Oil Field Services (Not Out of the Woods)

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It has been a bloodbath for the midstream segment of the oil and gas industry the past two years. With oil mired in the mid-40s and talk of peak supply, "It is now consensus that global oil markets will swing into surplus in 2018 and the burden of proof that this will not happen lies with the bulls," said Morgan Stanley analyst Ole Slorer. Others are calling oil to $30. Ruh roh.

News for the Week of 10/30/16

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“It’s not like it was 30 years ago, but it’s a good mall”...

  • Athleisure - Lululemon, Nike and Under Armour had all killed it in recent years by focusing on athletic wear but the trend is in decline. Jeans may be making a comeback -- so long as they're not uber-cheesy, e.g., True Religion. Meanwhile, J.Crew recently announced a shift towards athleisure. Are they too late to the party?
  • More Under Armour. The Company reported down numbers this quarter, continuing to exhibit the effect The Sports Authority's bankruptcy has on its business. This holiday season will be make-or-break for a large number of retailers and may be watched closely by those who invest in malls...
  • "Dead Malls" - This really puts the disparity between "A" malls and "dead" malls in perspective: Schuylkill Mall in Frackville Pennsylvania filed for bankruptcy this week. Anchor tenants: Bon-Ton, Dunham Sports, KMart, Hess's, and Sears. The latter three closed in the last 24 months, contributing to a "large vacancy rate."
  • Fund Raising: Oak Hill Advisors raised $2.7b for its second distressed fund while Carlyle raise $1.5b for another distressed fund. Clearly folks are prepping for increased activity.
  • Last Week: To quote renowned bankruptcy expert, Keanu Reeves Esq., "Whoa". Last week we discussed the historic Saudi Arabian debt issuance in our piece about "yield." This week, a Saudi official noted that the country's continued busted budget deficit could lead to sovereign bankruptcy within a few years.
  • Last Week Part II: That Ryan Kavenaugh dude has nine lives. It looks like Relativity Media will avoid a Chapter 22 filing (or liquidation) in light of its announced $250mm sale to some Singaporean sucker. Clearly its the Netflix streaming rights that proved compelling given the whopping ~$6mm intake on "Masterminds."
  • "Captain Obvious" Headline of the Week: "Bankruptcies in Oil Field Services are Accelerating."
  • Chart of the Week: To put this in perspective, as recently as 2010, only three states had at least a 10% wind share. Think about that in the the broader oil and gas context: this energy downturn is not just debt-related. We are looking at the broad-based beginning of a secular decline. 

What the Pros Say (Week of 10/30/16)

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