Decline rates
Posted: 23 Feb 2016, 23:30
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Conventional oil clearly has. Investors will be spooked by what has been happening more recently, but will simply factor in a higher rate of return for the higher risk.adam2 wrote:I consider it possible that oil production has already peaked, and that investment will slow the rate of decline rather lead to an actual increase.
It will be the banks that will be doing the supply of capital, John.johnhemming2 wrote:Prices will come back up and then people will invest.
They may organise things but behind this will be investors. Schemes normally have a portfolio of finance where the lower risk lower interest elements are funded by the banks then you have bonds and following that equity.raspberry-blower wrote:It will be the banks that will be doing the supply of capital, John.
BP is down a lot, but no shirts have been lost by equity holders. Any bond holders are OK and the banks are OK.raspberry-blower wrote:The banks and investors are currently losing their shirts following the collapse in commodity prices
I would expect people to see energy investments as more risky and therefore look for a greater return.raspberry-blower wrote: Time will tell on this...
BP is at the top end of the pyramid. It recently had a credit downgrade which I linked earlier in the thread. The significance of this has totally passed you by, John.johnhemming2 wrote:BP is down a lot, but no shirts have been lost by equity holdersraspberry-blower wrote:The banks and investors are currently losing their shirts following the collapse in commodity prices
Bond holders of whom? If you referring to BP alone, then a far more relevant question is: Are they happy in the way the company is being managed?Any bond holders are OK and the banks are OK
Bloomberg: Biggest wave yet of US Oil Defaults loom as bust intensifiesWolf Richter wrote: This is an increasingly steep cliff, with the largest portions due in the later years of the period, including $400 billion to mature in 2020, the highest amount of rated debt ever to mature in one year.
And near term? Moody’s Senior Analyst Tiina Siilaberg warned that there would be “a significant wave of new issuance in late 2016 and 2017.” At the worst possible time – because “a range of macroeconomic factors will make it more difficult for lower-rated companies to tap the debt capital markets in order to refinance their debt obligations.”
Are you sure all bond holders are ok, John?Bond investors aren’t likely to recover much money from oil and gas companies that default. Standard & Poor’s estimates, for example, that Energy XXI’s and SandRidge’s unsecured noteholders will receive, at most, 10 cents on the dollar.
Banks are setting aside more money to cover potential losses on souring energy loans. S&P estimates that credit lines to these companies could be cut by 30 percent by April, when banks conduct one of their twice-yearly evaluations of their loans.
"We are at the very beginning of the next wave of energy defaults," said Paul Halpern, chief investment officer at Versa Capital Management, which manages about $1.5 billion of distressed debt.
Bond holders are last in line - the whole basis of investment , well money itself, is based on trust. Once bitten investors may be wary to re-enter the fraywould expect people to see energy investments as more risky and therefore look for a greater return
Equity holders are last in line.raspberry-blower wrote: Bond holders are last in line -