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"The second quarter is going to be devastating for the service companies," warns Conway Mackenzie - the largest U.S. restructuring firm - adding that, despite slashing thousands of jobs, delaying (or scrapping) billions in capex amid the prolonged rout in oil prices, "there are certainly companies that are going to die." As Bloomberg reports, oil drillers will begin collapsing under the weight of lower crude prices during the second quarter and energy explorers who employ them will shortly follow with oilfield-service providers are facing a "double-whammy." As we noted here, there are more than a few candidates for this 'death' list as it appears increasingly clear that what was considered an "unambiguously good" narrative for the nation is anything but...

As Bloomberg reports,

Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy.

 

Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter, Young said Thursday.

 

“The second quarter is going to be devastating for the service companies,” Young said in a telephone interview from Houston. “There are certainly companies that are going to die.”

 

Oilfield-service providers are facing a “double-whammy,” he said. Even as oil companies are demanding 20 percent to 30 percent price reductions, they’re also extending wait times before paying their bills, enlarging cash-flow gaps for the drilling and equipment firms, he said.

 

...

 

The amount of projected 2015 oil and natural gas output a company has hedged is a strong indicator of whether they’ll be able to pay their bills, he said. Another important metric is how much is drawn on revolver loans, Young said.

 

“I’m telling them they really have to keep an eye on this stuff and you’ve got to be the squeaky wheel,” he said. “You’ve got to start filing liens if you see a company starting to go down.”

*  *  *

Wondering who is top of the list? As we detailed previously, there are plenty...

Readers will be most interested in the "restructuring/bankruptcy" option, most applicable for Group 4, because these are the names which,  all else equal, will file for bankruptcy first.

This is what Goldman's Jason Gilbert has to say:

We believe oil market weakness presents H&Y E&P management teams with difficult decisions. For certain stronger companies, the challenge may be one of deciding if and when to high grade the portfolio through M&A. For some weaker companies, the decisions may be more stressful, with many lower-quality names being forced to consider (1) selling themselves, (2) restructuring/filing for bankruptcy protection, and/or (3) bolstering liquidity through asset sales and/or second lien debt issuance.

 

We have created a 2x2 matrix, shown in Exhibit 1, where we classify E&Ps according to both asset quality and balance sheet strength. In Exhibit 2, we provide the backup data on each company that justifies its classification in the chart below.

The matrix in question:

Group 4: Weak balance sheet/weak assets

This group includes companies with leverage above 2.5x and assets we rate “B-“ or lower. Names we highlight are Approach Resources (NC), Exco Resources (NC), Goodrich Petroleum (NC), Halcon Resources (IL), Magnum Hunter (NC), Midstates Petroleum (NC), Rex Energy (NC), Sabine Oil & Gas (U), Samson Investment (NC), Sandridge Energy (IL), and Swift Energy (U).

 

We view management teams in this group as facing the most difficult decisions. Given the general lack of “core” assets, we believe strategic interest from a larger acquirer is less likely than for Group 3. Furthermore, with the bonds in this group generally trading below $80, we believe 101% change of control provisions act as de facto “poison pills” for acquirers. 

 

Given high leverage and the lack of strategic interest, we believe many companies will need to seek alternative sources of capital. While the options here will vary case by case, we note that most of these names have secured debt baskets that can be used to bolster liquidity. Based on the phone calls we receive, investor interest in this type of security remains high, which suggests to us we will see robust second-lien issuance as soon as the conclusion of 1Q earnings. The bottom line is that, for now, we think investors should tread lightly in this group, despite the average bond yield of 19% (excluding obviously distressed names Swift Energy, Samson Investment, and Sabine Oil & Gas).

*  *  *

As Conway McKenzie's John Young concludes:

"When I saw WTI hit $65, I thought we’re going to be really busy with restructurings,” Young said. “When it hit the $40s, I knew we were looking at outright liquidations."

But if it walks like an idiot, and talks like an idiot...?

h/t @RudyHavenstein

With President Obama shunning Bibi and cutting short his India trip (along with Michelle) to meet new Saudi Arabian King Salman (dementia and all), we thought this cartoon summed up the relationship between America and its oil-exporting ally...

h/t ForexLive

PAX South is going on right now, and two of our most honey-loving sugarbears are in the fray as we speak, lapping up all that sweet golden joy. One of the games they're set to check out is Nicalis's Castle in the Darkness, a 2D action game that features a baby being eaten by a giant plant. Oh the humanity!

Nicalis was spilling the beans about that title and many of their other projects at their PAX South panel when all of a sudden, one of the attendees noticed a folder marked "Cave Story 2" on the Nicalis laptop. When asked about if Nicalis is working on a follow up to one of the most beloved independently produced videogames of our modern era, they reportedly responded "maybe, maybe not". 

I'm a huge fan of Kero Blaster, the latest game by Cave Story's creator. but there is no denying that Cave Story is still Daisuke Amaya's greatest game. In the times that I've asked Nicalis and Amaya-san if they would consider a developing sequel, they responded with a mix of hope and anxiety regarding the prospect, much like your average Cave Story fan might. As it stands, Cave Story is nearly perfect, and following perfection is no small feat.

If anyone can do it though, it's Amaya-san. I think I can speak for his fan base when I say that any new Cave Story would be better than no new Cave Story. 

Nicalis panel at PAX South leads to Cave Story 2 speculation [GoNintendo]

Earlier this week, our president, Barack Obama, added to the dignity of the office of the president by sitting down for an interview with a clutch of YouTube personalities:

(CNN)In his continuing effort to connect to a younger audience (like the time he went on ‘Between Two Ferns’), President Barack Obama sat down with, and took questions, from three YouTube stars: GloZell Green (3 million followers), Bethany Mota (8 million followers) and half of the vlogbrothers (2.4 million followers).

Not being a tween, (or suffering from a clinical mental impairment) I hadn’t heard of any of these people. Here is a rundown:

Bethany Mota–

[S]he rose to fame for her haul videos, in which she shows her fashion purchases via the internet. She uploads videos of outfit ideas, makeup and hair tutorials, recipes, and do it yourself ideas. She has since expanded into her own fashion line at Aéropostale. She has gone on multiple tours, which she calls her “motavatours” to meet and interact with fans.

GloZell Green–

Green established her YouTube channel in 2008, with video interviews, comedy about her life and song parodies. As of August 2014, the channel had accumulated more than three million subscribers and more than 500 million total views.[7] By the same month, six of her individual videos had each been viewed more than 10 million times, such as her “My Push up Bra will help me get my man” video (23 million views)[8] and her cinnamon challenge video (40 million views).

VlogBrothers–

The Greens state that their vlog has no consistent format: “Really, it’s not about anything in particular. Whether we’re talking about our lives, making each other laugh, or trying to get something more important across, people seem to enjoy it.”[1][2] The channel passed one million subscribers on March 5, 2013.[3]

The fans and supporters of VlogBrothers are known individually as Nerdfighters, and collectively as Nerdfighteria. Subscribers of the brothers on YouTube are the base of the online community Nerdfighteria. The Green brothers encourage their viewers to become a community by creating websites and various projects, like the Project for Awesome,[4] to involve their subscribers.[5][6]

Now let’s juxtapose

President Obama will not meet with Israeli Prime Minister Benjamin Netanyahu in March when he travels to the United States, CBS News Senior White House Correspondent Bill Plante reports.

And this:

“There are things you simply don’t do. He spat in our face publicly and that’s no way to behave. Netanyahu ought to remember that President Obama has a year and a half left to his presidency, and that there will be a price,” he said.

What happened here was that the President of the United States has declined to meet with the prime minister of our only ally in the Middle East. He did this because Netanyahu hasn’t been helpful in the cause of selling Israel out to the Islamic fascists who rule the West Bank and Gaza. And because of that the White House has been meddling in domestic Israeli politics as well as lying to Congress about the Iranian nuclear threat. On the other hand he has time to meet with a woman who stuffs condoms in her nose and eats cereal from a bathtub (this is not a hit on Ms. Green, I’m sure she’s funny and, though a Ron White fan myself, I’d have the same critique if Obama was sharing cigars, bourbon, and X-rated jokes with Mr. White. And in Ms. Green’s defense, she has been hard on Obama on several issues.)

The post Obama meets with YouTube kids but refuses to meet Netanyahu appeared first on RedState.

Lars Andersen has mastered ancient archery techniques allowing him to quickly fire arrows while performing various stunts. Archery trainers hate him.