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Energy Companies Face "Come-To-Jesus" Point As Bankruptcies Loom
Last week, amid a renewed bout of crude carnage, Morgan Stanley made a rather disconcerting call on oil.
"On current trajectory, this downturn could become worse than 1986: An additional +1.5 mb/d [of OPEC supply] is roughly one year of oil demand growth. If sustained, this could delay the rebalancing of oil markets by a year as well. The forward curve has started to price this in: as the chart shows, the forward curve currently points towards a recovery in prices that is far worse than in 1986. This means the industrial downturn could also be worse. In that case, there would be little in analysable history that could be a guide to this cycle," the bank wrote, presaging even tougher times ahead for the O&G space.
If Morgan Stanley is correct, we’re likely to see tremendous pressure on the sector’s highly indebted names, many of whom have been kept afloat thus far by easy access to capital markets courtesy of ZIRP.
With a rate hike cycle on the horizon, with hedges set to roll off, and with investors less willing to throw good money after bad on secondaries and new HY issuance, banks are likely to rein in credit lines in October when the next assessment is due. At that point, it will be game over in the absence of a sharp recovery in crude prices.
Against this challenging backdrop, we bring you the following commentary from Emanuel Grillo, partner at Baker Botts's bankruptcy and restructuring practice who spoke to Bloomberg Brief last week.
* * *
Via Bloomberg Brief
How does the second half of this year look when it comes to energy bankruptcies?
A: People are coming to realize that the market is not likely to improve. At the end of September, companies will know about their bank loan redeterminations and you’ll see a bunch of restructurings. And, as the last of the hedges start to burn off and you can’t buy them for $80 a barrel any longer, then you’re in a tough place.
The bottom line is that if oil prices don’t increase, it could very well be that the next six months to nine months will be worse than the last six months. Some had an ability to borrow, and you saw other people go out and restructure. But the options are going to become fewer and smaller the longer you wait.
Are there good deals on the horizon for distressed investors?
A: The markets are awash in capital, but you still have a disconnect between buyers and sellers. Sellers, the guys who operate these companies, are hoping they can hang on. Buyers want to pay bargain-basement prices. There’s not enough pressure on the sellers yet. But I think that’s coming.
Banks will be redetermining their borrowing bases again in October. Will they be as lenient this time around as they were in April?
A: I don’t know if you’ll get the same slack in October as in April, absent a turnaround in the market price for oil. It’s going to be that ‘come-to-Jesus’ point in time where it’s about how much longer can they let it play. If the banks get too aggressive, they’re going to hurt the value for themselves and their ability to exit. So they’re playing a balancing act.
They know what pressure they’re facing from a regulatory perspective. At the same time, if they push too far in that direction, toward complying with the regulatory side and getting out, then they’re going to hurt themselves in terms of what their own recovery is going to be. All of the banks have these loans under very close scrutiny right now. They’d all get out tomorrow if they could. That’s the sense they’re giving off to the marketplace, because the numbers are just not supporting what they need to have from a regulatory perspective.
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The price of energy will necessary rise - Obama the prophet.
Oh hell yes - Cloward and Piven.
The ability of every human to access consumable calories will decline - MATH.
(talking about "prices" in the absence of true price discovery is moronic)
Good thing Americans have built up strategic fat reserves.
Liquidations are already coming hot and heavy from the drilling service companies.
Cranes, haul trucks, trailers, service trucks are coming available in packages that total dozens to hundreds of pieces of equipment.
Hmmmm...Low Energy Companies (and people) make easy takeover taagets..
Just saying, vultures are hovering...
Somewhere between Agenda 21 and rapacious greed of the chosen actors, boom bust and boom...
here is some boom boom....blind man's blues at that...
https://aadivaahan.wordpress.com/2015/07/26/limitations/
Good thing we have the lair Mitch McConnell looking out for us....right bitchez?
He'll put Obama in his place.....right after he handles Ted Cruz.
Donald Trump and 15 other bumbling fools are coming....we're finally on our own. Watching the MSM reaction....priceless!
Tim for the taxpayer to bail them all out I guess. Seems inevitable now.
I heard that "Tim for the taxpayer" is kinda busy in the Hamptons and won't be around much.
That has to be a major negative on NYSE: CAT going forward.
2015 (7 years after 2008) looks like wil be the deciding year.
If the energy prices are going to boom, does that mean the cost of consumer goods and groceries will boom along with it? I'm still trying to figure why prices didn't go down with the gas prices. We've been told for decades that rising consumer prices is largely due risingshipping expenses.
Now it should be more clear: the cause of this problem (and most problems in our time) is the federal reserve and the hidden tax of inflation.
LOL! Sure sure. Speaking of "come-to-Jesus" moments...
If you have access to reduced hydrocarbons and consumable calories, then you can do and build real shit...
Some people will, most will not...
Same as it ever was...
Not will not, but cannot. The average person thinks that food and fuel just magically shows up at the store and if you try explain differently they think your insane. These are the same people who have been investing in this farce and reality is about to show up and bend them over...hard. I expect the next few months to be an education for a lot of people, but it will tend to be a terminal education.....
Wow, sounds like great news for those that have the methods and means to manipulate markets.
Good to see Tin handle Iron-y so well...
That could be trouble. The Tribe doesn't believe in Jesus.
But oddly....they still believe in the other guy....go figure.
They believe, but they don't recognize Him as the Messiah.
I think it is important to clarify that when we say Tribe, we mean the illuminati and not the Jews.
But that would be a thirteenth tribe.
The tribe believes in Jesus. They just don't like Him or believe He is God.
well that is part of the problem, modern christiandumb believes he is god and not the son of God
He's 3-in-1 oil.
Covers all the bases. Lubricates, loosens frozen nuts and prevents rust.
Why should a deity be less performance based than your toolbox lubricant?
Three thousand years of beautiful tradition from Moses to Sandy Kolfax, you're damn right I'm living in the fucking past!
Mathematics does not give a rat's arse what the Jew tribe thinks, believes, or 'thinks they believe', eh. Mathematics does not give a rat's arse what the rubes on Wall Street believe either. That's because mathematics is a bitch, and a blind motherfucker, when it comes to ethnicity, religion, or God. Moreover, 'Jesus' is a proxy for frauds that emanate out of the Roman Catholic Church, and God damned Israel. The Synagogue of Satan, and the Roman Catholic Church have been utilizing the 'Jesus proxy fraud' for centuries quite successfully. Unfortunately, for them, the global fraud was exposed in March of 2008, and now mathematics alone will annihilate them en masse. They can scream for Jesus all they want now that Lucifer has proven to be a full fledged functional retard that has been serving the Roman Catholic Church, and the Synagogue of Satan, for centuries, to no avail.
The Bible says...."you will know them by their fruits'. And the enlightened in the American Government know that the debt, and deficit, pretty much ensures that the trees are bare, and so are the cupboards, for the next few hundred years or more.
NOTE: God did not 'bless America', he FUCKED it up the wazzzooo instead.
Seems like 1986 with all the layoffs down here except for the real estate market- somehow they just keep on building even as trucking comanies are starting to fold after their last hauls of rigs to the storage yards. Smaller companies just doing the math of how long they can stay alive with x amount of employees and I am hearing 3 years before we get back to $80. People need to stop moving here because new jobs are no longer available.
Sadly many looking for the government to create a new shitstorm by "liberating" some poor oil rich country as they have for the last 70 years.
I live in Oklahoma and layoff galore. My clients tell me that 40$ oil means they shut thier doors for now no work no employees. All one must do it look at CERN and say nothing really matters when they are messing with anti matter and opening black holes. Maybe the politicians will fall in and the world will be saved.
My cousin works engineering in Houston and said it's a bloodbath for them there. Many are looking overseas at this point but it's a global slowdwon...Bigtime.
Also,problem is, what to do with that $550k house they bought 2-3 years ago? Renting is a losing proposition there with property taxes 3-3.5%, huge HOA fees, home insurance, etc. No way you can pass all those costs onto a buyer when they can rent pretty cheaply elsewhere.
Most people thought majoring in engineering would make them solid. Not so. All the STEM areas are under pressure due to Gubmint policies. Even docs are feeling the pinch from wide open borders and lots of foreign docs flooding into the USA.
It's pretty tough out there unless you're a well-connected banker or insider broker.
HOA's are another huge AmeriCON scam.
There's a lot more contributing to this mess than the dollar price of oil. I remember when oil was under $20 and the economy was strong.
A offshored economy and with it middle income jobs, and with that,,, demand.
Then a pinch of on shoring professional yobs (H1B) and a cup of illegals taking whats left.
Add in a burgeoning tyrannical security state with all the zombies flocking to it,,, eager to screw over their fellow americans.
Then a central bank destroying whats left of the currency, by QE and other printing methods, by destroying the capitol in capitolism (savers) with ZIRP, and by creating mal investment which will lead up to a crack up boom never before seen.
It's just as my avatar depicts.
China turns away from Russia
China's direct investments in Russia shrank by 25 percent in the first half of this year, even as its overall foreign investment increased, according to Chinese Ministry of Commerce figures cited by Russian media.
China invested $56 billion in the non-finance sectors of 147 countries and territories around the world in the first six months of this year, marking a 29.9 percent increase from the same period in 2014, Ministry of Commerce spokesman Shen Danyang said Tuesday in Beijing, Russia's Prime business news agency reported.
The greatest increase was reported in countries of the Association of Southeast Asian Nations, or ASEAN, where Chinese investment grew by 92.6 percent, Danyang was quoted as saying.
Investment in Hong Kong increased by 71.8 percent, and in the U.S. by 30 percent, he said, without specifying absolute figures.
But Chinese investment in Russia saw a 25 percent decline, Danyang said. Investment in Australia also dropped by 39.1 percent, Prime quoted him as saying.
Ah, viedoklis_lv newsoutlet, always entertaining if you like to watch the verbal flow of the unconscious from the unshaven wino in a deep binge with shifty eyes in a soiled blouse, a flag in hands and a drum on a neck.
I remember when counter-intelligence use to mean something.
It's now called Over-the-Counter-intelligence....
The day Pollard is released, something big will shift...
I support the posthumous release of Pollard. [Six-feet-]under-the-counter intelligence.
+100
Russia military falling apart
Russian Defense Minister Sergei Shoigu has ordered an investigation into the shocking loss of seven military aircraft in crashes during routine training exercises since the beginning of June, news agency RIA Novosti reported Friday.
The crashes appear to show that an increase in Russian military activity connected to the crisis in Ukraine is straining the air force to breaking point.
“The accident rate for military aviation continues to be one of the most acute problems [facing the military],” Shoigu said in a meeting at the Defense Ministry on Friday, RIA Novosti reported.
“We need to thoroughly understand the causes of these accidents and to identify specific measures to improve the situation,” he added.
Over the past 18 months, Russian military aircraft have been flying at a much higher rate than in previous years, as the Kremlin seeks to demonstrate its military power by sending bombers and fighter aircraft to probe NATO defenses in Europe and North America.
NATO reported intercepting 400 Russian military aircraft near alliance airspace last year — a 50 percent increase from 2013. The heightened operational tempo is catching up with Russia's largely Soviet-built and aging fleet of bombers and fighters.
According to news agency TASS, Russia from 2010 to 2014 lost on average one aircraft every two months. But the past seven weeks have seen seven crashes across a spectrum of designs and classes, pointing to problems larger than flaws in a single aircraft design.
Since early June the air force has lost two Tu-95 “Bear” strategic bombers, two MiG-29 fighters, an older Su-24 strike jet, a newer Su-34 fighter-bomber, and most recently an Antonov An-12 military transport.
Engine problems appear to be a common theme. One of the Bear bombers careened off a runway when an engine burst into flames on takeoff, and according to one unidentified source quoted by RIA Novosti after the second Tu-95 crash in mid-July, all four engines on that aircraft died mid-flight.
The problems come despite rapid growth in Russian defense expenditure in recent years and a 20 trillion ruble ($350 billion) rearmament program begun in 2010.
The guy posting this flaming text is a clear idiot. Is not only suffers from mental retardation, so to speak mild madness.
I think the new, pro trolls do not even have to make even a semblence of engagement. Just post tripe, crowd and cloud...
CAPTCHA to the rescue Tylers?
This Latvian potato troll is well known as an unimaginative copypaster in the Kiev Kartofel Korps.
Honestly, I miss AnAnonymous. Despite everything, at least he made you think, and was sometimes uniquely insightful.
Absolutely miss AnAnon, he was very intelligent and made great, uncomfortable observations...wonder if he got banned or left...
.
...and he stubbornly defended his point of view much the vigorously. That's what was so much fun about getting him going, US citizenly speaking.
No, he didn't get banned, as far as I can tell.
He'd go through occasionals period of inactivity for a few months, but never for this long. I think he last posted a comment around December sometime.
For some reason, I got the impression that he worked in academia. Despite all the joking about Easter Island, he was definitely well-versed in history. Hopefully he's just enjoying a sabbatical.
Yes, he was very intelligent, not a native english speaker and in my mind actually NOT Chiense at all.... :-) Always wondered why you all made that assumption.
Things are definitely getting weird though, there are days I wish TRAV777 was back here...I felt like he was my ZH anti-thesis, we had totally opposing views, 180 degrees, on everything...
.
Agreed, agreed, and agreed. My hunch is that he's actually from eastern Europe.
I never really did. It was just part of the fun of playing the role of US 'american' citizen. Besides, the whole Chinese citizenism thing provided a wealth of cultural differences to draw from. For instance, the phrase "wokking the dog" just doesn't fit any western stereotypes of Czechian citizenism or Moldavian citizenism.
Understood. And if you stripped away the harsh racial/ethnic/cultural views and abrasive attitude, there was an underlying intelligence which led to comments I could occasionally agree with.
Your observation on increasing weirdness is on the mark. It seems that what were once semiannual or bimonthly outrages are now happening on a weekly basis. It's like living in Bizarro World and stepping into the Twilight Zone.
'An" in front of anon- clue would be Hong Kong British style education. My guess.
The Chicoms probably have him pumping shares. Always plausible, as every conman must be.
Speaking of red meat. Where's our Chinese solars pedlar now?
Maybeee its a dream about oversupply of oil to the engines. Hick, pass me another beer. Hell, I tried!
Well you'd be a little crazy too if Putin lived under your bed and was waiting to jump out and turn you into his sex slave.
I guess.
You must be thinking of another world leader,,, Putin isn't a homo.
The Russian military is falling apart...!?!?
I guess we will soon be hearing how safe it will be to attack them.
Yet NATO and the lame stream media keeps claiming Russia is about to invade and conquer Western Europe. LMAO!!!
So which is it? Are the falling apart or are they about to conquer all of Europe?
Fix it with "fixed" accounting magic. Presto, chango!
Cushing can store how much more?
God says:
thou shalt not use a computer to bear false witness.
It's not just energy companies. Mining companies are in the same slump.
Anglo American just announced they are getting rid of 53,000 jobs, out of their worldwide workforce of 151,000, and they are selling off assets.
It is TIME for the REAL to be SUBSUMED in the ARTIFICE-ial...
I tell you, the Dune series gentlemen, what a tale and what a tell....
I'm in my goodness knows which re-reading of which of the six...
MUCH bigger tells than orwell or huxley...
Oh and of course Baudrillard and the Simulacra.
And Oculus...
And transhumanism....
Yet, we ARE magnificient...
https://aadivaahan.wordpress.com/2015/07/26/limitations/
Sucks when Central Banks think they are the economy. The millions of micro decisions made every day are saying fuck the Central Banks and all their cronies floating on top. It's time to drain the pool one tiny leak at a time.
Thou shalt not sneak around in other people's computer files!
Leave Hillary's private email alone......she's a human!
https://www.youtube.com/watch?v=kHmvkRoEowc
Bankers just flat ut refuse to take haircuts on investments... Period. Risk has been removed from the investor vocabulary. There will be a Black Swan event that will shock the system, then and only then will this unsustainable charade be exposed. That is when each and every coward in a suit will be exposed for what they are and what they have done to the entire global economy.
"Bankers just flat out refuse to take haircuts on investments."
The haircuts are there whether they want to record them or not. If an enterprise doesn't generate positive cash flow profits to service debt, then the bank has to lend them the money to make the payment or force liquidation of assets.
Can the Fed increase its' balance sheet to $10 Trillion, $20 Trillion ? Hell yes. Can the economy be shrunk to insured railcars of Kraft Dinner and Ketchup ? I don't think so.
More and more things are coming due or need to be acted on in the Sep-Oct time period. Seems like that period is going to be a make it or break it time for the overall economy.
CHC. Wow. Great Sep-Oct observation !
This article is "amazing". Looks like the economy is where it was in 2008, but this time the crash is occurring across the entire economic universe, not just housing and mortgages.
This time the crash is coming from commodities, the source of all economies and fields of work.
In 2008 the banks were given a "free pass" on real estate which remains in-place today.
Now there is no 'free pass' for commodities...you either have em' or they are in the ground, and a free pass won't get the commodity mined or distributed or stored above ground or developed.
All the other stuff is looking very dicey as well, so now the bail-ins will begin.
No more free passes, while commodities and rest all coming down.
The IBs want a war.
Dear Mr. Gubmint,
I need you to help my company get through this harsh time where free market forces are not acting properly. We all know that oil should be $100 and it's your job to make this right.
Sincerely,
Patriotic Oilman
PS. My town is littered with unemployed men who would make great soldiers. Just trying to help the cause of freedom and free markets.
The domestic oil industry is now Greece.
How much more money can you dump to try to save the money you already have in?
WTF! The price of gas at the pump is barely different for consumers, so where is all the money going? The oil producers are selling oil to the refineries at a third the price it use to be but the price of gas at the pump is barely different.
When the recovery of oil prices and interest rates intersect, look for a "hail Mary and come to Jesus moment" like nothing before.
Keep them balls afloat!
The oil industry never came back after 1986 and it will never come back after this downturn either.
Wait...
Texas is feeling the 'crunch' already.
I would avoid Houston Texas.
I have posted many times before that here in Lafayette la thye are still building $500k spec homes everywhere
http://www.vaneatonromero.com/L15300315
I just don't get it and now to boot they want to impose a $2,250 impact fee per house due to lack of infrastructure ..
Builders crying that will hurt home sales...nigga please ...if you can afford to spend that much on a home what's another ....what 40 cents a month...
I on the other hand am losing my home due to job loss that I have not been able to recover from...lawyer said that to file chapter 7 (why file 13, fucked either way)I will have to let the house go because my current earnings show that I can't afford note plus household expense and health insurance...I AM FUCKED !!!
I would like to see the oil blow out and all these overpaid fucks be in the same boat as me...
"The markets can stay irrational longer than you can stay solvent.", but rest assured that once you are insolvent, the markets don't all-of-a-sudden become rational. This means that all the players are FUCKED too.
NOTE: This will give you extra time to sharpen your pitchfork tines with a hand file. Good luck to you.
Section: Junk Bonds & Energy Funding & the Increasing Possibility of Far Greater Effects
http://www.zerohedge.com/news/2015-07-25/junk-bond-heatmap-has-not-been-...
OAS and WLL to zero.
Instead of coming to Jesus, America comes to zion. Wage war against the last Christian power, Russia, eliminates all forms of Christianity from America, says to be white is bad.
Now the zio’s can crush the markets and enslave the unemployed population who are on food stamps, convince you of the war on muslims, and removing Christianity from schools, public offices is also good.
They shall remove whites from USA, again try to reduce the population in Russia. And American Christians just suck in all up – they must love Israel… just like robots- causing their own doom.
What is good about christianity?
Of course the US could stop mindlessly increasding oil production and there wouldn't be a crisis in the first place, but they prefer to externalize th blame onto OPEC.
http://3.bp.blogspot.com/-Exv5ibJeUHo/VFoXn1F3iiI/AAAAAAAATRo/Zgh2Q3eQWD...
Seems like it's OPEC that is mindlessly increasing production or didn't you read the OP?
When will the pension funds start to pop? Chasing yield, they have to be in this mess up to their eyeballs.
If one looks at all of the conflict the US has caused in the ME in recent times from the perspective of control of oil resources and a Z Big consolidation of power heading toward Russia etc., what have these idiots actually accomplished besides spending an unbelievable amount of money and massive bloodshed? Did they just gain Iraq to loose Saudi Arabia? Whatever the case may be it is clear it isn't working out so well for them.
I sometimes wonder how much Snowden had to do with all of this, did he provide Russia with detailed proof that the US meant to destroy Russia (which of course they were aware of to some extent) and exactly how they were going to do it? What about Saudi Arabia, did Russia pass on information pertinent to them? It's just speculation but we know that man changed the course of history it's just about the matter of degree.
The Age of Oil has been one long boom and bust cycle. Every boom was kicked off by a vast new discovery of cheap and easy-to-get oil which juiced the economy via debt issuance and massive energy infusion. Every bust that followed was just a bad hangover from the previous boom as the debt became due. Then another boom which paid off the debt from the last time and enabled another round of debt accumulation, until the next bust. And so on and so on. But guess what. There won't be another "boom". The only oil left is stuff that is extremely expensive to get in terms of energy and labor invested. There are NO vast easy-to-get oil fields waiting to be discovered and exploited. So, fact is, the oil industry is on the verge of experiencing another bust, but this will be the LAST BUST. There will be no more booms. The debt and ZIRP induced fracking "revolution" was the going away party for the oil industry, a final last grand bash to send them on their way. Once this last bust plays out, that's when the fat lady will sing and we can kiss this version of high-tech consumption-oriented and oil dependent human civilization good-bye. What comes next depends a lot on how well our leaders have planned for the inevitable, and on what those plans are. But I wouldn't count on it.
Runaway debt trains all running full stem waiting for a wall to hit....
October sounds great to me!
Bring it on!
Bankruptcy is so Good
;-) it gives you free QE money
Freshly printed
Its just like Brown Sugar
-----
Brown sugar how come you taste so good?
Brown sugar just like a young girl should
Drums beating, cold English blood runs hot
Lady of the house wonderin' where it's gonna stop
House boy knows that he's doing alright
You shoulda heard him just around midnight
Brown sugar how come you taste so good, now?
Brown sugar just like a young girl should, now
Ah, get along, brown sugar how come you taste so good, baby?
Ah, got me feelin' now, brown sugar just like a black girl should
I bet your mama was a tent show queen
And all her boyfriends were sweet sixteen
I'm no schoolboy but I know what I like
You shoulda heard me just around midnight
Brown sugar how come you taste so good, baby?
Ah, brown sugar just like a young girl should, yeah
I said yeah, yeah, yeah, woo
How come you... how come you taste so good?
Yeah, yeah, yeah, woo
Just like a... just like a black girl should
Yeah, yeah, yeah, woo
----
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