Oil’s Collapse : Cost North American Investors $390-billion since June

The bear market has wiped out a total of US$393 billion since June — US$353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost US$40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index.

The bear market has wiped out a total of US$393 billion since June — US$353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost US$40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index. The exception : Jack A. Bass Managed Accounts

Investors have a message for suffering U.S. oil drillers: We feel your pain- and our services are open to your potential gains.

Investors pumped more than US$1.4 trillion into the oil and gas industry the past five years as oil prices averaged more than US$91 a barrel. The cash infusion helped push U.S. crude production to the highest in more than 30 years, according to data compiled by Bloomberg.

Now that oil prices have fallen below US$45, any euphoria over cheaper energy will be tempered by losses that are starting to show up in investment funds, retirement accounts and bank balance sheets. The bear market has wiped out a total of US$393 billion since June — US$353 billion from the shares of 76 companies in the Bloomberg Intelligence North America Exploration & Production index, and almost US$40 billion from high-yield energy bonds, issued by many shale drillers, according to a Bloomberg index.

“The only thing people are noticing now is that gas prices are dropping,” said Sean Wheeler, the Houston-based co-chairman of the oil and gas industry team for law firm Latham & Watkins LLP. “People haven’t noticed yet that it’s also hitting their portfolios.”

The money flowing into oil and gas companies around the world in the last five years came from a variety of sources. The industry completed US$286 billion in joint ventures, investments and spinoffs, raised US$353 billion in initial public offerings and follow-on share sales, and borrowed US$786 billion in bonds and loans.

50 Cents

The crash caught investors and lenders by surprise. Eight months ago, Houston-based oil producer Energy XXI Ltd. sold US$650 million in bonds. Demand was so high that the company more than doubled the size of the offering, company records show. The debt is now trading for less than 50 cents on the dollar, and the stock has declined 88%.

Energy XXI, which has more than US$3.8 billion in debt, is one of more than 80 oil and gas companies whose bonds have fallen to distressed levels, meaning their yields are more than 10 percentage points above Treasury debt, as investors bet the obligations won’t be repaid, according to data compiled by Bloomberg.

The stocks and bonds of Energy XXI and other struggling energy firms have been bought up by pension funds, insurance companies and savings plans that are the mainstays of Americans’ retirement accounts. Institutional investors had more than US$963 billion tied up in energy stocks as of the end of September, according to Peter Laurelli, a New York-based vice president of research with eVestment, an analytics firm in Marietta, Georgia, that gathers data on about US$22 trillion of institutional strategies.

Bank Lenders

Energy XXI’s second-largest reported shareholder is a group of funds managed by Vanguard Group Inc., the biggest U.S. mutual-fund firm, according to data compiled by Bloomberg. The top reported owner of the bonds Energy XXI issued in May is Franklin Resources Inc. in San Mateo, California, also known as Franklin Templeton Investments, which manages multiple funds that bought Energy XXI’s debt, according to data compiled by Bloomberg.

Energy XXI didn’t return calls and e-mails seeking comment. The company has “plenty of liquidity,” Greg Smith, a spokesman, said in a December interview.

A reckoning may also be in store for Energy XXI’s bank lenders. The company, which drills in the Gulf of Mexico, has tapped US$974 million of a US$1.5 billion credit line extended by a group of banks including Gulfport, Mississippi-based Hancock Holding Co.’s Whitney Bank; Amegy Bank of Texas, a subsidiary of Salt Lake City-based Zions Bancorporation; and Comerica Inc. in Dallas, according to data compiled by Bloomberg. Energy XXI has also borrowed money from banks in the U.K., Australia, Canada, Spain and Japan.

Struggling Drillers

The three U.S. banks are also among the lenders to other struggling drillers. The loans are backed by oil reserves that are worth less at today’s prices than they were when banks last performed scheduled revaluations of the collateral.

Representatives of Amegy, Comerica and Hancock declined to comment on the performance of specific loans. Shares of Zions have declined 15% this month. Comerica is down 9.8%, and Hancock slid 15%.

“This is a big deal for banks in states like Texas where oil is one of the most prominent businesses,” said Brady Gailey, an Atlanta-based analyst at Stifel Financial Corp.’s KBW unit. “There are going to be loan losses and it’s going to hit multiple banks that have exposure to that credit. It will slow economic growth, it could ding real estate values, banks will lose money and their stock will get slammed.”

Regional Lender

One regional lender with energy exposure is Lafayette, Louisiana-based MidSouth Bancorp Inc., with 21% of its US$1.25 billion of lending tied to oil and gas, according to regulatory filings.

Rusty Cloutier, MidSouth’s chief executive officer, said he’s not worried about the oil decline hurting his business because the bank’s portfolio consists of experienced oil and gas companies.

“There will be some players that get hurt, but the real players in the energy market aren’t going anywhere,” Cloutier said. “Companies who are leveraged very highly and got into the business not long ago, those are the ones that are going to get hurt.”

Hundreds of smaller banks in states such as Texas, Colorado, Oklahoma and North Dakota have also plunged into energy lending during the oil boom.

‘Very Concerned’

Gil Barker, the Office of the U.S. Comptroller of the Currency’s top overseer of community banks in states including Texas and Oklahoma, said he has confidence that the smaller lenders were doing what they should, though circumstances might change.

“We’re very concerned about the banks located in these oil-producing areas,” he said. “A prolonged time of low oil prices is really going to cause banks significant problems.”

More people will be affected than realize it, said Michael Shaoul, who helps oversee about US$9 billion as CEO of Marketfield Asset Management LLC in New York. “So much of this has ended up in 401(k)s and in pension funds and in mutual funds, and that’s where the bulk of the pain is going to be felt.”

 Jack A. Bass Managed Accounts

November 2014 – 40 % cash position

Year End Review and Forecast

 

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% plu

 

ConocoPhillips (NYSE:COP) $ 66.07 -6.72%
Vanguard Natural Resources, LLC (NASDAQ:VNR) $ 23.22 -6.86%
Seadrill Ltd. (SDRL) $ 14.66 -8.32%
Have you avoided this sector – you would have been better off to follow our advice in 2014 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.

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

You can withdraw your funds monthly if you require an income stream.

Contact information:

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

Email 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).

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

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.

 

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

Houston, We Have An Oil Investor Problem : Survival

Photographer: Dmitry Beliakov/Bloomberg

Hedge Funds Cut Oil Bets After Worst Drop Since 2008

 

 

 

(And it will get worse -

Oil Companies and Investors In Denial : Portfolio Profits At Risk - Jack A. Bass)

Oil’s dramatic fall in price will have serious effects on revenues and spending in the sector, according to some industry analysts, with one investment firm predicting a sector-wide “recession” that will last for several years.

Both U.S. crude and Brent futures fell to fresh 5½-year lows on Tuesday, with the former slipping below $48 at one stage. Weak global demand and booming U.S. oil production are seen as the key reasonsbehind the price plunge, as well as OPEC’s (Organization of the Petroleum Exporting Countries) reluctance to cut its output.

This sector slump will lead to a fight to the death for oil firms, according to analysts at Bernstein Research. The research firm likened the current environment to the Hollywood movie “The Hunger Games”, which portrays a dystopian post-apocalyptic future where the main protagonists battle each other to survive.

“Our research convinces us an oil services recession is largely unavoidable at even $80 a barrel…The Hunger Games have begun,” Nicholas Green, a senior analyst at the company, said in a note on Tuesday morning.

Bernstein’s Green believes that offshore activity will also face a “structural recession.” He predicts that there will be only half of the new work available in 2015, compared to last year, and forecasts no material recovery before 2017.Hedge funds reduced bets on rising oil prices for a second week as futures extended their worst plunge since 2008.

Speculators pared their net-long positionin West Texas Intermediate crude by 3.6 percent in the week ended Dec. 30, U.S. Commodity Futures Trading Commission data show. Short wagers jumped 12 percent, the first gain in six weeks.

The U.S. benchmark price sank 46 percent last year as domestic oil output reached a three-decade high and OPEC produced more than its target for a seventh month. The International Energy Agency has cut its estimate for global demand as economies outside the U.S. are expected to grow more slowly, adding to a supply glut.

Oil Prices

“You had the combination of weak fundamentals and a shift in market psychology,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said yesterday. “People realized that there’s no imminent market tightness, and this caused big selloffs.”

WTI fell $3, or 5.3 percent, to $54.12 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Futures declined $1.16, or 2.3 percent, to $48.88 a barrel at 8:46 a.m. after sliding to $48.47, the lowest since April 2009.

U.S. crude production was 9.12 million barrels a day in the seven days ended Dec. 26 after reaching 9.14 million two weeks earlier, the highest in weekly government data since 1983.

Global Production

Crude stockpiles in the U.S. were 385.5 million barrels as of Dec. 26, while gasoline suppliesincreased to 229 million, the highest seasonal levels in weekly Energy Information Administration data.

Russian oil production rose 0.3 percent in December to a post-Soviet record of 10.667 million barrels a day, according to preliminary data e-mailed by CDU-TEK, part of the Energy Ministry. Iraq exported 2.94 million barrels a day in December, the most since the 1980s, Oil Ministry spokesman Asim Jihad said.

“The consistent production around the world is overwhelming demand,” Michael Hiley, head of energy OTC at LPS Partners Inc. in New York, said yesterday. “It looks like prices will keep making new lows.”

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 Texas and the Bakken in North Dakota.

Saudi Prices

“Everybody is producing as much oil as they can,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “With the shale revolution flooding the market with oil and OPEC not cutting at all, the market is fundamentally weak.”

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, produced 30.24 million barrels a day in December, according to a Bloomberg survey. The group decided to maintain its output quota at 30 million barrels a day at a Nov. 27 meeting in Vienna.

Saudi Arabia, the world’s biggest oil exporter, raised its price yesterday for February deliveries of Arab Light to Asia from the biggest discount in at least 14 years. The price cut last month was followed by Iraq, Kuwait and Iran, prompting speculation that Middle East producers were protecting market share.

“The Saudis refuse to cut and lose market share, to prop up prices for the rest of the world,” Hiley said. “As the price goes down, it doesn’t mean production goes away.”

Natural Gas

Net-long positions for WTI dropped by 7,551 to 199,388 contracts of futures and options in the week ended Dec. 30, according to the CFTC. Long positions fell 0.4 percent to 259,613 and short bets climbed to 60,225.

In other markets, bearish wagers on U.S. ultra low sulfur diesel increased 11 percent to 27,087 contracts as the fuel sank 6.1 percent to $1.8688 a gallon.

Wagers on U.S. natural gas swung to net short position of 12,130 contracts in the week ended Dec. 30 from net long of 3,648 in the previous week. 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 2.4 percent to $3.094 per million British thermal units.

Bullish bets on gasoline tumbled 10 percent to 44,226. Futures slumped 7.4 percent to $1.4537 a gallon on Nymex in the reporting period.

Regular retail gasoline dropped 0.5 cent to an average of $2.194 yesterday, the cheapest since May 2009, according to Heathrow, Florida-based AAA, the country’s largest motoring group. U.S. drivers may save as much as $75 billion at gasoline pumps in 2015, AAA said on Dec. 31.

“People realized how bearish the fundamentals are,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s probably the worst of times for hedge funds. For drivers, it’s probably the best of times.”

 

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.

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

 

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
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
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

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. After successfully 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 website  Http://www.youroffshoremoney.com

Get Out Of The Oil Patch New Paradigm Update

It is human nature to look for bargains - and destroy your portfolio as you gather losers into what used to be a ” nest” egg.

Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the  dollar level it now enjoys.

“We could definitely see $55 next week,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We are probably going to see some violent trading.”

The Saudis are not messing around.

“Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
WWW.BUSINESSINSIDER.COM

‘Drifting Down’

Skip York, a Houston-based vice president of energy research at Wood Mackenzie Ltd., said the next price target is $45.

“The market hasn’t seen the response they’re looking for on the supply side yet,” York said. “We’re now in this environment where I think prices are going to keep drifting down until the market is convinced, until the signal that production growth needs to slow has been received and acted on by operators.”

Are you still a client of a portfolio manager urging you to ” stay the course” – or worse, telling you to add to losing positions and losing sectors?

small- and mid-capitalization stocks, both E&P and Oil Service, are trading ~60% below their recent peaks, on average.

  • A growing number of stocks are priced at less than one-quarter of their peak prices achieved less than six months ago.

This is what is happening to oil TODAY ( Dec 22)

Crude Extends Fourth Weekly Decline Amid Supply Glut

Standard & Poor’s Ratings Services revised its outlook to negative for Royal Dutch Shell Plc (RDSA), Total SA (FP) and BP Plc (BP/)as the oil-market rout driven by weakening demand and a flood of supply from American shale fields threatens cash flow into 2016.

The credit-rating company also cast a dim eye on Houston-based ConocoPhillips, saying it’s facing similar cash flow pressure, and said it may cut the ratings on Eni SpA (ENI) and BG Group Plc’s BG Energy Holdings. S&P cited “the dramatic deterioration in the oil price outlook” and the 50 percent increase in debt loads and dividend commitments for the biggest European oil producers since the end of 2008.

Saudi Oil Minister Ali Al-Naimi said OPEC’s biggest producer will seek to maintain market share and that global demand growth this year was slower than expected. Iraq plans to boost its production next year, Oil Minister Adel Abdul Mahdi said. Trading volatility stayed at the highest level in more than three years.

Saudi Arabia is not willing to give up market share,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “With the U.S. production trajectory intact certainly in the next few months, it’s going to be a fight. It certainly looks like oil is heading toward $50.”

Oil has slumped about 21 percent since OPEC decided against cutting its production target last month, prompting a plunge in the value of currencies from the Russian ruble to the Norwegian krone. Surging production and slower-than-expected demand growth have also contributed to this year’s rout. Output in the U.S. is the highest in three decades.

Brent for February settlement dropped $1.10, or 1.8 percent, to $60.28 a barrel at 1:05 p.m. New York time on the London-based ICE Futures Europe exchange. The volume of all futures was 16 percent below the 100-day average. The European benchmark crude traded at a premium of $4.82 to West Texas Intermediate. Prices have fallen about 45 percent this year, set for the largest drop since 2008.

WTI for February delivery fell $1.73, or 3 percent, to $55.40 on the New York Mercantile Exchange with volume 12 percent below the 100-day average. The U.S. benchmark is down about 43 percent this year.

Implied Volatility

Implied volatility for at-the-money options in the front-month Brent contract, a measure of expected futures movements and a key gauge of options value, rose to 49.7 percent, the highest level since August 2011, according to data compiled by Bloomberg. WTI volatility is also at the highest since 2011.

“Nothing fundamentally has changed,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “The Saudis have been saying that they are not going to cut production. We are going to see some violent trading with very high volatility.”

The market is oversupplied by 2 million barrels a day, according to Mohammed Al Sada, Qatar’s energy minister. The International Energy Agency cut projections on Dec. 12 for the amount of crude OPEC will need to provide next year by 300,000 barrels a day to 28.9 million.

Wrong Information

Lack of cooperation from non-OPEC producers and wrong information in the market hit prices, Al-Naimi said at a conference in Abu Dhabi yesterday. Saudi Arabia’s oil policy doesn’t target other countries, and if non-OPEC producers were to offer cuts, OPEC probably wouldn’t follow suit, he said.

“Whether it goes down to $20/b, $40/b, $50/b, $60/b, it is irrelevant,” Al-Naimi told the Middle East Economic Survey when asked what price would prompt OPEC to cut output.

Iraq, OPEC’s number two producer, will have output of 4 million barrels a day and export 3.3 million barrels a day next year, Abdul Mahdi said in an interview in Abu Dhabi. Its production accounted for 10 percent of OPEC’s output in November at 3.35 million barrels a day, according to data compiled by Bloomberg.

OPEC pumped 30.56 million barrels a day in November, exceeding its collective target of 30 million for a sixth straight month, a Bloomberg survey of companies, producers and analysts shows.

Output in the U.S., the world’s biggest oil consumer, expanded to 9.14 million barrels a day in the week ended Dec. 12, according to the Energy Information Administration. That’s the highest level in weekly data that started in January 1983.

Shale Boom

The nation’s oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota. The three shale plays supplied record amounts in November, said the industry-funded American Petroleum Institute.

The slump in oil is spurring the most bullish bets by hedge funds in four months. Speculators expanded their net-long position in WTI by 14 percent in the week ended Dec. 16 to 217,723 futures and options, U.S. Commodity Futures Trading Commission data show.

and today Dec. 22 Natural Gas Tumbles ( again)

Natural gas futures tumbled to a two-year low in New York as mild weather and record production threatened to expand a stockpile surplus.

Futures slumped 9 percent to the lowest settlement since Jan. 9, 2013, making the fuel the worst performer among 22 materials in the Bloomberg Commodity Index. Gas stockpiles totaled 3.295 trillion cubic feet as of Dec. 12, 47 billion more than a year earlier and above the year-ago level for the first time since 2012, government data showed. The surplus will “balloon to just shy of 200 billion cubic feet” by the start of 2015, according to JPMorgan Chase & Co.

Temperatures may be above normal in most of the lower 48 states through Dec. 26 and on the East Coast through Dec. 31, according to Commodity Weather Group LLC in Bethesda, Maryland.

“The hope of cold weather boosting inventory withdrawals is receding, and that’s opened up a floor in gas prices,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “The weather models are generally less supportive for the persistence of cold.”

Natural gas for January delivery fell 32 cents to settle at $3.144 per million British thermal units on theNew York Mercantile Exchange. Volume for all futures traded was 59 percent above the 100-day average at 2:41 p.m. Prices have dropped 26 percent this year, heading for the biggest annual loss since 2011.

‘Downside Risk’

U.S. gas production may climb 5.5 percent this year to a record 74.26 billion cubic feet a day, Energy Information Administration data show.

“Supply growth and mild weather returned working gas storage to a year-on-year surplus for the first time since December 2012,” Morgan Stanley analysts including New York-based Adam Longson said in a report e-mailed today. That “adds to near-term downside risk.”

Gas production from the Marcellus shale formation in the Northeast may climb to 16.3 billion cubic feet a day in January, up 19 percent from a year earlier, the EIA said Dec. 8 in its monthly Drilling Productivity Report. The agency is the Energy Department’s statistical arm.

The low in New York on Dec. 27 may be 36 degrees Fahrenheit (2 Celsius), 7 higher than average, data from AccuWeather Inc. in State College, Pennsylvania, show. Boston temperatures may drop to 35 degrees, 10 above normal.

You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
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/ EnergyI 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 would have been better off to follow our advice in 2014 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.

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

You can withdraw your funds monthly if you require an income stream.

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 ,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

Call 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

 

Get Out Of The Oil Patch, Get Out of Dry Bulk Shipping – New Paradigm Update

It is human nature to look for bargains - and destroy your portfolio as you gather losers into what used to be a ” nest” egg.

Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the sub dollar level it now enjoys.

“We could definitely see $55 next week,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We are probably going to see some violent trading.”

‘Drifting Down’

Skip York, a Houston-based vice president of energy research at Wood Mackenzie Ltd., said the next price target is $45.

“The market hasn’t seen the response they’re looking for on the supply side yet,” York said. “We’re now in this environment where I think prices are going to keep drifting down until the market is convinced, until the signal that production growth needs to slow has been received and acted on by operators.”

Are you still a client of a portfolio manager urging you to ” stay the course” – or worse, telling you to add to losing positions and losing sectors?

small- and mid-capitalization stocks, both E&P and Oil Service, are trading ~60% below their recent peaks, on average.

  • A growing number of stocks are priced at less than one-quarter of their peak prices achieved less than six months ago.

This is what is happening to oil TODAY ( Friday Dec. 12)

U.S. oil drillers, facing prices that have fallen below $60 a barrel and escalating competition from suppliers abroad, idled the most rigs in almost two years.

Rigs targeting oil dropped by 29 this week to 1,546, the lowest level since June and the biggest decline since December 2012, Baker Hughes Inc. (BHI) said on its website today. Those drilling for natural gas increased by two to 346, the Houston-based field services company said. The total count fell 27 to 1,893, the fewest since August.

As OPEC resists calls to cut output, U.S. producers from ConocoPhillips (COP) to Oasis Petroleum Inc. (OAS) have curbed spending. Chevron Corp. (CVX) put its annual capital spending plan on hold until next year. The number of rigs targeting U.S. oil is sliding from a record 1,609 following a $50-a-barrel drop in global prices, threatening to slow the shale-drilling boom that’s propelled domestic production to the highest level in three decades.

“It’s starting,” Robert Mackenzie, oil-field services analyst at Iberia Capital Partners LLC, said by telephone from New Orleans today. “We knew this day was going to come. It was only a matter of time before the rig count was going to respond. The holiday is upon us and oil prices are falling through the floor.”

ConocoPhillips said Dec. 8 that the Houston-based company would cut its spending next year by about 20 percent, deferring investment in North American plays including the Permian Basin of Texasand New Mexico and the Niobrara formation in Colorado. Oasis, an independent exploration and production company based in Houston, said Dec. 10 that it’s cutting 2015 spending 44 percent to focus on its core area in North Dakota.

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter at http://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/ EnergyI 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 would have been better off to follow our advice in 2014 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.

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

You can withdraw your funds monthly if you require an income stream.

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 ,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

Call 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

 

Lor Loewen's photo.
Like · ·

Oil Sector – It Will Be Ugly : Protect your Assets

OPEC Gusher to Hit Weakest Players, From Wildcatters to Iran

The refusal of Saudi Arabia and its OPEC allies to curb crude oil output in the face of plummeting prices has set the energy world on a painful course that will leave the weakest behind, from governments to U.S. wildcatters.

A grand experiment has begun, one in which the cartel of producing nations — sometimes called the central bank of oil — is leaving the market to decide who is strongest and how to cut as much as 2 million barrels a day of surplus supply.

Oil patch executives including billionaire Harold Hamm have vowed to drill on, asserting they can profit well below $70 a barrel, with output unlikely to fall for at least a year. Marginal producers in less profitable U.S. shale areas, as well as countries from Iran to Russia and operations from Canada to Norway will see the knife sooner, according to analyses by Wells Fargo & Co., IHS Inc. and ITG Investment Research.

“We’re in a very nerve-wracking environment right now and will be for probably the next couple of years,” Jamie Webster, senior director for global crude markets at IHS said today in a phone interview. “This is a different game. This isn’t just about additional barrels, this is about barrels that are going to keep coming and keep coming.”
Investors punished oil producers, as Hamm’s Continental Resources Inc. fell 20 percent, the most in six years, amid a swift fall in crude to below $70 for the first time since 2010. Exxon Mobil Corp. fell 4.2 percent to close at $90.54 in New York. Talisman Energy Inc., based in Calgary, was down 1.8 percent at 3:00 p.m. in Toronto after dropping 14 percent yesterday.

U.S. Supplies

A production cut by the 12-member Organization of Petroleum Exporting Countries would have been the quickest way to tighten the world’s oil supplies and boost prices. In the U.S., supply is expected either to remain flat or rise by almost 1 million barrels a day next year, according to the Paris-based International Energy Agency and ITG.

That’s because only about 4 percent of shale production needs $80 or more to be profitable. Most drilling in the Bakken formation, one of the main drivers of shale oil output, returns cash at or below $42 a barrel, the IEA estimates.

Many expect reductions to U.S. output to occur slowly because of a backlog of wells that have already been drilled and aren’t yet producing, and financial cushioning from the practice of hedging, in which producers locked in higher prices to protect against market volatility, according to an Oct. 20 analysis by Citigroup Inc.

Production Slowdown

With a sustained price drop to $60 a barrel, shale drilling would face significant challenges, according to Citigroup and ITG, especially in emerging fields in Ohio and Louisiana, where producers have less practice. ITG estimates it will take six months before lower prices slow production growth from U.S. shale, which is responsible for propelling the country’s production to the highest in more than three decades.

“It’s going to be very producer-specific,” said Judith Dwarkin, chief energy economist at ITG in Calgary. “Companies have to revise their budgets, then you see the laying down of rigs, then you see the fewer wells being drilled, then you see the natural decline rates starting to have more of an effect.”

Drilling in Western Canada may drop by 15 percent in 2015, according to a report today by Patricia Mohr, an economist at Bank of Nova Scotia in Toronto.

Different Strokes

The market pressure will hit shale companies in different ways. Many have spent years honing their operations to pull the most oil out of every well at the lowest cost, a process that can be as much art as science at the nexus of geology, engineering and infrastructure. That experience means some producers, such as EOG Resources Inc. and ConocoPhillips, can turn a profit at $50 a barrel.

Those companies will now capitalize on that expertise to keep drilling wells, and so far have even promised to boost production.

The idea that lower prices will pressure shale producers to produce less oil is “a fundamental error,” said Paul Stevens, a distinguished fellow at Chatham House in London. Such thinking has focused on how much it costs to drill new wells in new fields, ’’ he said. “But what really matters is the price at which it is no longer economic to produce from existing fields, and that is very much lower.”

Worst Pain

Some companies won’t be as fortunate, especially smaller operators that rely heavily on debt and are focused on new areas, where the most efficient production techniques are in the early stages of being understood. Such producers have for years outspent cash flow to develop properties that could pay off big in the future.

Goodrich Petroleum Corp. is one example. With a market capitalization of just $269 million, the upstart producer is developing a prospect in Louisiana and Mississippi that one rival called possibly one of the last great opportunities in North America. But drillers in the Tuscaloosa Marine Shale need oil prices at about $79.52 a barrel, according to Bloomberg New Energy Finance. Goodrich fell 34 percent to 6.05, the most ever.

Wells drilled by Hess Corp. in Ohio’s Utica formation, which has yet to produce significant volumes and is held in high esteem by many in the industry, also require nearly $80 a barrel for profitability, according to Citigroup.

Offshore, Too

The punishment wasn’t limited to shale. The day’s worst performing oil producer was offshore specialist Energy XXI Ltd., which has its principal office in Houston. It lost a record 37 percent of its value, falling to $4.01.

With cash flow shrinking from lower prices, the company may not be able to reduce debt until the market rebounds, Iberia Capital Partners analyst David Amoss, based in New Orleans, wrote today in a note cutting his rating to hold from buy. As of Sept. 30, Energy XXI reported net debt of $3.7 billion.

Plunging oil markets already have begun to pressure governments that rely on higher prices to finance their budgets, fuel subsidies to citizens and expand drilling. Venezuela’s oil income has fallen by 35 percent, President Nicolas Maduro said on state television Nov. 19.

Nigeria increased interest rates for the first time in three years on Nov. 26 and devalued its currency. The government is planning to cut spending by 6 percent next year, Finance Minister Ngozi Okonjo-Iweala said Nov. 16. Both Nigeria and Venezuela are part of OPEC.

‘Real Victims’

Saudi Arabia has enough cash stockpiled to finance its budget for more than 20 years at an oil price of $80 a barrel, according to an Oct. 16 analysis from CIBC World Markets Corp. Russia has about six years of financial reserves at that price, but Iraq, Nigeria and Iran all have less than two years. Venezuela has less than six months, based on the analysis.

Several countries within OPEC such as Iran, Iraq, Nigeria and Venezuela, as well as non-OPEC states such as Russia, Canada and Norway, “will end up being the real victims of lower oil prices in 2015 and beyond,” Roger Read, an analyst at Wells Fargo, said today in a note to investors. The countries “are unlikely to be able to maintain their production trends in the face of today’s oil price declines.”

“It’s pretty clear to me that the Saudis are no longer interested in being the world’s central banker for oil,” said John Stephenson, who manages C$50 million ($44 million) at Toronto-based Stephenson & Co. as chief executive officer. “It’s going to be ugly.”

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:

Company                                   (Ticker)                        Price Change
Energy Transfer Partners LP (NYSE:ETP)             $ 65.17 -4.13%
Exxon Mobil Corporation (NYSE:XOM)                $ 90.54 -4.17%
Chevron Corporation (NYSE:CVX)                       $108.87 -5.42%
ConocoPhillips (NYSE:COP   )                                 $ 66.07 -6.72%
Vanguard Natural Resources, LLC (NASDAQ:VNR) $ 23.22 -6.86%
Seadrill Ltd. (SDRL)                                                  $ 14.66 -8.32%

Have you avoided this sector – you would have been better off to follow our advice in 2014 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.

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

You can withdraw your funds monthly if you require an income stream.

 

YEAR END UPDATE AND FORECAST

NEW go to  http://youroffshoremoney.com/

November 2014 – 40 % cash position

Year End Review and Forecast

Contact information:

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

Email info@jackbassteam.com or

Call Jack direct at 604-858-3202

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

A decade of increasing productive capacity has fattened supplies of commodities just as the world economy grows less commodity-intensive and investment demand wanes with traditional equity and bond markets performing well.

The idea that commodities were even a proper investment asset class for long-term investors was never fully demonstrated. Commodity prices tend to be mean reverting through successive cycles rather than instruments that produce cash income or build economic value.

Yet many in the financial industry promoted the idea of a “supercycle” fed by global industrialization and “peak oil” supply constraints. For sure, commodities look quite oversold in the short term and sentiment has turned severely against them, supporting the chances for a trading bounce or pause in the declines.

Yet even if the lows are in for oil or gold, the big picture is now looking decidedly less “super” for long-term commodity bulls. In one representative example of flagging investor interest in commodities, assets in the bellwether Pimco Commodity Real Return Strategy fund (PCRIX) have fallen below $13 billion – down by more than a third in two years.

 

Sprott Resource Light At The end of The Drill Bit ?

(SCP : TSX : $3.04), Net Change: 0.05, % Change: 1.67%, Volume: 205,132
WHAT’S IT WORTH AS A PUBCO?

Texas-based Independence Contract Drilling (IDC) has filed a registration statement with the U.S. Securities and Exchange Commission for a possible initial public offering. Several big name Wall Street bankers have been tasked with underwriting the deal. IDC is an investee company of Sprott Resource. Sprott owns 31.7% of IDC and made their $49.4 million investment in IDC in Q1/12.

IDC was formed in 2011 as a vertically integrated premium land drilling services provider. From its wholly owned API certified manufacturing facility in Houston, Texas, IDC provides E&P operators the ShaleDriller series rigs. The ShaleDriller is designed to target longer-reach horizontal wells that are technically demanding and more efficiently drilled by high-specification, programmable AC rigs, which precisely control key drilling parameters. In
addition, the ShaleDriller series have “walking” capability to allow the rig to be quickly moved to a new drilling location on a pad without disassembling and reassembling the rig.

As of Q1/14, ICD had six rigs fully contracted two additional rigs under construction, and one rig in the manufacturing facility for upgrades. The oil & gas drilling industry has entered a land rig replacement cycle because much of the current U.S. land drilling rig fleet is old and technologically inefficient. Some 40% of the fleet was built before 2000, and more than 50%are mechanical and below 1,000 HP.

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