“Energy Companies Seize the Day with Bond Refinancings”. Wall Street Journal, January 14, 2019.
WSJ reports a surprise window of opportunity opened for oil companies to refinance debt. Last year, some thought credit markets were closed to all but the strongest oil companies. North American oil companies face $40 billion debt maturities in 2020, and $200 billion in four years.
However, energy company (junk bond) yields improved from 9.7% to 8.1% in the last six weeks (Bloomberg Barclays High Yield Index).
Seven energy companies with speculative debt ratings sold $6 billion bonds last week, biggest volume since 2014.
Laredo Petroleum Inc. refinanced $1 billion bonds maturing 2022-23 into 2025-28 maturities. In early December, Laredo’s 2023 bonds traded at a discount to yield 12%, but the yield improved to 8% in January. Laredo’s new bonds sold at par with 9.5% and 10.125% coupons. (I understand Laredo to be one of the smallest Permian E&P players with $1.1 billion capital, $1 billion debt, and losses two of the last three quarter).
This improvement in the high yield energy bond market is attributed to increased demand related to improved economic outlook, higher oil prices, and low yields elsewhere.
Oil and gas activity contributed $16.3 billion in taxes and royalties to the State of Texas last year, a record. Of course, the Chronicle has to find a way to work in a climate change tie in, though. Honestly, if you read the articles in my San Antonio newspaper that didn’t have some strained tie in to climate change or Trump, you would be left with Sports and the Comics.
BP, who bought BHP Billiton’s assets in the Permian, and goes by BXP (confused yet?) is increasing its investment in midstream assets, especially around Orla.
Major shareholders in Lillis offering to buy others Lillis stock. I imagine those shareholders who have taken a bath on the stock are thrilled with that. Lillis is primarily a penny stock company that issues a press release five days a week (maybe slight exaggeration here).
Word is filtering out to the investment community about the slowing rate of productivity improvements in the Permian and elsewhere. Improvements in well performance are flattening, and in some cases declining. Parent/child well interference and service companies inability to keep bearing a disproportionate share of the cost reductions are the main cause.
Elizabeth Warren’s Gas Royalties, editorial, Wall Street Journal, 1/31/20. The editorial states:
Elizabeth Warren reported gas royalties from Latimer County, OK in 2012-13 in Senate disclosures. Warren’s joint tax returns with her husband Bruce Mann disclosed OK gas royalties from 2008 for several years. Warren’s husband sold mineral rights in Latimer & Pittsburg Counties OK to their son in 2011 two weeks before Warren declared her Senate candidacy. Elizabeth Warren conveyed minerals in Okfuskee and Hughes Counties OK to her children in 2014. Elizabeth Warren’s children & brothers granted a 3-year O&G lease in 2017, Hughes County 80 acres.
Presidential candidate Warren threatened to “ban fracking, everywhere”, and stated “…we have to start by attacking the corruption that gives … fossil fuel industries a stranglehold over this country”.
Anyone notice mineral prices have become mostly stagnant, if not decreased? It seems like wall street investors have reeled funds back in, which has caused the mineral market to relax from its previous highs. However, mineral owners have high expectations still, meaning less deals are happening and may cause investors to back away even more! Hope some of us didn’t miss the boat when offers were nice an high. Thoughts?
They should decrease. The whole energy sector is in shambles. Earning season is going to kill some folks at $52 oil and $1.9 mcf. In the end its all dependent on the E&P companies, if the head dies the rest of the body is a bit hosed. Will be interesting.
There were a lot of people in the Barnett who held out for a bigger lease bonus and got nothing. There will be some elsewhere who do the same. Be it leasing or selling. Its a risk business for all parties.
@TwoShoeBeagie7 A January 26, 2020 Houston Chronicle article titled “Oil and gas M&A market poised for recovery in 2020” mentions sellers possibly coming to terms with dramatically lower acreage prices now as compared to 2016-2017 peak Permania.
The hits for the gas market keep coming. The Wall Street Journal is reporting this morning that the price for LNG has dropped to $3/mbtu. All the LNG terminals are being built on assumption that they can make money by compressing cheap gas here, and shipping it overseas where it is much more expensive. It it drops to a point where they lose money by liquefying gas and shipping it overseas, they will stop buying gas from the Permian.