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Can the Boom Continue?


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Despite the precipitous drop in oil prices, new companies are still finding the capital to exploit the shale:

 

http://www.bizjournals.com/houston/morning_call/2014/12/houston-energy-company-snags-220m-to-expand-in.html

 

And Southwestern Energy is still drilling the Marcellus:

 

http://www.bizjournals.com/houston/morning_call/2014/12/southwestern-energy-expands-in-marcellus-with-300m.html

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I think the real questions we need to ask about doom and gloom is exactly how much of our office space going up right now is purely speculation? How much of them have lead tenants, or are being constructed purely for a company? After the massing hiring spurs that have occurred, these companies still need more space right? How much have we really caught up with? How much is still left to catch up?

 

As for the Residential buildings (condos/apartments), how much more do we really need? I'd assume a lot, the units that came on this year haven't helped with rent prices. My place went up $100, did last year too. Year before that in our previous place it went up $300.

 

BP was going to lay off some people in a rumor I heard a few years ago after the Gulf disaster (downsizing their US operations). What other companies are not hiring? What companies are still hiring? Which companies have hiring freezes?

 

I know I'm optimistic but I haven't had this many job offers before in my life. I know I'm not directly in the oil biz, but tied pretty close to it.

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How low can oil go? Exxon CEO says it's prepared for $40 crude

Dec 3, 2014, 12:05pm CST

http://www.bizjournals.com/houston/news/2014/12/03/how-low-can-oil-go-exxon-ceo-says-itsprepared-for.html

Just shows that these companies are prepared for these type of situations.

 

I'm sure they are.  The top leadership in the oil industry were junior employees when the bottom fell out in the 80's.  It's kind of like how Vietnam affects the thinking of senior military officers today. 

 

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BP was actually upgraded today. Big companies like BP and Exxon will be fine. It's employees that could have problems, especially at service and manufacturing companies related to the energy industry. The Northwest side of the Beltway and the Energy Corridor are filled with service and manufacturing companies.

 

http://www.cnbc.com/id/102236082?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=102236082

 

Barclays upgraded BP to "overweight" and called for the company to slash production and fire employees in order to get costs in line after oil's drop. The firm lowered its Brent crude oil estimate to $70 a barrel for 2015. That's about where it was trading Wednesday.

 

 

 

Again, I don't think this is the end of the world but I do believe Houston will see a slowdown. 

 

I work for an energy related company and I am in a position to hire and fire. The contingency plan for a slowdown is layoffs. 

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Can't tell if you're fearmongering/spreading rumors or being gleeful that people will lose their jobs. :-/

This is from people in those companies. I'm not gleeful but a lot of people are in denial about the major impact the oil price will have on Houston and this is tangible evidence of its effects.

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Rumor is 40% of shell back office jobs to be cut

 

The fact is that for the large oil companies, more than 40% of the back office jobs have already been migrated to other parts of the world. US back office staffing is not that large these days. just do a search for shared service centers along with the company of your choice. Shell was one of the first to migrate jobs overseas on a large scale. After all, why would you pay an American new hore $65k to do transactional accounting when you can hire someone in the Philippines for $15k with the same skills.

 

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This is from people in those companies. I'm not gleeful but a lot of people are in denial about the major impact the oil price will have on Houston and this is tangible evidence of its effects.

 

Sounds like people in those companies are hearing rumors from around the water cooler. I could be totally wrong, and your friends may have legitimate credible information. Most companies, HR and upper management don't talk about layoffs with anyone until the layoffs are imminent. So I'll assume, if your friends have heard about it and aren't in HR themselves (which I'd assume you realize if they are in HR they can probably be fired for sharing confidential information outside of the company) then the layoffs will happen today?

 

I'm not going to be holding my breath.

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This is from people in those companies. I'm not gleeful but a lot of people are in denial about the major impact the oil price will have on Houston and this is tangible evidence of its effects.

Assuming you are gainfully employed, I would guess that you don't actually work in an oil company (unless you've been a hypocrite and decried the evils of private automobiles and oil while working for the Man this whole time), and have been hearing rumors from your buddies at the office from their friends at the oil companies. By this time, information has already been passed on at least 3 times or so, and given your own reputation for tending to miscommunicate information, there's little proof of what you're saying at all. 

 

If you're not being gleeful, we'll fall back on fearmongering, which makes sense and is also par for the course. Carry on.

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This is from people in those companies. I'm not gleeful but a lot of people are in denial about the major impact the oil price will have on Houston and this is tangible evidence of its effects.

 

I heard a rumor somewhere that Victor Trevino was completely innocent...and then he pled guilty.  So you never know about rumors...whether they will turn out to be true or false.  Usually it's best not to pass them around because then you look like a complete fool when they turn out to not be true.

 

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Not everybody's cutting back in the face of lower oil prices:

http://www.bizjournals.com/houston/news/2014/12/05/phillips-66-boosts-2015-budget.html

Chevron Philips is also looking at another $3B expansion in addition to Chevron Chemicals 110ac purchase on the grand parkway for their possible HQ. Motiva (shell/Aramco) is growing like crazy as well. And that's without mentioning Dow's massive expansion in Lake Jackson. Its easy to focus on solely the upstream side of things but far too many folks are forgetting what cheap natgas AND oil mean to the downstream guys.

In unrelated news, geico recently announced they were going to hire up to 500 more at their new Katy office.

I'm shocked that slick Vik doesn't so much as mention any of the above when he's preparing his honest constructive criticism of Houston.

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I'm shocked that slick Vik doesn't so much as mention any of the above when he's preparing his honest constructive criticism of Houston.

Don't forget his mission of "only spreading truth", then dumping a bunch of unsubstantiated rumors on this thread.  :rolleyes:

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I feel bad about saying this but there will be some pain. Rigs out in the oil patch are down 15% and new permits are down 40%,  That and the Bloomberg article calling bull on shale at<$80 is a good (bad) sign that some pain will come. I work in the field now, our work has slowed down a bit, and some people are starting to get worried. Not end of the world, but enough to  end the craziness of the boom for sure.

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Oh a slowdown is definitely upon us... Only the foolishly optimistic would argue that. The question is to what extent? We added 120k jobs oct 13 - oct 14... A 50% drop (which is a huge YTY decrease) still puts houston at 60k jobs. Whether or not that is the number I have no clue. What I do know is landlords have had all the leverage of late and that is about to change.

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Oh a slowdown is definitely upon us... Only the foolishly optimistic would argue that. The question is to what extent? We added 120k jobs oct 13 - oct 14... A 50% drop (which is a huge YTY decrease) still puts houston at 60k jobs. Whether or not that is the number I have no clue. What I do know is landlords have had all the leverage of late and that is about to change.

I agree on your last point

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Despite the precipitous drop in oil prices, new companies are still finding the capital to exploit the shale:

 

http://www.bizjournals.com/houston/morning_call/2014/12/houston-energy-company-snags-220m-to-expand-in.html

 

And Southwestern Energy is still drilling the Marcellus:

 

http://www.bizjournals.com/houston/morning_call/2014/12/southwestern-energy-expands-in-marcellus-with-300m.html

 

You are pointing to firms that are late to the game. Battlecat Oil & Gas LLC is simply riding on the coat tails of the Eagle Ford formation success. 

 

 

Look, forget OPEC. The reason this collapse in oil is happening is that the forecasted economic growth that was supposed to occur in Europe, Japan, China, India and many other places just isn't happening. There's been a gut of bad economic data coming out of these regions. The two bright spots in the developed world are the United States and the United Kingdom (with several other countries to a lesser extent). When the world looks terrible economically, the price is sure to go down, especially with the 3M barrels of American produced oil. There are several regions where another recession is either forecast to occur or is already taking place. China has been stuck at 7-7.5% annual growth for far too long which isn't great compared to its 9-10% growth rate last decade, Abe has been trying to reform Japan while tackling a large tax increase that has absolutely killed economic growth in Japan for several quarters now, and India is hoping that its new president will get them out of their slump as well. And with its horrid economic growth now, not even the great manufacturing base of Germany can bail out the rest of the EU. The EU is still walking a fine line between tepid growth and possible recession, thanks to the terrible policies of austerity. If any of these regions can start picking up again, then I am sure the price of oil will start picking up as demand increases.

 

 

Projects will be cancelled. How can't people see this? I'm not in a doom and gloom crowd as Slick Vik appears to be, but I feel like there are a lot of people in denial on this forum.

 

My forecast is that the Houston market needs this correction to take place. We need this market to become a buyers market yet again... for far too long have the landlords and sellers enjoyed this shortage of apartment units and housing here. The median price of homes skyrocketed in this city, with most of the growth occurring from the higher income segment of our population. In the long run, the fundamentals for this city are still great. We need a slow down every once in a while. The last thing we need is a bubble waiting to pop. And, as we are seeing now, the belief that this boom will last forever was just idiotic. What I worry about more now is shale oil related... how long these smaller companies will be able bare this lower oil price. 

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You are pointing to firms that are late to the game. Battlecat Oil & Gas LLC is simply riding on the coat tails of the Eagle Ford formation success. 

 

 

Look, forget OPEC. The reason this collapse in oil is happening is that the forecasted economic growth that was supposed to occur in Europe, Japan, China, India and many other places just isn't happening. There's been a gut of bad economic data coming out of these regions. The two bright spots in the developed world are the United States and the United Kingdom (with several other countries to a lesser extent). When the world looks terrible economically, the price is sure to go down, especially with the 3M barrels of American produced oil. There are several regions where another recession is either forecast to occur or is already taking place. China has been stuck at 7-7.5% annual growth for far too long which isn't great compared to its 9-10% growth rate last decade, Abe has been trying to reform Japan while tackling a large tax increase that has absolutely killed economic growth in Japan for several quarters now, and India is hoping that its new president will get them out of their slump as well. And with its horrid economic growth now, not even the great manufacturing base of Germany can bail out the rest of the EU. The EU is still walking a fine line between tepid growth and possible recession, thanks to the terrible policies of austerity. If any of these regions can start picking up again, then I am sure the price of oil will start picking up as demand increases.

 

 

Projects will be cancelled. How can't people see this? I'm not in a doom and gloom crowd as Slick Vik appears to be, but I feel like there are a lot of people in denial on this forum.

 

My forecast is that the Houston market needs this correction to take place. We need this market to become a buyers market yet again... for far too long have the landlords and sellers enjoyed this shortage of apartment units and housing here. The median price of homes skyrocketed in this city, with most of the growth occurring from the higher income segment of our population. In the long run, the fundamentals for this city are still great. We need a slow down every once in a while. The last thing we need is a bubble waiting to pop. And, as we are seeing now, the belief that this boom will last forever was just idiotic. What I worry about more now is shale oil related... how long these smaller companies will be able bare this lower oil price. 

 

This is going to happen and it's not exactly a terrible thing unless global demand is slow for many years. Houston will still have strong population growth that will require the supporting infrastructure and services. Workers from the oil patch will return to construction while oil prices are down helping to meet demand in single family. Hopefully in the future the LNG exporter capacity will spur the world to move to nat gas (it certainly seems a lot of the major are setting themselves up for this) along with the downstream side of the O&G in general. Houston is a global city that requires growth to fuel a large manufacturing and exporting base that will hopefully also learn to invest in education and luring more VC investment into Houston (bio and/or nano tech hub). 

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Projects will be cancelled. How can't people see this? I'm not in a doom and gloom crowd as Slick Vik appears to be, but I feel like there are a lot of people in denial on this forum.

No one has said that projects won't get cancelled. In fact, there was a discussion earlier that the bust has already set in when giant grandiose plans get drawn up (circa 2008, it was the Hardy Yards redevelopment and the Astroworld redevelopment). Development will definitely slow down, but unless things go seriously south (like worldwide depression), things won't be like in the 1980s. While the suburbs will continue to extend their reach, we won't see anything like "neighborhoods get permanently damaged" like Gulfton or Sharpstown or something. Older multi-family developments, for instance, will likely stay as-is, instead of being wrecked for denser, nicer structures (boom) or become shitholes (bust). Oil companies likewise won't be firing people en masse, just not hiring as much.

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