Anxiety In Williston, Boom Town -- February 10, 2015

Reporting Today

Genesee & Wyoming (GWR), misses by $0.06, reports revs in-line: reports earnings of $1.12 per share, excluding non-recurring items, $0.06 worse than the Capital IQ Consensus Estimate of $1.18; revenues rose 6.1% year/year to $415.6 mln vs the $417.7 mln consensus. (good news in USA; bad news in Australia)

Coca-Cola (KO), forecast $0.42; net income attributable to shareholders fell to $770 million, or 17 cents per share, in the quarter from $1.71 billion, or 38 cents per share, a year earlier; excluding items such as the effects of cost-cutting measures and the refranchising of bottlers, the company earned 44 cents per share.

Williams Partners L.P. announced its expanded Geismar, Louisiana olefins plant has begun manufacturing ethylene for sale.  Williams Partners' share of the total capacity of the expanded plant will be approximately 1.7 billion pounds per year

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Anxiety in Boom Town?

From The Financial Times:

“No one expected prices to fall this far, this fast,” said Ward Koeser, the long-time former mayor of Williston who lived through that 1980s crash. “It’s fair to say there is a lot of nervousness around town. A lot of people worrying if it’s a case of ’here we go again.'”

And it’s not hard to see why. Everywhere in Williston there are signs of retrenchment. Oil companies and the contractors who provide them with everything from drilling rigs to pork ribs, pipes to Portaloos, are now battening down the hatches for what many fear will be a prolonged period of lower prices.

The headline indicators are stark. The number of drilling rigs in North Dakota fell to 156 last month from a 2014 high of 206 and the lowest number since 2010. Nationwide rig numbers fell by about 15%, in the last 60 days, according to Halliburton.

Much, much more at the link.

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All That Cash Just Isn't Enough

I get a kick out of this story. "Everyone" seems surprised that Microsoft and Apple would raise even more cash by selling bonds. But when they are paying interest of less than 2% the question is why isn't everyone doing this. Again, the top story over at Yahoo!Finance at the moment:

Microsoft, with about $90 billion on its balance sheet, sold $10.8 billion yesterday. The 10-year portion of that offering yields 2.7%. That's less than the dividend yield on Microsoft shares.

Apple  is pricing Swiss bonds today. Since Swiss franc denominated debt has a negative yield Apple is expected to pay buyers of its corporate bond less than .5 percentage points a year for 10 or 15 year paper. This is astonishingly low.

The company's are telling us they think yields may go higher from here. Apple famously nailed the absolute low for corporate debt yields in 2013 issuing $17 billion at the rock bottom. If you look at the long term for the 10-year rates you can see they didn't get as low as they were in 2013 until last week when, yes, Apple hit the offer again.

What's not to like?