Tag Archives: Midland Texas

“It’s Crazy”: Midland Texas Roiled By Unprecedented Labor Shortage Hiring “Just About Anyone”

A battle is playing out in Midland, TX between employee-starved local businesses and multinational energy companies who are poaching local residents left and right for high-paying jobs as the latest Permian Basin shale-oil boom accelerates.

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Midland Mayor Jerry Morales says the boom is a double-edged sword; while the energy industry has increased sales-tax revenue by 34% year-over-year, an incredibly low unemployment rate of  2.1% has resulted in a severe shortage of low-paying jobs around town – such as the 100 open teaching positions, according to Bloomberg.

Morales, a native Midlander and second-generation restaurateur, has seen it happen so many times before. Oil prices go up, and energy companies dangle such incredible salaries that restaurants, grocery stores, hotels and other businesses can’t compete. People complain about poor service and long lines at McDonald’s and the Walmart and their favorite Tex-Mex joints. Rents soar. –Bloomberg

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“This economy is on fire,” said Morales – who is also the proprietor of Mulberry Cafe and Gerardo’s Casita. Unfortunately, the fire is so hot that the Mayor is scrambling to fill open jobs – from local government positions, to cooks at his restaurants. 

In the country’s busiest oil patch, where the rig count has climbed by nearly one third in the past year, drillers, service providers and trucking companies have been poaching in all corners, recruiting everyone from police officers to grocery clerks. So many bus drivers with the Ector County Independent School District in nearby Odessa quit for the shale fields that kids were sometimes late to class. The George W. Bush Childhood Home, a museum in Midland dedicated to the 43rd U.S. president, is smarting from a volunteer shortage.

And it doesn’t take much to get hired by the oil industry – which, as Bloomberg summarizes, “will hire just about anyone with basic training“… and it will quickly double, triple or x-ple their pay in the process. “It is crazy” said Jazmin Jimenez, 24, who flew through a two-week training program at New Mexico Junior College about 100 miles north of Midland. Jimenez was hired by Chevron as a well-pump checker. “Honestly I never thought I’d see myself at an oilfield company. But now that I’m here — I think this is it.

And at $28-an-hour, Jimenez makes double what she was earning as a prison guard at the Lea County Correctional Facility in Hobbs. 

Meanwhile, innovations in oilfield technology promise to find new and efficient ways of finding and pulling oil from the pancaked lawyers of rock in the 75,000 square-mile Permian basin – an extraction method which now accounts for 30% of all US output

The booming shale economy has also effected the local real-estate market – as the supply of homes for sale is the lowest on record according to the Texas A&M Real Estate Center. 

The $325,440 average price in Midland is the highest since June 2014, the last time the world saw oil above $100 a barrel. Apartment rents in Midland and Odessa are up by more than a third from a year ago, with the average 863-square-foot unit commanding $1,272 a month.

People who move for jobs are stunned by the cost of living. Armin Rashvand’s apartment is smaller and costs more than the one he rented in Cleveland before moving last August to run the energy-technology program at Odessa College.

“That really surprised me,” he said, because Texas’s reputation is that it’s affordable. “In Texas, yes — except here.”

Some of Rashvand’s students with two-year degrees are making more than he does, despite his master’s degrees in science, electrical and electronic engineering.

Keep on truckin’

And for those who would rather work a bit further upstream from the oilfields, schools that teach how to pass the test for a commercial drivers license (CDL) are packed.  “A CDL is a golden ticket around here,” said Steve Sauceda, head of the workforce training program at New Mexico Junior College. “You are employable just about anywhere.

Truckers in the shale fields can easily make six-figures, such as Jeremiah Fleming, 30, who is on track to make $140,000 driving flatbed trucks for Aveda Transportation & Energy Services Inc., hauling rigs. 

“This will be my best year yet,” said Fleming, who used to work in the once-bustling shale play in North Dakota. “I wouldn’t want to go anywhere else.”

So what is Mayor Morales doing? 

In order to try and retain employees, Morales has come up with several strategies – such as weekly vs. twice-monthly paychecks, more opportunities for overtime, and a “common-sense pitch” to employees thinking of jumping ship for the oil fields: 

“If you’ll stay with me, I can give you three quarters of what the oil will give you but you don’t have to get dirty or worry about getting hurt.”

Source: ZeroHedge

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‘Moving in droves’ to Midland, Texas
CNN’s famous 2013 Midland Texas oil boom report

 

 

 

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‘Housing Bubble 2’ Has Bloomed Into Full Magnificence

The current housing boom has Dallas solidly in its grip. As in many cities around the US, prices are soaring, buyers are going nuts, sellers run the show, realtors are laughing all the way to the bank, and the media are having a field day. Nationwide, the median price of existing homes, at $236,400, as the National Association of Realtors sees it, is now 2.7% higher than it was even in July 2006, the insane peak of the crazy housing bubble that blew up with such spectacular results.

Housing Bubble 2 has bloomed into full magnificence: In many cities, the median price today is far higher, not just a little higher, than it was during the prior housing bubble, and excitement is once again palpable. Buy now, or miss out forever! A buying panic has set in.

And so the July edition of D Magazine – “Making Dallas Even Better,” is its motto – had this enticing cover, sent to me by David in Texas, titled, “The Great Dallas Land Rush”:

Dallas Land Rush

“Dallas Real Estate 2015: The Hottest Market Ever,” the subtitle says.

That’s true for many cities, including San Francisco. The “Boom Town,” as it’s now called, is where the housing market has gone completely out of whack, with a median condo price at $1.13 million and the median house price at $1.35 million. This entails some consequences [read… The San Francisco “Housing Crisis” Gets Ugly].

The fact that Housing Bubble 2 is now even more magnificent than the prior housing bubble, even while real incomes have stagnated or declined for all but the top earners, is another sign that the Fed, in its infinite wisdom, has succeeded elegantly in pumping up nearly all asset prices to achieve its “wealth effect.” And it continues to do so, come heck or high water. It has in this ingenious manner “healed” the housing market.

But despite the current “buying panic,” the soaring prices, and all the hoopla round them, there is a fly in the ointment: overall home ownership is plunging.

The home ownership rate dropped to 63.4% in the second quarter, not seasonally adjusted, according to a new report by the Census Bureau, down 1.3 percentage points from a year ago. The lowest since 1967!

home ownershipWolf Street

The process has been accelerating, instead of slowing down. The 1.2 percentage point plunge in 2014 was the largest annual drop in the history of the data series going back to 1965. And this year is on track to match this record: the drop over the first two quarters so far amounts to 0.6 percentage points. This accelerated drop in home ownership rates coincides with a sharp increase in home prices. Go figure.

The plunge in home ownership rates has spread across all age groups, but to differing degrees. Younger households have been hit the hardest. In the age group under 35, the home ownership rate in Q2 saw a slight uptick to 34.8%, from the dismal record low of 34.6% in the prior quarter. Either a feeble ray of hope or just one of the brief upticks, as in the past, to be succeeded by more down ticks on the way to lower lows.

This chart by the Economics and Strategy folks at National Bank Financial shows the different rates of home ownership by age group. The 35-year and under group is where the first-time buyers are concentrated; and they’re being sidelined, whether they have no interest in buying, or simply don’t make enough money to buy (represented by the sharply descending solid black line, left scale). Note how the oldest age group (dotted blue line, right scale) has recently started to cave as well:

homeownership ratesWolf Street

The bitter irony? In the same breath, the Census Bureau also reported that the rental vacancy rate dropped to 6.8%, from 7.5% a year ago, the lowest since 1985. America is turning into a country of renters.

This chart shows the dynamics between home ownership rates (black line, left scale) and rental vacancy rates (red line, right scale) over time: they essentially rise and dive together. It makes sense on an intuitive basis: as people abandon the idea of owning a home, they turn into renters, and the rental market tightens up, and vacancy rates decline.

homeownership rate v rental vacancy rateWolf Street

This too has been by design, it seems. Since 2012, private equity firms bought several hundred thousand vacant single-family homes in key markets, drove up prices in the process, and started to rent them out. Thousands of smaller investors have jumped into the fray, buying homes, driving up prices, and trying to rent them out. This explains the record median home price across the country, and the totally crazy price increases in some key markets, even as regular Americans are trying to figure out how to pay for a basic roof over their heads.

This has worked out well. By every measure, rents have jumped. According to the Census Bureau’s report, the median asking rent in the US rose 6.2% from a year ago, and 17.6% since 2011. So inflation bites. But the Fed is still desperately looking for signs of inflation and simply cannot find any.

And how much have incomes risen over these years to allow renters to meet these rising rents? OK, that was a rhetorical question. We already know what has been happening to incomes.

That’s what it always boils down to in the Fed’s salvation of the economy: people who can’t afford to pay the rising rents with their stagnant or declining incomes should borrow the money to make up the difference and then spend even more on consumer goods. After us, the deluge.

One Third Of U.S. Companies’ Q1 Job Cuts Due To Oil Prices

https://i2.wp.com/www.jobcutnews.com/wp-content/uploads/2011/10/pink-slips.jpgby Olivia Pulsinelli

Oil prices caused one-third of the job cuts that U.S.-based companies announced in the first quarter, according to a new report. March was the fourth month in a row to record a year-over-year increase in job cuts, Chicago-based outplacement consultancy Challenger, Gray & Christmas Inc. reports. And 47,610 of the 140,214 job cuts announced between January and March were directly attributed to falling oil prices. Not surprisingly, the energy sector accounted for 37,811 of the job cuts — up a staggering 3,900 percent from the same quarter a year earlier, when 940 energy jobs were cut. However, U.S. energy firms only announced 1,279 job cuts in March, down about 92 percent from the 16,339 announced in February and down nearly 94 percent from the 20,193 announced in January. The trend held true in Houston, where several energy employers announced job cuts in January and February, while fewer cuts were announced in March. Overall job-cut announcements are declining, as well. U.S. employers announced 36,594 job cuts in March, down 27.6 percent from the 50,579 announced in February and down 31 percent from the 53,041 announced in January. In December, 32,640 job cuts were announced. “Without these oil related cuts, we could have been looking one of lowest quarters for job-cutting since the mid-90s when three-month tallies totaled fewer than 100,000. However, the drop in the price of oil has taken a significant toll on oil field services, energy providers, pipelines, and related manufacturing this year,” John Challenger, CEO of Challenger, Gray & Christmas, said in a statement.

The U.S. Oil Boom Is Moving To A Level Not Seen In 45 Years

by Myra P. Saefong

Peak U.S. oil production is a ‘moving target’

SAN FRANCISCO (MarketWatch) — U.S. oil production is on track to reach an annual all-time high by September of this year, according to Rystad Energy. If production does indeed top out, then supply levels may soon hit a peak as well. That, in turn, could lead to shrinking supplies. The oil-and-gas consulting-services firm estimates an average 2015 output of 9.65 million barrels a day will be reached in five months — topping the previous peak annual reading of 9.64 million barrels a day in 1970. Coincidentally, the nation’s crude inventories stand at a record 471.4 million barrels, based on data from U.S. Energy Information Administration, also going back to the 1970s. The staggering pace of production from shale drilling and hydraulic fracturing have been blamed for the 46% drop in crude prices CLK5, -1.08% last year. But reaching so-called peak production may translate into a return to higher oil prices as supplies begin to thin.

Rystad Energy’s estimate includes crude oil and lease condensate (liquid hydrocarbons that enter the crude-oil stream after production), and assumes an average price of $55 for West Texas Intermediate crude oil. May WTI crude settled at $49.14 a barrel on Friday. The forecast peak production level in September is also dependent on horizontal oil rig counts for Bakken, Eagle Ford and Permian shale plays stabilizing at 400 rigs, notes Per Magnus Nysveen, senior partner and head of analysis at Rystad. Of course, in this case, hitting peak production isn’t assured. “Some will be debating whether the U.S. has reached its peak production for the current boom, without addressing the question of what level will U.S. production climb to in any future booms,” said Charles Perry, head of energy consultant Perry Management. “So one might also say U.S. peak production is a moving target.” James Williams, an energy economist at WTRG Economics, said that by his calculations, peak production may have already happened or may occur this month, since the market has seen a decline in North Dakota production, with Texas expected to follow.

Permian Basin Idles Five Rigs This Week

by Trevor Hawes

Drilling rig

The number of rigs exploring for oil and natural gas in the Permian Basin decreased five this week to 285, according to the weekly rotary rig count released Thursday by Houston-based oilfield services company Baker Hughes.

The North American rig count was released a day early this week because of the Good Friday holiday, according to the Baker Hughes website.

District 8 — which includes Midland and Ector counties — shed four rigs, bringing the total to 180. The district’s rig count is down 42.68 percent on the year. The Permian Basin is down 46.23 percent.

At this time last year, the Permian Basin had 524 rigs.

TEXAS

Texas’ count fell six this week, leaving 456 rigs statewide.

In other major Texas basins, there were 137 rigs in the Eagle Ford, unchanged; 29 in the Haynesville, down three; 23 in the Granite Wash, down one; and six in the Barnett, unchanged.

Texas had 877 rigs a year ago this week.

UNITED STATES

The number of rigs in the U.S. decreased 20 this week, bringing the nationwide total to 1,028.

There were 802 oil rigs, down 11; 222 natural gas rigs, down 11; and four rigs listed as miscellaneous, up two.

By trajectory, there were 136 vertical rigs, down eight; 799 horizontal rigs, down 13; and 93 directional rigs, up one. The last time the horizontal rig count fell below 800 was the week ending June 4, 2010, when Baker Hughes reported 798 rigs.

There were 993 rigs on land, down 17; four in inland waters, unchanged; and 31 offshore, down three. There were 29 rigs in the Gulf of Mexico, down four.

The U.S. had 1,818 rigs at this time last year.

TOP 5s

The top five states by rig count this week were Texas; Oklahoma with 129, down four; North Dakota with 90, down six; Louisiana with 67, down five; and New Mexico with 51, unchanged.

The top five rig counts by basin were the Permian; the Eagle Ford; the Williston with 91, down six; the Marcellus with 70, unchanged; and the Cana Woodford and Mississippian with 40 each. The Mississippian idled three rigs, while the Cana Woodford was unchanged. The Cana Woodford shale play is located in central Oklahoma.

CANADA AND NORTH AMERICA

The number of rigs operating in Canada fell 20 this week to 100. There were 20 oil rigs, up two; 80 natural gas rigs, down 22; and zero rigs listed as miscellaneous, unchanged.

The last time Canada’s rig count dipped below 100 was the week ending May 29, 2009, when 90 rigs were reported.

Canada had 235 rigs at this time last year.

The total number of rigs in the North America region fell 40 this week to 1,128. North America had 2,083 rigs a year ago this week.

Junk-Rated Oil & Gas Companies in a “Liquidity Death Spiral”

by Wolf Richter

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On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however.

Behind the facade of stability, the re-balancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly. Steep drops in the US rig count have been a key driver of the price rebound. Yet US supply so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations.

So said the International Energy Agency in its Oil Market Report on Friday. West Texas Intermediate plunged over 4% to $45 a barrel.

The boom in US oil production will continue “to defy expectations” and wreak havoc on the price of oil until the power behind the boom dries up: money borrowed from yield-chasing investors driven to near insanity by the Fed’s interest rate repression. But that money isn’t drying up yet – except at the margins.

Companies have raked in 14% more money from high-grade bond sales so far this year than over the same period in 2014, according to LCD. And in 2014 at this time, they were 27% ahead of the same period in 2013. You get the idea.

Even energy companies got to top off their money reservoirs. Among high-grade issuers over just the last few days were BP Capital, Valero Energy, Sempra Energy, Noble, and Helmerich & Payne. They’re all furiously bringing in liquidity before it gets more expensive.

In the junk-bond market, bond-fund managers are chasing yield with gusto. Last week alone, pro-forma junk bond issuance “ballooned to $16.48 billion, the largest weekly tally in two years,” the LCD HY Weekly reported. Year-to-date, $79.2 billion in junk bonds have been sold, 36% more than in the same period last year.

But despite this drunken investor enthusiasm, the bottom of the energy sector – junk-rated smaller companies – is falling out.

Standard & Poor’s rates 170 bond issuers that are engaged in oil and gas exploration & production, oil field services, and contract drilling. Of them, 81% are junk rated – many of them deep junk. The oil bust is now picking off the smaller junk-rated companies, one after the other, three of them so far in March.

On March 3, offshore oil-and-gas contractor CalDive that in 2013 still had 1,550 employees filed for bankruptcy. It’s focused on maintaining offshore production platforms. But some projects were suspended last year, and lenders shut off the spigot.

On March 8, Dune Energy filed for bankruptcy in Austin, TX, after its merger with Eos Petro collapsed. It listed $144 million in debt. Dune said that it received $10 million Debtor in Possession financing, on the condition that the company puts itself up for auction.

On March 9, BPZ Resources traipsed to the courthouse in Houston to file for bankruptcy, four days after I’d written about its travails; it had skipped a $60 million payment to its bondholders [read… “Default Monday”: Oil & Gas Companies Face Their Creditors].

And more companies are “in the pipeline to be restructured,” LCD reported. They all face the same issues: low oil and gas prices, newly skittish bond investors, and banks that have their eyes riveted on the revolving lines of credit with which these companies fund their capital expenditures. Being forever cash-flow negative, these companies periodically issue bonds and use the proceeds to pay down their revolver when it approaches the limit. In many cases, the bank uses the value of the company’s oil and gas reserves to determine that limit.

If the prices of oil and gas are high, those reserves have a high value. It those prices plunge, the borrowing base for their revolving lines of credit plunges. S&P Capital IQ explained it this way in its report, “Waiting for the Spring… Will it Recoil”:

Typically, banks do their credit facility redeterminations in April and November with one random redetermination if needed. With oil prices plummeting, we expect banks to lower their price decks, which will then lead to lower reserves and thus, reduced borrowing-base availability.

April is coming up soon. These companies would then have to issue bonds to pay down their credit lines. But with bond fund managers losing their appetite for junk-rated oil & gas bonds, and with shares nearly worthless, these companies are blocked from the capital markets and can neither pay back the banks nor fund their cash-flow negative operations. For many companies, according to S&P Capital IQ, these redeterminations of their credit facilities could lead to a “liquidity death spiral.”

Alan Holtz, Managing Director in AlixPartners’ Turnaround and Restructuring group told LCD in an interview:

We are already starting to see companies that on the one hand are trying to work out their operational problems and are looking for financing or a way out through the capital markets, while on the other hand are preparing for the events of contingency planning or bankruptcy.

Look at BPZ Resources. It wasn’t able to raise more money and ended up filing for bankruptcy. “I think that is going to be a pattern for many other companies out there as well,” Holtz said.

When it trickled out on Tuesday that Hercules Offshore, which I last wrote about on March 3, had retained Lazard to explore options for its capital structure, its bonds plunged as low as 28 cents on the dollar. By Friday, its stock closed at $0.41 a share.

When Midstates Petroleum announced that it had hired an interim CEO and put a restructuring specialist on its board of directors, its bonds got knocked down, and its shares plummeted 33% during the week, closing at $0.77 a share on Friday.

When news emerged that Walter Energy hired legal counsel Paul Weiss to explore restructuring options, its first-lien notes – whose investors thought they’d see a reasonable recovery in case of bankruptcy – dropped to 64.5 cents on the dollar by Thursday. Its stock plunged 63% during the week to close at $0.33 a share on Friday.

Numerous other oil and gas companies are heading down that path as the oil bust is working its way from smaller more vulnerable companies to larger ones. In the process, stockholders get wiped out. Bondholders get to fight with other creditors over the scraps. But restructuring firms are licking their chops, after a Fed-induced dry spell that had lasted for years.

Investors Crushed as US Natural Gas Drillers Blow Up

by Wolf Richter

The Fed speaks, the dollar crashes. The dollar was ripe. The entire world had been bullish on it. Down nearly 3% against the euro, before recovering some. The biggest drop since March 2009. Everything else jumped. Stocks, Treasuries, gold, even oil.

West Texas Intermediate had been experiencing its biggest weekly plunge since January, trading at just above $42 a barrel, a new low in the current oil bust. When the Fed released its magic words, WTI soared to $45.34 a barrel before re-sagging some. Even natural gas rose 1.8%. Energy related bonds had been drowning in red ink; they too rose when oil roared higher. It was one heck of a party.

But it was too late for some players mired in the oil and gas bust where the series of Chapter 11 bankruptcy filings continues. Next in line was Quicksilver Resources.

It had focused on producing natural gas. Natural gas was where the fracking boom got started. Fracking has a special characteristic. After a well is fracked, it produces a terrific surge of hydrocarbons during first few months, and particularly on the first day. Many drillers used the first-day production numbers, which some of them enhanced in various ways, in their investor materials. Investors drooled and threw more money at these companies that then drilled this money into the ground.

But the impressive initial production soon declines sharply. Two years later, only a fraction is coming out of the ground. So these companies had to drill more just to cover up the decline rates, and in order to drill more, they needed to borrow more money, and it triggered a junk-rated energy boom on Wall Street.

At the time, the price of natural gas was soaring. It hit $13 per million Btu at the Henry Hub in June 2008. About 1,600 rigs were drilling for gas. It was the game in town. And Wall Street firms were greasing it with other people’s money. Production soared. And the US became the largest gas producer in the world.

https://martinhladyniuk.files.wordpress.com/2015/03/be197-deathspiral2.jpg?w=287&h=191

But then the price began to plunge. It recovered a little after the Financial Crisis but re-plunged during the gas “glut.” By April 2012, natural gas had crashed 85% from June 2008, to $1.92/mmBtu. With the exception of a few short periods, it has remained below $4/mmBtu – trading at $2.91/mmBtu today.

Throughout, gas drillers had to go back to Wall Street to borrow more money to feed the fracking orgy. They were cash-flow negative. They lost money on wells that produced mostly dry gas. Yet they kept up the charade. They aced investor presentations with fancy charts. They raved about new technologies that were performing miracles and bringing down costs. The theme was that they would make their investors rich at these gas prices.

The saving grace was that oil and natural-gas liquids, which were selling for much higher prices, also occur in many shale plays along with dry gas. So drillers began to emphasize that they were drilling for liquids, not dry gas, and they tried to switch production to liquids-rich plays. In that vein, Quicksilver ventured into the oil-rich Permian Basin in Texas. But it was too little, too late for the amount of borrowed money it had already burned through over the years by fracking for gas below cost.

During the terrible years of 2011 and 2012, drillers began reclassifying gas rigs as rigs drilling for oil. It was a judgement call, since most wells produce both. The gas rig count plummeted further, and the oil rig count skyrocketed by about the same amount. But gas production has continued to rise since, even as the gas rig count has continued to drop. On Friday, the rig count was down to 257 gas rigs, the lowest since March 1993, down 84% from its peak in 2008.

US-rig-count_1988_2015-03-13=gas

Quicksilver’s bankruptcy is a consequence of this fracking environment. It listed $2.35 billion in debts. That’s what is left from its borrowing binge that covered its negative cash flows. It listed only $1.21 billion in assets. The rest has gone up in smoke.

Its shares are worthless. Stockholders got wiped out. Creditors get to fight over the scraps.

Its leveraged loan was holding up better: the $625 million covenant-lite second-lien term loan traded at 56 cents on the dollar this morning, according to S&P Capital IQ LCD. But its junk bonds have gotten eviscerated over time. Its 9.125% senior notes due 2019 traded at 17.6 cents on the dollar; its 7.125% subordinated notes due 2016 traded at around 2 cents on the dollar.

Among its creditors, according to the Star Telegram: the Wilmington Trust National Association ($361.6 million), Delaware Trust Co. ($332.6 million), US Bank National Association ($312.7 million), and several pipeline companies, including Oasis Pipeline and Energy Transfer Fuel.

Last year, it hired restructuring advisers. On February 17, it announced that it would not make a $13.6 million interest payment on its senior notes and invoked the possibility of filing for Chapter 11. It said it would use its 30-day grace period to haggle with its creditors over the “company’s options.”

Now, those 30 days are up. But there were no other “viable options,” the company said in the statement. Its Canadian subsidiary was not included in the bankruptcy filing; it reached a forbearance agreement with its first lien secured lenders and has some breathing room until June 16.

Quicksilver isn’t alone in its travails. Samson Resources and other natural gas drillers are stuck neck-deep in the same frack mud.

A group of private equity firms, led by KKR, had acquired Samson in 2011 for $7.2 billion. Since then, Samson has lost $3 billion. It too hired restructuring advisers to deal with its $3.75 billion in debt. On March 2, Moody’s downgraded Samson to Caa3, pointing at “chronically low natural gas prices,” “suddenly weaker crude oil prices,” the “stressed liquidity position,” and delays in asset sales. It invoked the possibility of “a debt restructuring” and “a high risk of default.”

But maybe not just yet. The New York Post reported today that, according to sources, a JPMorgan-led group, which holds a $1 billion revolving line of credit, is granting Samson a waiver for an expected covenant breach. This would avert default for the moment. Under the deal, the group will reduce the size of the revolver. Last year, the same JPMorgan-led group already reduced the credit line from $1.8 billion to $1 billion and waived a covenant breach.

By curtailing access to funding, they’re driving Samson deeper into what S&P Capital IQ called the “liquidity death spiral.” According to the New York Post’s sources, in August the company has to make an interest payment to its more junior creditors, “and may run out of money later this year.”

Industry soothsayers claimed vociferously over the years that natural gas drillers can make money at these prices due to new technologies and efficiencies. They said this to attract more money. But Quicksilver along with Samson Resources and others are proof that these drillers had been drilling below the cost of production for years. And they’d been bleeding every step along the way. A business model that lasts only as long as new investors are willing to bail out old investors.

But it was the crash in the price of “liquids” that made investors finally squeamish, and they began to look beyond the hype. In doing so, they’re triggering the very bloodletting amongst each other that ever more new money had delayed for years. Only now, it’s a lot more expensive for them than it would have been three years ago. While the companies will get through it in restructured form, investors get crushed.


Oil Production Falling In Three Big Shale Plays, EIA Says

HOUSTON – It’s official: The shale oil boom is starting to waver.

And, in a way, it may have souped-up rigs and more efficient drilling technologies to thank for that.

Crude production at three major U.S. shale oil fields is projected to fall this month for the first time in six years, the U.S. Energy Information Administration said Tuesday.

It’s one of the first signs that idling hundreds of drilling rigs and billions of dollars in corporate cutbacks are starting to crimp the nation’s surging oil patch.

But it also shows that drilling technology and techniques have advanced to the point that productivity gains may be negligible in some shale plays where horizontal drilling and hydraulic fracturing have been used together for the past several years.

Because some plays are already full of souped-up horizontal rigs, oil companies don’t have as many options to become more efficient and stem production losses, as they did in the 2008-2009 downturn, the EIA said.

The EIA’s monthly drilling productivity report indicates that rapid production declines from older wells in three shale plays are starting to overtake new output, as oil companies drill fewer wells.

In the recession six years ago, the falling rig count didn’t lead to declining production because new technologies boosted how fast rigs could drill wells.

But now that oil firms have figured out how to drill much more efficiently, “it is not clear that productivity gains will offset rig count declines to the same degree as in 2008-09,” the EIA said.

Energy Information Agency

Overall, U.S. oil production is set to increase slightly from March to April to 5.6 million barrels a day in six major fields, according to the EIA.

But output is falling in the Eagle Ford Shale in South Texas, North Dakota’s Bakken Shale and the Niobrara Shale in Colorado, Wyoming, Nebraska and Kansas.

In those three fields, net production is expected to drop by a combined 24,000 barrels a day.

The losses were masked by production gains in the Permian Basin in West Texas and other regions.

Efficiency improvements are still emerging in the Permian, faster than in other oil fields because the region was largely a vertical-drilling zone as recently as December 2013, the EIA said.

Net crude output in the Bakken is expected to decline by 8,000 barrels a day from March to April. In the Eagle Ford, it’s slated to fall by 10,000 barrels a day. And in the Niobrara, production will dip by roughly 5,000 barrels a day.

But daily crude output jumped by 21,000 barrels in the Permian and by 3,000 barrels in the Utica Shale in Ohio and Pennsylvania.

Read more at MRT.com

Tenants Benefit When Rent Payment Data Are Factored Into Credit Scores

by Kenneth R. Harney | LA Times

It’s the great credit divide in American housing: If you buy a home and pay your mortgage on time regularly, your credit score typically benefits. If you rent an apartment and pay the landlord on time every month, you get no boost to your score. Since most landlords aren’t set up or approved to report rent payments to the national credit bureaus, their tenants’ credit scores often suffer as a direct result.

All this has huge implications for renters who hope one day to buy a house. To qualify for a mortgage, they’ll need good credit scores. Young, first-time buyers are especially vulnerable — they often have “thin” credit files with few accounts and would greatly benefit by having their rent histories included in credit reports and factored into their scores. Without a major positive such as rent payments in their files, a missed payment on a credit card or auto loan could have significant negative effects on their credit scores.

You probably know folks like these — sons, daughters, neighbors, friends. Or you may be one of the casualties of the system yourself, a renter with a perfect payment history that creditors will never see when they pull your credit. Think of it this way and the great divide gets intensely personal.

But here’s some good news: Growing numbers of landlords are now reporting rent payments to the bureaus with the help of high-tech intermediaries who set up electronic rent-collection systems for tenants.

One of these, RentTrack, says it already has coverage in thousands of rental buildings nationwide, with a total of 100,000-plus apartment units, and expects to be reporting rent payments for more than 1 million tenants within the year. Two others, ClearNow Inc. and PayYourRent, also report to one of the national bureaus, Experian, which includes the data in consumer credit files. RentTrack reports to Experian and TransUnion.

Why does this matter? Two new studies illustrate what can happen when on-time rent payments are factored into consumers’ credit reports and scores. RentTrack examined a sample of the tenants in its database and found that 100% of renters who previously were rated as “unscoreable” — there wasn’t enough information in their credit files to evaluate — became scoreable once they had two months to six months of rental payments reported to the credit bureaus.

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Tenants who had scores below 650 at the start of the sampling gained an average of 29 points with the inclusion of positive monthly payment data. Overall, residents in all score brackets saw an average gain of 9 points. The scores were computed using the VantageScore model, which competes with FICO scores and uses a similar 300 to 850 scoring scale, with high scores indicating low risk of nonpayment.

Experian, the first major credit bureau to begin integrating rental payment records into credit files, also completed a major study recently. Using a sample of 20,000 tenants who live in government-subsidized apartment buildings, Experian found that 100% of unscoreable tenants became scoreable, and that 97% of them had scores in the “prime” (average 688) and “non-prime” (average 649) categories. Among tenants who had scores before the start of the research, fully 75% saw increases after the addition of positive rental information, typically 11 points or higher.

Think about what these two studies are really saying: Tenants often would score higher — sometimes significantly higher — if rent payments were reported to the national credit bureaus. Many deserve higher credit scores but don’t get them.

Matt Briggs, chief executive and founder of RentTrack, says for many tenants, their steady rent payments “may be the only major positive thing in their credit report,” so including them can be crucial when lenders pull their scores.

Justin Yung, vice president of ClearNow, told me that “for most [tenants] the rent is the largest payment they make per month and yet it doesn’t appear on their credit report” unless their landlord has signed up with one of the electronic payment firms.

Is this something difficult or complicated? Not really. You, your landlord or property manager can go to one of the three companies’ websites (RentTrack.com, ClearNow.com and PayYourRent.com), check out the procedures and request coverage. Costs to tenants are either minimal or zero, and the benefits to the landlord of having tenants pay rents electronically appear to be attractive.

Everybody benefits. So why not?

kenharney@earthlink.net Distributed by Washington Post Writers Group. Copyright © 2015, Los Angeles Times

Dreaming Big: Americans Still Yearning for Larger Homes

by Ralph McLaughlin | Trulia

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43% of adults would prefer homes bigger than where they currently live, but attitudes differ by age. Baby boomers would prefer to upsize rather than downsize by only a small margin, while the gap among millennials is much wider, with GenXers falling in between. Would-be downsizers outnumber upsizers only among households living in the largest homes.

Last year, we found that Baby Boomers were especially unlikely to live in multi-unit housing. At the same time, we noted that the share of seniors living in multi-unit housing rather than single-family homes has been shrinking for decades. These findings got us thinking about how the generations vary in house-size preference. So we surveyed over 2000 people at the end of last year to figure out if boomers have different house-size preferences than their younger counterparts. And that led us to ask: What size homes do Americans really want?

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Most Americans are not living in the size home they want

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As a whole, Americans are living in a world of mismatch – only 40% of our respondents said they are living in the size home that’s ideal. Furthermore, over 43% answered that the size of their ideal residence is somewhat or much larger than their current digs. Only 16% told us that their ideal residence is smaller than their existing home. However, these overall figures mask what is going on within different generations.

It’s natural to think that baby boomers are the generation most likely to downsize.  After all, their nests are emptying and they may move when they retire.  As it turns out though, more boomers would prefer to live in a larger home than a smaller one: 21% said their ideal residence is smaller than their current home, while 26% wanted a larger home – a 5-percentage-point difference. Clearly, boomers don’t feel a massive yearn to downsize. On the contrary, just over half (53%) said they’re already living in their ideally sized home. Nonetheless, members of this generation are more likely to want to downsize than millennials and GenXers.

In fact, those younger generations want some elbow room. First, the millennials. They’re looking to move on up by a big margin: just over 60% told us their ideal residence is larger than where they live now – the largest proportion among the generations in our sample. By contrast, only a little over 13% of millennials said they’d rather have a smaller home than their existing one – which is also the smallest among the generations in our sample. The results are clear: millennials are much more likely to want to upsize than downsize.

The next generation up the ladder, the GenXers, are hitting their peak earning years and many in this group may be in a position to trade up. Many aren’t living in their ideally sized home. Just 38% said where they live now is dream sized. Nearly a majority (48%) said their dream home is larger, while only 14% of GenXers would rather have a smaller home.  This is the generation that bore the brunt of the foreclosure crisis. So, some of this mismatch could be because a significant number of GenXers lost homes during the housing bust and may now be living in smaller-than-desired quarters. But a much more probable reason is that many GenXers are in their peak child-rearing years. With kids bouncing off the walls, the place may be feeling a tad crowded.

Even the groups that seem ripe for downsizing don’t want smaller homes

Of course, age doesn’t tell the whole story about why people might want to downsize. It could be that certain kinds of households, – such as those without children, and living in the suburbs or in affordable areas – might be more likely to live in larger homes than they need. But our survey shows that households in these categories are about twice as likely to want a larger than a smaller home. For those with kids especially, the desire to upsize is strong: 39% preferred a larger home versus 18% who liked a smaller home.  For those living in the suburbs, the disparity is even greater – 42% to 16%. And even among those living in the most affordable zip codes, where ideally-sized homes might be within the budgets of households, 40% of our respondents preferred larger homes versus 20% who said smaller.

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Are all households more likely to upsize than downsize?

At this point you might be asking, “Are there any types of households that want to downsize?” The answer is yes. But only one kind of household falls into this category – those living in homes larger than 3,200 square feet.  Of this group, 26% wanted to downsize versus 25% that wanted to upsize – a slight difference. But, when we looked overall at survey responses based on the size of current residence, households wanting a larger home kicked up as current home size went down. We can see this clearly when we divide households into six groups based on the size of the home they’re living in now. Among households living in 2,600-3,200 square foot homes, 37% prefer a larger home versus 16% a smaller home; in 2,000–2,600 square foot homes, its 34% to 18%; 38% to 18% in 1,400–2,000 square foot homes; 55% to 13% in 800–1,400 square foot homes; and 66% to 13% in homes less than 800 square feet. This makes intuitive sense.  Those living in the biggest homes are most likely to have gotten a home larger than their ideal size. And those in the smallest homes are probably the ones feeling most squeezed.

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The responses to our survey show significantly more demand for larger homes than for smaller ones. But the reality, of course, is that households must make tradeoffs between things like accessibility, amenities, and affordability when choosing what size homes to get. The “ideal” sized home for most Americans may be larger than where they’re living now. But that spacious dream home may not be practical.  As result, the mismatch between what Americans say they want and what best suits their circumstances may persist.