Fracking

[boutons_deux]

Wall St. Slumps After Goldman Cuts Oil Forecast

GOLDMAN’S OIL DOWNGRADE In a wide-ranging note to clients assessing the recent plunge in oil markets, Goldman Sachs slashed its price forecasts for the next two years.

It said the benchmark New York rate would average $50.40 a barrel this year, way down on its previous forecast of $83.75.

It also cut its Brent forecast to $70 a barrel from $90.

In response, oil prices fell further, with the New York rate down $1.72 at $46.66 a barrel, while Brent crude slid to $48.62.

Energy stocks fell.

Chevron dropped 2 percent, the most of the 30 stocks in the Dow.

http://www.nytimes.com/2015/01/13/business/daily-stock-market-activity.html?partner=rss&emc=rss

[boutons_deux]

As Oil Prices Fall, Banks Serving the Energy Industry Brace for a Jolt

Banks have been lending hand over fist to companies in the nation’s energy industry, underwriting bonds, advising on mergers, even financing the building of homes for oil workers. All of this has provided a boon to banks that have been struggling to find more companies and consumers wanting to borrow.

Yet with the price of crude oil falling below levels sufficient for some energy companies to service their huge debts, strains are being felt and defaults are likely. While it may take some time for the crunch in the oil industry to translate into losses, one thing already seems clear: The energy banking boom is over.

“At the least, you are talking about a slowdown in loan growth for the banks in the energy-producing states,” said Charles Peabody, a banking specialist at Portales Partners. “That, we feel pretty strongly about.”

And Wall Street firms that financed energy deals may now have trouble offloading some of the debt, as they had originally planned.

Morgan Stanley, for instance, led a group of banks that made $850 million of loans to Vine Oil and Gas, an affiliate of Blackstone, a private equity firm. Morgan Stanley is still trying to sell the debt, according to a person briefed on the transaction. Similarly, Goldman Sachs and UBS led a $220 million loan last year to the private equity firm Apollo Global Management to buy Express Energy Services. Not all the debt has been sold to other investors, according to people briefed on the transaction.

A precipitous drop in oil prices can quickly turn loans that once seemed safe and conservatively underwritten into risky assets.

The collateral underpinning many energy loans, for example, is oil that was valued at $80 a barrel at the time the loans were made. As oil has dropped well below that price in recent months, the value of the banks’ collateral has sunk.

When oil prices crashed in the 1980s, many Texas banks failed not because of loans to oil producers, but because of loans to local real estate developers who had been caught in the energy bust.

“Some marginal producers will get challenged in this, but this is not something new to them,” he said last month. “Cycles like this happen, so industry will be able to work through this.”

Investors in the junk bond market — of which energy companies account for an estimated 18 percent, according to JPMorgan Chase — are not so optimistic.

Junk bonds issued by energy companies are signaling a jarring jump in the number of defaults in the coming months. Martin S. Fridson, chief investment officer at Lehmann Livian Fridson Advisors, said the yields on energy junk bonds appeared to be predicting that 6 percent of the bonds would default this year, and even more in 2016.

“As far as the high-yield market is concerned, the energy sector is in a recession,”

http://mobile.nytimes.com/blogs/deal...ce-for-a-jolt/

[boutons_deux]

Natural gas: The fracking fallacy

The United States is banking on decades of abundant natural gas to power its economic resurgence. That may be wishful thinking.



http://www.nature.com/news/natural-g...allacy-1.16430

[CosmicCowboy]

The gas is there dumbass. Natural gas does not always move in lockstep with oil. There will always be a price for natural gas that balances supply and demand.

[boutons_deux]

The gas is there dumbass. Natural gas does not always move in lockstep with oil. There will always be a price for natural gas that balances supply and demand.

100 years of NG? when will it peak? how many 1000s of fast-depleting gas wells to keep it flowing? Red Queen Rules!

[boutons_deux]

Schlumberger To Layoff 9,000, As Crude Prices Fall

Although Q4 revene rose 6% to $12.5 billion and operating income by 7% to $1.9 billion, the company believe the situation has deteriorated

“The strength of these results demonstrated the resiliency of our business portfolio in the face of activity challenges in 2014 in Brazil, Mexico, and China; reduced spending in deepwater, exploration and seismic activity; unrest in Libya and Iraq; international sanctions in Russia; and the accelerating fall in the price of oil toward the end of the year. The combination of these headwinds reduced revenue growth by more than $1 billion, or 2%, yet revenue still increased 7% as a result of strong tailwinds in Argentina, Ecuador, Sub-Saharan Africa, Saudi Arabia, the United Arab Emirates, and North America that combined with market share gains, drove overall performance.

Unfortunately for the workers the company will use some of the savings elsewhere, as money will go to dividends which the company increased by 25%

http://247wallst.com/energy-business/2015/01/16/schlumberger-to-layoff-9000-as-crude-prices-fall/?utm_source=feedburner&utm_medium=feed&utm_campaig n=Feed%3A+typepad%2FRyNm+%2824%2F7+Wall+St.%29

So the salaries of employees get REDISTRIBUTED upward to capitalists (of course that includes Schlumberger top mgmt).

[boutons_deux]

So Where Did All the Energy Debt Go?


A big puzzle, as oil prices have plunged and look unlikely to return to their former levels, is who is holding energy-related debt, particularly give the high level of issuance in 2014. Yet it is troublingly difficult to get hard information, a situation troublingly similar to the mortgage backed securities and CDO markets in 2008.

One issue under discussion is the energy debt concentration in CLOs. That has come into focus due to the amounts on bank balance sheets (numerous reports on Twitter indicate that the market froze last July) and that one of the provisions of Dodd-Frank gutting HR 37 that is now moving through Congress is to delay for two years a stipulation that would banks to sell most collateralized loan obligations held on their balance sheets. The reason for wanting CLOs out of banks is that they are actively traded vehicles, effectively mini hedge funds.

The reason for concern is the recent plunge in energy-related debt prices and their questionable prospects, and where that debt is sitting.




When the subprime mortgage market shut down, banks wound up eating a lot of their cooking. If that has happened again, it could show up not only in CLOs but in other assets and exposures. And if not the banks, then who were the bagholders?

High yield energy new issuance has doubled since 2008. It cons utes 16-20% of new issuance since 2011
.
JP Morgan’s projected default rates for US high yield energy: at $65 oil, 3.9% in 2015 and 20.5% in 2016. At $75 oil, 3.9% and 4.8%.

http://www.nakedcapitalism.com/2015/...+capitalism%29

[dbestpro]

Over a period of time, the decreased energy prices should cause an increase in manufacturing and durable good purchases, which in turn will increase demand which then will stabilize energy prices. What is happening is not more than the expected mechanism of upping the ante of the U.S. as a more aggressive energy player, which will have the net effect of reducing the energy influence or their percentage of the economic pie, and provide some leverage with oil producing nations.

The next logical step (open to debate) is the liquefaction of natural gas for sale overseas. Yes, this would cause domestic prices to increase, but would also create a stronger market for the product. Fracking is not without its faults, but I wonder where we would be in regards to our economy without it.

[boutons_deux]

Producers are pushing hard for crude exports, saying production will exceed refining capacity (leaving it in the ground as a "gift from God to His favorite country) for eventual domestic consumption conflicts with corporate/investor demand for PROFITS NOW, not later), while refiners say "no problem, bring it on". Somebody's lying.

Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. Energy Markets

http://www.eia.gov/analysis/requests/fe/

[boutons_deux]

Al Jazeera Exposes Deadly Working Conditions for Bakken Oil Workers

The explosion in drilling for oil on the Bakken Shale in North Dakota has been seen by many as a threat to the environment and the safety of oil workers. There have been concerns over radioactive waste contaminating local water, oil spills, crude by rail fiery explosions and evensex trafficking. Now, Al Jazeera America is looking into how North Dakota became the number one state for worker fatalities.

Many workers are very inexperienced and not properly trained before engaging in high-risk activities. Bill Wuolu, training director for the nonprofit North Dakota Safety Council, says “what we’re getting is workers that are doing jobs that they’re not trained, skilled or maybe even qualified for.”

Josh Rushing, the Al Jazeera correspondent who worked with a team to produce the program,says there are two main reasons the state is facing a worker crisis:

“Carelessness among the companies operating in North Dakota’s shale region,” and

“a state government that is failing to protect workers in hazardous occupations and that is beholden, financially, to the industries it is supposed to regulate.”

“Workers and their survivors have little recourse because the state of North Dakota generally prohibits workers from suing their employers for negligence,” said Rushing.

With so many of the workers from out of state, it’s hard to have accountability because the state government “has no political responsibility” to all of these out-of-staters, according to Rushing..

Governor Jack Dalrymple is the effective head of the worker’s compensation system and the Public Service Commission, which regulates the oil and gas industry.

Rushing believes that “the oil industry’s generous contributions to Dalrymple’s campaigns” is the reason why the governor is failing to address the worker crisis.

Dalrymple is not too alarmed by the statistics.

In a statement to Al Jazeera America, he said“We believe we have an effective strategy whereby we focus on employee and worker education, safety training and incentives to operate safe work places. Occupational Safety and Health Administration (OSHA) plays a critical role by enforcing federal safety laws, and OSHA officials have said they may add additional resources in North Dakota if they see the need.”

http://ecowatch.com/2015/01/12/death...3a7a1-85879165

Sounds like ND is another red state as corrupt to the core as TX

[boutons_deux]

Nearly 3 Million Gallons of Sal er Leak into North Dakota Creek

Nearly 3 million gallons of sal er and an unknown quan y of crude oil have leaked from a North Dakota pipeline into a creek that feeds the Missouri River, by far the largest spill of its kind in the state's history, officials said.

The leak, from a sal er collection line owned by Summit Midstream Partners LP approximately 15 miles north of Williston, occurred sometime earlier this month and was reported to state officials on Jan. 7.

The leak does not pose a threat to drinking water supplies, the North Dakota Department of Health said in a statement released late Wednesday.

Sal er is a byproduct of the hydraulic fracturing process. Typically it is filtered and re-injected back into the earth after oil is extracted.

The sal er leaked into a creek that passes by Williston, considered the capital of the state's oil boom, and flows into the Missouri River. Williston's drinking water comes from the Missouri River, though the city's water department has the ability to turn off collection valves until any harmful material washes downstream.

http://www.scientificamerican.com/ar...-dakota-creek/

[boutons_deux]

Federal Court Order: Explosive DOT-111 "Bomb Train" Oil Tank Cars Can Continue to Roll

A U.S. federal court has ordered a halt in proceedings until May in a case centering around oil-by-rail tankers pitting the Sierra Club and ForestEthics against the U.S. Department of Transportation (DOT). As a result, potentially explosive DOT-111 oil tank cars, dubbed “bomb trains” by activists, can continue to roll through towns and cities across the U.S.indefinitely.

“The briefing schedule previously established by the court is vacated,” wrote Chris Goelz, a mediator for the U.S. Court of Appeals for the Ninth Circuit. “This appeal is stayed until May 12, 2015, or pending publication in the Federal Register of the final tank car standards and phase out of DOT-111 tank cars, whichever occurs first.”

http://www.commondreams.org/news/201...-continue-roll

a huge economic stimulus, manufacturing stimulus, and JOB CREATOR would be a "general mobilization" to build the entire fleet of new tanker cars (plus the business of scrapping the old ones), and make US/CA BigOil pay for all of it.

[boutons_deux]

CAP Analysis Shows High Levels of Liquefied Natural Gas Exports Could Hurt Consumers

CAP analyzed the EIA data to better understand the potential cost impacts for residential, commercial, and industrial natural gas consumers in different parts of the country. CAP looked at the EIA scenarios in which the U.S. Department of Energy approves export levels of 16 Bcf/d or 20 Bcf/d of LNG and found:

Residential, commercial, and industrial consumers could spend at least $7 billion more on their natural gas bills per year by 2020 and up to $14 billion more per year by 2040 under high levels of LNG exports.

By 2020, natural gas consumers in the West South Central states of Arkansas, Louisiana, Oklahoma, and Texas could see the largest percentage increase in their natural gas bills.

By 2040, natural gas consumers in the Middle Atlantic and New England states could face the largest percentage increase in the their natural gas bills.

https://www.americanprogress.org/pre...urt-consumers/

duh!

[boutons_deux]

North Dakota Faces Massive Budget Shortfall from Lower Crude Prices

The new forecast cuts about $762 million from the state’s budget for the rest of the fiscal year ending in June 2015 and slices $4.05 billion from the two-year biennium from July 2015 to June 2017. Even with the cuts the state is still expected to collect $4.3 billion in oil and gas taxes in the new biennium.

Royalty payments to landowners will cut individual income tax collections by $30 million in the current fiscal year and by $139 million of the 2015-2017 biennium. Corporate income tax collections will drop by $13 million this year and by $58 million in the next biennium.

North Dakota Faces Massive Budget Shortfall from Lower Crude Prices - 24/7 Wall St. http://247wallst.com/energy-economy/...#ixzz3QXlZ1gCM

[Winehole23]

The US shale oil industry is also suffering. This graph below from industry analysts Baker Hughes shows the dramatic fall in the number of rigs operating in the US shale industry.



In just three months, the rig count has fallen by 24 per cent, or 389 from the all-time high of 1,609 recorded for the week of 10 October last year. As Mark Lewis, from Paris-based analysts Kepler Chevreux notes: “In all of the historical Baker Hughes data stretching back to July, 1987, there is no precedent for a drop of this speed or severity.”


So, what does this mean?


Lewis notes that the US rig count is a leading indicator of US supply (the more rigs there are, the more supply there will be). For this reason, it is probably the most closely watched single indicator in world oil markets at the moment, as it offers the best guide to what will happen with US shale-oil supply in the months ahead.


That matters because it is the US shale industry that has been the fundamental driver of global crude-oil supply in the last five years, and without the huge surge in shale oil since 2009 global crude-oil output would actually have been lower in 2014 than it was in 2005. This is the very supply that the Saudis and other OPEC members have been targeting.


What the sudden drop in rig count suggests, Lewis says, is that the market is starting to re-appraise the shale-oil model, derided by some as some sort of giant “Ponzi” scheme, because of its reliance on capital recycling and new drilling to replace the wells that exhaust themselves within a year or two.


The significance of this is that predictions of the shale bubble may now come true. As David Hughes, the the Post Carbon Ins ute, wrote in his analysis “Drill, Baby, Drill”, there were always questions about how sustainable the shale revolution was going to be.


“First, shale gas and shale oil wells have proven to deplete quickly, the best fields have already been tapped, and no major new field discoveries are expected,” he wrote in 2013.


“Thus with average per-well productivity declining and ever-more wells (and fields) required simply to maintain production, an “exploration treadmill” limits the long-term potential of shale resources.”

http://reneweconomy.com.au/2015/grap...industry-76188

[Winehole23]

liberal green-washing at Baker-Hughes?

“At best, shale gas, tight oil, tar sands, and other unconventional resources provide a temporary reprieve from having to deal with the real problems: fossil fuels are finite, and production of new fossil fuel resources tends to be increasingly expensive and environmentally damaging.

“Fossil fuels are the foundation of our modern global economy, but continued reliance on them creates increasing risks for society that transcend our economic, environmental, and geopolitical challenges. The best responses to this conundrum will entail a rethink of our current energy trajectory.”

[boutons_deux]

Slump in Oil Prices Brings Pressure, and Investment Opportunity

American history is littered with oil busts that created big winners and losers.

Now, as the cracks appear in the latest energy boom, the forces of failure and opportunity are stirring again. Resolute Energy, a Colorado company that borrowed big in the boom, is among those in an endgame that is being played up and down Wall Street and in the vast oil fields that new drilling methods have opened in recent years.

It is a struggle that could take place at scores of other companies, leading to thousands of layoffs, as well as losses for banks and investors. At the same time, new fortunes stand to be made.
When Resolute set out three years ago to buy thousands of acres in the oil patch of West Texas, lenders showered the company with hundreds of millions of dollars. But the company had little expertise in the costly and complicated horizontal drilling that it employed on its new property.

Such easy money has abruptly come to an end, mostly because oil prices have plunged, potentially making life much harder for companies like Resolute. Banks slashed the size of the company’s credit line late last year and imposed new lending conditions. Its stock has ​plummeted, and now trades for mere pennies.

The sudden drop in oil prices, incited by fears of a global supply glut and waning demand, caught the oil industry and its lenders by surprise. Many companies, which only a few months ago were the toast of the high-yield debt and initial public offering markets, suddenly cannot raise additional equity or sell bonds. A few lenders have started reining in bank lines and more are expected to tighten loan terms in the coming months.

http://mobile.nytimes.com/blogs/deal...t-opportunity/

[boutons_deux]

liberal green-washing at Baker-Hughes?

won't hear that from BigOil or API

[boutons_deux]

Oil companies are dumping waste into California’s remaining drinkable water sources

Drillers are threatening the drought-plagued state's water -- and state officials are letting it happen

California has a drinking water problem on top of its drinking water problem. Oil companies, with the permission of state officials, have been injecting their wastewater into clean aquifers, according to a damning new report. The practice goes back decades, and is now threatening water quality at a time when the drought-plagued state needs every drop it can get.

The San Francisco Chronicle broke down state data stretching back to 1983, when the EPA first handed over responsibility for enforcing regulations to California’s oil field regulators. While state officials say there’s no indication yet that they contaminated drinking water wells, the Chronicle counted 464 wells that injected wastewater into aquifers that should have been protected under state law and the federal Safe Drinking Water Act:

To gauge water quality in a river, lake or aquifer, researchers often start with the water’s total dissolved solids — salts and other materials in the liquid. High counts don’t necessarily make water harmful to drink, but they can cloud it and give it a salty or bitter taste.

In general, anything below 500 parts per million requires no treatment and is considered high quality. Water from San Francisco’s Hetch Hetchy system, piped straight from the Sierra, averages 71. State water officials want to prevent contamination of any aquifers that are below 3,000.

And yet, the oil industry drilled 171 injection wells into aquifers with counts of 3,000 parts per million or less, according to state data. Companies also received permits to drill five wells into aquifers of the same quality, but for those wells there is no record of injections.

Another 253 injection wells went into saltier but potentially usable aquifers that the EPA considers protected. Companies received permits for an additional 26 wells of the same quality.
Finally, companies drilled 40 injection wells into aquifers for which there is no water-quality data.

A total dissolved-solids count above 1,000 may require treatment before use, either by blending it with fresher water or putting it through reverse osmosis, the process used in seawater desalination plants. But it is usable, for crops or people.

Unless they can come up with a plan for how to deal with this by February, the EPA said, the federal government intends take control back from the state. “If there are wells having a direct impact on drinking water, we need to shut them down now,” Jared Blumenfeld, the regional adminstrator for the EPA, told the Chronicle. “Safe drinking water is only going to become more in demand.”

http://www.salon.com/2015/02/03/oil_...water_sources/

[Spurminator]

won't hear that from BigOil or API

Baker-Hughes is Big Oil, bra.

[boutons_deux]

Baker-Hughes is Big Oil, bra.

oil field service company ain't BigOil

[Spurminator]

okay. And lumber and steel are not part of the construction industry.

[Th'Pusher]

Generally speaking Big Oil refers to the supermajors.

[Spurminator]

Generally speaking Big Oil refers to the supermajors.

Seems you're right.

I've always considered "Big ____" to refer to the entire industry and any business that primarily functions within that industry.

[Winehole23]

tangential:

Saudi Arabia and Russia have had numerous discussions over the past several months that have yet to produce a significant breakthrough, according to American and Saudi officials. It is unclear how explicitly Saudi officials have linked oil to the issue of Syria during the talks, but Saudi officials say — and they have told the United States — that they think they have some leverage over Mr. Putin because of their ability to reduce the supply of oil and possibly drive up prices.



“If oil can serve to bring peace in Syria, I don’t see how Saudi Arabia would back away from trying to reach a deal,” a Saudi diplomat said. An array of diplomatic, intelligence and political officials from the United States and the Middle East spoke on the condition of anonymity to adhere to protocols of diplomacy.

http://www.nytimes.com/2015/02/04/wo...ssad.html?_r=0