Half of U.S. Fracking Companies Will Be Sold OR Dead This Year

Half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International Plc said.
There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracking, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices.
There were 61 fracking service providers in the U.S., the world’s largest market, at the start of last year. Consolidation among bigger players began with Halliburton Co. announcing plans to buy Baker Hughes Inc. in November for $34.6 billion and C&J Energy Services Ltd. buying the pressure-pumping business of Nabors Industries Ltd.
Weatherford, which operates the fifth-largest fracking operation in the U.S., has been forced to cut costs “dramatically” in response to customer demand, Fulks said. The company has been able to negotiate price cuts from the mines that supply sand, which is used to prop open cracks in the rocks that allow hydrocarbons to flow.
Oil companies are cutting more than $100 billion in spending globally after prices fell. Frack pricing is expected to fall as much as 35 percent this year, according to PacWest, a unit of IHS Inc.
While many large private-equity firms are looking at fracking companies to buy, the spread between buyer and seller pricing is still too wide for now, Alex Robart, a principal at PacWest, said in an interview at CERAWeek.
Fulks declined to say whether Weatherford is seeking to acquire other fracking companies or their unused equipment.
“We go by and we see yards are locked up and the doors are closed he  said. “It’s not good for equipment to park anything, whether it’s an airplane, a frack pump or a car.”

Oilpatch Casualties : Price War Enters The ‘Market Death’ Phase

The battle for market share has reached the stage where the weak will start dropping out, warns energy economist, a global cull that could go on for another year.<br />

The “market death” phase of the oil downcycle is about to commence as margins of many producers are starting to dry up, according to an energy analyst.

Claudia Cattaneo: With the Canadian dollar depressed and share prices of some companies at bargain levels, the odds are high that well-known Canadian names will disappear.

“We are in the midst of a price war and one of the key elements of a price war is that producers start to raise production to elbow out the competition,” Peter Tertzakian, chief energy economist and managing director of ARC Financial Resources told a business audience at a conference in Toronto Thursday.

Last November, Saudi Arabia and OPEC allies decided to maintain output despite falling oil prices, triggering a global oil war that has seen prices cut in half.

“First thing you do [in a price war], is you crank up capacity. You have to pay the bills, employees and banks. You crank it up, till you can’t crank it up anymore.
Until you hit Phase 2, ‘Market Death’, which sounds very ominous. Market death is when some of the participants can no longer produce and start dropping out. It’s starting to happen, not enough yet.”

We are still in the first phase, with market death about to occur.

“And at some point there is capitulation. I would argue that it is coming in the third and fourth quarter, but it could drag on for a year,” Tertzakian said.

The OPEC meeting in June is unlikely to see the Saudis retreat from their determined position of raising production and gaining greater market share at the expense of their competitors.

“I don’t think they [the Saudis] would have felt that enough market death has happened yet. The objective in price wars is to put the weak out of business.”

The silver lining for Canadian and U.S. producers is that tight oil is more responsive and nimble compared to the inelastic conventional global supplies. This is evident from the financings of Canadian oil producers, which have been almost at the same pace as the first quarter of 2014.

“Light oil is going to be winner in the global price wars and the investor sentiment shows that. But the money is going to be very selective and backing winners – perceived winners.”

“The longer [low oil prices] persist, the more you will see companies’ financial situation become more precarious, and potentially looking at being acquired as the best outcome,” said Scott Sharabura, associate principal at McKinsey & Co.’s Calgary office.

At the same time, their businesses remain attractive, he said. “Everything about the logic of investing in Canada — lots of reserves, a safe environment from a geopolitical perspective, low risk, lots of long-term investment potential — still holds.”

Among the larger companies, oil sands producer Cenovus Energy Inc. and oil and gas producer Encana Corp. saw the steepest stock price declines since the beginning of the year. Cenovus issued $1.5 billion and Encana $1.4 billion in equity to soothe the bite of low oil prices. But Cenovus still has a $1.3 billion “funding gap” and Encana is digesting acquisitions it made at high prices as part of its transformation to become a balanced oil and gas producer before oil collapsed.

Penn West Exploration Ltd. is among those struggling with high debt and has been in discussions to ease terms.

“Companies will doubtless feel the squeeze as time goes by and Q2 2015 will inevitably be a time when we see an increase in distressed sales as debt-laden companies have their hands forced by the need to furnish debt,” Eoin Coyne, of research firm Evaluate Energy, said in a report Wednesday.

The most talked about potential acquirers are Canadian Natural Resources Ltd. and Suncor Energy Inc., which saw the largest stock price increases over the same period.

Canadian Natural has been acquisitive throughout its history, particularly when industry conditions are weak. Suncor became acquisitive in the last oil price crash, when it purchased PetroCanada.

Husky Energy Inc., whose stock has been relatively stable, has signalled it has appetite for a “transformational” deal.

But global companies are also likely on the hunt, and in some cases have the benefit of stronger currencies and deeper pockets. In addition to Shell, Petronas, ExxonMobil Corp., Chevron Corp., BP PLC, PetroChina, ENI, Total S.A, Lukoil and Statoil ASA have the financial capacity to make acquisitions, according to Evaluate Energy. With the exception of Lukoil, all have operations in Canada. The Shell-BG merger could push others to do their own deal to keep up, or because by eliminating competition they can reduce costs.

The 1998 oil crash pushed Exxon to purchase Mobil, and BP to acquire Amoco. Chevron later scooped up Texaco Inc. and Conoco took out Phillips.

Big Oil’s Push to Replace Coal : Coal Mining and Shipping Sectors At Risk

BP Plc coined the slogan “Beyond Petroleum.” The new industry mantra might be “Beyond Oil and Into Gas.” Oh, and while we’re at it, “Down With Coal.”

Consider Royal Dutch Shell Plc’s recent $70 billion acquisition of BG Group Plc — clearly a huge bet that natural gas will prove to be its cash cow of the future.

The petroleum industry’s move toward gas is hardly new — the hydraulic fracturing shale revolution is in its second decade, after all. Still, Shell’s move is an emphatic confirmation that some among the Big Oil family firmly believe gas will play a growing role in meeting the energy demand of emerging countries such as China and India that are trying to move away from dirtier coal.

“Gas will likely overtake coal as the world’s second fuel by the late 2020s,” said Jonathan Stern, head of the natural gas program at the Oxford Institute for Energy Studies.

Gas is emerging as a preferred fuel around the world because it’s cleaner to burn than coal and oil, prompting the International Energy Agency to say in 2011 that the world was entering into the “golden age of gas.” In a highly symbolic move, China announced last month it would convert the last of four major coal-fired power plants around Beijing to gas next year.

Last September, in a petroleum industry meeting timed to a United Nations session on global warming, some of the world’s leading producers got up to argue that gas gave them a huge advantage over coal in the climate-change battle, according to the website Responding to Climate Change.

“One of our most important contributions is producing natural gas and replacing coal in electricity production,” said Helge Lund, then chief executive officer of Statoil ASA, citing figures that switching from coal to gas could halve global emissions.

Fast Growing

Until recently, coal was the world’s fastest-growing major energy source, averaging a 5 percent annual rate. The Paris-based IEA forecast the rate would slow down to 1 percent from 2012 to 2020, and decelerate further to 0.3 percent in the 2020s as China and other emerging countries battle pollution.

Shell CEO Ben van Beurden said in February that “a shift from coal to natural gas” was needed to battle climate change. “When burnt for power, gas produces half the CO2 coal does,” he told an industry audience.

For Shell, this is the second gas-focused deal in so many years. In early 2014, it bought the liquefied natural gas business of Spain’s Repsol SA for $4.1 billion. The Anglo-Dutch group is not alone betting on gas: Chevron Corp., BP, Total SA and Exxon Mobil Corp. are spending heavily on the fuel.

Gas Focused

Trevor Sikorski, head of natural gas, coal and carbon for consultant Energy Aspects Ltd., said companies were “starting to recognize” a trend in emerging markets in favor of gas and against coal. “This deal potentially kicks off acquisitions of other gas-focused companies the size of BG or maybe smaller,” he said. Among the potential candidates, analysts are looking at Woodside Petroleum Ltd. and Santos Ltd. of Australia, U.S.-based Devon Energy Corp. and Noble Energy Inc., among others.

The bet on gas has been extremely profitable so far for Shell. The company reported underlying earnings of $10.4 billion in 2014 from gas, up 470 percent in five years.

But it has its risk, nonetheless. First, LNG prices have dropped about a quarter from the torrid levels reached after Japan bought large quantities of the fuel following the 2011 nuclear crisis of Fukushima. The price drop will hurt profits.

Coal Prices

At the same time, coal prices have fallen to levels not seen since the global financial crisis, providing cost-sensitive countries, including India, a strong reason to keep buying. BP CEO Bob Dudley last June warned that with coal prices falling, the commodity was “extending its competitive edge in power generation” over gas.

Second, the shift from coal into gas depends in a great part on climate change negotiations of uncertain outcome.

And third, analysts worry that energy companies would struggle to keep construction costs under control, jeopardizing the future of the LNG sector.

If Big Oil is successful in its push toward gas at the expense of coal, those most at risk will likely be global mining groups including Glencore Plc, Anglo American Plc and Rio Tinto Group with billions of dollars in coal deposits in South Africa, Australia and Colombia.

Iran Nuclear Deal – Oil and Iran – What Happens To The Oil Price Now ?

 

 

Oil Falls; Will it Last?

Iran has been under official sanction by the UN Security Council since 2006 after failing to acquiesce to Western demands that the Iranians stop all enrichment activity.

After nearly a decade of strict sanctions against Iran’s oil and finance industries, both sides came to the negotiation table over a year ago.

On one side, the U.S., France, Britain, Germany, China, and Russia worked to curb the proliferatory elements of Iran’s program, while the Iranians fought for their own autonomy in energy production.

Upon news of the deal, the market saw oil drop significantly.

Brent crude fell almost $3 per barrel, while West Texas Intermediate dropped 3.5% to $48 per barrel.

The reason for this reaction is simple…

IranExports

Per the deal, sanctions against Iran’s oil industry would be lifted, which means Iran would be able to increase the export numbers you see above.

In an already flooded global market, news of the possibility of more oil sent prices down again.

While this is a completely plausible reason for oil prices to fall, the market fails to recognize that oil could actually go up because of this deal.

With Iran holding some more clout in the oil market in the Middle East, the nation will have incentive to grow production and exports.

Iran’s natural enemy by proxy — Saudi Arabia — may lose its gumption in an oil price war with the United States, Russia, and other OPEC producers.

Sure, the Saudis can withstand low oil prices until shale wells dwindle further, but with Iran, Russia, and the U.S. continuing production growth, Saudi Arabia may want to cut production, as a longer period of low prices will hurt revenues and cause budgetary problems for the Kingdom.

I realize this may sound counterintuitive, but while prices stand to fall in the short term, the long-term health of the oil market improves with a diversified set of major producers and exporters.

Ways to Benefit from an Iran Deal

By pushing short-term oil prices lower, the Iran deal gives us a great buying opportunity for oil stocks.

By no means am I suggesting you buy Iranian oil companies or speculative plays out of the Middle East. Instead, it would behoove you to find a constructive way to play a coming rise in oil exports and, eventually, prices.

Tanker companies authorized for American imports will be valuable, as will American midstream companies that are involved in the movement of refined oil products like gasoline and plain old crude oil.

The United States, still the biggest oil importer in the world, should now look to lift the export ban to remain competitive with global prices, as Saudi Arabia and Iran will both have a presence in the export market.

And midstream companies in the U.S. can expect to see a vast increase in business as more pipelines, refineries, and storage facilities are permitted and built to boost exports.

In a recent report, I vetted a midstream services company that has improved its business enough to garner an investment from my readers and me.

Its services will be instrumental in the development of midstream and oil logistics throughout the U.S., especially in places like the Permian, where shale oil production is rising despite the bear market.

 

The World Tax Haven / Trust Survey : Chose The Protection / Jurisdiction That Fits Your Need  –    https://taxhavenguru.wordpress.com/

Energy Sector Dealmaking On Pause- As Buyers Eye Bottom

Oil in Storage Rises More Than Expected Again

“You’re not going to lose anything by waiting,”

(Bloomberg) — When Whiting Petroleum Corp. put itself up for sale this month, the oil industry appeared on the brink of a deal surge that would dramatically redraw the energy landscape.

Instead, Whiting decided it was better off selling shares and borrowing more money to surmount a cash shortfall brought on by tumbling crude prices. The lesson? Takeover fever driven by the oil-market crash is yet to really heat up because share prices haven’t fallen as fast or hard as crude.
It may be later this year or early 2016 before buyout candidates resign themselves to a long-term market slump and lower valuations, said David Zusman, chief investment officer at Talara Capital Management LLC.
“Nobody wants to catch a falling knife,” said Chris Pultz, portfolio manager of a merger-arbitrage fund at Kellner Capital in New York. “The last thing anyone wants to do is price a deal now, only to have oil fall to $30 a barrel later on. There’s a lot of skittishness.”
Whiting, a potentially juicy prize as the biggest oil producer in North Dakota’s Bakken shale, isn’t the only one fending off bargain seekers. Tullow Oil Plc, an Africa-focused group seen as a perennial takeover target, earlier this month tapped lenders to restore its finances. In North America, Encana Corp., Noble Energy Inc., RSP Permian Inc. and Carrizo Oil & Gas Inc. have sold new shares, effectively blocking deals.
Lesser Evils
For oil producers squeezed by heavy debt and a collapse in crude prices below $50, issuing new shares and rolling over old loans, when given the choice, remain lesser evils than a corporate fire sale. So far this year, the oil and natural gas sector has seen deals worth nearly $1.9 billion, the lowest quarterly figure in at least five years, according to Bloomberg data. In the first quarter of 2014, energy deal making reached $27.9 billion.
“Every time there’s a market downturn, you always have this chorus of suggested interest in takeovers,” said Vincent Piazza, global energy research coordinator at Bloomberg Intelligence in New York. “In reality, few deals of any consequence occur.”
A disconnect between company valuations and the crude market is adding to buyers’ uncertainty. Since Dec. 15, stock values in an index of 20 U.S. producers have bounced back an average 7 percent, even as oil fell another 15 percent to $47.51 a barrel on Tuesday.
Second Half
The price crash was so swift that many companies may be waiting for the market to stabilize before agreeing to major acquisitions, said Osmar Abib, who leads the global energy practice for Credit Suisse Group AG.
“You’re going to see a much bigger flow of announcements in the second half of the year because by then, people will have adjusted to the new environment,” Abib said Tuesday in an interview.
Buyers and sellers need time to find common ground on valuations, Scott Sheffield, chief executive officer at Pioneer Natural Resources Co., said Tuesday in an interview at the Howard Weil Energy Conference in New Orleans.
“It’s going to take at least mid-summer or late in the year for oil prices to bottom and to start going up again and for people to develop their own views,” Sheffield said.
Much will depend on where oil prices settle. Sheffield said he sees a rebound to $60 a barrel by the end of the year, with prices ranging from $60 to $80 over the next five years. A $60 price over the long term will lead to more consolidation, he said.
Rising Rates
Another possible deal-driver: the availability of capital from loans and equity offerings may dry up, particularly if the U.S. Federal Reserve increases interest rates.
Dealmaking hasn’t completely ground to a halt. Whiting, based in Denver, paid $1.8 billion in stock and assumed $2.2 billion in debt in December to close on the purchase of Bakken rival Kodiak Oil & Gas Corp., a deal announced in July, when crude was still above $100 a barrel.
That same month, Spain’s Repsol SA agreed to pay $8.3 billion in cash and assume $4.66 billion in debt for Canada’s Talisman Energy Inc. The transaction has yet to close.
Companies that own drilling rigs and provide equipment and field services to the producers are most prone to consolidation during bear markets, Piazza said. During the last crude slump in 2009-10, 247 oilfield-services deals with a combined value of $32 billion dwarfed the 51 transactions among oil producers, which amounted to just $6.6 billion, he said.
Blackstone, Carlyle
Money is certainly waiting in the wings for a flurry of acquisitions. The world’s four largest buyout firms, including Blackstone Group LP and Carlyle Group LP, have amassed a $30 billion war chest for deals.
“This is one of the best periods, if not the best, to invest in global energy,” said Marcel van Poecke, head of Carlyle International Energy Partners.
Piazza of Bloomberg Intelligence said the biggest oil companies are more likely to snatch up individual assets and business units of smaller rivals, rather than acquire entire corporations. Exxon Mobil Corp. is among buyers indicating they’re particularly interested in acquiring drilling assets that expand on their existing oilfields.
For those companies with an appetite for wholesale corporate takeovers, the best approach may be to bide their time, said Jack A. Bass tax strategist .
“You’re not going to lose anything by waiting,” Jack A. Bass advises clients. “You’ll probably get it cheaper a few months from now.”

Protect your portfolio profits read more  at http://www.youroffshoremoney.com

Crude Oil Is Crashing

On Wednesday, the price of oil was tumbling again, with West Texas Intermediate prices falling more than 8% to trade back below $49 a barrel.

This action follows a furious rally in oil prices seen over the last few days that sent oil prices in to a technical bull market, rising more than 20% from last Thursday through Tuesday afternoon. WTI prices were as high as $52.50 just hours ago.

The speed and velocity of the recent increase in oil prices, however, has been met with some skepticism, with some calling the move a “short squeeze” or a “dead cat bounce.” In short, there were and are some nonbelievers in the oil rally, and major Wall Street firms have not yet changed their outlooks for lower oil prices in the first half of this year.

And in a research note earlier this week, analysts at Morgan Stanley outlined why any rallies in oil prices in the first half of this year ultimately won’t last.

On Twitter, Dan Greenhaus at BTIG noted that, ” In the last 5 YEARS, oil has been down a greater percentage than today on only TWO other days; the day of the OPEC announcement and May ’11.”

Oil prices are still about 50% below their peaks hit in the summer.

The latest leg lower in oil prices comes after the latest report from the EIA showed that crude oil inventories rose by another 6 million barrels last week, more than was expected by economists and analysts.

Here’s Wednesday’s drop in WTI futures.

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fut_chart (35)

FinViz

Looking at prices over the last year, the drop is still dramatic, though the recent rally makes a dent, however small.

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fut_chart (31)

FinViz

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 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

Gas Price Drop Pressures Aging Coal and Nuclear Power

A 37 percent drop in natural gas prices since June has lowered what U.S. nuclear and coal plants can charge for electricity, potentially speeding the demise of generators teetering on the brink of closing.

While power plants that burn gas get a break on the cost side, allowing them to charge less for their product, coal and nuclear operators are seeing thinning profits. The gas squeeze comes as companies are upgrading plants to meet new environmental rules and demand weakens as a result of competition from solar and wind energy.

FirstEnergy Corp. (FE), NRG Energy Inc. (NRG), and the generation unit that will be spun off fromPPL Corp. (PPL), are among companies most at risk from depressed energy prices, according to a Dec. 31 note published by UBS AG energy analysts. Exelon Corp. (EXC), the biggest U.S. owner of nuclear reactors, said it needs to almost double power prices to keep a New York plant running.

“Natural gas prices have been falling and that’s generally not a good thing for coal and nuclear power producers who sell in competitive wholesale markets,” said Paul Patterson, a New York-based analyst for Glenrock Associates LLC.

Public Service Enterprise Group Inc. (PEG) could also face reduced revenues, UBS said. Plant closings threaten the reliability of power supplies in some regions. Mild weather has disappointed hopes for a surge in summer cooling and winter heating demand for gas.

Changing Fuels

“The latest slide in natural gas prices raises the specter of big coal-to-gas switching in 2015,” said Julien Dumoulin-Smith, a New York-based analyst for UBS.

Expectations for a repeat of last year’s polar vortex, when frigid temperatures spurred record demand and soaring prices for gas and electricity, are dwindling due to milder-than-expected winter weather.

“As you get further along in the winter, the risk of extreme weather begins to go down,” Patterson said.

Gas settled yesterday in New York at $2.938 per million British thermal units after hitting a two-year low this week. Gas last month hit historic lows in some parts of the Mid-Atlantic.

Power prices for delivery during the peak hours of the day for winter has fallen 21 percent to $54 a megawatt-hour since mid-December in PJM Interconnection LLC, the nation’s largest U.S. electricity grid. PJM serves more than 61 million people from Washington, D.C. to Chicago.

Stocks Suffer

Shares of some of the nation’s largest power generators have also suffered. NRG, the largest U.S. independent generation owner, has fallen 22 percent since hitting a recent high on Nov. 7. Dynegy Inc., another large independent operator, is down 15 percent over the same period.

Owners of utilities, which are allowed to charge rates that provide a profit, are exiting the competitive power business that leaves them vulnerable to market swings. American Electric Power Co. (AEP), the biggest U.S. coal burner, said yesterday it had hired Goldman Sachs Group Inc. to advise on a potential sale of seven power plants as the utility owner struggles to compete amid falling prices.

Utilities including FirstEnergy, which owns about 10,000 megawatts of coal capacity, and Exelon are lobbying regulators and grid operators to boost what they can charge customers at their financially pinched units. They say closing the plants will risk blackouts and raise customer bills even higher.

After recording losses that exceeded $100 million from 2011 to 2013, Exelon said it needs to charge about 83 percent more than wholesale prices to earn a profit at its Rochester-area Ginna plant. Last month, Entergy Corp. shut Vermont’s only operating reactor citing low power prices.

EPA Rule

The U.S. Environmental Protection Agency said today it will delay the release of carbon-emission rules for all power plants until the middle of the summer. Industry groups and Republican lawmakers said the proposed rules would effectively ban new coal facilities.

The companies say gas shortages last winter showed the value of coal and nuclear plants that were needed to keep the lights on. PJM, the grid operator, is asking federal regulators to allow for increasing payments to plant owners to ensure at least 2,000 megawatts of aging generation is kept in operation through next winter, according to a filing with the Federal Energy Regulatory Commission.

That won’t provide any relief in the short term as milder weather and lower gas prices could reduce FirstEnergy’s earnings per share by 20 cents in 2015, according to UBS. The company is among “the most exposed” to declining use of coal-fired power units, UBS said.

Hedging Help

NRG could see a $30 million reduction in earnings before interest, taxes, depreciation and amortization in 2015, UBS said.

To protect themselves from volatile price swings, power companies are using hedging contracts to lock in future prices for power and gas.

FirstEnergy is taking “aggressive actions” to reduce its exposure to the market and has increased its hedged contracts since November, said Tricia Ingraham a spokeswoman for FirstEnergy. Exelon reduces its exposure to power price movements with a three-year forward hedging strategy, spokesman Paul Adams said. NRG, PPL and Public Service declined to comment on the UBS report. Dynegy didn’t immediately respond to a request for comment.

This year, coal-fired power production in PJM could be close to the lowest level since 2008, according to UBS.

How $50 Oil Changes Almost Everything

 Investors are in denial but bankers see the problem:

  • Lenders are already doling out tough love to companies,  with some lenders wanting to see producer plans for handling further price drops while others are urging asset sales.
  • The 10 highest ratios of net debt/EBITDA from the last 12 months, according to S&P Capital IQ, belong to KWK, AR, WRES, GDP, REN, HK,XCO, REXX, MPO, EPE.


Photographer: Andrew Burton/Getty Images
U.S. shale oil production.

The plummeting price of oil means no more trout ice cream.

Coromoto, a parlor in Merida, Venezuela, famous for its 900 flavors,closed during its busiest season in November because of a milk shortage caused by the country’s 64 percent inflation rate, the world’s fastest.

That’s the plight of an oil-producing nation. At the same time, consuming countries like the U.S. are taking advantage. Trucks, which burn more gasoline, outsold cars in December by the most since 2005, according to data from Ward’s Automotive Group.

The biggest collapse in energy prices since the 2008 global recession is shifting wealth and power from autocratic petro-states to industrialized consumers, which could make the world safer, according to a Berenberg Bank AG report. Surging U.S. shale supply, weakening Asian and European demand and a stronger dollar are pushing oil past threshold after threshold to a five-and-half-year low, with a dip below $40 a barrel “not out of the question,” said Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which oversees about $120 billion.

Oil prices are the big story for 2015,” said Kenneth Rogoff, a Harvard University economics professor. “They are a once-in-a-generation shock and will have huge reverberations.”


Photographer: Daniel Acker/Bloomberg

Travis Simmons, a driver for Yo-Mac Transport, stores a filling hose after delivering..

Weak Prices

Brent crude, the international benchmark, fell as low as $49.66 a barrel today, dropping below $50 for first time since 2009. Prices dropped 48 percent in 2014 after three years of the highest average prices in history. West Texas Intermediate, the U.S. benchmark, plunged to as low as $46.83 today, about a 56 percent decline from its June high.

“We see prices remaining weak for the whole of the first half” of 2015, said Gareth Lewis-Davies, an analyst at BNP Paribas in London.

If the price falls past $39 a barrel, we could see it go as low as $30 a barrel, said Walter Zimmerman, chief technical strategist for United-ICAP in Jersey City, New Jersey, who projected the 2014 drop.

“Where prices bottom will be based on an emotional decision,” Zimmerman said. “It won’t be based on the supply-demand fundamentals, so it’s guaranteed to be overdone to the downside.”

The biggest winner would be the Philippines, whose economic growth would accelerate to 7.6 percent on average over the next two years if oil fell to $40, while Russia would contract 2.5 percent over the same period, according to an Oxford Economics Ltd.’s December analysis of 45 national economies.


Inflation Outlook

Among advanced economies, Hong Kong is the biggest winner, while Saudi Arabia, Russia and the United Arab Emirates fare the worst, according to Oxford Economics.

One concern of central bankers is the effect of falling oil prices on inflation. If crude remains below $60 per barrel this quarter, global inflation will reach levels not seen since the worldwide recession ended in 2009, according to JP Morgan Securities LLC economists led by Bruce Kasman in New York.

Kasman and his team are already predicting global inflation to reach 1.5 percent in the first half of this year, while sustained weakness in oil suggest a decline to 1 percent, they said.

Negative Inflation

The euro area would probably witness negative inflation, while rates in the U.S., U.K. and Japan also would weaken to about 0.5 percent. For what it calls price stability, the Federal Reserve’s inflationtarget is 2 percent. Emerging-market inflation would also fade although lower currencies and policies aimed at slowing the effects on retail prices may limit the fall.

As for growth, a long-lasting price of $60 would add 0.5 percentage point to global gross domestic product, they estimate.

Even as cheaper fuel stimulates the global economy, it could aggravate political tension by squeezing government revenue and social benefits, Citigroup Inc. analysts said in a Jan. 5 report.

Either way, previously unthinkable events now look more likely. Byron Wien, a Blackstone Group LP vice chairman, predicting that Russian President Vladimir Putin will resign in 2015 and Iran will agree to stop its nuclear program.

Iran Losses

Iran is already missing tens of billions of dollars in oil revenue due to Western sanctions and years of economic mismanagement under former President Mahmoud Ahmadinejad.

President Hassan Rouhani, elected on a pledge of prosperity to be achieved by ending Iran’s global isolation, is facing a falling stock market and weakening currency. Iranian officials are warning of spending and investment cuts in next year’s budget, which will be based on $72-a-barrel crude. Even that forecast is proving too optimistic.

“Iran will stumble along with less growth and development,” said Djavad Salehi-Isfahani, a professor of economics at Virginia Tech in Blacksburg, Virginia, who specializes in Iran’s economy. “The oil price fall is not reason enough for Iran to compromise.”

The Russian economy may shrink 4.7 percent this year if oil averages $60 a barrel under a “stress scenario,” the central bank said in December. The plunge in crude prices prompted a selloff in the ruble with the Russian currency falling to a record low against the dollar last month and tumbling 46 percent last year, its worst performance since 1998, when Russia defaulted on local debt.

Russian Production

“The risk is that, as a badly-wounded and cornered bear, Russia may turn more aggressive in its increasing desperation, threatening global peace and the European economic outlook,” said Holger Schmieding, Berenberg Bank’s London-based chief economist. However, “the massive blow to Russia’s economic capabilities should –- over time –- make it less likely that Russia will wage another war.”

Russian oil production rose to a post-Soviet record last month, showing how pumping of the nation’s biggest source of revenue has so far been unaffected by U.S. and European sanctions or a price collapse. The nation increased output to 10.667 million barrels a day, according to preliminary data from the Energy Ministry on Jan. 2. That compares with global consumption of 93.3 million barrels a day, based on the International Energy Agency’s estimate for 2015.

Venezuela, which relies on oil for 95 percent of its export revenue, risks insolvency, Jefferies LLC said in a Jan. 6 note. The cost of insuring the country’s five-year debt has tripled since July, Citigroup said. President Nicolas Maduro is visiting China to discuss financing and expects to travel to other OPEC nations to work out a pricing strategy.

Confounding Investors

The U.S., still a net oil importer, would accelerate economic growth to 3.8 percent in the next two years with oil at $40 a barrel, compared with 3 percent at $84, the Oxford Economics study found. The boost to consumers could be offset by oil companies’ scaling back investments, according to Kate Moore, chief investment strategist at JPMorgan Private Bank. Producers are cutting spending by 20 percent to 40 percent, according to Fadel Gheit, an analyst at Oppenheimer & Co.

The mixed picture is confounding investors. The Standard & Poor’s 500 Index of U.S. equities fell 1.9 percent on Jan. 5, the biggest decline since October, as oil brought down energy shares and stoked concerns that global growth is slowing.

While cheaper oil helps consumers, business spending has a bigger effect on equities, and oil companies are set to cut investments. Oil at $50 a barrel could trim $6 a share off earnings in theS&P 500 Index this year, according to Savita Subramanian and Dan Suzuki, New York-based strategists at Bank of America Corp.

Bets on high energy prices have mashed share prices of companies such as Ford Motor Co., Tesla Motors Inc. and Boeing Co.

Redistributes Income

Fifth Third Bancorp (FITB), one of the regional lenders that tried to chase the fracking boom, is down 12 percent since June 20.

Caterpillar Inc., Joy Global Inc., Allegheny Technologies Inc., Dover Corp., Jacobs Engineering Group and Quanta Services Inc. are all down more than 20 percent since oil peaked at almost $108.

Despite those losses, Morgan Stanley last month concluded cheaper fuel is a net benefit for the U.S. economy.

“Any massive redistribution of income can raise political tensions,” Schmieding of Berenberg Bank said in the Jan. 6 report. “But, net/net, strengthening the U.S., Europe, Japan, China and India, while weakening Russia, Iran, Saudi Arabia and Venezuela, is likely to make the world a safer place in the end.”

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