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I wouldn't broad brush the effect on oil. note that O&G companies with heavy reliance on US production r up on Trump's election. That is solely because the EPA regulations on water and gas emissions will get sent to the nether regions of those that put them in place
i c u and raise you 2
OPEC Warns Oil Prices Will Stay Low for Longer
http://www.wsj.com/articles/opec-says-non-opec-supply-to-fall-until-end-next-year-1478589646
Oil Market: It Could Turn Bloody, Again
http://www.forbes.com/sites/panosmourdoukoutas/2016/11/06/oil-market-it-could-turn-bloody-again/#268d6706ffea
the Forbes speculation about oil heading into the $20s seems a bit ludicrous. If that were to happen it would refute all the happy talk from some quarters about how great the economy is.
i think the comment in your linked WSJ story about producers being addicted to producing is spot on. Too many producing & exporting countries with domestic/regional problems that need the revenue.
the WSJ story linked above has what i think are some logical flaws, principally: if OPEC acknowledges that the response to higher OPEC production wasnt as they expected, why does their new batch of prognostications have merit?
My sense from the oil services side is that things are not getting better.
Great. Thx. My concern was whether the divvy would factor into the exchange. Quite content with how things have worked out (I sold my GE with small gain when HAL deal collapsed and bot BHI with the proceeds).
I c plenty of belly-aching from both GE and BHI holders but looks like a good deal for both companies over the long haul.
will newco be created with 1128M shares (=423M/0.375; the 423M being BHI's share count), 423M going to BHI holders on 1:1 exchange and 705M going to GE?
BHI/GE stock question
does anybody have an idea of how GE is going to acquire its 62.5% of BHI or 'newco'? I understand how 62.5% of 'newco' is easily obtained if they simply create new shares of 'newco' but then there has to be an exchange rate for BHI to 'newco' shares and i don't see any mention of specifics behind the share exchange. Maybe i'm a bit clueless but i know i'm not alone in the lack of understanding.
thx
charlie
apparently, my comment about being written in mud as soon as the HAL deal collapsed was closer to the mark than i expected.
http://www.bloomberg.com/news/articles/2016-10-31/ge-baker-hughes-started-with-e-mail-as-halliburton-deal-died
also explains some rumors about M&A folks continuing to linger around BHI after the HAL deal collapsed.
on slide 15 of GE's presentation WFT has a lot fewer filled dots than everybody else and I think those that are filled were done so charitably. Once upon a time WFT was strong/dominant in testing services but that's become more crowded. I was never impressed with the limited range of chemistry related services and equipment that i was exposed to.
I suspect that part of the reason why WFT had strength in those areas was entirely legacy based rather than due to technical superiority. In the oil industry, many folks care more about relative differences rather than accuracy and technology improvements. So clients stay married to an original service provider because the client believes that the service provider's procedures remain constant and are operator independent. The former is usually true but the latter isnt and the folks that set rules seem to be oblivious to that fact (this seems to be an industry constant).
The recent prolonged market depression could displace some of the client/service provider relationships. Unfortunately, i suspect many of the antiquated procedures will survive. Changing procedures once formally adopted is a serious problem. If these companies cant optimize low-skill operations like their supply chain systems (amazingly, this is true even now), then replacing an engineering procedure is like trying to level Mnt. Everest. That's a bit of tangential rant but GE might have an advantage in this respect because they dont have an ancient, entrenched oil & natural gas operation.
WFT also has a relatively enormous debt load although only ~$600M is due in next 2 yrs.
the water business never made sense to me. Seems like low margin business. I suspect GE will still have some water related activities related to hydraulic fracturing and water-reuse in hydrocarbon extraction but it wont involve building and selling clean-up units.
one thing i forgot to add earlier - this deal does not bode well for Weatherford but otherwise i agree with your comment about strengthening the services sector.
i'd bet on eventual spin-off similar to the SLB spin-off of Sedco-Forex into Transocean, however, it could be 10 yrs down the line. Conversely, if this JV was managed adroitly, GE could create an entity that could surpass SLB. I'd quibble with some of the 'best-in-class' stuff attributed to BHI but with effective integration with GE's research folk and facilities, BHI could actually be 'best-in-class'. The million $ question is whether GE and the combined entity are too ponderous to realize the opportunity. If the JV is successful then i would bet on eventual absorbtion of the JV within GE, however, i think ponderous will win out. One thing that never ceased to amaze me is how salaries & benefits could be so high for many oil-industry personnel (principally supply chain) who could easily be replaced by Walmart stockers. The Walmart stockers would do a better job yet the oil-industry folks keep their jobs. The technical side of the oil industry usually gets all of the attention but the supply-chain, manufacturing, and HSE sides can kill technical superiority, efficiency, and R&D.
Baker Hughes and GE to Host Investor Webcast Monday October 31 at 8:30 AM ET
http://www.businesswire.com/news/home/20161030005051/en/
trick or treat
Recognized.
Another personal prognostication: after ~100 yrs of failures in peak oil calls, people with tendencies to calling the fall of oil will now shift to 'peak consumption'
this will eventually occur; however, like 'peak oil' it will occur much further out than has been called.
I do think that China is likely to shift heavily towards nuclear. The curves in the article u linked will cross again but I'd b the last person to run out and buy uranium mining stocks.
the speculations that BP's GAB wells could produce Macondo-like hazards to near shore aquaculture and fisheries are completely fallacious. 1. The closest of BP's exploration wells is about 200 km offshore (>2x the proximity of the Macondo well) and 2. the currents there would sweep any spills to the east and the nearest land in that direction is about 300 km.
The weather and currents would potentially pose problems but as links below show, folks have been drilling in the Bight for ~50 yrs. Most of those wells were much closer to land and the local human populations
http://www.petroleum.statedevelopment.sa.gov.au/frequently_asked_questions/Petroleum_Exploration_in_the_Great_Australian_Bight
http://www.ga.gov.au/scientific-topics/energy/province-sedimentary-basin-geology/petroleum/offshore-southern-australia/bight#heading-5
this link seems to indicate that BP's GAB plans have been on the political rocks for a while
http://www.offshoreenergytoday.com/bp-files-second-plan-for-great-australian-bight-drilling/
OT: apparently John Podesta thinks GMOs cause migraines
https://wikileaks.org/podesta-emails/emailid/4208
i lean toward skepticism but part of the point was that russia is a crap shoot - logic and coherence at a national level dont apply. there's lots of 'winging it' at lower levels which has chaos as its only predictable result.
i'm not a field guy so i dont know how true that claim is but one of my former interns worked at a production base near the arctic circle in central russia and one day in 2009/2010 almost the entire base was fired which has a tendency to shut things down. There was no local preparation for the shutdown so i'd bet the consequences werent pretty but it's not like they havent done such things previously.
Conversely, operations run by western companies probably have budgets set in $US or euros and much of the product is sold in $US while much of the costs are in rubles so combined with the maintenance costs i suspect that there isnt a strong impetus to curtail production.
And it may come back for a 2nd run
how much of that $500B to $1T are interest payments on US debt held outside the US?
capital expense budgets will also be pretty much set in stone by November so it's not like western oil companies are going to ramp up exploration & development in anticipation of something that might happen. I think that factor plus the fact that Saudi Arabia didnt immediately rain on the parade is why Brent jumped but i doubt if this is the onset of a spike to >$60. Will need economic growth in the US, Europe, and SE Asia considerably better than 1-2% to see that happen.
That magnitude of a production cut across OPEC is meaningless. Larger cuts could be realized by civil strife continuing or materializing in several countries.
There's plenty of lawyers that would be better employed defending looters and murderers in places like Charlotte NC and prosecuting and defending HRC
Saying that if we want to preserve our income we have to hire a lawyer is absurd. That's why some of us would be happy with a flat tax and everybody paying income taxes. If Buffett wants to pay more, he can send a fat check to the IRS anytime he wants. He hasn't so he should stop suggesting that others pay more. Same for Hillary.
I am trying to change the law but there are far too many folks who like free stuff and not paying taxes.
BTW my family has utilized rather expensive tax lawyers and it was indeed worthwhile, however, tax laws have NOT always been this complicated nor onerous. Tax law that allows Bill Clinton to deduct $5 a pop for his used undies is a stupid tax code.
From the link Dew posted
"The former secretary of state would exempt the first $3.5 million of an estate from taxes—compared to the current $5.45 million exemption. She would impose a 45% marginal rate on many estates with assets between $3.5 million and $10 million."
her plan lowers the exemption and increases the rate. My father was a lawyer who did trust/estate law and one of my brothers is a lawyer (although not estate/trust). The fact of the matter is that her plan DOES affect businesses and families who are NOT extremely wealthy. There is a large section of the country - which obviously doesnt vote for democrats (with the exception of Iowa for some strange reason) who own family businesses - called farms - many of which would be broken up under Clinton's plan. That already tends to happen but her plan would exacerbate the problem.
PS your suggestion of contacting an estate lawyer further illustrates jbog's point and one of great annoyance to those that are not extremely wealthy but will be affected by Clinton's yet another redistribution scam. Why should folks constantly have to run off to tax lawyers in order to preserve our business. It's anger over things like that which have begotten Trump. I'm not a Trump fan but I am a very angry white guy with a PhD who is tired of democrats bankrupting everybody that tries to make an honest living.
i'll 2nd jbog's response and note that your comment
satan with a grandpa suit and a smile. how's that for a better description?
my magic 8-ball says that fate of HES stock price will be strongly affected by election outcome because a large fraction of Hess's production is from Bakken with another non-trivial fraction from the Utica. If Clinton is elected i suspect the EPA will go hog-wild on emissions and water regulations. Many of these new rules have already been drafted and the default is that they will be adopted. While there's no guarantee that Trump wouldnt quash those rules he's the only chance that those rules wont come into effect. Pipelines would enable some of the emissions problems to be solved but we've already seen how that game plays out.
PS: i dont see an imminent rebound of oil prices to $55+ and if that did happen, all oil industry stocks will go up so why pick one that is so heavily dependent on US production that isnt from Texas (where the gods of logistics and environmentalism have smiled upon producers)?
probably not. Reuters had a story 1-2 days ago about VZ trying to roll over $7B in 2017 bonds using CITCO as collateral. At least one bond rater says that would amount to default.
from the land of slow learners
http://www.reuters.com/article/us-venezuela-pdvsa-contract-idUSKCN11R1NY
Venezuela PDVSA awards $3.2 billion oil service contracts, protest brews
i wouldnt count on it. Uranium is nearly bottomless. While i wouldnt be shocked if the Chinese (and possibly India) end up going strongly nuclear for electrical power generation, that does not mean that U ore prices would necessarily follow. U ores are readily accessible in many countries. So while hype-based speculation could drive prices up in response to a ramp up in Chinese nuke power plant construction, it would be short-lived. In addition, given the waste problems, I wouldnt be surprised if more countries dont start going with different reactor designs that utilize the 'waste' as fuel. With existing designs, most of the fuel is not 'consumed' but it costs more to 'recycle' the fuel so nobody bothers (the cost aspect is arguable; it's a matter of who is paying).
The money to be made in the nuke power industry is everywhere but the raw fuel.
thx. yours is a reasonable argument but i suspect the emotional, irrational arguments of the anti-mega company, anti-MON, anti-GMO folks will win out. Those folks are now pervasive in most western European and NAM federal governments in both regulatory and elected positions.
what's your logic for the a nix on the Dow/DD merger being bullish for the MON/Bayer merger?
yup. happy days (being sarcastic).
some US producers are starting to hire and service companies are hiring for various horrible places to live but it appears that service companies are still trimming staff. The article u linked somehow translated 10000s whacked in the 2nd qtr 2016 to 10000s over the entire last 2 yrs. The correct number is somewhere in the neighborhood of 400k and that's a conservative estimate.
I'm getting whiffs of a lot of private equity companies sniffing around to buy assets and smaller producers. I still think we're past the bottom but it's beginning to feel like the 1980s early 1990s when US oil industry employment was very depressed.
"Aren't car loans lower in dollar amount than home loans? You pretty much always need a dry place to sleep but you can bike or take mass transit with no car"
While I don't disagree w your point, for much of the US, including many large cities, biking and mass transit r not options.
As for some people's home loans/rent being more than their car loans/leases: I'm not so sure. 2 days ago I was standing between 2 people having a conversation that involved their work and what they were doing. Then one walked out and climbed into a late model Cadillac Escalade. I might have some prejudices but I'd bet from the speech and type of work being discussed that the individual couldn't afford a mortgage payment much less a loan on a Toyota Corolla yet he sure seemed comfortable with the Escalade.
I hate criminals (indicted or not) and chronic liars and I think I'd be better presidential material than any of the major candidates so by that measure - I guess the answer is yes.