Half Of US Frackers Will Be Dead By Year End, Weatherford Warns - By Tyler Durden (24/4/15) PDF Print E-mail
Tyler Durden   
Friday, 24 April 2015 07:21

Zero Hedge

Following the CEO's comments that over 100,000 energy jobs will be lost this year, an executive with Weatherford International - the fifth largest US fracker - has warned half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies. “We go by and we see yards are locked up and the doors are closed," said Rob Fulks, seemingly confirming what Weatherford CEO Duroc-Danner said earlier in the year, "we're now confronted with an unusually severe market contraction."

As Bloomberg reports, there were 61 fracking service providers in the U.S., the world’s largest market, at the start of last year. Now there are 41... and it's going to get a lot less...

Half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International Plc said.
 
There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracking, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices.
 
Weatherford, which operates the fifth-largest fracking operation in the U.S., has been forced to cut costs “dramatically” in response to customer demand, Fulks said. The company has been able to negotiate price cuts from the mines that supply sand, which is used to prop open cracks in the rocks that allow hydrocarbons to flow.
 
Oil companies are cutting more than $100 billion in spending globally after prices fell. Frack pricing is expected to fall as much as 35 percent this year, according to PacWest, a unit of IHS Inc.
 
“We go by and we see yards are locked up and the doors are closed,” he said. “It’s not good for equipment to park anything, whether it’s an airplane, a frack pump or a car.”

While 'stability' in oil prices remains the status quo, it appears the industry cannot manage on that alone (and given the pricing of recent resource-related junk bond offerings, they will not have the luxury of cheap financing to enable them to keep running).




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Oil Prices Won't Recover Anytime Soon Says Exxon CEO - By Nick Cunningham (24/4/15) PDF Print E-mail
Nick Cunningham   
Friday, 24 April 2015 07:20

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Most Of The World’s Banks Are Headed For Collapse - By Doug Casey (23/4/15) PDF Print E-mail
Doug Casey   
Thursday, 23 April 2015 07:26

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Bill Gross’ Short Of A Lifetime Would Mean Armageddon - By Mark Gilbert (23/4/15) PDF Print E-mail
Mark Gilbert   
Thursday, 23 April 2015 07:23

Bloomberg

The trade that George Soros and Stanley Druckenmiller pulled off in 1992 by betting against the British pound — and making $1 billion in the process — has gained legendary status. So when Bill Gross, the world’s best-known bond investor, tweeted yesterday from his current employer Janus Capital that betting against German government debt is the trade of a “lifetime,” he reached for that bit of history to benchmark the current opportunity:

Overlooking the fact that he got the year wrong (we all make mistakes, right?), here’s how the numbers would play out if he’s correct.

Negative Yields

The bet that the U.K. couldn’t keep propping up its currency at an artificially overvalued level was Druckenmiller’s idea; Soros’s contribution was to persuade him that if he was convinced about its potential, he should bet the farm on it. Sure enough, in the middle of September 1992 the U.K. abandoned its efforts to keep the pound trading in a corridor around a central target of 2.95 deutsche marks. At the point of capitulation, the pound was trading at 2.81 marks; in the space of three weeks, sterling had dropped by 14 percent, and was worth just 2.41 marks:

The 10-year German bund currently trades at a price of about 104, for a yield of 0.09 percent (which is as close to zero as makes almost no difference). For it to replicate the performance of the pound all those years ago, the price would have to drop to 89.4 by May 13:

At that price level, the yield would shoot up to almost 1.7 percent, causing a tsunami of repricing across trillions of dollars of government debt around the world:

If 10-year German debt — one of the few countries still rated AAA by all of the major rating agencies, a privilege even Uncle Sam doesn’t currently enjoy — was suddenly yielding 1.7 percent, Spanish bonds (currently at 1.4 percent) or Italian debt (1.42 percent) and even U.S. Treasuries (1.9 percent) would see the biggest jump in yields ever. Government and corporate borrowing costs everywhere would surge as investors reassessed the value of fixed-income securities in light of the German move; the knock-on effects into other asset classes would be catastrophic as yields rose, bond prices fell and investors backfilled their losses in a wave of selling and margin calls.

It does seem intuitively uncomfortable to be lending money to the German government for a decade in return for less than one-tenth of one percent (and indeed to be paying for the privilege of lending for any time period shorter than nine years). So Gross may well be right. If he is, and German bonds suffer the kind of collapse that would echo how the pound performed in 1992, investors will find themselves in the midst of a financial Armageddon that could make the Great Crash of 1929 look like a walk in the park.




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This Is Nuts - $5.3 Trillion Of Government Bonds Now Have Negative Yields - By David Stockman (22/4/15) PDF Print E-mail
David Stockman   
Wednesday, 22 April 2015 07:32

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