Energy explorers reeling from the rout in oil prices are looking for liquidity in an obvious place: their rocks. Having exhausted other ways to raise cash as a glut of global supply depresses prices, a slew of producers from Anadarko Petroleum Corp. to Comstock Resources Inc. announced more than $2.4 billion in asset sales last month, according to data compiled by Bloomberg.
Selling oil and gas fields to pay off lenders and fund new drilling -- often a wildcatter’s option of last resort -- is surging after a six-month lull.
There’s more to come -- by one estimate, another $20 billion this year -- as executives at Occidental Petroleum Corp., Whiting Petroleum Corp., Penn Virginia Corp., Exco Resources Inc., Chesapeake Energy Corp. and Ultra Petroleum Corp. have all said in recent weeks that they are selling assets or exploring sales.
The surge shows how the industry’s two-pronged strategy for staying financially healthy since oil prices started tanking -- raising capital while tightening belts -- may not be enough, particularly for companies with a lot of outstanding debt. Bank regulators are getting nervous about the industry’s exposure to drillers, creating another incentive to sell assets.
“For the most part, lending banks have worked with their clients to provide temporary relief,” said Ron Gajdica, co-head of energy acquisitions and divestitures investment banking with Citigroup Inc. “That relief can’t go on forever.”
The international swimming community, gathered here for the FINA
World Championships, got a one-day respite from the tasks of
recalibrating its record book and getting its collective head around the
phenomenon in its midst.
Katie Ledecky
swam again Thursday, for the fifth day in a row, but this time was all
giggles and hugs and goofy smiles as she and three teammates swam off
with the gold medal in the women’s 4×200 freestyle relay, Ledecky’s
fourth of this meet.
“We had a blast out there,” said Ledecky, the 18-year-old from
Bethesda. “It was so much fun being in the ready room with those girls,
just so relaxed.”
On Friday, the pursuit of history begins again, with the preliminary
heats of the women’s 800-meter freestyle, one of three events in which
Ledecky holds the world record. The finals are Saturday, and if she wins
– and no one in the world is within 10 seconds of her this year – she
will complete an unprecedented sweep of the 200, 400, 800 and 1,500
freestyles at a single world championship.
It is a feat that has no
official name, but one that may henceforth be known as the Ledecky Slam.
1500 Meter Women's Freestyle World Record, 2015
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Speaking Of Slams
Schumer won't support Obama on Iran. At least that's what the New York Times is reporting. Schumer still has a political future left. In New York. The state with the highest percentage of Jews in the United States. The state with the largest number of Jews in the United States -- and by a wide, wide margin. President Obama is a lame duck. He has no political future but worse than that, he has thrown his turban in with the enemies of Israel. From The Times:
As
if on cue, Representative Eliot L. Engel of New York, the ranking
Democrat on the House Foreign Affairs Committee, who was widely expected
to oppose the deal, announced his opposition Thursday night.
Mr.
Schumer’s announcement comes as Representative Nancy Pelosi of
California, the minority leader, labors to build a firewall in the House
in support of the deal, which has been denounced by Prime Minister
Benjamin Netanyahu of Israel. At six meetings in recent weeks, Ms.
Pelosi has assembled an informal team of Democrats determined to win
over the 146 House Democrats needed to uphold a veto.
But
Ms. Pelosi’s team had had its eye on Mr. Schumer, conceded
Representative Jan Schakowsky, Democrat of Illinois and one of Ms.
Pelosi’s deputies on the Iran deal.
Ms. Schakowsky said that Democratic
leaders had never put Mr. Schumer “in the ‘yes’ column,” but that “the
calculation still is we’ll have the votes” even without him.
So
far, 12 Senate Democrats and one Democratic-leaning independent,
Senator Angus King of Maine, have announced their support for the deal.
Two others, Senator Bernie Sanders, a liberal independent from Vermont,
and Senator Jack Reed of Rhode Island, the ranking Democrat on the Armed
Services Committee, have all but announced their support.
President Obama explicitly states the US is no longer responsible for Saudi's security;
the tea leaves clearly suggest it is US policy to move Iran to singular super-power status in the Mideast;
announces this past week that it will issue $27 billion in bonds;
has a shooting war in Yemen; terrorists on its borders;
a $35 billion, 5-year program to increase crude oil production announced in 2012, has failed; and,
it continues to give away its oil at $60/bbl (when it needs $100 oil to balance its budget).
That $100-oil figure is based on data from at least a year ago. After giving away its oil for the past year at $60/bbl, the $100-oil figure is probably understated.
So, with all that, it doesn't take a rocket scientist to think the unthinkable, but even I couldn't go that far.
If the oil futures market is correct, Saudi Arabia will start running
into trouble within two years. It will be in existential crisis by the
end of the decade.
The contract price of US crude oil for delivery
in December 2020 is currently $US62.05, implying a drastic change in
the economic landscape for the Middle East and the petro-rentier states.
The
Saudis took a huge gamble last November when they stopped supporting
prices and opted instead to flood the market and drive out rivals,
boosting their own output to 10.6 million barrels a day (b/d) into the
teeth of the downturn.
Bank of America says OPEC is now "effectively dissolved". The cartel
might as well shut down its offices in Vienna to save money.
If the aim was to choke the US shale industry, the Saudis have
misjudged badly, just as they misjudged the growing shale threat at
every stage for eight years. "It is becoming apparent that non-OPEC
producers are not as responsive to low oil prices as had been thought,
at least in the short-run," said the Saudi central bank in its
latest stability report.
"The main impact has been to cut back on
developmental drilling of new oil wells, rather than slowing the flow of
oil from existing wells. This requires more patience," it said.
One Saudi expert was blunter. "The policy hasn't worked and it will never work," he said.
By
causing the oil price to crash, the Saudis and their Gulf allies have
certainly killed off prospects for a raft of high-cost ventures in the
Russian Arctic, the Gulf of Mexico, the deep waters of the mid-Atlantic,
and the Canadian tar sands.
Consultants Wood Mackenzie say the
major oil and gas companies have shelved 46 large projects, deferring
$US200 billion ($272 billion) of investments.
The problem for the Saudis is that US shale frackers are not high-cost. They are mostly mid-cost, and as I reported from the CERAWeek energy
forum in Houston, experts at IHS think shale companies may be able to
shave those costs by 45 per cent this year - and not only by switching
tactically to high-yielding wells.
Much more at the link.
Earlier today while bike riding, I was thinking about Saudi's problems. I thought about what they would have to do. I typed it all out below but then realized that folks much smarter than I would note all the flaws. So, I deleted it.
But if you don't read anything else this week, read the article at The Sydney Morning Herald linked above. The original appeared in The (London) Telegraph, perhaps one of the two best newspapers in the world.
**************************************
Later, see first comment:
The succession status/procedures in KSA may be vastly more problematic
as the current king is in the process of partially disenfranchising
something like 34 out of the current 35 sub branches of the house of
Saud.
Diminishing resources will greatly accelerate the tension.
and my reply:
Very,
very interesting. I was unaware of that. These three sources provide
some insight, in order of importance (first one listed is most
important):
Texas power users broke a record for the second time in two days this week after electric demand peaked at 68,912 megawatts on Thursday between 4 and 5 p.m. See yesterday's report here.
The Electric Reliability Council of Texas, which runs the state’s electric grid, said the preliminary estimate for power demand during that hour was the highest it has ever recorded. Thursday’s peak was just ahead of the record set on Wednesday, when demand registered 68,538 megawatts.
From yesterday's' report:
The Texas grid reached 68,459 megawatts within the record 60-minute time frame, which
exceeded the previous Aug. 3, 2011 record of 68,305 megawatts.
Texas better start building those solar farms and wind turbines farms post-haste.
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Obama's Unintended Consequences
Is it possible President Obama's war on coal in the United States has had a most unexpected, unintended consequence? IBD is reporting:
At the very moment President Obama has decided to shutter America's
coal industry in favor of much more expensive and less efficient
"renewable energy," coal use is surging across the globe.
A new
study by the prestigious National Academy of Sciences detects an
unmistakable "coal renaissance" under way that shows this mineral of
fossilized carbon has again become "the most important source of
energy-related emissions on the global scale."
Coal is expanding
rapidly "not only in China and India but also across a broad range of
developing countries — especially poor, fast-growing countries mainly in
Asia," the study finds.
Why is coal such a popular energy source
now? The NAS study explains that many nations are attracted to
"(relatively) low coal prices . .. to satisfy their energy needs."
It
also finds "the share of coal in the energy mix indeed has grown faster
for countries with higher economic growth."
In sum, using coal is a stepping stone to prosperity. So much for it being a satanic energy source.
Regular readers are well aware of the amount of energy India and China need. I had forgotten about the "poor, fast growing countries mainly in Asia."
The unintended consequence (rapid rise for coal demand outside of the US) was precisely because President Obama had nothing to offer those countries who might have otherwise given up coal. US exports of natural gas and oil would not have solved all the problems, but it might have helped stem the use of coal globally, but alas, President Obama was unable to see that.
**********************
Iowa's ObamaCare Co-Op Won't Be The Last (To Fail)
President Obama's legacy won't end with his failure to stem the use of coal worldwide. It will extend to ObamaCare. This is also from IBD. This is not a crackpot, right-wing publication. It has a reputation for unbiased, "bottom-line" reporting:
Bankruptcy: A
court filing this week shows that the first ObamaCare-created insurance
co-op to fail will likely cost $147 million. How many more will have to
go under before President Obama admits to this boondoggle?
A few
years ago, the idea of nonprofit co-ops was music to ObamaCare
advocates' ears.
Freed from the need to deliver profits to investors,
these nonprofits would provide competition and choice to the individual
market. That was the theory, anyway.
And there were few places
better suited to the success of this concept than Iowa and Nebraska,
states that had little competition, where uninsured rates were high and
businesses were dropping coverage.
So with millions in federal
low-interest startup loans, CoOpportunity was one of the first ObamaCare
co-ops to get off the ground.
It was also the first to fail.
The Iowa government took it over in late 2014 and shut it down entirely a few months later.
In his most recent liquidation status report filed with the Iowa District Court in Polk County,
Daniel Watkins shows why. As of June, CoOpportunity had $282.4 million
in liabilities and just $108.7 million in assets. Among those
liabilities is the $147 million CoOpportunity in federal startup and
solvency loans that it's unlikely ever to pay back.
These losses came despite the fact that CoOpportunity had far more sign-ups than it had expected.
As far as ObamaCare failures go, CoOpportunity might be the first, but won't be the last.
By the way, this was absolutely predictable and posted several times on this blog when ObamaCare was first being voted upon. The early adopters of ObamaCare paid very little in premiums and being the most chronically ill (AIDS, cancer, mental health issues) used medical resources far in excess of what their premiums covered.
I assume Iowans are well aware of this story, and they will still vote for Hillary in 2016.
Platts is reporting that Enbridge storage at ECHO may lead to more Canadian crude being stored along the US Golf Coast:
Enbridge has subleased crude storage at Enterprise Product Partners'
ECHO terminal in Houston, which may result in increased flows of
Canadian crudes to the US Gulf Coast, according to a source familiar
with the situation.
The Calgary-based midstream company has
subleased 1 million barrels worth of storage at the 1.65 million-barrel
capacity terminal, which has become a pricing point for Canadian crude
in Houston following the Enterprise/Enbridge Seaway twin line beginning
service in December and brought the line's capacity to 850,000 b/d. The
crude terminal is slated to have 6.5 million barrels of storage
available by late this year.
*******************************
The graphic is hard to read, but the "green" terminals are individual storage areas. The amount of storage is already immense, but the degree to which these storage areas are going to be expanded is simply staggering.
