This page has been archived and commenting is disabled.
For The World's Largest Rig Operator, The "Recovery" Is Now Worse Than The Post-Lehman Crash
The last time the world's largest oil and gas drill operator, Seadrill, halted its dividend payment was in 2009, shortly after Lehman had filed and the world was engulfed in a massive depression. Retrospectively, this made sense: the company was struggling not only with depressionary oil prices, but with a legacy epic debt load as can be seen on the chart below.
So the fact that the stock of Seadrill collapsed by 20% today following a shocking overnight announcement that it had once again halted its dividend...
... despite what is a far lower debt load than last time, indicates that when it comes to energy companies, the current global economic "recovery" - if one believes the rigged US stock market - is actually worse than the Lehman collapse.
Some more details from FT, on what is said to be a Seadrill "perfect storm" involving the declining oil price and Russian sanctions, and which is why the company just went into cash clampdown mode:
Seadrill’s shares fell as much as 18 per cent on Wednesday morning following the announcement of its third-quarter results, in which the Oslo-listed company reported a 40 per cent fall in net income. The shares recovered somewhat by early afternoon, and were down 10 per cent.
The sharp fall in the oil price since June, plus an oversupply of drilling rigs, has coincided with uncertainty over the future of an Arctic exploration deal involving Seadrill subsidiary North Atlantic Drilling and Rosneft, the Russian state owned energy company.
“It has almost been a perfect storm for Seadrill this quarter,” said Rune Magnus Lundetrae, chief financial officer, “in terms of downward pressure on the oil price, the demand-supply balance for rigs, increasing cost focus from the oil companies and then geopolitical uncertainty surrounding the Rosneft deal, the biggest offshore contact we have ever signed.”
Seadrill is controlled by billionaire John Fredriksen. Both Seadrill and NADL – which specialises in the Arctic and harsh offshore drilling environments – are listed in New York.
From Perfect storm to no more dividend:
By suspending the dividend, the company was “acting responsibly, before we are forced to”, Mr Lundetrae said. Seadrill instead intends to strengthen its balance sheet by cutting debt, putting itself in a position to consider possible acquisitions.
....
Mr Fredriksen said the decision to suspend the dividend had been a difficult one for the board. “However, taking into consideration the significant deterioration in the broader offshore drilling and financing markets over the past quarter, the board believes this is the right course of action for the company,” he added.
And while we know that Obama's Russian "costs" pushed Europe into a triple-dip recession (sorry, but those benefits from hookers and blow will soon run out), it appears now Obama has taken aim at shareholders of publicly-traded companies:
Mr Lundetrae said the uncertainty around Rosneft – which has been affected by western sanctions imposed on Russia over the Ukraine crisis – had added to negative sentiment in the energy industry.
US sanctions on Russia “look very challenging to operate within . . . given all the US equipment on our rigs”. But Mr Lundetrae said Seadrill is still working with Rosneft, having just extended a walkaway clause to May next year.cd
But the worst news is for bondholders of energy Junk here in the US: because at least according to SDRL that default wave among high yield energy companies that DB warned about is about to strike:
Mr Lundetrae said Seadrill was not convinced the market would revive in the next 18 to 24 months, with next year likely to be worse than this year. Meaningful recovery was more likely in 2017, he added.
As they just warned:
- *SEADRILL SAYS SOME FINANCING MARKETS HAVE BECOME UNATTRACTIVE
Which is clear as 5Y bonds trade well above 9.5% yields...
Perhaps this is an opportune time to reread the warnings from 2 weeks ago about what may and likely will happen to the US junk bond market unless OPEC pulls a miracle out of a hat tomorrow: If WTI Drops To $60, It Will "Trigger A Broader HY Market Default Cycle"
But fear not: those same bondholders who are about to be wiped out will soon be allowed to sell their worthless bonds to the ECB's latest monetization contraption and use the proceeds to buy stawks at recorder all time highs, because just like CYNK, unless the S&P 500 keeps exponentially rising on ever lower volumes, it has only one other, far less pleasant, option.
»
- 13044 reads
- Printer-friendly version
- Send to friend
- advertisements -
DEAD PLANTS AND ANIMALS BITCHEZ!
Dateline: March 2015- World economy collpases due to low energy prices.
Yep, I expect to see a lot of this in 2015, at least from the corporations that don't go directly to bankruptcy.
Herc, Diamond and a whole bunch of other guys who leveraged up to chase Chinese and Brazil deep exploration will need to credit restructure. Just like King Coal, (and WSJ already covered this) its not IF but When. Unlike onshore rigs, a giant aircraft carrier sized MSP has zero use but for metal scrap, or rotting in a dockyard. Its not even worth the cost to nationalize them.
The volume of debt, and the fact this debt was rated BBB to A only a few months ago will be shocking to many who assumed this term would roll over in 2015/16. without problems.
However, if you were a NOC on the other side of this trade, and a bit bitter your currency purchasing power was being devalued, bending the offshore's over for 40% day rate discounts would not seem so bad.
We are going to see a shakeout in the drillers... Too much drilling capacity and too many new rigs being built on spec, coupled with over-capacity of crude in a shrinking market... Some of these company's stock prices are at or below the scrap price of their fleets, then add the leverage, plus reduced future contracts spells disaster...
Ohh eye H! Oh my
Http://www.hedge.bz
http://investmentwatchblog.com/incredible-60-of-all-us-households-get-mo...
Now add in the 20+% work for the goobermint and pay a tax rate of what, 25% to 35% meaning the rest of their pay comes from us, that leaves the "us" being the residual 20% who work for a living to support the rest of the fucking leaches.
Well somebody has to tend the cattle....
finally the truth
Russia and U.S. partnerships have Nigeria covered
http://newworldorderg20.wordpress.com/2014/11/21/u-s-chevron-enter-joint-project-with-russias-lukoil-in-nigeria/
http://newworldorderg20.wordpress.com/2014/11/20/russias-gazprom-already-part-owner-of-so-called-alternative-energy-sources-for-e-u-energy/
http://newworldorderg20.wordpress.com/2014/11/05/are-u-s-and-russia-overstating-amount-of-oil-in-arctic-as-shell-produced-no-oil-in-eight-years/
http://newworldorderg20.wordpress.com/2014/11/14/u-s-koch-membrane-selected-as-russian-oil-refinery-replacement-supplier/
http://newworldorderg20.wordpress.com/2014/11/07/jpmorgans-deal-with-gazprom-cements-thier-relationship-of-course/
So bullish it hurts!
Abraham Lincoln
But...you can fool enough of the people enough of the time to get elected president and in effect, like Chavez in Venezuela, pull off a coup.
JUST an Illusion
Searching for a destiny that's mine
There's another place another time
Touching many hearts along the way, yeah
Hoping that I'll never have to say
It's just an illusion, illusion, illusion
Follow your emotions anywhere
Is it really magic in the air?
Never let your feelings get you down
Open up your eyes and look around
It's just an illusion, illusion, illusion
Could it be that it's just an illusion
Putting me back in all this confusion?
Could it be that it's just an illusion now?
Could it be that it's just an illusion
Putting me back in all this confusion?
Could it be that it's just an illusion now?
Could it be a picture in my mind?
Never sure exactly what I'll find
Only in my dreams I turn you on
Here for just a moment then you're gone
It's just an illusion, illusion, illusion
Could it be that it's just an illusion
Putting me back in all this confusion?
Could it be that it's just an illusion now?
Could it be that it's just an illusion
Putting me back in all this confusion?
Could it be that it's just an illusion now?
You can fool some people sometimes, but you can't fool all the people all the time.
Bob Marley
core capex orders down 3 of last 4 months
july ... -0.1%
august ... +0.4%
september ... -1.3%
october ... -1.3%
Not to worry, fracking will save the US economy. Besides, the Nobel Prize Winner is on the job. And the Fed says there is no inflation. The American Dream is alive and well in the land of the free if only you could believe your liars.
Whatever downward effect this might have on GDP will be easily covered by moving move Personal Savings into the consumption bucket. Annnnnnnnd... fixed.
when the tide recedes, you see who's swimming naked
No in this case you can see who got his\her swimsuit on
(Almost the whole world is swimming naked)
The real question is: How will those bondholders be bailed?
a swimming pool full of oil?
Yeah, I think they're fucked - price will continue trending down, and the banks behind buying the bonds will eventually gobble up shares, make changes, and make sure the company has nothing to do with Russia
The backdrop is the clear intent by TPTB to ethnically cleanse and 'pacify' SE Ukraine, rather than engage in any kind of reasonable diplomacy - at all- not that the MSM seems to notice how the Nobel Prace Prize winner has not once floated the idea of federation talks... it's all about the IMF/ZATO rape... and they want to draw Putin in as the pressure from the nationalists is quite strong.
http://www.atlanticcouncil.org/blogs/new-atlanticist/for-putin-ukraines-...
I'm yet to see any good evidence of Russian regulars, but it's easy to believe Russia has provided the citizens in the East of Ukraine some weapons to defend themselves. 5 minutes on live leak or youtube should make clear that Kiev's Zio-Nazi junta has no interest in doing anything but killing and smashing as much as possible.
The media silence on Ukraine is stunning. I mean, basically all at once the MSM dropped it - just as all at once they dropped the story of the airliner, which I believe most people now understand was shot down by Kiev in an attempt to blame Putin....
I don't think Hagel's resignation had much to do with Syria, as alleged - they are very happy to let that fighting rage for some time. I think it had more to do with Russia and a spring offensive. I may, of course, be wrong...
Russians Increasingly Converting Savings to Euros and Dollars to Escape Weak RubleRussians increased their foreign currency bank deposits in October while the size of their ruble deposits fell, Central Bank data showed on Tuesday, pointing to rising concern over a steep slide in the ruble.
Russians had 3.856 trillion rubles' ($82.27 billion) worth of foreign-currency deposits as of Nov. 1, compared to 3.421 trillion rubles on Oct. 1, an increase of more than 12 percent.
Their ruble deposits fell by 0.3 percent to 13.829 trillion rubles over the same period, according to the Central Bank.
The ruble lost more than 8 percent of its value against the dollar in October, prompting many Russians to buy dollars at currency-exchange booths and rent safety deposit boxes, fearing restrictions on bank withdrawals.
Analysts said the Russian currency's devaluation explained most of the increase in the ruble value of foreign-currency deposits in October but that the data also showed Russians were actively favoring deposits in dollars and euros.
"Deposits in foreign currency rose by approximately 3.8 percent due to [people] adding funds. The rest of the rise was due to revaluation [of the ruble,]" said Yury Tulinov, head of research for capital markets and investment banking at Rosbank.
http://www.themoscowtimes.com/business/article/russians-increasingly-con...
The herd always charges the wrong way.
Putin is converting ALL Russia's dollar earnings to gold .Every dollar.Not diversfying at all.
Who do you think is better informed ?
I hope you're right. I want to buy some of that cheap gold Vlad has to liquidate when he's bent over a barrel.
Zero Hedgers, which Russian city are y'all meeting in to celebrate your new citizenship?
I'm not in favor of any side, or a blinkered dumbfuck 'patriot' who can't tell his arse from his elbow.
Whats happening is not new.Dog wasn't born in Boise, and doesn't play baseball, whatever you might
believe.
You can't fix willfully stupid.
All-Out War in Ukraine: NATO’s ‘Final Offensive’
Better go local coin shop to buy
Russia is buying, not sell.
You are full BS
The herd always charges the right way.. The way the billionaires TELL THEM TO CHARGE. Do you <notice> all the billionaires are <not.in.the.stock.market.right.now>
HELLO.
But do you think I could get a single co-worker to listen and close out their positions FUK NO!!
I have been saying this for months as soon as the oil price started falling it was to squeeze oil prices and hurt Russian oil revenue. People looked at me like I was on acid..
And it was like exactly what happened.
Lookit.. Here is what is going to happen in the spring of 2015, I suspect according to Guccifer's Manifesto and other research that a dirty nuke is going to be detonated in Chicago. It will be contrived to make it look like Iran did it and the 'terrorists' slipped accross the border from Canada (Can you spell ANNEX).
However the bank accounts will be frozen it will be called 'the Obama freeze.'
Ok got that. GTFO of the stock market.
Gold will shoot up in value 250% in line with an asset collapse. Oil will goto $180 / barrel because we will be cut off from Saudi Arabian oil.
You ARE on acid
The world's largest Rig/Rogue operator has got to be Goldman Sachs. Those fuckers bring down whole economies.
...while using the IMF as their condom.
Would some of you Zero Hedgers mind supplementing Vlad's shrinking currency fund account with a small donation? Oil is falling again and so is the ruble, so he could use any assistance you can provide.
Vlad will truly appreciate it, and he might even expedite your citizenship application!
Yes AP if you measure hardship in weeks and months then yes. However with little debt and a century of energy resources and new friends coming on board i don't think Mr Putin will lose much sleep compared to your Bozzo & Loons in the USSA.
Looks like a long term buy opportunity to me.
When you think Fracking Drillers, I want you to remember this little line " a legacy epic debt load", and then add " junk bonds ".
The miracle of fracking may or may not be a true miracle. Only the long term well life data will confirm or refute the miracle story. But it looks like a miracle at this point in the game, ONLY because we have yet to deal with their expanding debt burden, up front costs from paying for a lease, to drilling with all the expensive inputs needed to maintain a drill rig. If well life can't out last by a long shot the time it takes to pay down the debt taken on up front, then the whole shit works will go bankrupt. Since fracking on a grand scale is very new, we are at the point where debt is not yet really being paid down and new wells, at peak production, are coming on line daily. Cash flow, minus long term debts, looks good. My gut tells me, in 10 years the word "Fracking" will have no connection at all to the world "miracle".
That is just one man's guess. Other's, of course, still believe in the miracle. My life has taught me, "Miracles are 99% of the time just a short term horizon type of thing, extend out time a bit, and the miracle evaporates." So don't sell me on "fracking is a miracle" based only on the situation today, we both know we are at peak cash flow pretty much now, easy oil is fast being pumped and the harder wells are what will be fracked next. And NO long term legacy costs are yet built in to the overall picture. It's like picking gold out of the rivers in California, looked like a fucking miracle, a few years later miners were digging pits into hillsides and being killed like flies as they desperately sought to keep the miracle on track. Such in fracking, I think.
AWLCF down also..
Polishing the brass on the Titanic is not a strategy to keep her from sinking.
BULLISH!!!
</s>
I've never liked these drilling companies as safe investments, so I've never even glanced at Seadrill.
When Exxon and Chevron drop their dividends, let me know.
Good Night Irene
Lets see the bots try pushing this bitch back up.
If one were to look at charts of other players in the shale fields, such as ERF, PGH, and PWE, the share prices are lower than when crude was at $35.
Something is clearly very wrong.
Not paying dividends means they have more cash on the sidelines. Bullish.