Next For Oil: Mergers, Layoffs and ‘Death Spirals’

CNBC

Next for oil: Mergers, layoffs and 'death spirals'
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Getty Images

The oil industry may be getting pinched by falling prices , but the next year could be a busy and lucrative time for private equity firms and restructuring specialists working in energy.

With crude prices nearly 60 percent off their highs , experts foresee a wave of corporate restructuring and acquisitions playing out over the next 12 to 18 months. Oilfield services companies are set to absorb smaller firms, while exploration and production companies could face a “death spiral” as their access to debt dwindles.

In December, Deutsche Bank analysts projected that U.S. shale producers “could be entering a zone of deep distress” once oil dipped below the $60 to $55 range.

 

“If prices were to stay sustainably below these levels for a few months/quarters, chances of a broad sector restructuring increase materially,” they wrote.

U.S. crude first settled below $60 on Dec. 11 and fell below $55 the following week. U.S.-traded West Texas Intermediate was near $44 on Thursday, while internationally traded Brent crude was close to $49.

“You’re pretty much in the top half of the first inning in the oil and gas sector,” George Koutsonicolis, managing director at SOLIC Capital Advisors, told CNBC. “Definitely, I expect there to be a pretty significant round of restructuring.”

That restructuring will come not just in the form of layoffs and cost cutting, but in capital restructurings in possible bankruptcy court cases, he said.

 

The job cuts have already begun to roll in from big oilfield services companies.

Last week, Baker Hughes (BHI) announced it would lay off 7,000 employees, or about 12 percent of its workforce. The same day, Halliburton (HAL) told investors to expect more reductions on top of a previously announced 1,000 cuts. Earlier in the month, Schlumberger (SLB) said it would shed 9,000 jobs.

BP (London Stock Exchange: BP.-GB)announced in December it would spend $1 billion and shed thousands of positions as part of a restructuring.

SOLIC now has its eye on oilfields services companies with high debt and poor capital structures.

The large oilfield companies are likely to scoop up weaker middle-market players, Koutsonicolis said. They will be on the hunt for firms with overlapping regional operations and back-office functions, two factors that will immediately add to earnings.

The fate of those firms is tied in part to exploration and production companies, for whom they provide infrastructure, specialized equipment, transportation and other services. Cost-cutting and reductions in revenue-generating activities among E&P companies eventually bleed into the oilfields services sector, forcing them to take similar measures.

 

Capital investment in the energy industry has decreased by about 23 percent, according to SOLIC.

Exploration and production companies have largely funded growth by borrowing on the high-yield debt market. The energy sector accounts for 17.4 percent of the high-yield bond market, up from 12 percent in 2002, according to Citi Research.

Now, the value of E&P firms’ primary asset is depleting, so banks are willing to lend them less money, and liquidity is drying up.

 

“Given the situation we’re in, the access to that high-yield debt will be somewhat impeded for some players,” Koutsonicolis said. “It’s kind of a death spiral for some of these firms.”

Exploration and production companies will typically restructure as a last resort, said John-Paul Hanson, head of Houlihan Lokey’s exploration and production practice. Instead, he told CNBC, they will try to weather the low commodity price market through financing and mergers and acquisitions activity.

The companies undergoing restructuring and bankruptcy filings at this point in the cycle lacked liquidity or had balance sheet constraints prior to the decline in commodity prices, he said. Low commodity prices effectively pushed them into restructuring because other solutions-such as tapping senior secured debt or selling assets-were not possible.

Hanson expects an uptick in M&A activity, but said sales of assets such as oilfield rights are more likely than outright buyouts of companies. That is because the value of E&P companies is in the underlying assets, not their corporate entities.

“The difficulty with oil and gas is you’re tied to the underlying commodity. E&P businesses really are just asset businesses,” he said.

 

While some companies may embark on mergers to achieve economies of scale, firms are more likely to sell noncore assets and unproductive oilfield acreage to increase cash flow and alleviate the cost of keeping them on the books. Those assets may find a home with another company that considers them core to their operations.

In the end, however, some oil and gas companies may not have a choice but to restructure, as they find it increasingly difficult to maintain cash flow while the cost of crude remains low, but while land-leasing and corporate expenses persist.

“The longer that we stay in a protracted, depressed price environment, the more likely it is that restructurings will be pervasive,” Hanson said.

 

Now it is up to you to act on this information

Contact Information:

To learn more about asset protection,  offshore company formation and structure your business

interests overseas ( at no cost or obligation)

Email info@jackbassteam.com  OR

jackabass@gmail.com OR

Telephone  Jack direct at 604-858-3202 for a  one  half hour no fee consultation.

10:00 – 4:00 Monday to Friday ( same time zone as Los Angeles).

 

Ten countries are islands famed for having no corporate income tax:

Bahamas, Cayman Islands, British Virgin Islands, and Bermuda – we know more

low or no tax jurisdictions.

The most important thing that you MUST do is seek advice from a qualified

advisor – Jack A. Bass, B.A. LL.B. (someone who understands international

tax jurisdictions and tax law) . Your advisor must understand the benefits

of particular offshore jurisdictions. It is your responsibility to take

action.

In most jurisdictions you can set up your offshore company in as little as

a few weeks. We most often start the process with registering a company

name and sending in the right documentation and supporting documents for

the incorporation and a bank account(s) or merchant account for you and

your business.All of this can be conducted by internet on in rare cases we

will attend in person – for you.

Here are the tax rules we use to eliminate tax on royalty and IP income –

Yes-you Can DIY ( Do IT Yourself ) – by following the IRS Rule Book :

HOW DO APPLE AND STARBUCKS AVOID US TAXES ON ROYALTIES AND IP ?

from http://www.youroffshoremoney.com

(b) Exclusion of United States income

In the case of a controlled foreign corporation, subpart F income does not

include any item of income from sources within the United States which is

effectively connected with the conduct by such corporation of a trade or

business within the United States unless such item is exempt from taxation

(or is subject to a reduced rate of tax) pursuant to a treaty obligation of

the United States. For purposes of this subsection, any exemption (or

reduction) with respect to the tax imposed by section 884 shall not be

taken into account.

(c) Limitation

(1) In general

(A) Subpart F income limited to current earnings and profits

For purposes of subsection (a), the subpart F income of any controlled

foreign corporation for any taxable year shall not exceed the earnings and

profits of such corporation for such taxable year.

HOW DID ROMNEY ACCUMULATE $ 250 MILLION IN THE CAYMANS – what can you do

to repeat his success ? – again quoting from the U.S. Tax Code:

(3) Special rule for determining earnings and profits

For purposes of this subsection, earnings and profits of any controlled

foreign corporation shall be determined without regard to paragraphs (4),

(5), and (6) of section 312 (n). Under regulations, the preceding sentence

shall not apply to the extent it would increase earnings and profits by an

amount which was previously distributed by the controlled foreign

corporation.

Amazon IS Amazin’ – But Some Folks Don’t Get It

Amazon’s profit shows how few people understand the way the company works

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jeff bezos

Amazon Inc. Amazon revealed a profit Thursday, and Wall Street analysts were pleasantly surprised by it. Comments coming from some of them suggest they still don’t understand the core philosophy of CEO Jeff Bezos and the way Amazon works.

AMZN rose 14% on the news, and a whole bunch of analysts welcomed the online retailer’s new era of profitability.

They’re almost certainly wrong. Amazon is extremely unlikely to suddenly start focusing on earnings per share for investors.

In fact, analysts have a long history of misunderstanding Amazon.

For years, investors have complained that Amazon is chronically unprofitable. In the early years, after Amazon was founded in 1994, a lot of serious people argued that perhaps Amazon was fundamentally broken, that it would never make money and would eventually collapse.

It didn’t.

Instead, Amazon grew and grew, reporting bigger and bigger revenues year after year.

But never any profits.

A lot of people believe that if a company never makes money, it must, fundamentally, go bankrupt. This isn’t the case, as Amazon proves.

Here is how Amazon actually works: As long as the company can grow its revenues, it can spend any profit it makes on new lines of business that throw off more revenues. Those revenues may also be profitable, and those profits can in turn be immediately spent again on more growth. By eschewing profits, the company can also offer the lowest prices possible (which is why consumers are so loyal to it). Some parts of the company are profitable and fuel growth in others.

So it doesn’t matter if Amazon never makes a dime. In fact, Amazon’s history clearly shows that profits are a secondary concern to revenues, as this chart from the Financial Times shows:

View gallery

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amazon

Financial Times / Thomson ReutersNow look at these analyst comments. Perhaps they have been selectively quoted by the press; maybe their words are taken out of context. We don’t know. But it’s a big coincidence that these guys are bullish on Amazon because the company has finally shown lovely new profits!

In fact it would be bad if Amazon now became profitable, because it would stunt Amazon’s ability to fund the growth it is going to need to fend off competitors. A whole bunch of new companies have figured out that Amazon’s model works in all sorts of the competing markets. Ocado, the grocery-delivery company, is the best example in the UK. Analysts in London fundamentally misunderstand how Ocado works, and the company just gets bigger and bigger regardless.

(A source tells Business Insider that Bezos has met with Ocado CEO Tim Steiner and that Bezos is an admirer of Ocado’s operation. Interpret that how you want. On paper, Ocado would make a great Amazon acquisition.)

So, to answer The Journal’s question: No! The answer is no! Get it into your heads: Amazon is not going to become a big-margin company. Never has, never will — it’s not in the model.

Blackberry Review Series : Market Realist

BlackBerry launches its Classic smartphone to attract enterprises

Market Realist

BlackBerry has been reduced to a niche smartphone player (Part 4 of 12)

(Continued from Part 3)

BlackBerry introduced the Classic smartphone with a physical keyboard

In the previous part of this series, we discussed why BlackBerry (BBRY) couldn’t reap the benefits of the Passport’s successful launch last quarter. BlackBerry introduced another important smartphone last month—the Classic. As the name suggests, the Classic takes brings back old BlackBerry features along with the re-introduction of the physical keyboard.

After the launch of the BlackBerry 10 operating system in 2013, the company had stopped introducing smartphones with physical keyboards and launched touch-screen phones only. BlackBerry may have changed this strategy due to the increasing popularity of Apple’s (AAPL) iPhone and other touch-screen smartphones introduced by Samsung (SSNLF), Sony (SNE), and Lenovo (LNVGY). However, BlackBerry quickly realized that it can’t compete in this market—and it’s better that it focuses on what it had been doing best, which is catering to enterprise professionals’ productivity needs.

Enterprise customers have remained die-hard fans of BlackBerry’s smartphones due to their physical keyboard. The physical keyboard provides ease of use for working professionals—especially for writing emails and taking calls—which is why BlackBerry listened to their demands and brought back this feature.

BlackBerry introduced superior features in the Classic

The Classic has better specifications that its predecessor, the Bold 9900 smartphone. The Classic’s screen size is larger than the Bold’s at 3.5 inches, although much smaller than the 5.5-inch Apple iPhone 6 Plus screen size. It has a dual core 1.5 GHz Qualcomm (QCOM) Snapdragon processoralong with 2 GB of RAM. The above chart shows the difference between the Classic and the Bold 9900, which makes the Classic a superior smartphone to the Bold in terms of specifications.

Continue to Part 5

Browse this series on Market Realist:

Oil Extends Drop : Worsening Glut – With Oil Companies and Investors In Denial

Oil extended losses to trade below $45 a barrel amid speculation that U.S. crude stockpiles will increase, exacerbating a global supply glut that’s driven prices to the lowest in more than 5 1/2 years.

Futures fell as much as 2.6 percent in New York, declining for a third day. Crude inventories probably gained by 1.75 million barrels last week, a Bloomberg News survey shows before government data tomorrow. The United Arab Emirates, a member of the Organization of Petroleum Exporting Countries, will stand by its plan to expand output capacity even with “unstable oil prices,” according to Energy Minister Suhail Al Mazrouei.

Oil slumped almost 50 percent last year, the most since the 2008 financial crisis, as the U.S. pumped at the fastest rate in more than three decades and OPEC resisted calls to cut production. Goldman Sachs Group Inc. said crude needs to drop to $40 a barrel to “re-balance” the market, while Societe Generale SA also reduced its price forecasts.

“There’s adequate supply,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone today. “It’s really going to take someone from the supply side to step up and cut, and the only organization capable of doing something substantial is OPEC. I can’t see the U.S. reducing output.”

West Texas Intermediate for February delivery decreased as much as $1.19 to $44.88 a barrel in electronic trading on the New York Mercantile Exchange and was at $44.94 at 2:26 p.m. Singapore time. The contract lost $2.29 to $46.07 yesterday, the lowest close since April 2009. The volume of all futures traded was about 51 percent above the 100-day average.

U.S. Supplies

Brent for February settlement slid as much as $1.31, or 2.8 percent, to $46.12 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $1.24 to WTI. The spread was $1.36 yesterday, the narrowest based on closing prices since July 2013.

U.S. crude stockpiles probably rose to 384.1 million barrels in the week ended Jan. 9, according to the median estimate in the Bloomberg survey of six analysts before the Energy Information Administration’s report. Supplies have climbed to almost 8 percent above the five-year average level for this time of year, data from the Energy Department’s statistical arm show.

Production accelerated to 9.14 million barrels a day through Dec. 12, the most in weekly EIA records that started in January 1983. The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota.

OPEC Output

The U.A.E. will continue plans to boost its production capacity to 3.5 million barrels a day in 2017, Al Mazrouei said in a presentation in Abu Dhabi yesterday. The country currently has a capacity of 3 million and pumped 2.7 million a day last month, according to data compiled by Bloomberg.

OPEC, whose 12 members supply about 40 percent of the world’s oil, agreed to maintain their collective output target at 30 million barrels a day at a Nov. 27 meeting in Vienna. Qatar estimates the global surplus at 2 million a day.

In China, the world’s biggest oil consumer after the U.S., crude imports surged to a new high in December, capping a record for last year. Overseas purchases rose 19.5 percent from the previous month to 30.4 million metric tons, according to preliminary data from the General Administration of Customs in Beijing today. For 2014, imports climbed 9.5 percent to 310 million tons, or about 6.2 million barrels a day.

Oil Companies and Investors In Denial : Portfolio Profits At Risk

My rant – the  curse of Cassandra :

Cassandra, daughter of the king and queen, in the temple of Apollo, exhausted from practising, is said to have fallen asleep – when Apollo wished to embrace her, she did not afford the opportunity of her body. On account of which thing :

when she prophesied true things, she was not believed.

I have written :

Managed Accounts Year End Review and Forecast

January Travel Schedule Three New videos

January Travel Schedule

I will be travelling from January 14 – 28th 2015

I will be available by email but not telephone.

If I am unable to reach you by email prior to January 29 I will email and call on that date.

Jack A. Bass

Attached :

3 DRAFT / unedited video for the offshore money blog:

Three different topics – feedback is most welcome:

Video

JB offshore.mp4  The First Rule Is Safety

Video

JB royalties .mp4  Topic Royalty Payments To Offshore Accounts

Video

test jack.mp4  Topic : Moving to Action In 2015

Send your comments to info@jackbassteam.com

Oil Producers Betting on Price Drop : Goldman Calls $ 40

Photographer: Gabriela Maj/Bloomberg

The oil industry was listening as OPEC talked down crude prices to a more than five-year low.

Drillers, refiners and other merchantsincreased bets on lower prices to the most in three years in the week ended Jan. 6, government data show. Producers idled the most rigs since 1991, with some paying to break leases on drilling equipment.

Companies are hedging more and drilling less amid concern that the biggest slump in prices since 2008 will continue. Oil dropped for a seventh week after officials from Saudi Arabia, the United Arab Emirates andKuwait reiterated they won’t curb output to halt the decline.

Oil Prices

“Producers are desperately hedging their production in a drastically falling market,” Phil Flynn, a senior market analyst at the Price Futures Group in Chicago, said by phone Jan. 9. “They’re trying to lock in prices because they are convinced that the market will stay down for a while.”

WTI slid $6.19, or 11 percent, to $47.93 a barrel on the New York Mercantile Exchange on Jan. 6, settling below $50 for the first time since April 2009. Futures for February delivery declined $1.53 to $46.83 in electronic trading at 8:09 a.m. local time.

OPEC Production

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, has stressed a dozen times in the past six weeks that it won’t curb output to halt the rout. The U.A.E. won’t cut production no matter how low prices fall, Yousef Al Otaiba, its ambassador to the U.S., said at a Bloomberg Government lunch in Washington on Jan. 8.

The group decided to maintain its collective quota at 30 million barrels a day at a Nov. 27 meeting in Vienna. Output averaged 30.24 million barrels a day in December, according to a Bloomberg survey.

U.S. crude production was 9.13 million barrels a day in the seven days ended Jan. 2 after reaching 9.14 million three weeks earlier, the highest in weekly Energy Information Administration data since 1983. Stockpiles were 382.4 million barrels as of Jan. 2, a seasonal high.

The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which have unlocked supplies from shale formations including the Eagle Ford and Permian in Texasand the Bakken in North Dakota. Global oil prices below $40 begin to make wells in such places unprofitable to operate, Wood Mackenzie, an Edinburgh-based consultant, said in a report Jan. 9.

Idling Rigs

Rigs seeking oil decreased by 61 to 1,421, Baker Hughes Inc. said Jan. 9, extending the five-week decline to 154. It was the largest drop since February 1991, which also followed a slide in prices before the start of the Persian Gulf War.

Helmerich & Payne Inc., the biggest rig operator in the U.S., and Pioneer Energy Services Corp. said last week that they had received early termination notices for rig contracts.

Producers and merchants boosted their net short position by 21 percent, or 17,577 futures and options, to 100,997 in the week ended Jan. 6, according to the Commodity Futures Trading Commission, the most since Jan. 10, 2012.

Hedge funds and other large speculators raised bullish bets by 7 to 199,395 contracts.

“You have this tension and lack of consensus among money managers of what to do with a price under $50,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone Jan. 9. “People tend to think of money managers as a black box where they all use same strategy and march in lockstep, but this highlights that it’s not really the case.”

Other Markets

Bullish bets on Brent crude rose to the highest level in more than five months, according to ICE Futures Europe exchange.

Net-long positions gained by 24,598 contracts, or 21 percent, to 140,169 lots in the week to Jan. 6, the data show. That’s the highest since July 15.

In other markets, bearish wagers on U.S. ultra-low sulfur diesel decreased 12 percent to 23,789 contracts as the fuel sank 7.6 percent to $1.7262 a gallon.

Net short wagers on U.S. natural gas fell 15 percent to 10,323 contracts. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Nymex natural gas dropped 5 percent to $2.938 per million British thermal units.

Bullish bets on gasoline declined 0.4 percent to 44,050. Futures slumped 6.8 percent to $1.3543 a gallon on Nymex in the reporting period.

Regular gasoline slid 1.3 cents to an average of $2.139 on Jan. 10, the lowest since May 5, 2009, according to Heathrow, Florida-based AAA, the country’s largest motoring group.

The global crude oversupply is 2 million barrels a day, or 6.7 percent of OPEC output, Qatar estimates. Only 1.6 percent of supply would be unprofitable with prices at $40 a barrel, according to Wood Mackenzie.

“If you’re a producer and your cost is below the price in the market, if you hedge it even at depressed prices you can still make money,” Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone Jan. 9. “Somebody’s locking in profits even at these low prices.”

Goldman Sees Need for $40 Oil as OPEC Cut Forecast Abandoned

Jan. 12 (Bloomberg) 

Goldman Sachs said U.S. oil prices need to trade near $40 a barrel in the first half of this year to curb shale investments as it gave up on OPEC cutting output to balance the market.

The bank reduced its forecasts for global benchmark crude prices, predicting inventories will increase over the first half of this year, according to an e-mailed report. Excess storage and tanker capacity suggests the market can run a surplus far longer than it has in the past, said Goldman analysts including Jeffrey Currie in New York.

The U.S. is pumping oil at the fastest pace in more than three decades, helped by a shale boom that’s unlocked supplies from formations including the Eagle Ford in Texas and the Bakken in North Dakota. Prices slumped almost 50 percent last year as the Organization of Petroleum Exporting Countries resisted output cuts even amid a global surplus that Qatar estimates at 2 million barrels a day.

Oil Prices

“To keep all capital sidelined and curtail investment in shale until the market has re-balanced, we believe prices need to stay lower for longer,” Goldman said in the report. “The search for a new equilibrium in oil markets continues.”

West Texas Intermediate, the U.S. marker crude, will trade at $41 a barrel and global benchmark Brent at $42 in three months, the bank said. It had previously forecast WTI at $70 and Brent at $80 for the first quarter.

Photographer: Eddie Seal/Bloomberg

A floor hand signals to the driller to pull the pipe from the mouse hole on Orion… Read More

Forecasts Cut

Goldman reduced its six and 12-month WTI predictions to $39 a barrel and $65, from $75 and $80, respectively, while its estimate for Brent for the period were cut to $43 and $70, from $85 and $90, according to the report.

“We forecast that the one-year-ahead WTI swap needs to remain below this $65 a barrel marginal cost, near $55 a barrel for the next year to sideline capital and keep investment low enough to create a physical re-balancing of the market,” the bank said.

Goldman estimates there’s sufficient capacity to store a surplus of 1 million barrels a day of crude for almost a year. It expects the spread between WTI and Brent to widen in the next quarter as discounted U.S. crude prices and “strong margins lead U.S. refineries to export the glut to the other side of the Atlantic.”

The Brent-WTI spread will average $5 a barrel in 2016, according to the bank. The gap was at $1.50 today.

 

SunEdison Inc. (SUNE) Planning a $4 billion Factory In India

SunEdison Inc. (SUNE), the best-performing solar company last year, is planning a $4 billion factory in India to supply the country’s booming market for clean power.

SunEdison will form a joint venture with the Indian power provider Adani Enterprises Ltd. (ADE) to build India’s largest photovoltaic panel plant, with as much as 7.5 gigawatts of annual production capacity, the Maryland Heights, Missouri-based company said today in a statement. Construction is expected to begin this year.

India set a target in November for as much as 100 gigawatts of solar capacity by 2022, five times its earlier goal. The country is the third-largest source of carbon emissions and is under pressure from China and the U.S., the two largest, to reduce pollution. Last month it pledged to spend at least $100 billion on climate-related projects, and President Barack Obama is scheduled to visit New Delhithis month to meet with Prime Minister Narendra Modi.

“The prime minister has been revising upwards India’s aspirations for solar,” Pashupathy Shankar Gopalan, SunEdison’s managing director for South Asia and Sub-Saharan Africa, said in an interview. The planned factory “very nicely plays into the aspirations for the country to grow solar significantly, as well as wanting to create stronger domestic manufacturing.”

Solar demand in India this year may triple to more than 3.2 gigawatts, according to Bloomberg New Energy Finance. The London-based research company expects as much as 63.6 gigawatts to be installed worldwide.

Rising Emissions

India gets about 60 percent of its power from coal. Under India’s existing energy policies, theInternational Energy Agency estimates that carbon dioxide emissions will jump 34 percent by 2020 and double by 2030.

The new plant in Mundra, Gujarat, will incorporate all stages of solar manufacturing, from polysilicon to cells and panels. Construction will take about three years and it will create about 20,000 jobs.

“Solar will be a very important part of the country’s energy mix,” Gopalan said. “The cost of solar has become so competitive that it’s our belief the facility we’re building will be able to compete head to head with fossil-powered energy in India.”

SunEdison shares climbed almost 50 percent in 2014, the most among the Bloomberg Intelligence Global Large Solar Energy index of 21 companies.

Tankers – The Bright Sector in Oil and Shipping Sector Collapse

Oil Traders Seen Storing Millions of Barrels at Sea on Slump

Oil companies are seeking supertankers to store 20 million barrels of crude as a collapse in the price of the commodity creates a trading opportunity last seen during the 2008-09 recession, a Greek shipping company said.

Companies inquired about booking 10 very large crude carriers for storage in the past several days, Odysseus Valatsas, the chartering manager for Dynacom Tankers Management Ltd. near Athens, said by e-mail today. A “handful” have already been hired for the trade, he said, citing discussions with shipbrokers and others working in the shipping market. Dynacom’s fleet can carry about 65 million barrels of oil.

Oil collapsed 48 percent in 2014 and prices for later this year are now so far above current costs that traders can make money from buying cargoes and storing them on ships, according to JBC Energy GmbH. As many as 60 million barrels could be held offshore within the next several months, the Vienna-based consultant predicted on Jan. 6. Traders stored 100 million barrels at sea in 2009, Frontline Ltd., a tanker owner, said at the time.

“It looks more and more likely that you’ll see more floating storage and it’s going to be good” for ship owners, Eirik Haavaldsen, a shipping analyst at Pareto Securities SA in Oslo, said by phone. “The re-emergence of floating storage is what could move the crude tanker market this year from being rather good to possibly very very good.”

Frontline Surge

Shares of Frontline rose as much as 14 percent in Oslo today to the highest in almost a year. They closed up 9.5 percent at 28.70 krone ($3.74).

Shipping costs gained today, with day rates for supertanker shipments to Japan from Saudi Arabiaclimbing 1 percent to $82,216 a day, the most for the time of year since at least 2009, according to data from the Baltic Exchange in London.

Brent crude for August traded at $55.87 a barrel as of 4:20 p.m. in London, a premium of $6.75 compared with February. That gap needs to be about $6.50 to cover hiring a ship and other costs associated with storing crude, according to E.A. Gibson Shipbrokers Ltd. in London.

JBC estimates that 30 million to 60 million barrels will be stored offshore in the next several months. The higher end of that forecast is about the same as Denmark’s annual consumption.

Oil Companies and Investors In Denial : Portfolio Profits At Risk

My rant – the  curse of Cassandra :

Cassandra, daughter of the king and queen, in the temple of Apollo, exhausted from practising, is said to have fallen asleep – when Apollo wished to embrace her, she did not afford the opportunity of her body. On account of which thing :

when she prophesied true things, she was not believed.

I have written :

Managed Accounts Year End Review and Forecast

Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors  ?– you  ( your portfolio) would have been better off today

and now you have to decide for 2015.

No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Two examples drawn from a recent sector review on Seeking Alpha – note that company management and you as an investor are not able to face present prices, trends and the facts of supply and demand . What are the these people thinking – why would you invest here ?

Cabot Oil and Gas (NYSE: COG)

Standing behind its production growth expectations of 20-30% in 2015, Cabot is budgeting $1.53-1.6 billion of capital expenditure for 2015, of which drilling and well completion capital will consist roughly 80%. However, the company is budgeting for $88/bbl oil, which at this point seems rather optimistic. Note that this is an increase from 2013’s $1.19 billion capital expenditure program.

Concho Resources (NYSE: CXO)

Concho is one rare company that is seeking to execute large increases in production in 2015, budgeting $3 billion for capex in 2015 as of their 3Q results release. To this end they have hedged roughly 42,000 barrels per day for 2015 at an average price of $87.22 per their derivatives information column on this page, or about a quarter of their target output.

Encana Energy (NYSE: ECA)

Encana is banking on higher realized oil prices in 2015 as their projected budget has actually increased this year to $2.7-2.9 billion, up from a previously announced $2.5-2.6 billion. Aftersuccessfully acquiring Athlon Energy (the transaction closing in November), Encana is making a bullish push to grow business in spite of ominous sector-wide headwinds.

The impending writedowns represent the latest blow to an industry rocked by a combination of faltering demand growth and booming supplies from North American shale fields. The downturn threatens to wipe out more than $1.6 trillion in earnings for producing companies and nations this year. Oil explorers already are canceling drilling plans and laying off crews to conserve cash needed to cover dividend checks to investors and pay back debts.

The mid-cap and small-cap operators are going to be hardest hit because this is all driven by their cost to produce,” said Gianna Bern, founder of Brookshire Advisory and Research Inc., who also teaches international finance at the University of Notre Dame.

An index of 43 U.S. oil and gas companies lost about one-fourth of its value since crude began its descent from last year’s intraday high of $107.73 a barrel on June 20.

Have you avoided these sectors  ?– you would have been better off  and now you have to decide for 2015.

No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Jack A. Bass Managed Accounts

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds at the rate of 1 % monthly if you require an income stream.

OR

Looking for Income ?  – Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management , tax reduction,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Telephone  Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax Free Portfolio  Growth website  Http://www.youroffshoremoney.com

Retailers : Closing Up Shop

Retailers are closing up shop. Here's why...
.

Another day, another retailer trimming its store count.

On Thursday, J.C. Penney (JCP) said that it will close 40 of its locations -about 4 percent of its stores-this year. Then Macy’s (NYSE:M) said it would close 14 stores in early spring. The announcements came one day after teen retailer Wet Seal (WTSL) said it will shutter about two-thirds of its 500-plus stores , and a bankruptcy judge in Delaware ruled that Deb Shops can shut down nearly 300 stores as part of its liquidation.

These are far from the only retailers whittling down their square footage.

When it filed for Chapter 11 bankruptcy protection last month, teen name Delia’s said it will seek court approval to close all of its stores.

Also last month, Aéropostale (ARO) said it would close 120 stores soon, a significant increase from the 40 or 50 it had originally planned. The company will also close about 125 of its P.S. by Aéropostale children’s stores by the end of the month.

Sears (SHLD), which is trying to turn around its performance after a string of declining sales reports, said last month it would accelerate the number of closings during the year, from 130 to 235.

And RadioShack (RSH), which is negotiating with lenders to gain approval to shutter 1,100 stores,said last month that it had closed 175 locations in 2014 .

Several macroeconomic factors are driving this push toward a smaller store base, analysts said. For one, retailers simply have too many stores, particularly as more consumers shop online. For another, the demographics no longer make sense for stores to exist in certain suburban locations, as more young Americans are flocking to cities and staying there longer.

But it’s more than just external factors. Many of the retailers closing stores are facing company-specific problems that in some ways forced them to downsize.

“When you have a fleet of 1,000 stores, you’re going to have some in lousy locations,” said Craig Johnson, president of Customer Growth Partners. “That’s a tiny subset of the issue.”

One of the biggest issues is that retail is simply overstored, Johnson said. He attributed this supply versus demand imbalance to the fact that retail sales growth has been too tepid to account for an increase in retail real estate. The situation developed even though 2014 saw limited new construction, according to Jesse Tron, a spokesman for the International Council of Shopping Centers.

“If we start most broadly, you have a retail sector that has basically been in slow-growth, no-growth mode for a number of years,” Johnson said. “Meanwhile, store square footage has kept expanding.”

Location also plays a role. Belus Capital Advisors analyst Brian Sozzi said suburban markets are particularly vulnerable, as more Americans move into cities. He used Target (TGT) as an example; although the discounter announced a round of store closures in November , it’s also opening new stores in urban markets.

Johnson added that mall-based locations are facing greater challenges than off-mall concepts, which are stealing share.

 

It should also come as no surprise that the rapid growth of the Web is causing a traffic decline at physical stores. Johnson said that for the merchandise category, online sales now account for about 13 percent of all retail sales.

While there are certainly external factors to blame, it’s important to note that the companies shuttering a large quantity of stores are also victims of their own mistakes.

For example, much of the trouble facing teen retailers is the fact that their target demographic no longer finds their product appealing. Instead, they’ve begun shopping at fast-fashion stores such as H&M (Stockholmsborsen:HM.B-SE) and Zara (Mercado Continuo: ITX-ES)-which, in contrast, are growing their U.S. square footage.

 

In a similar vein, Johnson pointed out that department stores’ woes are due, in part, to the fact that their overall share is shrinking. A few years ago, these big-box locations accounted for well over 10 percent of the retail market; now, it’s about 3 percent, he said.

“[J.C. Penney] has to shrink the size of its store base to fit the addressable demand that it can reasonably capture,” he said.

Not all store closings should be viewed as a sign of distress for the retailer. That’s because the beginning of the year is when most retailers evaluate their portfolios. According to preliminary estimates from ICSC, about 45 percent of last year’s announced store closings occurred in the first quarter.

Companies that close underperforming stores to strengthen their portfolio stand in sharp contrast to names such as RadioShack, which “need the store closures to stay alive,” Sozzi said.

Although analysts have long been calling for retailers to trim their square footage, it does come with pitfalls. Closing a store cannot only cause someone to switch to a competitor-it can also limit a company’s distribution network.

 

“If you’re aggressively closing stores, well now you can’t do this ship from store,” he said.

The past four years have seen the death of more than two dozen indoor malls, with another 60 teetering on the edge, according to data from Green Street Advisors that was first reported by The New York Times. But ICSC’s Tron said he does not foresee a year when the industry will post a net decline in retail space.

He added that occupancy rates were at 92.5 percent in the third quarter, which is back above prerecession levels.

“We kind of see this every year,” he said. [In the] first quarter a bunch of stores close and there’s a little bit of panic. And then new retailers emerge.”

Among new tenants filling these vacancies are gyms, minute clinics, clicks-to-bricks concepts such as Rent the Runway, and international retailers such as Primark. The latter signed a deal for space in seven Sears locations last year.

“For all these deaths there will be life,” Sozzi said.

Offshore Portfolio Tax Reduction  http://www.youroffshoremoney.com

Oil Declines / Impact On Major Players and Suppliers : Glut to Linger ( as we forecast)

Crude has dropped by more than half since June as U.S. output surged and the Organization of Petroleum Exporting Countries decided to maintain its production ceiling. Saudi Arabia won’t cut its output, though producers outside the group are welcome to do so, Ali Al-Naimi, that country’s oil minister, said at a conference in Abu Dhabi last month. Today’s decline accelerated as the dollar strengthened.

“The Saudis are providing no support for the market,” Helima Croft, chief commodities strategist at RBC Capital in New York, said by phone. “It looks like they will let prices continue to fall, taking as much non-OPEC production offline as possible.”

U.S. Cut Rigs Loose

Yesterday, Helmerich & Payne Inc. (HP), the biggest rig operator in the U.S., said it had received early termination notices for four contracts. Today, a second contract driller, Pioneer Energy Services Corp. (PES), said four rigs had been canceled early. Producers may cut short another 50 to 60 agreements, according to Bloomberg Intelligence analyst Andrew Cosgrove.

Terminations aside, less than half of land drillers’ rigs are on term contracts through 2015, data compiled by Bloomberg Intelligence show. Pioneer may be the most exposed, with 75 percent of its fleet up for renewal in the next three quarters, according to the data.

Ensign Energy Services Inc. (ESI) may lay off as many as 700 workers across Kern County and Long Beach, California, after an “early and unexpected termination” of drilling contracts, the company said in a Dec. 18 letter to the state’s Employment Development Department. The Calgary-based field services company was forced to halt production on a number of drilling rigs in California, according to the letter.

Oil Prices

Oil’s collapse has been so rapid and so driven by sentiment that forecasters from Bank of America Corp. to UBS AG say there are no clear signs of when the rout will end. The U.S. is pumping the most crude in more than three decades as horizontal drilling and hydraulic fracturing unlock shale reserves, adding to a global supply glut that Qatar estimates at 2 million barrels a day.

Brent for February settlement decreased $1, or 2 percent, to $50.15 a barrel at 2:06 p.m. New York time on the London-based ICE Futures Europe exchange, heading for the lowest settlement since April 2009.

West Texas Intermediate for February delivery slid 70 cents, or 1.4 percent, to $47.95 a barrel on theNew York Mercantile Exchange. The volume of all futures traded was 14 percent above the 100-day average for the time of day. Brent traded at a $2.17 premium to WTI on the ICE, the smallest since October

Crude Output

U.S. output expanded to 9.14 million barrels a day through Dec. 12, the highest level in weekly data from the Energy Information Administration that started in January 1983.

Credit Suisse Group AG cut its forecast for this year’s increase in U.S. crude output by 500,000 barrels a day, David Hewitt, the co-head of the bank’s global oil and gas equity research, said at an investor conference in Singapore today. Growth may slow by 800,000 barrels a day in 2016 compared with its previous estimate, he said.

Crude Exports

Credit Suisse had previously expected U.S. production to accelerate by 1.3 million barrels a day in 2015, and 1.4 million next year, he said. Brent crude will average $75 a barrel this year and $80 in 2016, according to Hewitt.

U.S. crude exports climbed 34 percent to 502,000 barrels a day in November, the most in records dating back to 1920, data from the Census Bureau and the EIA show. Some lawmakers inWashington are seeking to end a 40-year-old law that restricts crude sales to just a few overseas markets.

The Bloomberg Dollar Spot Index increased to 1,147.71. A stronger dollar reduces oil’s investment appeal.

“The dollar put downward pressure on oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The fundamentals of oil are still very bearish.”

Gasoline futures slipped 1.1 percent to $1.3236 a gallon. Ultra low sulfur diesel declined 0.7 percent to $1.6889.

Regular gasoline at U.S. pumps fell to the lowest level since May 2009. The average retail priceslipped 0.9 cent to $2.182 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group. Pump prices were around $2.05 a gallon when oil was last below $50 a barrel.

Oil Companies and Investors In Denial : Portfolio Profits At Risk

My rant – the  curse of Cassandra :

Cassandra, daughter of the king and queen, in the temple of Apollo, exhausted from practising, is said to have fallen asleep – when Apollo wished to embrace her, she did not afford the opportunity of her body. On account of which thing :

when she prophesied true things, she was not believed.

I have written :

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors  ? – you  ( your portfolio) would have been better off

and now you have to decide for 2015.

No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Two examples drawn from a recent sector review on Seeking Alpha – note that company management and you as an investor are not able to face present prices, trends and the facts of supply and demand . What are the these people thinking – why would you invest here ?

Jack A. Bass Managed Accounts

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds at the rate of 1 % monthly if you require an income stream

Contact information:

To learn more about portfolio management , tax reduction,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Telephone  Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

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