For Investors Only -- May 28, 2014; Bloomberg Suggests A Shakeout Among Shale Operators

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Trading at new 52-week highs: AAPL (again), COP (again), DAVE, WIN. On another note, ERF is near its 52-week high and up over 2%.

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For The Archives: A Shakeout In The Oil Patch

BloombergBusinessweek is reporting:

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., 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. 

The article lists a number of companies but none were associated with the Bakken, except Hess and EOG which are not considered at risk. [Big thank you to a reader who sent me this story.]

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From The Archives: It's Who You Know, Not What You Know

Remember this story? A lack of transmission lines thrwared T. Boone Pickens' ambitions for a huge wind farm in Texas. To guys like Algore it only made sense. unfortunately Pickens' apparently did not have friends in high enough places to get it done:

Texas is in the midst of a wind-power boom, and at the heart of it lies a conundrum: While plenty of ranchers are eager to host wind turbines, few want the unsightly high-voltage transmission lines needed to carry the power to distant cities running through their property. 

The lack of transmission lines — and the relatively low price of natural gas — has thwarted the ambitions of wind-power advocates to expand the use of this alternative energy source in Texas. The oilman T. Boone Pickens, for example, bet heavily on wind a couple of years ago, ordering hundreds of turbines and announcing plans to build the world’s largest wind farm in the Panhandle at a cost of up to $12 billion. He later scaled back, canceling some of the turbine orders, giving up his land lease and saying he was looking elsewhere to build. 

Now, fast forward, last week. Friends in high places approved a transmission line in Texas for a proposed wind farm. FuelFix is reporting:

A California-based energy company announced Thursday that it has federal approval to build a transmission line connecting Texas to the power grid in southeastern states.
The project has the potential to expand the Texas’s wind energy industry by giving it access to another market, according to Pattern Energy Group LP, the company behind the planned Southern Cross transmission line.

Pattern Energy said it received approval from the Federal Energy Regulatory Commission last week to move forward with the line, which is expected to be complete by 2019. The line, which would stretch about 400 miles, would extend from near Dallas into northern Louisiana and then into northern Mississippi.

It begs questions for which I have no answer, but it is interesting it is a California-based company, a state well known with high rollers who fund liberal causes and political races.  I guess Texas ranchers now like the unsightly high-voltage transmission lines needed to carry the power to distant cities running through their property. LOL.