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Comerica Drops as Oil Crash Pain Spreads to Shale Boom Bankers

Comerica Inc., a Dallas-based bank that has helped finance U.S. shale drillers, fell the most in three years after reporting Friday that it set aside more money to cover souring energy loans. Shares fell by as much as 6.8 percent, the most since October 2011, after the bank said Friday that its at-risk energy loans grew by $329 million in the second quarter, with past-due accounts up by $100 million. About 14 percent, or $578 million, of the bank’s energy portfolio has been classified as “criticized,” the bank said in a call with investors and analysts. Banks that have been critical to the U.S. shale boom have set aside more cash to cover potential losses after oil fell 51 percent in the past year to about $50 a barrel. This week, JPMorgan Chase & Co., Wells Fargo & Co., Bank of America Corp. and Citigroup Inc. all reported increased […]

Posted On : Published By : Tom Whipple
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BHP Shale Writedown Has Some Banks Asking: Where’s the Rest?

The size of BHP Billiton Ltd.’s $2.8 billion writedown for its U.S. shale assets took some banks by surprise: at least two thought it was too small. After the latest charge, Melbourne, Australia-based BHP values its U.S. onshore business at $24 billion. That’s more than 40 percent higher than what analysts at JPMorgan Chase & Co. think it is worth and over twice Citigroup Inc.’s estimate. The producer said its U.S. onshore assets would generate positive cash flow in the year to June 2016 with oil at $60 a barrel, above current prices. “Given the deteriorating conditions of the U.S. oil and gas market, we thought an impending impairment could have been larger,” analysts at JPMorgan including Lyndon Fagan wrote in a research note Wednesday. After four years of record supply, America’s natural gas output is shrinking as producers retreat from shale amid tumbling oil prices. That’s hurting investments […]

Posted On : Published By : Tom Whipple
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ConocoPhillips Increases Dividend But Cuts Deepwater Spending

The Houston-based oil company’s dividend is now 74 cents instead of 73 cents and is expected to cost an additional $12.3 million a quarter. The most significant spending reductions will come from its program in the Gulf of Mexico where ConocoPhillips will terminate its contract for the Ensco DS-9 deepwater drill ship. Drilling was scheduled to begin there later this year. Financial terms weren’t disclosed. ConocoPhillips will pay a termination fee that represents up to two years of contract day rates and will take a special item charge for the termination in the third quarter. “Since the start of the oil and gas price downturn last year, we have moved decisively to position ConocoPhillips for lower, more volatile prices by exercising capital flexibility and reducing operating costs across our business,” said Chief Executive Ryan Lance. “Our decision to reduce spending in deepwater will further increase our capital flexibility and […]

Posted On : Published By : Tom Whipple
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Sabine Oil, Lenders Put Off Fight Over Cash

During the hearing, Judge Shelley Chapman of the U.S. Bankruptcy Court in Manhattan approved of a series of routine motions designed to ensure the company’s continued operations, including paying employees and accessing bank accounts. But a long fight over about $250 million Sabine holds in cash could signal a difficult and contentious path forward for the company and its newly launched chapter 11 case. Discussions with lenders before filing for bankruptcy didn’t lead to a prearranged restructuring deal that could have made for a more streamlined trip through chapter 11, court papers show. Jonathan Henes, a lawyer for Sabine, said in court Thursday that the company cannot sustain a prolonged trip though bankruptcy. “We need to get this company out as quickly as we can,” he said. Sabine, which hasn’t sought special bankruptcy financing to fund its operations while in chapter 11, asked Judge Chapman for permission to support […]

Posted On : Published By : Tom Whipple
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ConocoPhillips plans further capex reduction for deepwater exploration

ConocoPhillips reported plans to further reduce its capital expenditures for deepwater exploration, with the “most significant reductions” coming from its operated program in the Gulf of Mexico. The company did not specify by how much capex would be decreased, however. At yearend 2014, the Houston-based independent slashed its 2015 capital budget by 20% to $13.5 billion compared with 2014’s capex plans ( OGJ Online, Dec. 8, 2014 ). “Since the start of the oil and gas price downturn last year, we have moved decisively to position ConocoPhillips for lower, more volatile prices by exercising capital flexibility and reducing operating costs across our business,” said Chairman and Chief Executive Officer Ryan Lance. The company has provided notice that it will terminate its contract for the Ensco DS-9 deepwater drillship, which was slated for delivery to the gulf late this year to start drilling the company’s operated deepwater inventory under a […]

Posted On : Published By : Tom Whipple
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U.S. Oil Rolls With OPEC’s Blows as Brazil and Canada Take Hits

Eight months into OPEC’s plan to hit rival oil producers, the casualties are mounting. Surprisingly, the most resilient may be the one that triggered the fight: the U.S. Projections for combined daily output from Brazil, Canada, Russia, Mexico and Colombia by the end of the decade were cut by 2.8 million barrels since oil slumped last year, data from the countries and the International Energy Agency show. In contrast, the U.S. Energy Department increased its estimate for crude output in 2020 by more than a million barrels. Prices fell more than 45 percent in the past year after the Organization of Petroleum Exporting Countries refused to cut output, instead pressuring rival producers to eliminate a global supply glut. While the number of active U.S. oil rigs has halved, production remains close to a three-decade high and is forecast to keep growing after a pause in the coming year. Projects […]

Posted On : Published By : Tom Whipple
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Why the cash economy in Greece may be ending

Many believe we have a teetering world economy, even without Greece as an indicator. Now Greece is looming ever larger as a critical if unknown actor. It is mostly considered a bad one, for the entire European, and even the worldwide, financial system and economy. The Greek economy is approaching an almost unprecedented standstill. For clear reasons it probably will never get back to a "normal" or desirable level of consumption. When stepping back from witnessing the daily crisis, it would appear timely to ask what are the real factors in the big picture? Was the crisis brought on just by second-rate policies combined with inefficiency, corruption, and oppression? Or have longer-term characteristics of industrialism and Western Civilization’s relentless, aggressive growth caught up with us to undermine our future as a species? If so, the discussion about what’s wrong and how to deal with it has to change, and […]

Posted On : Published By : ASPO-USA
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Oil’s Fall Requires Major Changes

The oil and gas industry is in for a new round of cost cutting. It also needs a dose of fresh thinking. Oil prices are under pressure thanks to a combination of China, Greece and Iran. That, along with a bearish prognosis from the International Energy Agency in its latest report, dents hopes for a quick rebound this year. That should have the oil producers teeing up for more cost cutting. All cuts, however, aren’t created equal. This industry had a cost problem at $100 a barrel, let alone $50 a barrel. Announcing their first-quarter results, the majors pointed to evidence that development costs on ambitious new projects were falling already. BP , BP -0.72 % for example, said it was seeing savings of between 20% and 30% in certain areas and the industry as a whole is trimming overheads, shedding jobs and squeezing contractors. There is a lot […]

Posted On : Published By : Tom Whipple
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How the plunging price of oil has set off a new global contest

HOUSTON — He’d spent years touting his vision that America would one day dominate one of the world’s most powerful markets. And when Harold Hamm, a pioneer in discovering vast reserves of shale oil under American soil, took the stage in front of several hundred oil luminaries, he never acknowledged that the narrative was in doubt. “For the next 50 years, we can expect to reap the benefits of the shale revolution,” Hamm said one day this spring. “It’s the biggest thing that ever happened to America.” But away from the stage, the U.S. oil industry — and Hamm — was in crisis. In the previous six months, Hamm, founder of oil giant Continental Resources, had lost $6.5 billion, more than one-third of his net worth. The industry that Hamm had helped create was facing its greatest test in a frantic race to stay profitable as rival Saudi Arabia […]

Posted On : Published By : Tom Whipple