Saturday, April 25, 2015

This June

This June both the Fed and the OPEC meet to discuss policy changes.  The Fed will announce its highly anticipated interest rate increase. How that may occur and how steep it may be is not going to be well understood right away. Though, the Fed could pullback some of its repos.

Hmmm
My experience as an adult tells me that the Fed is certain what actions it will take but uncertain how they will affect the economy.  My childhood experiences tell me that the Fed just doesn't understand me or the economy, and hates us both.  I wonder if both could be right.  I imagine OPEC will simply stick to its "no cuts" strategy - which seems to be effective in maintaining market share.

Thursday, April 9, 2015

How The Mighty Are Falling...Or Not

Well, this wasn't supposed to happen, or maybe it was. I can never quite figure our these private equity firms - KKR would be a good example.

Shale Producer Samson Says Bankruptcy May Be Best Option


Samson Resources Corp., an oil and natural gas producer controlled by private equity giant KKR & Co., warned investors that bankruptcy may be its best option as collapsing crude prices erode its ability to repay debt. 
Filing for Chapter 11 protection “may provide the most expeditious manner in which to effect a capital structure solution,” the Tulsa, Oklahoma-based company said Tuesday in its annual report. 
Samson told investors it’s at risk of defaulting on its debts, saying its financial condition raises “substantial doubt” that it can continue as a going concern, according to the filing. 
Other producers including Dune Energy Inc., BPZ Resources Inc. and Quicksilver Resources Inc. have also sought bankruptcy protection as a rapid decline in oil prices has led banks to rein in lending, drying up cash for drilling across North America.

Monday, February 2, 2015

Say Good Bye To The North Sea Oil Production

Shell will soon prepare 10 year program to possibly decommission some of the largest North Sea oil fields. From the FT:
Royal Dutch Shell will on Tuesday set out ambitious plans to decommission the North Sea’s Brent oilfield — one of the UK’s biggest — in a multibillion-dollar project over the next 10 years that could be followed by other closures after the plunge in oil prices. 
The Anglo-Dutch energy group will within days begin public consultation on a disposal plan for the “topside” of Brent Delta — one of four platforms in the field that gave its name to the international crude price benchmark. Shell is anxious to avoid a repeat of the public furore 20 years ago over its attempt to dump the Brent Spar oil storage buoy in the Atlantic Ocean.

Saturday, January 17, 2015

Inflation Takes a Nosedive

Is the Federal Reserve concerned that the CPI has dropped below 1%?


I wonder how much of this is due to falling oil prices. I suspect most of it. While it seems obvious that the drop in oil prices will put downward pressure on industrial prices (i.e. tubular steel, industrial/gray water, sand, synthetic oils, bentonite, diesel engines, etc), it doesn't seem obvious that it will affect consumer prices.

Perhaps the drop in the price of plastics, rubbers and other chemicals in consumer goods can account for this. However, demand should start to build as the CPI drops and as consumers save an extra $80 or so per month in gas money.

Monday, January 12, 2015

First Victim of the Oil Drop?

Maybe. WBH Energy was targeting the Barnett combo play which has NGLs - the Barnett is largely a tight gas formation. From Reuters:
Jan 7 (Reuters) - WBH Energy, one of many tiny shale oil and gas producers in Texas, has filed for bankruptcy protection, becoming what may be the first U.S. oil company to do so since crude prices started tumbling six months ago. 
It listed assets and liabilities of $10 million to $50 million in its filing in U.S. Bankruptcy Court for the Western District of Texas on Sunday. 
The company could not be reached for comment. 
The privately held company, based in Austin, has leases in the Barnett Combo Play of the Fort Worth Basin, which mainly produces gas and is not a significant field in the current U.S. oil boom that has lifted output to the highest level in decades.
Two years ago, GMX Resources filed for bankruptcy protection. They later rebranded as Thunderbird Resources. This was somewhat of a shock to because GMX was a Williston Basin operator which is considered one of the stalwarts of the oil boom.

Tuesday, January 6, 2015

A Tale of Two Oil Gluts

Consider this:

The 1980's drop in oil price was due to a supply glut created by the lowest cost producer.
The 2010's drop in oil price was due to a supply glut created by the highest cost producer.

I don't know if this is exactly true or not, but the general idea that Saudi and US production costs are at opposite ends is rather appealing and perhaps very true.