For our Alaska readers: Here is an important invitation for Thursday:
Please join us for the RDC breakfast meeting this Thursday, March 3rd:
One Man's Journey to the Supreme Court: Sturgeon v. National Park Service
Featuring: John Sturgeon (NGP Photo; see our background piece here)
Dena'ina Center, Anchorage
RSVP by calling 907-276-0700 ext. 6
From Our Mid Atlantic Energy Consultant Friend:
1. Marathon Oil followed the trail of other major oil producers in issuing stock to “strengthen its balance sheet” (and yield to the whip of the credit rating agencies). Make no mistake, Marathon can probably use the money in these tough times…. What CEO would issue stock in these circumstances without a gun to his head? It says the debt markets have functionally closed up. That fact, in turn, tells us that the bond markets are betting low Energy credit markets are here for an extended period. Certainly Moody’s has been saying that every chance it gets.
2. Of course, the bond markets are not completely closed to Energy companies, especially for a company that has a better credit rating than the US government. Following getting a negative indication on its AAA rating, Exxon wasted no time in getting to the bond market for $12 billion in bonds. According to the story, though, XOM paid a rate considerably higher than it would normally, given its rating. This is consistent with an article we sent out last week. The Energy companies are paying a premium for their industry.
3. Speaking of issuing stock, Saudi Arabia threw up a trial balloon not long ago about Saudi Aramco issuing stock in an IPO. Such an issuance would not involve issuing stock involving its producing arm, due to monstrous disclosure issues. But it could involve their downstream or gas processing facilities. …probable in our mind that Saudi Aramco will come to the market for capital in the near future.
4. Production is starting to fall, after cutbacks in drilling have finally fallen below the capex that would replace decline. The Street sell-side analysts are no longer beating on companies that do not promise solid year-over-year growth. However, the capitulation is not yet complete. The producers are operating in such a way as to be able to ramp up quickly in the event of a rebound, and there is still a massive amount of money on the sidelines looking to buy cheap assets, which would have to be put to work quickly to justify the move.