Oil-Industry Debt Mounts Up

Wall Street Journal ^ | April 27, 2015 | ERIC YEP And FIONA LAW

[thackney]

Oil and gas companies are continuing to pile up debt, a trend some warn could extend the slump in energy prices and hit economies reliant on the sector for growth and tax revenue.

Both independent and state-owned companies are involved in the borrowing bonanza, issuing $86.8 billion worth of bonds in dollars, euros and yen globally this year, up 10% from the same period in 2014, according to Dealogic, a data-tracking company. The rise is largely due to a high number of bond sales in Europe, the Middle East and Africa, and in the U.S., where both Exxon Mobil Corp. and Chevron Corp. have recently tapped investors.

The debt surge has been less dramatic in Asia. Still, China Petrochemical Corp., known as Sinopec, raised $6.4 billion last week in the region’s third-biggest bond sale on record. Cnooc Ltd. and China National Petroleum Corp., two other big state-owned oil companies, are also likely to issue bonds in the coming weeks, bankers say.

Last month, Malaysia’s Petroliam Nasional Bhd., or Petronas, made its first bond sale in six years, raising $5 billion.

Add in syndicated bank loans and total borrowing by the oil-and-gas sector rose to $2.5 trillion at the end of 2014, up from $1 trillion of outstanding debt at the end of 2006, according to the Switzerland-based Bank for International Settlements. It has warned that an “oil-debt nexus” could create a vicious circle whereby overindebted companies pump more oil to ensure they can pay interest on their loans, adding to the current global oil glut, and further depressing energy prices.

“Rapidly rising leverage creates risk exposures in the nonfinancial corporate sector that may be transferred across the global financial system,” it said in a recent report. Any selloff of oil-company debt could hit corporate bond markets hard, given the huge...

[thackney]

[alloysteel]

Like it or not, the world depends on the processing and use of petroleum as a fuel to power industry and a feedstock for a vast array of consumer products, a situation that will continue far into the future, which generates REAL wealth. The debt now piling up shall be offset and repaid from the continued rise in value of the products, and the ever-widening alternative uses of petroleum, so the fear of collapse from inability to repay incurred debt is just part of the MUCH larger effect of default by various government entities, which have no such means of producing wealth.

[ckilmer]

I buy T Boone Pickens argument that oil prices are going up.
http://www.cnbc.com/id/102623836

For now the oil companies will be able to pay their debts.

Five years from now imho there will start a secular change in the market that will be death to much of oil sector.

[thackney]

I buy T Boone Pickens argument that oil prices are going up.

I agree prices will most likely rise from the present price. When and how much are the real questions.

Understand for now, T.Boone Pickens is trying to justify continued investment in his company and its Natural Gas Vehicle fuel products. He is trying to convince people it will rise soon so buy what I have to sell even though the market doesn't justify it today.

[ckilmer]

contained in the same link above on pickens is his talk about adaption of natural gas by truckers which he says is picking up pace.
http://www.cnbc.com/id/102623836

[ckilmer]

contained in the same link above on pickens is his talk about adaption of natural gas by truckers which he says is picking up pace.
http://www.cnbc.com/id/102623836

[thackney]

I am amazed he would be talking about that.

< /sarc>

http://investors.cleanenergyfuels.com/directors.cfm

[thackney]

http://investors.cleanenergyfuels.com/secfiling.cfm?filingID=1047469-15-1290&CIK=1368265
Page 29

As of December 31, 2014, 18,139,720 shares of our common stock held by our co-founder and board member T. Boone Pickens were pledged as security for loans made to Mr. Pickens. We are not a party to these loans. If the price of our common stock declines, Mr. Pickens may be forced to provide additional collateral for the loans or to sell shares of our common stock in order to remain within the margin limitations imposed under the terms of the loans. Any sales of common stock following a margin call that is not satisfied may cause the price of our common stock to decline further.

- - - - - - - -

I think T.Boone Pickens is an very knowledgeable person about the oil and gas industry. He is a patriot.

I always like to read what he has to say. But before I read his words, I always first place a firm grip on my wallet.

[griswold3]

But before I read his words, I always first place a firm grip on my wallet.
Very wise, FRiend.

[ckilmer]

well, yes of course he’s talking his own game on natural gas so its also in his own interest to say some trucking companies are converting over to natural gas. the actual question is not whether its in his interest to point out that trucking companies are converting to natural gas. The actual question is whether the conversion of trucks to from diesel to natural gas is gaining much traction or whether Picken’s examples were one offs.

[thackney]

It is a growing market. I think it is growing more with new trucks rather than the conversion of existing.

http://www.ngvamerica.org/vehicles/

[thackney]

Just for reference, when folks are making predicitions about oil prices:

http://www.mrt.com/top_stories/article_70cebd70-688a-11e4-90d4-275b5aef60c1.html
November 9, 2014

Q: These sliding oil prices have stirred plenty of concerns within the U.S. oil industry. Will they fall much further?

Pickens: I think it can go down further. I don’t think it’s going to go to $60, but wouldn’t be at all surprised if it went down in the $70s.

[thackney]

And just for entertainment:

Anyone who has been in the business of predicting oil markets should be pretty humble, because we’ve all gotten it wrong many times, sometimes spectacularly.

As noted in an earlier post, my 2012 prediction at the OPEC International Energy Seminar that long-term oil prices would be $50-60 a barrel had met with skepticism and derision, and my submission to DOE last year brought the response, “Have you been drinking?” (Well, yes, but that’s beside the point.)

http://www.forbes.com/sites/michaellynch/2015/04/30/lessons-in-oil-price-forecasting/

T.Boone mentioned along with others at the article