energy (11)

Admin

Business Loan Delinquencies At 2008 Levels

104396071.jpg?width=450

Energy defaults have been heavy on my mind as their Bankruptcies are expected to increase greatly in the second half of 2016.  I didn't even touch on farms and other exploding debt. Clearly I'm not alone in this concern.  It's not housing this time; it's much worse.  If rates rise, what will happen? Emphasis in bold mine.  Read on.

This could not have come at a more perfect time, with the Fed once again flip-flopping about raising rates. After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the media today and yesterday to make sure everyone got that point, pending further flip-flopping.

Drowned out by this hullabaloo, the Board of Governors of the Federal Reserve released its delinquency and charge-off data for all commercial banks in the first quarter – very sobering data.

So here a few nuggets.

Consumer loans and credit card loans h

Read More, Comment and Share......

Admin

Bankruptcy Mayhem In The Oil Patch

oil-patch-bankruptcies-chart.png?width=606

And the second half of the year is touted to be even worse. What stress is this placing on banks which hold their debt???. Oye!

Most investors are aware that there is significant carnage in the oil patch. Low energy prices caught overleveraged companies off guard, and it’s forced many of these companies to seek protection from their creditors through bankruptcy.

However, the pace of new bankruptcies is accelerating fast, and now bigger companies are being affected. This week’s chart shows that the 11 new bankruptcies in April 2016 carry a substantial debt load of nearly $15 billion – most of which is unsecured.

A quick look at the data, which we pulled from Haynes and Boone, LLP, tells the tale:

  New Bankruptcies Total Debt Avg. Debt Per Company
January 2016 3 $32,000,000 $10,666,667
February 2016 6 $280,000,000 $46,666,667
March 2016 7 $1,840,000,000 $262,857,143
April 2016 11 $14,920,000,000 $1,356,363,636

In the first two months of 2016, there were nine bankruptcie

Read More, Comment and Share......

Admin

Crude Oil Bottom Truly Not A Bottom?

When crude oil was stopped by it's 200 month simple moving average in June, I wrote here that this posed a problem for the energy sector.  We analyzed rig counts and even questioned here if the Saudis had it wrong.  I had already posed here that there would be no recovery in 2015 and we should be fearful of the nasty word "deflation" here and it doesn't appear I was wrong.  Who's feeling the most pain from these prices?  We took a look here rtx1dv5y.jpg?width=300 as these countries could pose good buying opportunities down the road.  What's being said now on crude oil's recent drop in price is even more interesting.....at least until there's a disruption in supply or the Saudi's change their mind.

Back in January, Morgan Stanley drew similarities between the current oil crash and the one in 1986— when oil prices fell 45%.  Though they have been making these parallels for six months, analysts are now saying that the current crash could fare even worse.  "On current trajectory, this downturn could become wor

Read More, Comment and Share......

Admin

Received this SoberLook email from member Ryan and had to chuckle.  Did oil bulls (who are always drooling at the mouth) truly feel OPEC would cut production at some point to satisfy their desire for higher pricing?  Come on.  How much can the U.S.consumer handle with new jobs created at the low end of the scale?  What would happen with $5 gas gasoline?  Carpools would become all the rage here in my locale. At a time when the U.S. consumer needs money to spend, the impact of higher oil would be the last thing we need.

With low oil, the weak will fail and M&A will continue in the crowded space.  Let new technology force cost savings (as we're seeing it every where else) and bring O&G production up to 21st century standards.  I've written about it several times and I think the Saudis knew it was time.

In 2014 the Saudis could no longer accept the loss of crude oil market share as the North American production levels shot up sharply over a three-year period.

rotary-drilling-rig-horizontal-directional-crawler-22663-4420807.jpg
US%2Bvs%2Bsaudi%2Bproduction.png
Source: Yardeni Researc

Read More, Comment and Share......

Admin

Crude Oils Overhead Resistance

1291194?profile=RESIZE_1024x1024Had to share this monthly chart of crude oil because I am one that has viewed it bearishly since it broke it's 200 month sma; prior support during the financial crisis. (click chart to enlarge)

Blame it on fracking.  Blame it on OPEC.  Blame it in fuel efficient cars.  Blame it on whatever you wish but just because it was bullish for years, does not mean it will always be the same.

Natural gas has been embraced by the U.S. and continues to grow.  Coal is all but dead; being dropped by one country after the next.  There obviously is no U.S. oil shortage (thank you Bakkens) and our dependency on overseas oil becomes less with each passing day.

Yes they have shut down rigs to cut back on the oversupply but (imo) barring any disruption in production, I see this years move in crude oil as nothing more than back-n-fill.  The 200 month is an interesting overhead obstacle.  And that strong U.S. Dollar?  No, that not going to help it either (again barring a disruption).

It's not a bear mark

Read More, Comment and Share......

Admin

Rig Counts Continue Their Plummet

1291166?profile=originalAs the latest Baker Hughes rig count continues to plummet with the collapse in oil pricing some are still trying to catch a bottom.

Total Rigs down to 1633
Down -43 or -2.6% compared to last week
Down -144 or -8.1% year-over-year

Gas seems to be shuttering more than oil and inland waters more than land or offshore.

With many pundits forecasting crude to remain low for a few years (barring disruption in supply) this will be interesting to monitor going forward.1291189?profile=RESIZE_320x320

With Schlumberger (SLB) to layoff 9000 and Baker Hughes (BHI) to layoff another 7000, this is only the tip of the iceberg.

Data courtesy of Baker Hughes

Click charts to enlarge

Read More, Comment and Share......

Admin

Will Oil's Fall Damage The Rally?

1291003?profile=RESIZE_320x320I have to throw a flag in from the sidelines calling foul on the learned men on CNBCs Fast Money table Friday (video below) as traders remain bullish on the big screen.  In fact, they do not believe crude's fall will impact our rally.  Really?  Josh Brown stated there was 1291063?profile=RESIZE_320x320no correlation b/w the price of oil and the S&P500 and did their level best to downplay the selling in crude oil.  Alright, overlay a comparison chart (left) and you won't see black gold having an enormous impact on the market with a few exceptions BUT, the energy complex represents an average of 6.9% of U.S. GDP. 

If it's a bear market, this changes the scenery.  Come on Josh; there's much more that you're not saying and we know it.  Stay with me here.  So typically if we saw a ten percent correction in crude, another sector in the S&P would merely step up to the plate and help lead such as tech or financials.

This time, however, we see regional banks such a Cullen-Frost (who lend to oil names down here in Texas fo

Read More, Comment and Share......

Admin

Energy Contagion - The Big Unknown

20141208_energy2_0.jpg?width=400Indeed, I've read much concern over this area as oil collapsed so it does merit a warning.  From ZeroHedge:

The S&P 500 Energy sector stocks are down over 12% year-to-date, tumbling over 3% today to fresh 20-month lows. The spread (or risk) of high-yield energy credits surged again today, breaking above 850bps for the first time... The overall high-yield credit market is being dragged wider by this contagion as hedgers try to contain the collapse that is possible. For now, the S&P 500 remains entirely ignorant of the fact that over a third of its CapEx was expected to come from this crushed sector...

According to DB

US private investment spending is usually ~15% of US GDP or $2.8trn now. This investment consists of $1.6trn spent annually on equipment and software, $700bn on non-residential construction and a bit over $500bn on residential. Equipment and software is 35% technology and communications, 25-30% is industrial equipment for energy, utilities and agriculture, 15% is transpor

Read More, Comment and Share......

Admin

Breakeven Price On Oil

It's been bandied about a great deal lately so I thought I would post these graphics from CNBC to make things simpler to understand.  Clearly some drilling projects require higher prices to remain profitable while others, maybe not so much.  To explain a little on the price spreads, it all comes down to "when" each project was established where older ones may be require updating technology speaking and higher maintenance costs where newer ones are utilizing higher-tech equipment and can operate at a lower price on oil to break even.   Cost is also affected by how deep they have to drill to reach oil and how many barrels per day it puts out versus how much you invested in the well.  Clearly Saudi Arabia has the advantage but as they do, they drain their cash reserves (as does everyone else).

1291090?profile=RESIZE_1024x10241291127?profile=RESIZE_1024x1024

Read More, Comment and Share......

Admin

Energy On Sale But Few Are Buying

1291010?profile=RESIZE_480x480After Friday's spectacular 10% sell off in black gold, I went back to my earlier post on shorting crude oil and felt pretty darn good as I made myself a turkey sandwich for lunch.  Some would say it was a capitulation bottom but I just didn't see the volume which would come with such a move.   Yes there was heavy selling but it was funds getting OUT of energy names and forced selling - not buying a dip.  Sure, it can snap back and a near term bottom is most likely in but I will not be trading that.  The top is in in my opinion.  I will view any move higher (without an event risk occurring) as an opportunity to re-short at a higher level.

I still believe the entire sector is extremely over crowded with over 100 oil companies just in the U.S. alone.  While deflation in any sector is difficult to swallow, I may not be too far from the truth.  According to the WSJ:

Energy stocks are on sale following a five-month plunge in crude oil, but so far few investors are heeding the temptation

Read More, Comment and Share......

Admin

Daily Reads

  • The argument to lift the ban on crude oil exports Bloomberg
  • How big oil (and Senators) are positioning at the Senate Energy and Natural Resources Committee Bloomberg
  • A 3pm gold "fix"?  This study says it began in 2004. Bloomberg
  • That's what I've been saying.  Fed may have to let inflation run hot to meet goals. Reuters
  • Markets spooked as confirmation came of Russian troops taking over two airports in the Crimean area of the Ukraine.  UN to hold closed-door session this weekend to discuss situation. Reuters

Read More, Comment and Share......

We welcome you to post a blog entry, oped or share your daily reading with us as long as it is relevant to the topic of investing and not an attempt to sell a product, proprietary strategy, platform or other service. Please provide links to any research data and if re-posting other articles, give credit where credit is due providing a back link to the original site.

300 words minimum per post. You may also sort by category or search by topic. Don't forget to comment and please "share" via Facebook, Twitter and Google+. If you have any questions, please contact us.

FOLLOW STOCKBUZ

__________________

This is a member-supported site. Please donate when you can to help pay the rent. Thank you!

Stay Informed. Sign up for the FREE StockBuz eNewsletter

________________

Investing involves substantial risk. All content is subject to StockBuz disclaimer.

Create Income With Option Spreads

All content on StockBuz.net is subject to disclaimer and Terms of Service