Oil’s biggest bust since the global recession was good for a few cases of whiplash.Just two months ago, Continental Resources Inc. (CLR), the shale driller founded by billionaire Harold Hamm, budgeted for $80-a-barrel oil and planned to spend $4.6 billion in 2015. Six weeks later, with crude down 29 percent in the interim, Continental cut its 2015 budget to $2.7 billion.Halliburton Co. (HAL), the world’s biggest provider of fracking services to oil companies, announced Dec. 11 that it would dismiss 1,000 workers. Two months earlier, Chairman and Chief Executive Officer Dave Lesar said “our sector will be fine” if oil prices range between $80 and $100 a barrel.Oil PricesThe U.S. shale boom that’s brought the country closer to energy self-sufficiency than at any time since the 1980s will be challenged in 2015 as never before. The benchmark U.S. crude price fell below $50 today for the first time since April 2009. Demand growth is weakening and OPEC, which controls 40 percent of supply, is unwilling to cut output.“The extent and rapidity of the price decline has been a surprise,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consultant in Houston. “They’re facing a new reality.” Photographer: Daniel Acker/BloombergPioneer Drilling Co. operations near Montrose, Pennsylvania, U.S.West Texas Intermediate reached a 2014 peak of $107.73 in June before dropping as low as $49.77 today on the New York Mercantile Exchange. The grade settled at $50.04 a barrel. That’s below the break-even price for 37 of 38 U.S. shale oilfields, according to Bloomberg New Energy Finance.RBC Capital Markets and CIBC World Markets predict prices will remain below $60 for the first three months of 2015. Societe Generale SA’s Michael Wittner forecasts an average of $64.50 in the first quarter and $61.50 in the second.
via Oil Below $60 Tests Economics of U.S. Shale Boom – Bloomberg.
Posted in Bakken, Eagle Ford, shale breakeven
Tagged Bakken, Eagle Ford, energy capex, energy capital spending, Shale breakeven, shale jobs, Shale Natural Gas, Shale oil, Shale oil breakeven
The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year. Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”The Fed’s decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.
via The Fed Helped Cause $550 Billion Energy Debt Boom, And Now It Could End In Tears – Yahoo Finance.
Posted in Bakken, Eagle Ford, energy debt, Shale, shale breakeven, Shale Natural Gas, Shale oil, shale oil breakeven
Tagged Bakken, Eagle Ford, energy breakeven, Shale breakeven, Shale Natural Gas, Shale oil, Shale oil breakeven
Oaktree Capital Group LLC (OAK:US), the world’s biggest distressed-debt investor, is buying bonds of energy companies as oil prices plunge, co-Chairman Howard Marks said.“Prices of energy-related debt have fallen, in some cases substantially,” Marks said today at Goldman Sachs Group Inc.’s financial-services conference in New York. “If your product falls in price by 40 percent, there are a lot of levered businesses that aren’t going to service your debt. We have been investing.”High-yield bonds of energy companies have declined 11.5 percent since June 19, when oil prices peaked this year. Brent has since tumbled about 42 percent because of slower growth in global demand combined with surging production in North America. A sustained slump in crude may trigger a significant rise in the number of energy companies defaulting, Deutsche Bank AG credit strategists Oleg Melentyev and Daniel Sorid said in a report yesterday.
via Oaktree Investing in Energy Debt Amid Oil Price Drop, Marks Says – Businessweek.
Oil market analysts are debating if oil will fall to $50. In North Dakota, prices are already there.Crude sold at the wellhead in the Bakken shale region in North Dakota fell to $49.69 a barrel on Nov. 28, according to the marketing arm of Plains All American PAA Pipeline LP. That’s down 47 percent from this year’s peak in June, and 29 percent less than the $70.15 paid for Brent, the global benchmark.The cheaper price for North Dakota crude underscores how geographic and logistical hurdles can amplify the stress that plunging futures prices have put on drillers in new shale plays that have helped push U.S. oil production to the highest level in 31 years. Other booming areas such as the Niobrara in Colorado and the Permian in Texas have also seen large discounts to Brent and U.S. benchmark West Texas Intermediate.
via Sub-$50 Oil Surfaces in North Dakota Amid Regional Discounts – Bloomberg.
Posted in Shale oil, shale oil breakeven, shale service providers, U.S. Shale
Tagged Bakken, Eagle Ford, Permian, shale, Shale breakeven, Shale oil, Shale oil breakeven, U.S. shale
Although OPEC’s decision to maintain current crude production quotas was not entirely unexpected see post, the market reaction was violent. WTI crude fell by 10% over the last two days of the week.At $66 per barrel North American producers have real problems on their hands. While Eagle Ford is still profitable, both Bakken and Permian Basin are in now the red.
via Bakken And Permian Shale Basin In Red – Business Insider.
Houston, Tx has seen significant growth in recent years from the shale boom. A material amount of the companies which have the highest revenues and/or employ the most people in the Houston metropolitan area are in the energy industry or provide services to the energy industry. Many of these companies saw big declines in their stocks on November 28, 2014 after OPEC announced they would not be curtailing production.
Houston Tx Companies Equity Returns Dec 1 2014
With crude at $75 a barrel, the price Goldman Sachs Group Inc. says will be the average in the first three months of next year, 19 U.S. shale regions are no longer profitable, according to data compiled by Bloomberg New Energy Finance.Those areas, which include parts of the Eaglebine and Eagle Ford in East and South Texas, pumped about 413,000 barrels a day, according to the latest data available from Drillinginfo Inc. and company presentations. That compares with the 1.03 million-barrel gain in daily national output over the past year, government figures show.The expansion of U.S. oil supply to more than 9 million barrels a day is contributing to a global glut, driving down prices by as much as 32 percent since June. The data compiled by BNEF, which take into account the costs of drilling, royalties and transportation, show that certain shale patches fail to make money at the current price. Companies such as SandRidge Energy Inc. SD and Goodrich Petroleum Corp. GDP said they expect to pump more oil for less money so they can withstand the rout. “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.”
via Oil at $75 Means Patches of Texas Shale Turn Unprofitable – Bloomberg.
While consumers are enjoying low prices at the pump, producers are struggling with the low prices of oil and natural gas.As of Friday, the average for gas prices in the Youngstown-Warren area was $2.90 per gallon, 7 cents cheaper than the national average, according to AAA Daily Fuel Gauge Report.According to a report from ICF International, hydraulic fracturing and horizontal drilling practices have been credited with keeping U.S. petroleum products down between 29 and 94 cents per gallon for U.S. consumers.Crude oil prices, however, have declined from $105 at the beginning of September to $85 at the end of October, causing some speculation over its impact on the production in the shale plays.That’s because it’s expensive to not only produce the oil in those regions but also replace it because it’s a depleting resource, said Tom Stewart, executive vice president of the Ohio Oil and Gas Association. The finding costs for a barrel of oil is between $75 and $80, he said.
via Youngstown News, Oil prices tip favorable for consumers, hurt producers.
Warburg Pincus LLC said on Monday it had raised $4 billion for its first energy-focused private equity fund, exceeding its $3 billion target and making it the latest investment firm looking to tap into opportunities in North America’s shale gas boom.Warburg Pincus joins peers such as Blackstone Group LP BX.N and Apollo Global Management LLC APO.N that already have dedicated investment funds for energy deals alongside their flagship, multi-sector private equity funds.
via Warburg Pincus raises $4 billion private equity fund for energy | Reuters.