Tag Archives: Texas

West Texas Bust – “We Never Expected The Good Times To End”

The residents of West Texas are accustomed to a life dependent on hydrocarbons. As Bloomberg reports, the small communities built into the flat West Texas desert are dotted with oil pumps and rigs, and the chemical smell of an oil field hangs in the air.

Here the economy rises and falls on drilling.

When the drilling is good, everyone in the town benefits. When it’s bad, most of West Texas feels the pinch.

Oil prices have plunged as much as 75 percent since June 2014. That drop has dismal consequences for residents, and not just the ones working in oil fields. Bloomberg spoke with some of the people trying to endure the historic dip in oil prices. This video tells some of their stories….

In sharp contrast, click the following to enjoy this bitter sweet October, 2013 oil boom report by (CNN Money) titled ‘Moving in droves’ to Midland, Texas

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Oil Theft Soars as Downturn Casts U.S. Roughnecks Out of Work

The moon was a waning crescent sliver Sept. 9 when a man emerged from an oil tanker, sidled up to a well outside Cotulla, Texas, and siphoned off almost 200 barrels. Then, he drove two hours to a town where he sold his load on the black market for $10 a barrel, about a quarter of what West Texas Intermediate currently fetches.

“This is like a drug organization,” said Mike Peters, global security manager of San Antonio-based Lewis Energy Group, who recounted the heist at a Texas legislative hearing. “You’ve got your mules that go out to steal the oil in trucks, you’ve got the next level of organization that’s actually taking the oil in, and you’ve got a gathering site — it’s always a criminal organization that’s involved with this.”

From raw crude sucked from wells to expensive machinery that disappears out the back door, drillers from Texas to Colorado are struggling to stop theft that has only worsened amid the industry’s biggest slowdown in a generation. Losses reached almost $1 billion in 2013 and likely have grown since, according to estimates from the Energy Security Council, an industry trade group in Houston. The situation has been fostered by idled trucks, abandoned drilling sites and tens of thousands of lost jobs.

“You’ve got unemployed oilfield workers that unfortunately are resorting to stealing,” said John Chamberlain, executive director of the Energy Security Council.

In Texas, unemployment insurance claims from energy workers more than doubled over the past year to about 110,000, according to the Workforce Commission. In North Dakota, average weekly wages in the Bakken oil patch decreased nearly 10 percent in the first quarter of 2015, compared with the previous quarter, according to the Federal Reserve Bank of Minneapolis.

With dismissals hitting every corner of the industry, security guards hired during boom times are receiving pink slips. That’s leaving sites unprotected.

“There are a lot less eyes out there for security,” said John Esquivel, an analyst at security consulting firm Butchko Inc. in Tomball, Texas, and a former chief executive of the U.S. Border Patrol in Laredo. “The drilling activity may be quieter, but I don’t think criminal activity is.”

Special Charges

States are trying to get a handle on the theft, which can include anything from drill bits that can fetch thousands on the resale market, to copper wiring that can be melted down, to the crude itself. Texas lawmakers met earlier this month in Austin to craft a bill that would increase penalties related to the crime. A similar measure passed both houses of the legislature this year, but Republican Governor Greg Abbott vetoed it, saying it was “overly broad.” Lawmakers, at the urging of industry, are hoping to revive it next legislative session.

In Oklahoma, law-enforcement officers recently teamed with the Federal Bureau of Investigation to intensify their effort. In North Dakota, the FBI earlier this year opened an office in the heart of oil country to combat crimes including theft, drug trafficking and prostitution.

The lull in drilling has given oil companies more time to scrutinize their operations — and their losses.

During booms “they are moving at such a rapid pace there’s not a lot of auditing and inventorying going on,” said Gary Painter, sheriff in Midland County, Texas, in the oil-rich Permian Basin. “Whenever it slows down, they start looking for stuff and find out it never got delivered or it got delivered and it’s gone.”

Oil theft is as old as Spindletop, the East Texas oilfield that spewed black gold in 1901 and began the modern oil era. In the early 1900s, Texas Rangers were often deployed to carry out “town taming” in oil fields rife with roughnecks, prostitutes, gamblers and thieves. In 1932, 18 men were indicted for their role in a Mexia ring that included prominent politicians and executives and resulted in the theft of 1 million barrels.

The allure of ill-gotten oil money remains strong.

In April, the Weld County Sheriff’s office in Colorado recovered almost $300,000 worth of stolen drill bits. In January, a Texas man pleaded guilty to stealing three truckloads of oil worth nearly $60,000 after an investigation by the FBI and local law-enforcement officers. Robert Butler, a sergeant at the Texas Attorney General’s Office whose primary job is to investigate oil theft, said in the legislative hearing that he is investigating a case of 470,000 barrels stolen and sold over the past three years worth about $40 million.

In Texas, oilfield theft has become entangled with Mexican drug trafficking, as the state’s newest and biggest production area, the Eagle Ford Shale region, lies along traditional smuggling routes. That’s thrust oil workers in the middle of cartel activity, and made it even more difficult to track stolen goods across the U.S.-Mexico border, said Esquivel, the retired Border Patrol agent.

Trickling Away

Oil thieves are a slippery bunch. Criminals sand off serial numbers of stolen goods to evade detection or melt them for scrap. Tracking raw crude is even trickier, since tracing it to its originating well is almost impossible once it’s mixed with other oil. Many companies fail to report the crime, making it difficult for investigators to trace the origins of stolen goods.

Many of the crimes are inside jobs, with thieves doubling as gate guards, tank drivers or well servicers. Last year, a federal grand jury indicted three Texas men in connection with the theft of $1.5 million worth of oil from their employers, including Houston’s Anadarko Petroleum Corp.

“Your average person wouldn’t know the value of a drill bit or a piece of tubing or a gas meter,” said Chamberlain. “It’d be like breaking into a jewelry store; unless you know what’s valuable, you wouldn’t know what to steal.”

by Lauren Etter in Bloomberg Business

US Home Sales Surge In June To Fastest Pace In 8-Plus Years

WASHINGTON (AP) — Americans bought homes in June at the fastest rate in over eight years, pushing prices to record highs as buyer demand has eclipsed the availability of houses on the market.

The National Association of Realtors said Wednesday that sales of existing homes climbed 3.2 percent last month to a seasonally adjusted annual rate of 5.49 million, the highest rate since February 2007. Sales have jumped 9.6 percent over the past 12 months, while the number of listings has risen just 0.4 percent.

Median home prices climbed 6.5 percent over the past 12 months to $236,400, the highest level reported by the Realtors not adjusted for inflation.

Home-buying has recently surged as more buyers are flooding into the real estate market. Robust hiring over the past 21 months and an economic recovery now in its sixth year have enabled more Americans to set aside money for a down payment. But the rising demand has failed to draw more sellers into the market, causing tight inventories and escalating prices that could cap sales growth.

“The recent pace can’t be sustained, but it points clearly to upside potential,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

A mere five months’ supply of homes was on the market in June, compared to 5.5 months a year ago and an average of six months in a healthy market.

Some markets are barely adding any listings. The condominium market in Massachusetts contains just 1.8 months’ supply, according to a Federal Reserve report this month. The majority of real estate agents in the Atlanta Fed region – which ranges from Alabama to Florida- said that inventories were flat or falling over the past year.

Some of the recent sales burst appears to come from the prospect of low mortgage rates beginning to rise as the Federal Reserve considers raising a key interest rate from its near-zero level later this year. That possibility is prompting buyers to finalize sales before higher rates make borrowing costs prohibitively expensive, noted Daren Blomquist, a vice president at RealtyTrac, a housing analytics firm.

The premiums that the Federal Housing Administration charges to insure mortgages are also lower this year, further fueling buying activity, Blomquist said.

It’s also possible that home buyers are checking the market for listings more aggressively, making it possible for them to act fast with offers despite the lack of new inventory.

“Buyers can more quickly be alerted of new listings and also more conveniently access real estate data to help them pre-search a potential purchase before they even step foot in the property,” Blomquist said. “That may mean we don’t need such a large supply of inventory to feed growing sales.”

Properties typically sold last month in 34 days, the shortest time since the Realtors began tracking the figure in May 2011. There were fewer all-cash, individual investor and distressed home sales in the market, as more traditional buyers have returned.

Sales improved in all four geographical regions: Northeast, Midwest, South and West.

Still, the limited supplies could eventually prove to be a drag on sales growth in the coming months.

Ever rising home values are stretching the budgets of first-time buyers and owners looking to upgrade. As homes become less affordable, the current demand will likely taper off.

Home prices have increased nearly four times faster than wages, as average hourly earnings have risen just 2 percent over the past 12 months to $24.95 an hour, according to the Labor Department.

Some buyers are also bristling at the few available options on the market. Tony Smith, a Charlotte, North Carolina real estate broker, said some renters shopping for homes are now choosing instead to re-sign their leases and wait until a better selection of properties comes onto the market.

New construction has yet to satisfy rising demand, as builders are increasingly focused on the growing rental market.

Approved building permits rose increased 7.4 percent to an annual rate of 1.34 million in June, the highest level since July 2007, the Commerce Department said last week. Almost all of the gains came for apartment complexes, while permits for houses last month rose only 0.9 percent.

The share of Americans owning homes has fallen this year to a seasonally adjusted 63.8 percent, the lowest level since 1989.

Real estate had until recently lagged much of the six-year rebound from the recession, hobbled by the wave of foreclosures that came after the burst housing bubble.

But the job market found new traction in early 2014. Employers added 3.1 million jobs last year and are on pace to add 2.5 million jobs this year. As millions more Americans have found work, their new paychecks are increasingly going to housing, both in terms of renting and owning.

Low mortgage rates have also helped, although rates are now starting to climb to levels that could slow buying activity.

Average 30-year fixed rates were 4.09 percent last week, according to the mortgage giant Freddie Mac. The average has risen from a 52-week low of 3.59 percent.

for AP News

NAR Releases Mid-2015 U.S. Economic and Housing Forecast

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According to the National Association of Realtors (NAR), the U.S. housing market will continue its gradual pace of recovery as more home buyers enter a tight housing market for the balance of 2015, being nudged by rising mortgage rates and improving consumer confidence.

NAR’s chef economist Lawrence Yun has released the following observations for the US economy at large, and for the U.S. housing market specifically:

The U.S. Economy

  • GDP growth was slightly negative in the first quarter but will pick up in the second half.  For the year as whole, GDP will expand at 2.1 percent.  Not bad but not great.  A slow hum.
  • Consumer spending will open up because of lower gasoline prices.  Personal consumption expenditure grew at 2.1 percent rate in the first quarter.  Look for 3 percent growth rate in the second half.
  1. Auto sales dropped a bit in the first quarter because of heavy snow, but will ramp up nicely in the second half. 
  2. Spending for household furnishing and equipment has been solid, growing 6 percent in the first quarter after clocking 6 percent in the prior.  Recovering housing sector is the big reason for the nice numbers.
  3. Spending at restaurants was flat.  That is why retail vacancy rates are not notching down.
  4. Online shopping is up solidly.  That is why industrial and warehouse vacancy rates are coming down.
  5. Spending for health care grew at 5 percent in the first quarter, marking two consecutive quarters of fast growth.  The Affordable Care Act has expanded health care demand.  The important question for the future is will the supply of new doctors and nurses expand to meet this rising demand or will it lead to medical care shortage?

 

  • Business spending was flat in the first quarter but will surely rise because of large cash holdings and high profits.
  1. Spending for business equipment rose by 3 percent in the first quarter.  Positive and good, but nothing to shout about.
  2. Spending for business structures (building of office and retail shops, for example) fell by 18 percent.  The freezing first-quarter weather halted some construction.  This just means pent-up construction activity in the second half.
  3. In the past small business start-ups spent and invested.  It was not uncommon to experience double-digit growth rates for 3 years running for business equipment.  Not happening now.  But business spending will inevitably grow because of much improved business financial conditions of lower debt and more profits and rising GDP.
  4. What has been missing is the “animal spirit” of entrepreneurship.  The number of small business start-ups remains surprisingly low at this phase of economic expansion.  

 

  • Residential construction spending increased 6 percent in the first quarter.  Housing starts are rising and therefore this component will pick up even at a faster pace in the second half.
  • Government spending fell by 1 percent.  At the federal level, non-defense spending grew by 2 percent, while national defense spending fell by 1 percent.  At the state and local level, spending fell by 1 percent. 
  1. The federal government is still running a deficit.  Even though it is spending more than what it takes in from tax revenue, the overall deficit level has been falling to a sustainable level.  It would be ideal to run a surplus, but a falling deficit nonetheless does provide the possibility of less severe sequestration.   
  2. U.S. government finances are ugly.  Interestingly though, they are less ugly than other countries.  That is why the U.S. dollar has been strengthening against most other major currencies.  It’s like finding the least dirty shirt from a laundry basket.
  • Imports have been rising while exports have been falling.  The strong dollar makes it so.   Imports grew by 7 percent while exports fell by 6 percent.  The net exports (at minus $548 billion) were the worst in seven years.  Fortunately, with the West Coast longshoremen back at work, the foreign trade situation will not worsen, which means it will help GDP growth.
  • All in all, GDP will growth by 2.5 to 3 percent in the second half.  That translates into jobs.  A total of 2.5 million net new jobs are likely to be created this year.
  1. Unemployment insurance filings have been rising in oil-producing states of Texas and North Dakota.
  2. Unemployment insurance filings for the country as a whole have been falling, which implies lower level of fresh layoffs and factory closings.  That assures continuing solid job growth in the second half of the year.
  • We have to acknowledge that not all is fine with the labor market.  The part-time jobs remain elevated and wage growth remains sluggish with only 2 percent annual growth.  There are signs of tightening labor supply and the bidding up of wages.  Wages are to rise by 3 percent by early next year.  The total income of the country and the total number of jobs are on the rise.

 
The U.S. Housing Market Mid-2015 Trends
  

  • Existing home sales in May hit the highest mark since 2009, when there had been a homebuyer tax credit … remember, buy a home and get $8,000 from Uncle Sam.  This tax credit is no longer available but the improving economy is providing the necessary incentive and financial capacity to buy.  Meanwhile new home sales hit a seven-year high and housing permits to build new homes hit an eight-year high.  Pending contracts to buy existing homes hit a nine-year high.
  • Buyers are coming back in force.  One factor for the recent surge could have been due to the rising mortgage rates.  As nearly always happens, the initial phase of rising rates nudges people to make decision now rather than wait later when the rates could be higher still.
  1. The first-time buyers are scooping up properties with 32 percent of all buyers being as such compared to only 27 percent one year ago.  A lower fee on FHA mortgages is helping.
  2. Investors are slowly stepping out.  The high home prices are making the rate of return numbers less attractive.
  • Buyers are back.  What about sellers?  Inventory remains low by historical standards in most markets.  In places like Denver and Seattle, where a very strong job growth is the norm, the inventory condition is just unreal – less than one month supply.
  • The principal reason for the inventory shortage is the cumulative impact of homebuilders not being in the market for well over five years.  Homebuilders typically put up 1.5 million new homes annually.  Here’s what they did from 2009 to 2014:
  1. 550,000
  2. 590,000
  3. 610,000
  4. 780,000
  5. 930,000
  6. 1.0 million
  7. Where is 1.5 million?  Maybe by 2017.

 

  • Building activity for apartments has largely come back to normal.  The cumulative shortage is on the ownership side.     
  • Builders will construct more homes.  By 1.1 million in 2015 and 1.4 million in 2016.  New home sales will follow this trend.  This rising trend will steadily relieve housing shortage.
  • There is no massive shadow inventory that can disrupt the market.  The number of distressed home sales has been steadily falling – now accounting for only 10 percent of all transactions. It will fall further in the upcoming months.  There is simply far fewer mortgages in  the serious delinquent stage (of not being current for 3 or more months). In fact, if one specializes in foreclosure or short sales, it is time to change the business model.
  • In the meantime, there is still a housing shortage.  The consequence is a stronger than normal home price growth.  Home price gains are beating wage-income growths by at least three or four times in most markets.  Few things in the world could be more frustrating and demoralizing than for renters to start a savings program but only to witness home prices and down payment requirements blowing past them by.        
  • Housing affordability is falling.  Home prices rising too fast is one reason.  The other reason is due to rising mortgage rates.  Cash-buys have been coming down so rates will count for more in the future.
  • The Federal Reserve will be raising short-term rates soon.  September is a maybe, but it’s more likely to be in October.  The Fed will also signal the continual raising of rates over the next two years.  This sentiment has already pushed up mortgage rates.  They are bound to rise further, particularly if inflation surprises on the upside.
  • Inflation is likely to surprise on the upside.  The influence of low gasoline prices in bringing down the overall consumer price inflation to essentially zero in recent months will be short-lasting.  By November, the influence of low gasoline prices will no longer be there because it was in November of last year when the oil prices began their plunge.  That is, by November, the year-over-year change in gasoline price will be neutral (and no longer big negative).  Other items will then make their mark on inflation.  Watch the rents.  It’s already rising at near 8-year high with a 3.5 percent growth rate.  The overall CPI inflation could cross the red line of above 3 percent by early next year.  The bond market will not like it and the yields on all long-term borrowing will rise.
  • Mortgage rates at 4.3% to 4.5% by the year end and easily surpassing 5% by the year end of 2016.
  • The rising mortgage rates initially rush buyers to decide but a sustained rise will choke off as to who can qualify for a mortgage.  Fortunately, there are few compensating factors to rising rates.
  1. Credit scores are not properly aligned with expected default rate.  New scoring methodology is being tested and will be implemented.  In short, credit scores will get boosted for many individuals after the new change.
  2. FHA mortgage premium has come down a notch thereby saving money for consumers.  By the end of the year, FHA program will show healthier finances.  That means, there could be additional reduction to premiums in 2016.  Not certain, but plausible.
  3. Fannie and Freddie are owned by the taxpayers.  And they are raking-in huge profits as mortgages have not been defaulting over the past several years.  The very high profit is partly reflecting too-tight credit with no risk taking.  There is a possibility to back a greater number of lower down payment mortgages to credit worthy borrowers without taking on much risk.  In short, mortgage approvals should modestly improve next year.     
  4. Portfolio lending and private mortgage-backed securities are slowly reviving.  Why not?  Mortgages are not defaulting and there is fat cash reserves held by financial institutions.  Less conventional mortgages will therefore be more widely available.
  • Improving credit available at a time of likely rising interest rates is highly welcome.  Many would-be first-time buyers have been more focused about getting a mortgage (even at a higher rate) than with low rates.
  • All in all, existing and new home sales will be rising.  Combined, there will be 5.8 million home sales in 2015, up 7 percent from last year.  Note the sales total will still be 25 percent below the decade ago level during the bubble year.  Home prices will be rising at 7 percent.  For the industry, the business revenue will be rising by 14 percent in 2015.  The revenue growth in 2016 will be additional 7 to 10 percent. 

US Oil Rig Count Decline Quickened This Week

Idle rigs in Helmerich & Payne International Drilling Co.'s yard in Ector County, Texas. North Dakota has also been hit hard, forcing gains in technology.

Source: Rigzone

The fall in U.S. rigs drilling for oil quickened a bit this week, data showed on Friday, suggesting a recent slowdown in the decline in drilling was temporary, after slumping oil prices caused energy companies to idle half the country’s rigs since October.

Drillers idled 31 oil rigs this week, leaving 703 rigs active, after taking 26 and 42 rigs out of service in the previous two weeks, oil services firm Baker Hughes Inc said in its closely watched report.

With the oil rig decline this week, the number of active rigs has fallen for a record 20 weeks in a row to the lowest since 2010, according to Baker Hughes data going back to 1987.
Since the number of oil rigs peaked at 1,609 in October, energy producers have responded quickly to the steep 60 percent drop in oil prices since last summer by cutting spending, eliminating jobs and idling rigs.

After its precipitous drop since October, the U.S. oil rig count is nearing a pivotal level that experts say could dent production, bolster prices and even coax oil companies back to the well pad in the coming months.

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Pioneer Natural Resources Co, a top oil producer in the Permian Basin of West Texas, said this week it will start adding rigs in June as long as market conditions are favorable. U.S. crude futures this week climbed to over $58 a barrel, the highest level this year, as a Saudi-led coalition continued bombings in Yemen.

That was up 38 percent from a six-year low near $42 set in mid March on oversupply concerns and lackluster demand, in part on expectations the lower rig count will start reducing U.S. oil output.

After rising mostly steadily since 2009, U.S. oil production has stalled near 9.4 million barrels a day since early March, the highest level since the early 1970s, according to government data.

The Permian Basin in West Texas and eastern New Mexico, the nation’s biggest and fastest-growing shale oil basin, lost the most oil rigs, down 13 to 242, the lowest on record, according to data going back to 2011.

Texas was the state with the biggest rig decline, down 19 to 392, the least since 2009.
In Canada, active oil rigs fell by four to 16, the lowest since 2009. U.S. natural gas rigs, meanwhile, climbed by eight to 225, the same as two weeks ago.

Leading Texas Golf Resort Communities Revealed

By Scott Kauffman | World Property Journal

Tops in Texas: Leading Golf Resort Communities Revealed

While much of America struggled during the last financial crisis, Texas grew in greater economic stature on a number of levels. Fueled by a thriving energy economy, strong tech sector and job market, one strong growth area was real estate development.

Texans have always had a strong affinity to golf so it’s no surprise real estate communities, resorts and private clubs feature golf as a central component.  Two top leisure properties in Texas are 72-hole Horseshoe Bay Resort in Texas Hill Country and TPC Four Seasons at Las Colinas, home to the AT&T Byron Nelson Championship.

On the private club front, the “Big D” features a collection of renowned golf clubs, including Brook Hollow Country Club, Dallas National and Preston Trail Golf Club, where initiation fees start at $125,000.

The following is a handful of golf and resort-style communities leading the Lone Star State’s leisure real estate sector today.

Vaquero Club, Westlake, Texashttps://i1.wp.com/d2sa73fkuaa019.cloudfront.net/listings/ntreis/2474052/photo_1.jpg

When it comes to country club living, this Dallas-area private club is as luxurious as they come. Originally developed by Discovery Land Company, the Beverly Hills, Calif.-based company known for creating such elite clubs as Estancia in Scottsdale, Ariz. the Madison Club in La Quinta, Calif., and Kukio on the Big Island of Hawaii, Vaquero Club is now member-owned and fresh off an extensive $2.8 million renovation to its Tom Fazio-designed golf course.

According to club executives, part of the motivation behind the project was to enhance real estate vistas and create a more core-golf experience. A perfect example of this took place on the club’s drivable par-4 fourth hole, where new tee boxes were added, as well as on nine other holes.

This means resident members inside Vaquero’s stately manors have even more beautiful views to enjoy. Of an estimated dozen listings by the Jeff Watson Group of Briggs Freeman Sotheby’s International Realty, Vaquero’s most affordable home is currently listed at $1.295 million for a 4-bedroom, 4 1/2 -bath residence and it goes up to $5.995 million for a 5-bedroom estate on 3.8 acres featuring a 5-car garage and wine cellar with 1,500-bottle capacity.

The Vaquero Club consists of 385 equity memberships with an initiation fee approaching $200,000. Besides world-class golf, the club also offers a family-friendly Fish Camp, wine programs and other member amenities and services.

Cordillera Ranch, Boerne, Texas

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Located 30 minutes northwest of San Antonio, Cordillera Ranch is a debt-free 8,700-acre master-planned residential community in the Texas Hill Country. The family-owned and operated development is not short on activities, considering residents of the gated community can join The Clubs of Cordillera Ranch that feature seven resort-style clubs in one location: The Golf Club, The Social Club, The Tennis and Swim Club, The Equestrian Club, The Rod and Gun Club, The Spa and Athletic Club and The River Club.

Opened in 2007, the community’s Jack Nicklaus Signature golf course has consistently been ranked among the best in Texas, most recently placing fifth on the Dallas Morning News‘ annual poll. Its par-3 16th has claimed the No. 1 spot as “Most Beautiful Hole” by the same publication for the past five years.  

Among the community’s newest real estate offerings are golf course frontage lots, villas and an entirely new section aimed at young families. Overall, Cordillera Ranch boasts ¼-acre villa homes, valley-view and Guadalupe River-front homes, hilltop home sites and 1-to-10-acre estate residences.

According to the developer, 2014 was a banner year in both real estate and membership sales. For instance, Cordillera Ranch sold 33 homes at an average of $886,000 and total lot sales increased by 32 percent.

Trending in 2015: 46 new homes are under construction totaling more than $60 million in new starts – easily the highest total of any upscale community in the San Antonio area, according to the developer. Another 39 homes are in the architectural review approval process – a 65 percent increase over 2013.

Since its inception in 1997, more than 1,200 lots have been sold and approximately 700 homes have been completed. At final build-out, this low-density Hill Country community will total approximately 2,500 homes and preserve approximately 80 percent of the land in its natural vegetation. More than 70 new members were added in 2014, bucking the national trend of private club membership attrition.

“We’re excited and humbled to be a leader in the luxury lifestyle category,” says Charlie Hill, Vice President of Development at Cordillera Ranch. “With the economy thriving and the San Antonio area continuing to prosper, we expect the upward trend in real estate sales to continue in 2015.”

Cordillera Ranch credits much of its growth to being in the highly acclaimed Boerne School District, which is regarded as one of the best in Texas and boasts schools ranked in numerous national-best lists. The community is also benefitting from being in the prosperous Eagle Ford Shale. While other oil-rich areas have struggled with the drop in oil prices, the Eagle Ford Shale has continued to produce. That has attracted oil and gas executives to come to the Texas Hill Country and settle down in communities like Cordillera Ranch.

Boot Ranch, Fredericksburg, Texas

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Three years after being put up for sale, the once-bankrupt Boot Ranch community has kicked back into high sales gear. This posh 2,051-acre master-planned golf community in Texas Hill Country’s Gillespie County started selling luxury lots in 2005 and opened a golf course designed by PGA Tour star Hal Sutton in 2006.

But sales were sluggish as the real estate market started to collapse worldwide and Lehman Brothers eventually foreclosed on the property in 2010. Then, the Municipal Police Employees Retirement System of Louisiana, one of Sutton’s original backers and a past partner on the project, sued a number of Boot Ranch partnerships and corporations, putting the project under further stress.

With all of these financial and legal troubles behind them, Boot Ranch is now able to focus on a revitalized real estate market and the renewed life is paying off for this private golf and family community near the popular town of Fredericksburg.

Case in point is Boot Ranch is coming off an eight-year record high for home and property sales, highlighted last year by $13.781 million in year-to-date sales through Sept. 30. Of the $13.781 million in sales, $9.057 million came from estate home sites; another $1.524 million was from Overlook Cabin home sites and $2.825 million were sales of fractional shares of the club’s Sunday Houses.

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Overall, Boot Ranch sold 135 lots last year and had 16 homes completed with another 20 under construction or in the planning stages. Boot Ranch real estate options range from fractional ownership shares of 4,500-square-foot Sunday Houses to large Overlook Cabins priced from the $800,000s to estate home sites from $300,000 to $2.5 million for 2-18 acres.

“The booming demand for luxury ranch living is a byproduct of the successful Texas economy, particularly the energy business,” says Sean Gioffre, Boot Ranch director of marketing and sales. “The advent of hydraulic fracturing and the achievements of prized shale formations, like the Eagle Ford, Permian and Bakken, have pushed oil and gas production to record highs. With low interest rates, many people are looking to second homes as a hedge against inflation and as a tangible asset in which to put their money.”

Five miles north of the historic town of Fredericksburg, Boot Ranch is a master-planned retreat featuring one of the rare Sutton-designed courses, and a 34-acre practice park comprised of a short game range and executive par-three course. Other amenities at Boot Ranch include access to the 55,000-square-foot Clubhouse Village, casual and fine dining, a fully-stocked wine cellar, golf shop, ReStore Spa & Fitness Center, the 4.5-acre Ranch Club with pavilion, pools, tennis and sports courts, 10 member/guest lodge suites, a trap and skeet range overlooking Longhorn Lake, hiking, mountain biking, canoeing and fishing.

Construction is under way on a fishing pier and comfort station near Boot Ranch’s signature tenth hole on the golf course.

“We call Boot Ranch the ‘American Dream Texas Style,'” says co-director of marketing and sales Andrew Ball. “The motivation for buyers seems to be for recreational property – somewhere where owners can golf, fish, dine, swim, relax and generally enjoy the Texas outdoors. Many people say they just want to get their kids and grandkids out of the city, even if for only a few days or weeks at a time.”

Traditions Club and Community, Bryan, TX

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This new upscale golf and country club development gives Texas A&M loyalists something else to brag about in Aggieland. Located less than 10 minutes from 10 minutes from a bustling college town and burgeoning health and research center, it’s no surprise why this is shaping up to be another successful Texas real estate project.

Traditions Club and Community is the private golf and residential community in “Aggieland” and home to the Texas A&M men’s and women’s golf teams. Located in Bryan-College Station, the club rests in the shadow of the university and in the heart of The Research Valley’s “One Health Plus Biocorridor.”

From custom-garden homes to large estate lots, Traditions Club has a wide range of developments that cater to many buyers. Future plans to attract even more residents call for a multi-use retail, entertainment and health/fitness complex to be built within the neighboring Biocorridor area that would mirror one of the top suburbs in Houston, The Woodlands.

Traditions’ tournament-caliber, Jack Nicklaus/Jack Nicklaus II-designed golf course hosts many high-profile junior, collegiate and amateur events. Other amenities include a 21,000-square foot, four-building clubhouse with men’s and women’s locker rooms; 25-meter junior Olympic lap and sport-leisure pools; family swim center with beach-like wading pool; and fully-equipped fitness center.

Casual fare is offered at the Poole Grille and fine dining at the clubhouse, home to an impressive wine cellar. Overnight accommodations are available in two-, three- and four-bedroom cottages and casitas located just walking distance from all the club’s amenities.

Overlooking stately oak trees, gently rolling terrain and the lush green fairways of the golf course, the Traditions Club and Community is an enclave of custom estates, Game Day Cottages, cozy casitas, villas, garden homes and luxurious condominiums. Home sites range from .25 acres up to an acre, with homes spanning 1,800 to 8,000 square feet.

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Traditions Clubhouse

The newest phase being marketed is the Blue Belle home sites, a collection of 34 lots designed for two and three-bedroom custom homes. Overlooking a heavily wooded and rolling landscape in a peaceful and quiet enclave, the home sites encompass up to one-third of an acre and are priced with the home. The residences range from 2,200 to 3,500 square-feet and start in the low $400,000s.

Blue Belle residents can enjoy the outdoors without having to worry about extensive home and yard maintenance. Creative landscaped patios open up to peaceful settings that exemplify private community living. A multi-use trail meandering around a small lake is perfect for short walks and hikes

Interiors exude Texas Hill County elegance, with hardwood flooring, granite countertops, gourmet kitchens, high ceilings and open living area. The floor plans are highly personalized, providing a rich, distinguished selection of upscale finishes and features.

“Real estate sales in vibrant college towns like Bryan/College Station continue to thrive as master-planned communities like Traditions build to suit an array of buyers,” says Spencer Clements, Traditions Club Principal. “Empty-nesters or those seeking a second home with minimal maintenance will find Blue Belle offers the square-footages, relaxing setting and customized features catering to their needs and lifestyle.”

Tribute, The Colony, Texas

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The Tribute, a Matthews Southwest, Wynne/Jackson master-planned community on the shores of Lake Lewisville, is one of the more ambitious golf and country club developments in the Dallas-Fort Worth metroplex.

Located just 23 miles from Dallas-Fort Worth International Airport, the Tribute is a 36-hbole upscale semi-private facility whose original plans call for 1,150 single-family homes, 160 golf villas, 183 townhomes, and 700 European condominium units.

The community’s newest course, Old American Golf Club, opened in the summer of 2009 and was designed by Tripp Davis and PGA Tour player and native son Justin Leonard. When Old American opened (it was originally called the
New Course), the developers offered premium lake-view, golf course-fronting lots in the Balmerino Village.

This initial phase of lots, located adjacent to the No. 5 green and the No. 6 tee box featured unobstructed views of Lake Lewisville and ranged in price from $135,000 to $275,000 for little more than 1/3 of an acre.

What makes the Tribute so unique it its Scottish links-inspired setting. For instance, the Tribute’s namesake layout, or “Old Course” as it’s often called, is patterned after the legendary courses of Scotland and the Open Championship what with its wind-swept dunes and fescue grasses.

The first and 18th holes share the same broad fairway, just the Old Course at St. Andrews, and you’ll also find a likeness of Royal Troon’s Postage Stamp hole and experience replica holes from Prestwick, Muirfield, Western Gailes and Royal Dornoch. For a special treat, make sure to stay in one of the overnight guest suites above the clubhouse that overlook the course.

The Tribute’s newest course pays homage to famed golf course architects such as Donald Ross and A.W. Tillinghast, many of whom came to the United States from Great Britain around the turn of the century.

According to an Old American spokesman, the new course currently has about 58 resident members of the club, which represents approximately 25 percent of the overall membership. Among the other amenities enjoyed by members are first-class amenity centers, pools, parks, playgrounds, on-site schools, hike-and-bike trails, landscaped canals and hundreds of acres of accessible open space reminiscent of the Scottish Highlands.

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.

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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.

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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.


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