells or doing exploratory development, not much of a need for oil guys. Unless you watch the movie Armageddon one too many times.


Well, the government might have let some oil companies fail, but they're doing their best to prevent it, to the tune of about a half a trillion dollars in tax breaks, so far.

The Energy companies that are going under here are all the Too Small To Save.

Count on it, when this moves up the line to companies like Chesapeake, Halliburton, EOG and then further to Exxon, BP and Royal Dutch Shell, Da Goobermint will be Bailing them out with the same pumps used to pump the water out of NOLA after Katrina.  They'll be deemed "systemically important".  For now, these companies can still all rollover their debt on the High Grade Bond Market at relatively low interest rates.

What nobody has quite figured out here yet though is what they are gonna do with the Oil when they run out of storage tanks and VLCC tankers to store it all in, and the Konsumers STILL aren't buying.  Maybe they'll start giving away gas free at the pump to get it burned.

Without an equivalent Bail Out at the Demand end here, the Machine just won't run.  It's like trying to run your car with a full tank of gas and a Potato stuffed in the exhaust pipe.  It doesn't go very far despite having plenty of fuel.

RE
Title: Re: Fracker Debt Bubble
Post by: RE on March 17, 2015, 01:57:30 PM
More from Wolf on the Energy Industry Bailouts oncoming.

RE

US Government Plans to Bail out Oil Industry, Consumers to Pay (http://wolfstreet.com/2015/03/13/us-government-bails-out-oil-industry-russia-pe-firms-the-saudis-venezuela-wall-street-but-slams-american-consumers/)

by Wolf Richter • March 13, 2015   

Oil industry lobbyists must have been working the government over for months. The price of oil has plunged nearly 60% since June. Smaller oil companies are going bankrupt. Larger ones are bleeding. Energy junk-bondholders are getting massacred. Wall Street investment banks are fretting about losing the fees. Lenders are worried about their energy loans. PE firms that have funded the fracking boom are taking big losses. Venezuela is falling apart and is going to default. Russia is careening in the wrong direction. Kern County, the oil capital of California, declared a “fiscal emergency.”

They all need the price of oil to jump, and they need it to jump NOW.

And besides, American consumers, who’ve benefited from the lower price of gasoline, don’t seem to appreciate it, at least not in the true American way, as the last retail-sales reports have shown. They aren’t spending the money they’ve saved on gas. They’re supposed to spend all of it, and more than all of it in the true American spirit of living beyond your means. But instead, they’re squirreling it away to pay for surgery or college or whatever. Retail spending has been dropping. And that can’t be allowed to happen.

So on Friday evening, when consumers were busy with other things and weren’t supposed to pay attention, the government proposed to yank that little monthly bonus away from them and hand it to the fracking and off-shore drilling industry, the big oil companies, the little oil companies, their suppliers, to the PE firms that invested so heavily in fracking, to the Saudis, Russia, to the despised government of Venezuela….

Conspiracy theory?

Not quite. The Energy Department announced it Friday evening when no one was supposed to pay attention. It proposed to buy 5 million barrels of sweet crude for the Strategic Petroleum Reserve, Reuters reported. It could accommodate some oil in May but most of it would be for delivery in June and July.

How much is 5 million barrels? On first sight, not much, given the size of the oil markets. It represents over half a day of US production. But US crude oil inventories in the latest reporting week rose by 4.5 million barrels. Only about 70 million barrels in working storage capacity remain available. When storage is full, all sorts of heck is going to break lose. And storage is filling up quickly. The markets have been fretting about that.

These 5 million barrels would make a dent into such fears. It’s not huge, but it’s at the margins were prices are set.

The excuse this time is that the government is required by law to replace the 5 million barrels it took out of the SPR in March 2014. Back then, the excuse for taking out the oil was that it would be a “test.” Everyone figured at the time that the government wanted to bring down the price of oil to punish Russia and send a stern message about its actions in the Ukraine.

Could the government be motivated by “Buy low, sell high?” No. The US government doesn’t know what profit is. It has no profit motive. The number one unwritten rule that employees of the government learn as they move up the ladder: “No one has ever been promoted for saving the government money.” The opposite is the case.

The current proposal contradicts recent discussions about reducing the SPR. Given the booming oil production in the US, and the imports from reliable neighbors Canada and Mexico, relatively little oil is being imported from other countries. The SPR simply isn’t that necessary anymore. The Obama administration is already working on a plan to reduce the size of the SPR and is expected to include details in its next energy review.

But no. Apparently, the oil industry will have none of it. Instead, the government is going to do what we’d been suspecting it might eventually do: bail out the oil industry.

The government plowed part of the proceeds from the sale of those 5 million barrels in March 2014 into a gasoline reserve in the Northeast “to address some of the resiliency needs in the region made evident by Superstorm Sandy in 2012,” a DOE spokeswoman said, according to Reuters. The remaining money is going to be used to buy back that oil.

And in the air hangs the threat that the government can always buy more if the 5 million barrels fail to pump up the price of oil, and along with it the price of gasoline.

We assume that President Obama will soon explain in one of his noble speeches why the oil industry, speculators in the energy sector, energy junk-bondholders, Wall Street investment banks, regional banks, the Saudis, Russia, Venezuela, and all the others – why the heck they need to be bailed out by strung-out, underpaid, overtaxed, maxed-out American consumers.

The industry is desperate. The price of oil did today what it has been doing for a while: it waits for a trigger and plunges: West Texas Intermediate dropped 4.4%, going into the weekend at $45 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. Read…  The US Oil Bust Just Got Worse

Title: Re: Fracker Debt Bubble
Post by: MKing on March 17, 2015, 04:30:58 PM
Well, the government might have let some oil companies fail, but they're doing their best to prevent it, to the tune of about a half a trillion dollars in tax breaks, so far.

Everything on your list prior to the 1980's sure didn't prevent some 80% of the oil business in america to basically tank. More lost American jobs then the auto manufacturing and steel businesses combined I believe…but no one was demanding "buy american" for oil and gas. And those tax breaks are there for plenty of extraction industries, not just oil and gas. Coal, uranium, hell even timber and aggregate get those kinds of breaks.

But big oil is always the one that seems to take the heat, something that hasn't ever made me very charitable towards the American consumer.

How many beefs related to doom because of Big Ag subsidies do you see? Big Pharma? I've always wondered why people want to go after big oil, it has been an interesting "watch" for the past 5 decades now. And you are an educated man, prone to conspiracy and anti GovCo ideas like most at websites like this, and yet you appear to fall for it just like everyone else.
Title: Re: Fracker Debt Bubble
Post by: MKing on March 17, 2015, 04:37:12 PM
What nobody has quite figured out here yet though is what they are gonna do with the Oil when they run out of storage tanks and VLCC tankers to store it all in, and the Konsumers STILL aren't buying. 

The consumers ARE buying. They just can't buy as much as can be produced…because of…well…oil scarcity if you want to believe the peak oil guys. I don't recall them ever pitching the idea that oil is going to run out and that causes…..lower prices…..and…full inventory…but hey! they didn't know what they were talking about in the first place, odds are they aren't now either.

I recommend a reading of the EIA STEO report for March, it looks like their demand/supply calculations lead to more a balance during the 3rd Quarter, 2015. Of course, they didn't do a rant on it, but still, they do this for a living.

Title: Fracker Desperation
Post by: RE on March 20, 2015, 09:15:14 AM
What fucking idiot would buy this Dogshit?

Oh, I know, Da Fed!  ::)

RE

Desperate Shale Companies Issue Stock To Stay Afloat (http://www.zerohedge.com/news/2015-03-20/desperate-shale-companies-issue-stock-stay-afloat)

Submitted by Tyler Durden on 03/20/2015 11:15 -0400

    AT&T
    Capital Markets
    Contango
    Credit Suisse
    Crude
    Equity Markets
    High Yield

The collapse in crude has provided voluminous evidence that investors in fact never, ever learn and the temptation to buy something “cheaply” usually trumps the fact that in many cases, the buyers haven’t the slightest clue as to the multifarious underlying factors that actually dictate prices. This was on full display over the past several months as retail investors rushed into shares of US-listed oil ETFs ahead of the widest contango in four years (Goldman would later confirm that any short-term "stabilization" is likely tied to retail ETF inflows). A further demonstration of this was EXXI’s recent offering of $1.45 billion in 11% 2020 notes —  the deal was upsized. Neither of these “investments” has turned out particularly well and as we noted earlier this week, the EXXI notes promptly fell 10%, while at the aggregate level, Bloomberg notes that shale-related junk bonds have cost bargain shoppers some $7 billion in just two weeks since the start of March.

Meanwhile, producers are doing whatever they have to do to survive in the face of depressed prices and in addition to floating junk bonds, this means selling shares. Here’s more from Bloomberg:

    U.S. oil producers are issuing new shares of stock at the fastest pace in more than a decade, looking to investors for a cash lifeline to pay down debt and keep drilling as crude prices continue to sink.

     

    Tapping equity markets has become the best option for companies such as Dallas-based RSP Permian Inc., which announced March 17 it’s seeking to raise as much as $232 million by selling additional shares. Calgary-based Encana Corp. and Noble Energy Inc. of Houston also have issued shares in the past two months to reduce debt.

     

    That brings funds raised in the first three months of the year to about $8 billion, more than 10 times the total in the same period last year. As the continued slide in oil prices further crimps cash flows, banks are pressuring these companies to shore up their capital and reduce debt to lower servicing costs and provide wiggle room...

     

    As recently as December and January, many producers assumed there would be little interest in pouring more money into the sector, and that funding from debt or equity wouldn’t materialize, said Rob Santangelo, co-head of equity capital markets Americas for Credit Suisse Group AG.

     

    That began to change in February when prices seemed to stabilize and frozen credit and equity markets opened up. The $8 billion in stock issued in the first three months of 2015 is the highest of any quarter in more than a decade. If the pace continues, sales of new equity would surpass the total of 2008 and 2009 combined, the last time oil prices crashed, according to data compiled by Bloomberg.

     

    The surge in equity offerings, even with the dilution of existing shareholders, now is widely considered the lesser of evils versus expensive borrowing or asset sales at reduced prices, said Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota shale wells.

That makes sense: why raise capital by issuing something you have to repay when you can just dilute existing shareholders with what may turn out to be worthless equity especially when  investors dying to catch a falling knife will be happy to hand over their money?

    “Equity does not have to be paid back and requires no disbursements of revenue and net profits,” Eckard said. “It buys into your plan and works for companies that can make it through the downturn in commodity prices.”

     

    Investors are coming to the table in the belief they are buying in at the bottom of the market and will reap gains in the long-term as oil prices recover, said Christian O’Neill, an energy analyst at T. Rowe Price International Inc., which owns shares in numerous producers.

The problem here (well, besides the whole giant dilution and gullible retail investors thing), is that just as high yield debt issuance works to keep prices depressed by ensuring that producers have to keep producing at a breakneck pace to keep what little cash is still coming in flowing so coupon payments can be made, so too does issuing more and more equity put pressure on prices by keeping insolvent companies solvent:

    Meanwhile, the same companies that are offering investors double-digit yields may ironically be shooting themselves in the foot (and, as we suggested last month, contributing to disinflation) because as the Bank For International Settlements notes, keeping current on debt payments often means maintaining elevated production because keeping a leverage-driven bubble inflated means doubling and tripling down and this is exacerbated by investors’ willingness to take on risk if it means squeezing out a few basis points of yield versus “safer” debt which, depending on where you look, may actually produce loses thanks to NIRP.

The inevitable result here will be yet more supply, exacerbating the shortage of storage and validating what we said a few weeks back which is that in fairly short order, US on-land storage capacity will be exhausted meaning each incremental barrel will have to be dumped directly onto the market, a scenario which is clearly not conducive to supporting prices.

In the end, this is yet another example of what we discussed here almost a month ago. Namely, that easy money policies have contributed to overbuilding and oversupply and have actually served to perpetuate disinflation in some cases, the commodities markets being one of them.
Title: Perfect Storm for Frackers
Post by: RE on March 22, 2015, 01:55:56 AM
This is going right by the Diner Playbook!   :icon_sunny:

World Class Geochemists could not forsee this happening, but us Dumb Bloggers NAILED IT. :P

RE

The Perfect Storm For Oil Hits In Two Months: US Crude Production To Soar Just As Storage Runs Out

Tyler Durden's picture



 

Less than two weeks ago we warned that based on the current oil production trend, the US may run out of storage for crude as soon as June.

This is what we said back in early March when the BTFDers were hoping WTI in the low $40s would never again be seen:

 
 

Come June, when all available on-land storage is exhausted, each incremental barrel will have to be dumped on the market forcing prices lower and inflicting further pain on the entire US shale complex (just as Q1 results are released which will invariably show huge writedowns as companies will no longer be able to hide behind the SEC-mandated accounting trick that made Q4 results appear respectable). Here's Soc Gen:  "...oil markets can be impatient and prices could drop considerably lower. As we have written previously, we are currently more concerned about downside risk than upside risk."

Since then, as expected, crude tumbled to new post-Lehman lows, confirming the global deflationary wave is raging (for more details please see China), and WTI only posted a rebound on quad-witching Friday as another algo-driven stop hunt spooked all those who were short the energy complex.

The problem is that despite the latest "dead oil bounce" we have since had to revise our forecast for full US oil storage, and pulled forward the date when this will happen in the aftermath of the latest API inventory data.

Recall that earlier this week API reported, and EIA later confirmed, that for the 10th week in a row there was a "massive 10.5 million barrels (far bigger than the 3.1 million barrel expectation) and a 3 million barrel build at Cushing. If this holds for DOE data tomorrow (and worryingly API has tended to underestimate the build in recent weeks) it will be the biggest weekly build since 2001."

 

The DOE indeed confirmed all of this:

It also means that at the current rate of record oil production, storage will be exhausted in under two months, some time in mid-May. At that point, with no more storage to buffer the record oil production, the open market dumping begins and prices of WTI will crater as every barrel will have to be sold at any clearing price, since the producers will have no other choice than to, literally, dump the oil.

In other words, a perfect storm is shaping up for oil some time in late May, early June.

And then we learned something even more startling.

As the Platts oil blog reports, even as oil prices continue to fall amid flat demand and near-record supply, "North Dakota is likely to see a “big surge” in production this June, potentially besting another supply record even if prices continue to crater, according to Lynn Helms, director of the state’s Department of Mineral Resources."

What make things worse is that this time the production "surge" will have nothing to do with game theory, or beggaring thy oil producing neighbor in hopes that the other, more levered guy goes bankrupt first.

This surge will be largely propelled by two factors: a state-mandated time limit on drilling and the expected trigger of a major oil tax incentive, Helms said.

Here is how Bakken production has looked like in recent months:

 
 

Helms, the state’s top oil and gas official, reported last week that North Dakota oil production fell about 3%, or about 37,000 b/d, to 1.190 million b/d from December’s all-time high of 1.227 million b/d. The reduction was expected as sweet crude prices averaged $31.41/barrel in January, down from $40.74/b a month earlier and the statewide rig count fell by 21 to 161.

 

But Helms said he doesn’t expect production to tumble dramatically, even as prices continue to fall, and even though he expects the statewide rig count to “bottom out” at about 100 rigs. Production, he said, will likely remain between 1.1 million b/d to 1.2 million b/d over the next few months.

Nothing surprising.

And then this will happen: "Bakken production could suddenly skyrocket, by nearly 10%, or an additional 75,000 b/d, to 100,000 b/d in June, Helms said." This means that despite low prices and production curtailments throughout much of North America, oil production in North Dakota could actually shatter a new record this summer!

 
 

This is mainly due to a backlog of between 800 to 1,000 uncompleted wells statewide, about 125 of which need to be completed by the end of June in order to comply with state requirements to complete drilling within a year.

 

At the same time, operators may wait until June, when a major oil tax incentive known as the “large trigger” is expected to go into effect. The large trigger, which is aimed at boosting Bakken production at times of low crude prices, enters into force when the WTI crude price averages below $55.09/b for five consecutive months.

 

If that incentive is triggered, which Ryan Rauschenberger, North Dakota’s tax commissioner, said he expects will happen, the majority of wells will be exempt from a 6.5% oil extraction tax for as long as two years.

 

With that tax break in effect and hundreds more wells running up against one-year state deadlines, production in North Dakota could continue to surge even beyond the summer.

“We’re going to ride these waves of production increases,“ Helms said.

And that, coming just as US spare oil capacity hits its limit, is precisely what all those BTFDers who bought first junk bonds, and most recently, a desperate scramble in follow-on equity offerings by the universe of cash burning US shale companies, is precisely what they did not want to hear. Because no amount of Fed ramblings about the ever weaker US economy will offset what is about to be a veritable oil tsunami.

The time to buy asset may be when there is blood on the streets, but the moment to dump crude (and buy deep OTM puts) will be precisely when the majority of investors and algo-programming math PhDs realize that in just about two months the streets are about to become black, covered entirely in oil.

Title: Re: Perfect Storm for Frackers
Post by: MKing on March 22, 2015, 06:46:35 AM
This is going right by the Diner Playbook!   :icon_sunny:

World Class Geochemists could not forsee this happening, but us Dumb Bloggers NAILED IT. :P

Well…not quite. This is what the best dumb bloggers were claiming…..and no, it didn't turn out like they had hoped. Far closer to what the IEA had claimed actually.

(https://inbalance.files.wordpress.com/2010/02/oil_production_oildrum.png)

Title: Re: Perfect Storm for Frackers
Post by: MKing on March 22, 2015, 06:59:24 AM
And that, coming just as US spare oil capacity hits its limit, is precisely what all those BTFDers who bought first junk bonds, and most recently, a desperate scramble in <a href=\"http://www.zerohedge.com/news/2015-03-20/desperate-shale-companies-issue-stock-stay-afloat\">follow-on equity offerings [/url]by the universe of cash burning US shale companies, is precisely what they did not want to hear. Because no amount of Fed ramblings about the ever weaker US economy will offset what is about to be a veritable oil tsunami.

And how much better can it be said, that come time for summer time road trips for millions of Americans, good times, they are back!!

(http://fr.toonpool.com/user/1684/files/guzlr_suv_288585.jpg)
Title: Re: Fracker Debt Bubble
Post by: Palloy on March 23, 2015, 02:36:27 PM
http://www.bizjournals.com/houston/blog/drilling-down/2015/03/houston-energy-contractor-sees-stock-plummet-after.html?page=all (http://www.bizjournals.com/houston/blog/drilling-down/2015/03/houston-energy-contractor-sees-stock-plummet-after.html?page=all)
Houston energy contractor sees stock plummet after warning of potential default
Mar 18, 2015
Olivia Pulsinelli and Jordan Blum

Houston-based energy contractor Willbros Group Inc. (NYSE: WG) saw its stock shares plummet by more than 50 percent on March 18 after the company warned that it could face credit defaults that would raise "substantial doubt" about its ability to continue operating.

Willbros, which has been working to overhaul its business strategy after leadership shuffles, said it is trying to resolve debt issues and likely will miss the filing deadline for its annual financial report. Although the energy engineering and construction company was struggling already, Willbros said the crash of oil prices may lead it to face a credit default.

Willbros stock closed at $5.48 a share on March 17 and dropped to an all-time low of $1.50 a share on the morning of March 18 before rebounding to about $2.70 a share in the afternoon. The company was trading at more than $13 a share last June.

"The company does not expect to be in compliance with its maximum leverage ratio and minimum interest coverage ratio for the period from March 31, 2015, through March 31, 2016," the Houston-based energy engineering and contracting firm's statement reads. "As a result, the company is in discussions with its lenders regarding amendments and waivers to its credit agreements."

Without such waivers or amendments, all of Willbros' debt under the credit agreements would become due in the next 12 months, the company said.

"If the debt under the company's credit agreements becomes accelerated and the lenders demand repayment, it is expected that the company will not have sufficient forecasted liquidity to retire its existing debt obligations, which raises substantial doubt on the company's ability to continue as a going concern," the statement continues.

[more detail]
Title: Re: Fracker Debt Bubble
Post by: RE on March 23, 2015, 02:56:08 PM
http://www.bizjournals.com/houston/blog/drilling-down/2015/03/houston-energy-contractor-sees-stock-plummet-after.html?page=all (http://www.bizjournals.com/houston/blog/drilling-down/2015/03/houston-energy-contractor-sees-stock-plummet-after.html?page=all)
Houston energy contractor sees stock plummet after warning of potential default

Another one Bites the Dust.  :icon_sunny:

http://www.youtube.com/v/rY0WxgSXdEE?feature=player_detailpage

RE
Title: Re: Fracker Debt Bubble
Post by: RE on March 24, 2015, 06:48:11 AM
Thoughts on The Current Oil Market (http://www.zerohedge.com/news/2015-03-23/thoughts-current-oil-market)

Submitted by EconMatters on 03/23/2015 17:54 -0400

    Bear Market
    Crude
    Crude Oil
    Ford
    Global Economy
    Market Share
    Mexico
    NASDAQ
    Reuters
    Saudi Arabia
    Twitter
    Twitter
    Whiting Petroleum

By EconMatters


Crude oil has slid into a definitive bear market starting 2H14.  Since most of the oil companies (majors as well as E&Ps) based their budget, growth, and strategy trajectory on ~$50 oil price scenario even for the most conservative, the current ~ $45 WTI price environment has created a crisis situation for many oil and gas producers.

 

WTI 6-Month Chart

(https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F2.bp.blogspot.com%2F-IB5smSdr_GE%2FVRBC4N1JPSI%2FAAAAAAAAFAM%2FNa-BnShw9Cw%2Fs1600%2FWTI%252B6%252Bmo%252BChart.png&container=blogger&gadget=a&rewriteMime=image%2F*)

Chart Source: nasdaq.com, as of 3/23/2015 am

 

 

The immediate oil industry response has been reflected abundantly in rig count.  Oil rig count has dropped drastically particularly in the high-cost basins such as Permian in W. Texas / New Mexico and problematic transport regions such as land-locked Bakken in N. Dakota /Montana. For example, according to the latest Baker Hughes data, the number of rigs in the once red-hot Bakken fell to double-digit levels for the first time in at least four years, down 50% from the most-recent high in October, 2014.  Likewise, oil rigs drilling the Permian Basin also plunged ~50% from November, 2014. 

 

Read More: The Oil Market QE Premium Is Coming out of Price

 

We probably already learned the main contributors to the steep drop in oil prices include stagnant demand & global economy, rising production (and oil inventories) from U.S. Shale, and a strong dollar depressing all commodities priced in dollar.  I personally believe these macro-economic factors are unlikely to change that much as to lift oil out of the bear market in the next 12 months.  Nevertheless, I'm going to discuss my views on some other popular oil-market related topics.

 

Read More: GULF COAST PADD 3 The New U.S. Oil Bottleneck

 

Saudi Arabia

 

A decision and/or announcement from the Kingdom to cut its production would certainly give an immediate boost to oi price.  However, my observation is that Saudi is dead serious about protecting its market share, and unlikely to cut its production.

 

To illustrate, Taiwan's news media reported that in late 2014, Saudi sent a group of delegates courting one of the two refineries/petrochem plants in Taiwan which was the first ever in over 40 years.  According to EIA, Taiwan oil consumption is ~ 1 million barrels a day in 2013, which explains why Saudi never sent delegates visiting such a small client before.  This only demonstrated how Saudi is hunkering down to secure every bit of its market share. 

 

In addition, Saudi would never want to repeat the history of cutting production, propping up oil price just to give rise to Canadian Oil Sands, Russia and U.S. Shale.  Another psychological factor, if Saudi has hung in this long watching oil falling from $100 to $50, a production cut at this stage would only show weakness by the Kingdom to deviate from initial resolve.   Remember, Saudi is one oil producing country seen $10 oil before (as opposed to U.S. Shale Industry's total shock by $50 oil).   

 

Wells Drilled but Not Completed

 

Wells that operators do not want to produce at current low oil prices. Well backlogs have sparked some concern that holding back completions until oil prices rise would simply cause a production surge in the future, leading to another oil price plunge. For example, Platts reported EOG Resources (EOG) sees a backlog of about 350 wells this year and Anadarko (APC) says 125 wells. Continental Resources (CLR) said it had deferred completions in the Bakken by 25% in Q1, while Chesapeake (CHK) will have about 100 wells in its Eagle Ford Shale inventory.

 

Unlike rig count, well backlog is not a statistic tracked by anyone on a regular basis.  Platts cited estimates of 1,400-2,000 'fracklog' wells in the U.S.  However, I think this 'fracklog' seems more like a 'spin' by E&Ps (and Wall Street) to frame a better story for capex and/or production cuts of 2015+ rather than something of a material impact.

 

A lot of small and mid E&Ps typically cannot afford to remain so 'strategic' as they need cash just to stay afloat to fund operations and interest expense (See 'E&P Funding Crisis' section below).  Furthermore, the steep decline production curve, a characteristic of oil Shale, suggests the production impact from these wells most likely would not be significant and long enough as to bring about another oil bear market once oil prices recover.

 

E&P Funding Crisis

 

The long good days of $100 oil have spoiled many E&Ps into reckless spending and leverage.  Oil falling to 6-year low has put some E&Ps in jeopardy.  Reuters is reporting that JPMorgan has been shopping the entire Whiting Petroleum (WLL), the biggest oil producer in Bakken, to potential buyers but they're scared off by $5.6 billion in debt. Whiting piled up debt after the acquisition of Kodiak Oil & Gas last year.  Quicksilver Resources, a natural-gas-weighted producer, filed Chapter 11 on March 17 following Dune Energy and BPZ Resources.

 

I think this 'funding crisis' is individual-company based instead of an industry wide tsunami.  There are 100+ publicly traded mid to small E&Ps and E&P MLPs in North America.  Many risky and high levered companies were able to hide under the high oil price in the past.  This time around, the higher break-even point of Shale Oil dictates only the strong will survive.  So now is the time for some industry consolidation to weed out 'sour apples'.  In the end, bigger, smarter and healthier companies will remain, which is a good thing for investors and the U.S. energy industry as a whole in the long run.

 

Dividend Cut by ExxonMobil? 

 

A couple of weeks ago, CNBC had a segment talking about earnings per share vs. dividend per share and concluded that some of the bigger oil companies such as Hess (HES), ConocoPhillips (COP), and BP may need to cut dividend as earnings fall short of dividend.  ExxonMobil (XOM) name was also verbally discussed in this particular CNBC segment.

 

Frankly, I think it is plausible Hess, ConocoPhillips and BP cutting dividend due to lower oil prices & revenue; however, XOM has never ever cut dividend since the stock was $5, so I doubt the oil major would break tradition this time.  After all, XOM is sitting on $4.7 Bn cash and $53 Bn in Current Assets (as of 12/31/2014) .  In fact. I see XOM stock more a dividend play rather than energy, so I don't quite get Buffett's rationale of dumping all of his XOM holdings while still keeping IBM.       

 

Merit of The Integrated Model


Oil price plunge has also brought about the age-old debate over oil majors such as ExxonMobil (XOM) and Chevron (CVX) keeping the integrated model (Upstream + Downstream) instead of spinning off the refining business like Marathon (MRO) and ConocoPhillips (COP) did.

 

Sure, when oil prices are high, upstream (exploration & production) makes all the money while downstream (i.e. refining & marketing) drags.  But nothing lasts forever, when oil prices gone bust (like now), downstream actually serves as a natural hedge for the Upstream arm of the integrated model.  This is one reason integrates like XOM and CVX should fare better in the current oil price environment than E&Ps, and why hedging position/strategy is far more important for the pure E&Ps.

 

As I indicated before, shifting away from the integrated model is a short-sighted move blinded by Wall Street talk of 'unlocking shareholder value' (banks get hefty fees and shares in a spin-off IPO). Marathon and ConocoPhillips would certainly be a lot better off if they still have the steady cashflow from their old refining business to fall back on.   
Title: Re: Fracker Debt Bubble
Post by: Palloy on March 24, 2015, 05:08:48 PM
Neat interactive map with stats at
http://www.bloomberg.com/graphics/2015-oil-rigs/ (http://www.bloomberg.com/graphics/2015-oil-rigs/)
Watch Four Years of Oil Drilling Collapse in Seconds
By Tom Randall Julian Burgess and Blacki Migliozzi
March 13, 2014

The crash in oil prices kicked off intense debate over when, and how, American producers would react. So far they’re still cranking out oil, but there are signs that a slowdown is looming. Chief among them: the record drop-off in drilling for new oil. The animation below shows the deployment of drilling rigs since 2011, culminating recently in a sudden collapse.
Title: Re: Fracker Debt Bubble
Post by: RE on March 24, 2015, 05:25:22 PM
Neat interactive map with stats at
http://www.bloomberg.com/graphics/2015-oil-rigs/ (http://www.bloomberg.com/graphics/2015-oil-rigs/)
Watch Four Years of Oil Drilling Collapse in Seconds
By Tom Randall Julian Burgess and Blacki Migliozzi
March 13, 2014

The crash in oil prices kicked off intense debate over when, and how, American producers would react. So far they’re still cranking out oil, but there are signs that a slowdown is looming. Chief among them: the record drop-off in drilling for new oil. The animation below shows the deployment of drilling rigs since 2011, culminating recently in a sudden collapse.

FABULOUS Animation there PY!  Talk about an illustration of Ugo Bardi's Seneca Cliff!

I wish I could figure out how to embed those interactive maps.  :icon_scratch:

RE
Title: That $100 Price is Gone Boys, and it ain't EVAH Coming Back!
Post by: RE on March 26, 2015, 07:50:27 AM
http://www.youtube.com/v/77gKSp8WoRg?feature=player_detailpage

Even a full on War in Saudi can't keep the price propped up.  ::)

RE

Three Triggers That Will Send Oil Crashing Again (http://www.zerohedge.com/news/2015-03-26/three-triggers-will-send-oil-crashing-again)

Submitted by Tyler Durden on 03/26/2015 10:15 -0400

    Crude
    Goldman Sachs
    goldman sachs
    Japan
    Middle East
    Oklahoma
    OPEC
    Saudi Arabia
 

Submitted by Charles Kennedy via OilPrice.com,

Oil prices bounced back on March 24 on a sliding U.S. Dollar, and then again overnight on Middle East turmoil, but the pain may not be over yet.

Oil storage capacity continues to deplete. Storage levels at Cushing, Oklahoma, home to the crucial WTI benchmark, are at record levels. As of March 13, Cushing oil inventories hit 54.4 million barrels, the highest ever, according to the Energy Information Administration. That means that Cushing’s storage is now 77 percent full, up from just 27 percent in October 2014. The glut of oil has led to a flood of crude being diverted into storage tanks. As storage nears capacity, it becomes more likely that prices could drop significantly below current levels. That, of course, depends on if drillers cut back production enough to slow the storage build.

(https://oilprice.com/images/tinymce/Evan1/ada2106.png)

Yet another reason to suggest that oil prices could fall over the next two to three months is the annual planned maintenance that takes place at many U.S. refineries. Spring maintenance often leads to a significant volume of refining capacity temporarily closed down for several months. As that occurs, demand for domestic crude in the United States will decline, potentially pushing down prices. That also would force more output into storage, again exacerbating the shrinking ability for U.S. storage to handle more oil.

WTI could drop to $35 per barrel in the coming months, and Brent may fall to just $51.30 per barrel, according to projections from Facts Global Energy and Societe General.

The predictions echo those made by Goldman Sachs earlier this month, which forecasted oil prices declining to $40 per barrel. Goldman cited weak demand coming from Japan and Korea, which could rely more and more on LNG to offset oil in the electric power sector. Cutting even deeper into oil demand is the possibility that Japan will restart two nuclear reactors, easing the island-nation’s dependence on imported oil to meet power demands.

A renewed bout of weakness in the oil markets, notwithstanding this week’s price gains, was further backed up by comments from the Saudi Arabia’s OPEC governor Mohammed al-Madi, who said on March 22 that a return to $100 per barrel would be hard to reach. Saudi Arabia’s Oil Minister Ali al-Naimi reiterated that position, blaming non-OPEC producers for their unwillingness to cut back on production. He said that OPEC will not do it alone, and even revealed the fact that Saudi Arabia recently boosted its oil production to 10 million barrels per day. “The production of OPEC is 30 percent of the market, 70 percent from non-OPEC...everybody is supposed to participate if we want to improve prices,” al-Naimi said.
Title: Re: Fracker Debt Bubble
Post by: MKing on March 26, 2015, 10:24:33 AM
Excellent information. Sounds like everything is proceeding as expected, and the market is functioning as it is supposed to. Good to hear, and see.
Title: Peak Oil Storage
Post by: RE on April 01, 2015, 04:20:59 PM
Entertaining April Fools post, except for the fact I actually COULD see them refilling empty Water Reservoirs with Oil!  ::)

It will be interesting to see what occurs with the prices if they actually DO run out of storage room.

RE

America's New Crisis - Peak Oil Storage (http://www.zerohedge.com/news/2015-04-01/americas-new-crisis-peak-oil-storage)

Submitted by bugs_ on 04/01/2015 08:45 -0400

    Crude
    Tax Revenue

Domestic energy production continues to increase despite the anticipated shale shakeout.  The precipitous decline in gasoline prices were welcomed by most but government exise tax revenue was in jeopardy.

In order to stop the decline in gas prices there has been a national effort to store oil rather than put it on the market.  This has been successful for a few weeks and the price of gasoline has recovered slightly because crude is being withheld from the market.

Unfortunately for America most of our oil storage is now full and we will soon have no place left to store the oil we are producing.  In a few more weeks additional crude will have to seek the market with the associated drop in prices and "bad things" for the economy.  We are rapidly approaching "Peak Oil Storage".

We must marshal America's science and engineering talent in a manhattan style project to overcome "Peak Oil Storage".  If we do not attack this new crisis we will see government revenue implode at the same time individual disposable income increases.  This is, quite frankly, just too dangerous to allow.

I therefore propose the "Laurentian National Oil Storage Facility".  We can pump all the water out of Lake Erie and utilize the basin to keep even more crude production off of the market.  This would significantly defer the onset of "Peak Oil Storage".

Fully 80% or more of the great lakes would be left intact for future generations to enjoy (h/t snacky).

In California many former large lakes are on the verge of extinction.  Rather than squander scarce resources in a fruitless attempt to save them would it not make more sense to utilize these locations for oil storage as well?

If we do not act now oil prices, gasoline prices, and government exise tax revenues will continue to plummet.  The results will be nothing short of catastrophic.

Happy April 1'st!
Mark Hittinger
bugs_
Title: Re: Fracker Debt Bubble
Post by: MKing on April 01, 2015, 04:58:46 PM
Resource scarcity so problematic that we don't have any place left to put all the abundance. Talk about irony.

And they managed to do THIS, just imagine what they could do with more steady development environment, rather than this boom and bust nonsense.

When American consumers demand oil and gas, it is nice to know that there is at least has one industry in this country that can stand and deliver in a major way!

http://www.nola.com/business/index.ssf/2015/03/us_oil_production_century_spik.html (http://www.nola.com/business/index.ssf/2015/03/us_oil_production_century_spik.html)
Title: Re: Fracker Debt Bubble
Post by: Palloy on April 02, 2015, 06:16:19 PM
http://www.zerohedge.com/news/2015-04-02/revolver-raid-arrives-wave-shale-bankruptcies-about-be-unleashed (http://www.zerohedge.com/news/2015-04-02/revolver-raid-arrives-wave-shale-bankruptcies-about-be-unleashed)
The "Revolver Raid" Arrives: A Wave Of Shale Bankruptcies Has Just Been Unleashed
Tyler Durden
4/02/2015

Back in early 2007, just as the first cracks of the bursting housing and credit bubble were becoming visible, one of the primary harbingers of impending doom was banks slowly but surely yanking availability (aka "dry powder") under secured revolving credit facilities to companies across America. This also was the first snowflake in what would ultimately become the lack of liquidity avalanche that swept away Lehman and AIG and unleashed the biggest bailout of capitalism in history. Back then, analysts had a pet name for banks calling CFOs and telling them "so sorry, but your secured credit availability has been cut by 50%, 75% or worse" - revolver raids.

Well, the infamous revolver raids are back. And unlike 7 years ago when they initially focused on retail companies as a result of the collapse in consumption burdened by trillions in debt, it should come as no surprise this time the sector hit first and foremost is energy, whose "borrowing availability" just went poof as a result of the very much collapse in oil prices.

As Bloomberg reports, "lenders are preparing to cut the credit lines to a group of junk-rated shale oil companies by as much as 30 percent in the coming days, dealing another blow as they struggle with a slump in crude prices, according to people familiar with the matter.

    Sabine Oil & Gas Corp. became one of the first companies to warn investors that it faces a cash shortage from a reduced credit line, saying Tuesday that it raises “substantial doubt” about the company’s ability to continue as a going concern.

It's going to get worse: "About 10 firms are having trouble finding backup financing, said the people familiar with the matter, who asked not to be named because the information hasn’t been announced."

Why now? Bloomberg explains that "April is a crucial month for the industry because it’s when lenders are due to recalculate the value of properties that energy companies staked as loan collateral. With those assets in decline along with oil prices, banks are preparing to cut the amount they’re willing to lend. And that will only squeeze companies’ ability to produce more oil.

    Those loans are typically reset in April and October based on the average price of oil over the previous 12 months. That measure has dropped to about $80, down from $99 when credit lines were last reset.

    That represents billions of dollars in reduced funding for dozens of companies that relied on debt to fund drilling operations in U.S. shale basins, according to data compiled by Bloomberg.

“If they can’t drill, they can’t make money,” said Kristen Campana, a New York-based partner in Bracewell & Giuliani LLP’s finance and financial restructuring groups. “It’s a downward spiral.”

As warned here months ago, now that shale companies having exhausted their ZIRP reserves which are largely unsecured funding, it means that once the secured capital crunch arrives - as it now has - it is truly game over, and it is just a matter of months if not weeks before the current stakeholders hand over the keys to the building, or oil well as the case may be, over to either the secured lenders or bondholders.

The good news is that unlike almost a decade ago, this time the news of impending corporate doom will come nearly in real time: "Publicly traded firms are required to disclose such news to investors within four business days, under U.S. Securities and Exchange Commission rules. Some of the companies facing liquidity shortfalls will also disclose that they have fully drawn down their revolving credit lines like Sabine, according to one of the people."

Speaking of Sabine, its day of reckoning has arrived

    Sabine, the Houston-based exploration and production company that merged with Forest Oil Corp. last year, told investors Tuesday that it’s at risk of defaulting on $2 billion of loans and other debt if its banks don’t grant a waiver.

Another company is Samson Resource, which said in a filing on Tuesday that it might have to file for a Chapter 11 bankruptcy protection if the company is unable to refinance its debt obligations. And unless oil soars in the coming days, it won't.

    Its borrowing base may be reduced due to weak oil and gas prices, requiring the company to repay a portion of its credit line, according to a regulatory filing on Tuesday. That could “result in an event of default,” Tulsa, Oklahoma-based Samson said in the filing.

Indicatively, Samson Resources, which was acquired in a $7.2-billion deal in 2011 by a team of investors led by KKR & Co, had a total debt of $3.9 billion as of Dec. 31. It is unlikely that its sponsors will agree to throw in more good money after bad in hopes of delaying the inevitable.

The revolver raids explain the surge in equity and bond issuance seen in recent weeks:

    Many producers have been raising money in recent weeks in anticipation of the credit squeeze, selling shares or raising longer-term debt in the form of junk bonds or loans.

    Energy companies issued more than $11 billion in stock in the first quarter, more than 10 times the amount from the first three months of last year, Bloomberg data show. That’s the fastest pace in more than a decade.

    Breitburn Energy Partners LP announced a $1 billion deal with EIG Global Energy Partners earlier this week to help repay borrowings on its credit line. EIG, an energy-focused private equity investor in Washington, agreed to buy $350 million of Breitburn’s convertible preferred equity and $650 million of notes, Breitburn said in a March 29 statement.

Unfortunately, absent an increase in the all important price of oil, at this point any incremental dollar thrown at US shale companies is a dollar that will never be repaid.

Finally, speaking of Samson, its imminent bankruptcy should not come as a surprise. Back in January we laid out the shale companies which will file for bankruptcy first. The recent KKR LBO was one of them.

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/01/GS%20shale%20matrix%201_0.jpg)

Many more to come as the countdown to the day of reckoning for the US shale sector has just about run out.
Title: Re: Fracker Debt Bubble
Post by: RE on April 02, 2015, 06:22:52 PM

Why now? Bloomberg explains that "April is a crucial month for the industry because it’s when lenders are due to recalculate the value of properties that energy companies staked as loan collateral. With those assets in decline along with oil prices, banks are preparing to cut the amount they’re willing to lend. And that will only squeeze companies’ ability to produce more oil.

This is precisely the point Tom Lewis made a while back, which Moriarty dismissed as Tom is a "know nothing blogger".  So now he can dismiss Bloomberg as "know nothing financial reporters" as well.

Once again, the Bloggers are correct and the World Class Geochemist is shown to be just another Fracker Shill.

RE
Title: Re: Fracker Debt Bubble
Post by: MKing on April 02, 2015, 06:30:08 PM

Why now? Bloomberg explains that "April is a crucial month for the industry because it’s when lenders are due to recalculate the value of properties that energy companies staked as loan collateral. With those assets in decline along with oil prices, banks are preparing to cut the amount they’re willing to lend. And that will only squeeze companies’ ability to produce more oil.

This is precisely the point Tom Lewis made a while back, which Moriarty dismissed as Tom is a "know nothing blogger". 

Well, that too maybe, but I believe I focused on his lack of knowledge on the industry, and specific use of words that made no sense because of that lack of knowledge.

Quote from: RE
So now he can dismiss Bloomberg as "know nothing financial reporters" as well.

How quickly you have forgotten who has been discussing what happens during these busts, who has made it through more than one before, and knows exactly what to do next. The bloggers a year ago didn't have a clue this was coming, as opposed to those of us who have lived it multiple times and could have told stories about how this plays out before it ever happened.
Title: Re: Fracker Debt Bubble
Post by: RE on April 02, 2015, 06:38:17 PM

Why now? Bloomberg explains that "April is a crucial month for the industry because it’s when lenders are due to recalculate the value of properties that energy companies staked as loan collateral. With those assets in decline along with oil prices, banks are preparing to cut the amount they’re willing to lend. And that will only squeeze companies’ ability to produce more oil.

This is precisely the point Tom Lewis made a while back, which Moriarty dismissed as Tom is a "know nothing blogger". 

Well, that too maybe, but I believe I focused on his lack of knowledge on the industry, and specific use of words that made no sense because of that lack of knowledge.

Which was simply obfuscating the underlying point and was a meaningless and worthless criticism.  He was fundamentally correct as is proven by what is now occurring.

Quote from: RE
So now he can dismiss Bloomberg as "know nothing financial reporters" as well.

How quickly you have forgotten who has been discussing what happens during these busts, who has made it through more than one before, and knows exactly what to do next. The bloggers a year ago didn't have a clue this was coming, as opposed to those of us who have lived it multiple times and could have told stories about how this plays out before it ever happened.

If you all knew it before it happenned, then why did you do it?  Just to commit fraud and steal money?  What?

Besides that, both Steve and I predicted this would happen, in fact Steve's prediction goes back more than 2 years and he got it right to the month.  No "World Class Experts" saw it coming though, including the Saudi Oil Minister, he said so in speech.  So obviously in your meetings with him you did not clue him in to your foreknowledge.


Title: Re: Fracker Debt Bubble
Post by: MKing on April 02, 2015, 06:55:25 PM
Well, that too maybe, but I believe I focused on his lack of knowledge on the industry, and specific use of words that made no sense because of that lack of knowledge.

Which was simply obfuscating the underlying point and was a meaningless and worthless criticism.  He was fundamentally correct as is proven by what is now occurring.

Just because YOU don't understand the differences either DOESN'T make it obfuscating. If he can't write what he meant, can't be bothered with learning the subject matter, it isn't my fault.

Quote from: RE

If you all knew it before it happenned, then why did you do it?  Just to commit fraud and steal money?  What?

Why did I do what? Of course it had happened before, you might not have been paying attention in 1986, but some of us were living it. And the slowdown in the GOM in 92. And during the late 90's with the Asian flu. And the flash crash in 2008.

And I've never committed fraud nor stolen money, my conflicts with the federal authorities have been related to machine guns and a wild youth.

Quote from: RE
Besides that, both Steve and I predicted this would happen, in fact Steve's prediction goes back more than 2 years and he got it right to the month.

Oh please. Looks like Steve has just been calling for falling prices for years now…waiting to be right just like a broken clock is right twice a day.

(http://www.economic-undertow.com/wp-content/uploads/2011/11/CLB-111311.png)
Title: Re: Fracker Debt Bubble
Post by: Palloy on April 02, 2015, 07:04:25 PM
Quote
MKing: The bloggers a year ago didn't have a clue this was coming, as opposed to those of us who have lived it multiple times and could have told stories about how this plays out before it ever happened.

So tell us what is going to happen?  The frackers hand over the keys to the bondholders, and they can't make any better use of the facilities, so they hand over the keys to the banks that lent them the money to buy the junk bonds. The bankers can't make any money from the facilities, but I expect they can persuade the Fed to take the keys for some fiat notes. And then six months down the track when they re-average the price of oil from $80 down to $50 and the value of the collateral slumps again, then what?
Title: Re: Fracker Debt Bubble
Post by: RE on April 02, 2015, 07:20:42 PM

Oh please. Looks like Steve has just been calling for falling prices for years now…waiting to be right just like a broken clock is right twice a day.


Obviously you did not follow the Triangle of Doom series.

This one from August of 2012

(http://www.doomsteaddiner.net/blog/wp-content/uploads/2012/08/TriangleofDoom.png)

This one from August of 2013


(http://www.doomsteaddiner.net/blog/wp-content/uploads/2013/08/Triangle-of-Doom-080113.png)

This one from November of 2014 (PREDICTION BECOMES REALITY)


(http://www.doomsteaddiner.net/blog/wp-content/uploads/2014/11/Triangle-of-Doom-1101141.png)

Take that and stuff it up your World Class Asshole. :P

RE
Title: Re: Fracker Debt Bubble
Post by: MKing on April 02, 2015, 07:30:18 PM
Quote
MKing: The bloggers a year ago didn't have a clue this was coming, as opposed to those of us who have lived it multiple times and could have told stories about how this plays out before it ever happened.

So tell us what is going to happen? 

I already have, but it is possible that you haven't been allowed to see it. I've explained on multiple occasions now the methods by which some oil companies not only survive, but thrive, taking advantage of what they know about these business cycles.

Quote from: Palloy
The frackers hand over the keys to the bondholders, and they can't make any better use of the facilities, so they hand over the keys to the banks that lent them the money to buy the junk bonds.

Have you ever seen how a bank dissipates loss? I have, back during the GOM slowdown in the early 90's. I don't think I have described that before, even in the erased postings, but I can explain how if you'd like.

But to your point, no, when an oil company goes bankrupt, it doesn't just turn over the keys to bondholders. Certainly after the bankruptcy judge decides to either sell the companies assets, or just its components, those owed money get various amounts of fraction of a dollar. And certainly during the crash of 86, so called "energy banks" went as bankrupt as many oil companies did.

Those who make money in these downturns do so as follows….we go to the bankruptcy judge and offer those pennies on the dollar. We wait…and when the price recovers, we make a mint. I've been involved in about 4 company buyouts before, 2 from bankruptcy, 2 in distress, 2 banker haircuts related to energy lending, and one multi-billion dollar pipeline company bankruptcy.

Quote from: Palloy
The bankers can't make any money from the facilities, but I expect they can persuade the Fed to take the keys for some fiat notes. And then six months down the track when they re-average the price of oil from $80 down to $50 and the value of the collateral slumps again, then what?

My most recent examination of how this type of financing has been working goes like this. Wall Street assembles from investors money, promising to broker a deal. Wall Street then does just that (was watching a billion dollar Utica drilling deal just last year), "taxes" the deal for their "expertise" to the tune of tens of millions, and passes all the risk on to investors. In this deal in particular, if financial targets are not met, there are options within the deal financing that Wall Streets appointed minions can come in, kick out current management and basically take over the operation of the properties (in this case producing wells and pipelines). Wall Street or their representatives now operate the company, but without having paid for it, and can operate it to their benefit, preferential well operations, their fees are paid first, and they can also take the entire thing in bankruptcy, where they will continue to be paid for their expenses (and then some) until a buyer is found, or the pieces sold individually.

Bond holders, shareholders, stockholders, all cycle through the normal bankruptcy process, I've been involved on the inside of one of these  back in the 80's, those who operate the company in bankruptcy are about the only ones who come out on top. Like I said, some of us have seen, and DONE this all before.
Title: Re: Fracker Debt Bubble
Post by: Palloy on April 02, 2015, 11:40:02 PM
That makes it sound like nobody lost out, but SOMEBODY did.  Are you saying only muppets (with more money than sense) are currently the only investors? - I would find that hard to believe.

And doesn't it require somebody to wait out the period until things get back to BAU with increasing demand and high oil prices again?  I don't doubt that some entrepreneur will be willing to take that chance for a sufficiently low entry price, but will prices EVER recover with no signs of growth? The oil majors should know, and their verdict is to stay out of fracking and buy their own shares back.

Mostly finished wells will be finished, and not-yet-started wells not started, but what about those in-between wells? - can they be moth-balled for 5 years and then finished easily? Do the drilling rigs survive the lay-off period OK?
Title: Re: Fracker Debt Bubble
Post by: RE on April 03, 2015, 12:44:49 AM
That makes it sound like nobody lost out, but SOMEBODY did.  Are you saying only muppets (with more money than sense) are currently the only investors? - I would find that hard to believe.

And doesn't it require somebody to wait out the period until things get back to BAU with increasing demand and high oil prices again?  I don't doubt that some entrepreneur will be willing to take that chance for a sufficiently low entry price, but will prices EVER recover with no signs of growth? The oil majors should know, and their verdict is to stay out of fracking and buy their own shares back.

Mostly finished wells will be finished, and not-yet-started wells not started, but what about those in-between wells? - can they be moth-balled for 5 years and then finished easily? Do the drilling rigs survive the lay-off period OK?

Patience PY.

I did not respond to this bullshit in the Forum because it required the FULL TREATMENT in a Blog, which I just finished writing.

Coming Soon to a Laptop Near You. :icon_sunny:

RE
Title: Re: Fracker Debt Bubble
Post by: MKing on April 03, 2015, 12:23:51 PM
That makes it sound like nobody lost out, but SOMEBODY did.  Are you saying only muppets (with more money than sense) are currently the only investors? - I would find that hard to believe.

As I mentioned earlier, you need to see how a bank dissipates huge losses in order to really understand the sleight of hand involved. But of course someone gets hammered, those who are ultimately left holding the bag, those who most directly are tied to the production stream and results of the change in commodity price usually. Those involved in the game understand it, and have various means of hedging risk, even throughout the bankruptcy procedures.

Your 401k certainly might take a hit, if it invested in some energy fund, the return of which had been plowing along steadily at 8%/annum and then dropped to -2%. It really depends on your exposure as well, the more diversified the better. The energy banks of the 80's, sometimes just their energy lending divisions, were put down by the parent company when this same kind of thing happened back then. The exposure during the early 90's, late 90's, and 2008 were all too short in length to really trigger the kind of oil field contagion that happened through the mid and late 80's. THOSE were the days of pucker factor, and of course, the American consumer profited handsomely from it, even if energy banks, energy investors and others did not. It was ugly back then, we haven't even approached that yet.

Quote from: Palloy
And doesn't it require somebody to wait out the period until things get back to BAU with increasing demand and high oil prices again?

Depends on the type of organization, their risk profile, their commodity hedging strategy, etc etc. In the easy 80's, drilling companies were going belly up YEARS before the prices finally crashed. The high prices tends to allow companies to start up that never learned what "lean and mean" is. Some of us did, and succeeded wildly because of it, but it is not the FUN part of the oil and gas business. Watching pennies just seems so…accountant like.

Quote from: Palloy
I don't doubt that some entrepreneur will be willing to take that chance for a sufficiently low entry price, but will prices EVER recover with no signs of growth? The oil majors should know, and their verdict is to stay out of fracking and buy their own shares back.

Price is about the balance between supply and demand, not absolute volumes. What the world (and newbies to the oil business) learned in 2008 was that changes in demand are far more powerful than underlying field declines (a hot topic among peakers at the time), and so yes, if demand continues to drop off, everyone and all companies dependent upon the price of oil are going to be absolutely HAMMERED. Until those underlying field declines drop supply down far enough to bring more of a balance to the market.

There is a change afoot in the energy extraction business (and this includes coal and anything else as well) that is beginning to show up in the market, and it has quite interesting consequences for the future of energy production. Will be fun to watch, the bloggers haven't seen it yet or even discussed it, but then they aren't in the business, and you can't see how this all works without at least some substantial experience in what to look for.

Quote from: Palloy
Mostly finished wells will be finished, and not-yet-started wells not started, but what about those in-between wells? - can they be moth-balled for 5 years and then finished easily? Do the drilling rigs survive the lay-off period OK?

There is no such thing as an "in between" wells. State and Federal regs require anything not drilled to be plugged, unless some special circumstances can be explained to the regulators. It doesn't help anyone to have half finished wells sitting around, they are public liabilities. Drilling rigs are just big hunks of steel, they can sit around and rust for a decade and be put back to use fairly easily. But the problem nowadays is what KIND of rig you might lay down. Now that horizontal wells can be manufactured like Nike makes shoes, if you lay down a low hook load non-walker, it might never come back without another boom, and maybe not even then. New ADR rigs are wonders of electronic control, top drive and hydraulic handling devices, you don't even need but a single floor hand nowadays, even the pipe handling is hydraulic. They can stand back 20,000 of drill pipe and MOVE, which is itself cool. And all of this is efficiency stacked on top of efficiency, which translates to lower drilling costs, and therefore even less well results are required to make a buck. Completion costs have already dropped some 20-25% I believe, but it will still take the better part of this year to shake out. Maybe even longer. But within a year, if this thing goes the way of 1986 (leading to Bruce Babbitt in the late 90's famously proclaiming that "oil will never again be higher than $30/bbl!") it will be great for the consumer, a disaster for all those kids with less than 10 years of experience who will forever curse the oil industry, and those that stick to it, make it through to the far side, will reap the benefits of the one constant in all of this conversation….the continued demand by the American public for their hydrocarbons. We can always count on that, prices might go up and down, but thank god for american consumers not able to change their behavior.
Title: Re: Fracker Debt Bubble
Post by: JoeP on April 03, 2015, 03:02:00 PM