In 2008-09, when the oil price fell from above $147 to below $33 before rebounding, the median borrowing base for oil companies dropped by only 17 per cent, according to Fitch.
Instead of withdrawing credit, banks could push for improved terms, including higher fees.
The financial strength of US exploration and production companies varies widely, and the ones that are more exposed to the oil price, have drawn down more of their credit lines and have hedged less of their revenues with forward sales and options, are those most at risk.
The only company Fitch identified as showing warning indications in all three of those areas is Kodiak Oil and Gas, a producer in the Bakken shale of North Dakota, which has already accepted a takeover offer from local rival Whiting Petroleum.
Linn Energy, Breitburn Energy and offshore oil producer Energy XXI are among the companies that have less than half of their revolving credit facilities still unused and available, while Clayton Williams was one that had hedged less than half its production for next year, according to Fitch.
Heavily indebted US shale companies are facing financial pressure as a result of the fall in the price of oil but may find their lenders are inclined to "go easy" on them, according to Fitch, the rating agency.
The 40 per cent fall in crude prices since June has raised fears that liquidity could dry up for companies with the greatest debt burdens.
However, Fitch argues that, as in the previous oil price crash of 2008-09, banks are likely to show forbearance rather than pushing many companies towards restructuring or bankruptcy.
"We still think there's going to be a continued flow of credit," said Mark Sadeghian of Fitch.
"Are the banks going to be the ones that push creditors to the wall? We don't think so."
The US shale oil boom of the past five years has been led by small and midsized companies, which have generally spent more on drilling wells than they have earned in cash from operations, meaning that they have needed to finance themselves externally, typically with debt.
High-yield bond issuance by exploration and production companies increased from $2.5bn in 2003 to $27.7bn so far in 2014, according to Dealogic.
The average net debt of the leading US oil and gas exploration and production companies rose from $981m in 2005 to $2.46bn last year, according to Bloomberg data.
Bank lending to smaller oil companies is usually linked to a borrowing base representing the value of the company's oil and gas reserves. When the price of oil drops, the value of those assets also falls, meaning that companies' borrowing limits will be constrained.
The borrowing base is typically assessed twice a year and if lending to the company exceeds the limit then it will be cut back.
However, banks have some discretion in assessing borrowing bases, such as the oil price assumptions that they use, and do not have to insist on immediately using the lower levels after crude has fallen.
In 2008-09, when the oil price fell from above $147 to below $33 before rebounding, the median borrowin
Wow, most drug addicts bought way cheaper than the low.... I am surprised you paid so much!
enown Hugh A 2. Issuer Name and Ticker or Trading Symbol
Energy XXI Ltd [ EXXI ] 5. Relationship of Reporting Person(s) to Issuer (Check all applicable)
_____ Director _____ 10% Owner
__ X __ Officer (give title below) _____ Other (specify below)
Executive VP, CAO
(Last) (First) (Middle)
Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1.Title of Security
(Instr. 3) 2. Trans. Date 2A. Deemed Execution Date, if any 3. Trans. Code
(Instr. 8) 4. Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5) 5. Amount of Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 3 and 4) 6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V Amount (A) or (D) Price
Common Stock 11/28/2014 I 8700 A $5.10
If you want to put $100k bucks into silver then AG deserves a 10k allocation...great reserves...I prefer PAAS...but I do own AG
We will be left with 200 million ounces of silver which the owners will be not taking profits on at any price. The bullion in private hands I calculate will be the first to take profits, but Silver Eagle holders will hold for the long run. I still believe that Silver Eagles will do the best investment-wise and I will not be surprised that at one point the Eagle price will trade much higher than the price of silver in a bubble mania.
I am a fanatic silver believer and what I write is only my private belief. There are not many believers in silver. Just look at CNBC, the newspapers, other media, and gold investors. Hardly ever a good word on silver. Silver for them is a forgotten metal. One day they will be shocked when the shortage of silver will come and the price will go up and then gold will be a forgotten sister. There is more gold in the world than silver, so parity in prices is a must.
I think Ted Butler spoke the truth in a recent speech he gave: “The supply/demand set up in silver, which has evolved over an incredibly long period of time, has been one continuous process promising to culminate in an explosion in price at some point. Quite simply, we are rapidly approaching that defining moment when there just won’t be enough physical material to go around at anything but rapidly escalating prices. Those escalating prices will encourage and drive others, including industrial consumers, to enter what should become a buying frenzy. Superimpose upon that the sudden destruction of a decades-old downward price manipulation and you have all the necessary ingredients for a price event that will be referred to forever.”
The Silver Shortage Will Come
Based on the supply and demand situation of silver, it’s only a question of time when a silver shortage will come. Nobody can predict exactly when this is going to happen, but we have more and more signs that those who control the price of silver are sweating to balance the supply.
The biggest question I have is, will the shorts be successful to cover their short position on time? Right now the CFTC seems to want to force all the manipulators to get in line by making them obey new rules of position limits, but I feel that the banks who are the big shorts will be exempt. Mr. Butler thinks that the CFTC will do the right thing, but I am skeptical. We argue about this a lot, as we both have strong opinions.
If the banks will not be forced to cover their short positions, only a true shortage in silver will bring the right price. Be prepared for that to happen. How much will silver be worth in a shortage situation? It’s tricky to calculate, because a real shortage has never happened in silver history. But it is how you must think. My own thoughts go back to what some things cost during and after World War II in Europe. When there is not enough of something is when you see real crazy prices.
So I will give you my calculation. It will be a gradual explosion of prices and slowly the users and the new investors will eat up the world visible silver, which today is around 500 million ounces. In my calculation the first 100 million ounces of visible silver will disappear at a price of $60 to $100 an ounce. The second 100 million ounces will disappear by $250, and the third 100 million ounces will disappear between $250 and the price of gold ounce for ounce.
Is Seadrill’s Dividend Safe?
By Ben Levisohn
Morgan Stanley’s Ole Slorer and Jacob Ng don’t think Seadrill (SDRL) will cut its dividend but acknowledge that the risks that it will are growing. They explain why:
Despite high leverage, we still believe in Seadrill’s ability to bridge a funding gap via asset backed financing, Seadrill Partners (SDLP) dropdowns, and other corporate transactions. Meanwhile, Seadrill’s contract backlog continues to provide cash flow visibility that could tide it through near-term rig market weakness. However, we now model for a flat dividend through 2016 vs. our prior expectation for dividend growth of $0.01 per quarter past 2Q15.
The cracks are appearing and the floodgates will soon open.....Gold is going to US$5k an ounce and then MUCH MUCH higher
The Dutch central bank has secretly brought a large chunk of the European nation's gold reserves held in New York back to Amsterdam.
In total, 120 tonnes of gold valued worth nearly $5 billion were brought back to the Netherlands by ship in what according to some accounts resembled a military operation carried out over months.
The central bank decided to bring some of its gold reserves back to the Dutch capital to ensure a more even spread of bullion, the bank said in a statement.
De Nederlandsche Bank said it has changed its allocation policy from 11% in Amsterdam and 51% at the Federal Reserve in New York, 20% in Canada and 18% at the Bank Of England to an equal 31% shares between the DNB and the Fed. The Ottawa and London holdings are unaffected.
According to the World Gold Council’s latest data the Netherlands has 612.5 tonnes of official gold reserves (roughly 50% of total reserves), worth some $23.5 billion.
Then in June diplomats seemed to give up on the endeavour altogether removing a possible irritant in US-German relations
The Dutch seems to have been much more successful in their attempts to repatriate bullion held in New York than the Germans, which has reserves of 3,387 tonnes, second only to the United States.
Throughout histroy Gold has been considered a store of wealth. Paper currencies fail, gold never does. There is no paper currrency around today that was around 500 years ago. Gold has been used as currency ever since mankind dicovered it.
The Euro, for example has little chance of being around in ten years time. The dollar is worthless and is being propped up by a totally corrupt administration...The fall is as certain as death and taxes.
The chances are that it will be defeated....But that really is not the point. The point is that bit by bit, those who are wis erealize that we are on the edge of the collapse of paper moeny.
And all we see is
A heap of broken images, where the sun beats,
And the dead tree gives no shelter, the cricket no relief,
And the dry stone no sound of water. Only
There is shadow under this red rock
(Come in under the shadow of this red rock),
And I will show you something different from either
Your shadow at morning striding behind you
Or your shadow at evening rising to meet you;
I will show you fear in a handful of dust.
The Egyptian Empire rose and fell….Gold looked on, untarnished
The civilizations of the Incas and Mayans rose and fell…Gold looked on, untarnished
The Roman Empire rose and fell….. Gold looked on, untarnished
The Industrial Revolution came, the South Sea China bubble rose and burst…. Gold looked on, untarnished.
People then believed that Tulips were the answer…Gold looked on, untarnished
The Great Depression of the 1930s came and went, the Deutsche Mark collapsed, sparking WW2…. Gold looked on, untarnished.
The horror show of the Internet Bubble came and went …. Gold looked on, untarnished.
The criminal activities, both governmental and corporate, of 2001-2007 nearly drove the western economies to bankruptcy…. Gold looked on, untarnished
Now, when moral and intellectual bankruptcy is riding high, interest rates are at zero and there is nowhere left to turn as the economies start to falter… The Great Collapse awaits us …
And, as always, Gold looks on, untarnished.
It is note that it is paper with ink that is the problem ....the problem is that the hand that wrote, in ink, on the the paper was attached to a man with no moral or intellectual integrity.