Upload
coy-davidson
View
212
Download
0
Embed Size (px)
Citation preview
Disclosures, page
Crude Oil Facts and Fears Houston Trends 2016
27
February 2, 2016
Brandon Blossman [email protected]
mailto:[email protected]
The News
Crude Lower for (a Lot) Longer
Shale Oil There will be Blood
US Oil Export Ban Lifted Energy Security Gains
Saudi Wages Market Share WarCrushes Price
Oil Crushed on Threat of Iranian Exports
Softening Asian Demand Dooms Oil
3
4
Remember When Oil was a $100 Commodity?
Source: FactSet, Bloomberg (through 1/22/16)
$0
$20
$40
$60
$80
$100
$120
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
Wes
t Te
xas
Inte
rmed
iate
, $/
bbl
January 2012 - Current WTI Crude Oil
$100?
$30?
The Market Doesnt Have a Clue About the Future
5 Source: Bloomberg, TPH & Co.
-50%
-25%
0%
25%
50%
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Jan-15
Jan-17
% D
iffe
renc
e-St
rip
vs. A
ctua
l
Strip Too High(Strip Too Low)
6
Global Supply and Demand : Quarterly
84
88
92
96
100
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
Supp
ly/D
eman
d (m
mbb
l/d)
Und
er/ S
uppl
y (m
mbb
l/d)
Implied Inventory Change Supply Demand
Undersupplied
Oversupplied
Note: A missing barrels adjustment is made to projected inventories, but not shown on this chart. Thus, they will not match with the supply and demand differences.
OECD Inventories
7 Source: IEA, TPH Research
2,200
2,700
3,200
Jan Apr Jul Oct
Mill
ion
Barr
els
2015
Max
Min
Norm
2014
Sep & Oct inventories: Built at ~normal pace, pointing to a
market approaching balance
The US Has Been The 800 Pound Gorilla Of Supply
Source: IEA, TPH & Co. 8
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2008 2009 2010 2011 2012 2013 2014 2015 2016E
Prod
uctio
n G
row
th (I
ndex
ed to
1.0
)OPEC (ex. Saudi) OECD (ex. US) Non-Oecd (ex. Russia) Saudi Arabia United States Russia
Oil Production Growth By Country/Region
The News
Crude Lower for (a Lot) Longer
Shale Oil There will be Blood
US Oil Export Ban Lifted Energy Security Gains
Saudi Wages Market Share WarCrushes Price
Oil Crushed on Threat of Iranian Exports
Softening Asian Demand Dooms Oil
9
10
The Shale Revolution
4
6
8
10
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
mm
bpd
US Oil Production1995-2015
Source: EIA
Brave New WorldSame Old Rules Apply
11
Source: Holditch
Hard to findeasy to produce
Easy to findhard to produce
12
U.S. Rig Count Setting New Shale Era Lows
Sources: Rigdata, TPH Research
200
700
1200
1700
2200
2700
RigData US Land Rig Count
Rig count fell ~1,475 rigs or 62% peak to trough (~8 month troughing process)
Rig count currently down >1,500 rigs or 70% peak to trough
(~15 months into this bottoming process). No
economic reason for it to flatten /
reverse course with oil ~$30-35/bbl.
~600 rigs currently drilling
2008 / 2009 troughed at ~900 rigs
Painful Realities of Current Macro Environment
13
* Refelcts a world where operators try to live within cash flow at $35/bbl oil and $2.35/mmbtu gas** Still reflects industry cash flow outspend, asset sales / capital markets access will be needed to fund the spending gap
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Large-Caps Mid-Caps Small-Caps
2015 vs. TPHe 2016 E&P Capex Expectations ($Billions)
TPHe 2015 Capex TPHe 2016 Capex
-60%
-50%
-40%
-30%
-20%
-10%
0%
Large-Caps Mid-Caps Small-Caps
TPHe 2016 E&P Capex Delta vs. 2015
TPHe 2016 E&P Capital Expenditures TPHe 2016 Capex
Source: TPH Research, FactSet, Company Filings
Our E&P coverage universe is looking to make meaningful cuts to capex y/y 2016
Companies and investors seem laser focused on balance sheet preservation and ~$30/bbl oil has enhanced E&P discipline / desire to live closer to within cash flow.
We believe overall E&P capex for our coverage universe is biased down ~50% y/y at $35/bbl oil and $2.35/mmbtu gas.
US Drilling Activity Quick-Cycle Reaction
Source: RigData, TPH Securities 14
0
500
1,000
1,500
2,000
2,500
U.S
. Lan
d Ri
g Co
unt
Week
Peak to Trough Rig Count:'08-'09 vs. Current2008-2009 Current
0
3
6
9
Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
US O
il Pr
oduc
tion,
mill
ion
barr
els p
er d
ay
US Onshore
65kbopd monthly decline results in ~700kbopd annual onshore decline in 2016.
US Oil Production Declines are HappeningNow!
15 Source: EIA, TPH Research
65 kbpd monthly declineOnshore Annual Change
mmbpd kbpd2014 6.8 2015 7.4 608 2016 6.7 (696)
Dec'16 less Apr'15 (1,507)
The News
Crude Lower for (a Lot) Longer
Shale Oil There will be Blood
US Oil Export Ban Lifted Energy Security Gains
Saudi Wages Market Share WarCrushes Price
Oil Crushed on Threat of Iranian Exports
Softening Asian Demand Dooms Oil
16
17
Exports?...What About Imports?
-
2
4
6
8
10
12
14
2011 2012 2013 2014 2015 2016
mm
bpd
Venezuala
Mexico
Saudi
Canada
Others
US Still Imports ~40% of Crude Supply
The News
Crude Lower for (a Lot) Longer
Shale Oil There will be Blood
US Oil Export Ban Lifted Energy Security Gains
Saudi Wages Market Share WarCrushes Price
Oil Crushed on Threat of Iranian Exports
Softening Asian Demand Dooms Oil
18
Non-OPEC Oil Production Growth Aint Happening
19
20
25
30
35
40
4
5
6
7
8
9
10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Non
-OPE
C Cr
ude
Oil
Prod
ucti
on (
ex.
US)
, mm
bpd
US
Crud
e O
il Pr
oduc
tion
, m
mbp
d
United States Non-OPEC ex. US
Source: EIA, TPH Research
Non-OPEC ex-US supply has been ~flat in recent years. We do not expect major declines in 16 or 17 as projects in progress should offset declines. The big decline
risk starts in 2018 as project deferrals/cancelations start to impact supply
20
OPEC: Volatility, Growth and Decline
Sources: IEA, TPH Research
10
12
14
16
18
20
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
Prod
ucti
on, m
illi
on b
arre
ls p
er d
ay
Saudi ArabiaIranIraqLibya
Rest of OPEC
1.5% annual decline ~200kbpd decline in 2016
Further, OPEC growth will come from Saudi, Iran, Iraq, Libya, as second tier OPEC is in decline
The News
Crude Lower for (a Lot) Longer
Shale Oil There will be Blood
US Oil Export Ban Lifted Energy Security Gains
Saudi Wages Market Share WarCrushes Price
Oil Crushed on Threat of Iranian Exports
Softening Asian Demand Dooms Oil
21
Iran: The 1mmbpd Supply Risk?
22 Source: IEA, TPH Research
1
2
3
4
5
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
Mil
lion
bar
rels
per
day
500 kbopd Increase
Sanctions
Post-sanctions, Iran should produce 3.3mmbpd500kbpd higher than current. But expect Iraq production to decline 200kbpd (leakage).
1
2
3
4
5
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
Mil
lion
bar
rels
per
day
Iraq
Iran
23
Iran and Iraq Leakage?
Sources: IEA, TPH Research
We assume only 200kbpd of cross border Iranian supply even though a 1mmbpd decrease in Iranian supply corresponded with a 500kbpd increase in Iraqi production in 2012.
The News
Crude Lower for (a Lot) Longer
Shale Oil There will be Blood
US Oil Export Ban Lifted Energy Security Gains
Saudi Wages Market Share WarCrushes Price
Oil Crushed on Threat of Iranian Exports
Softening Asian Demand Dooms Oil
24
25
Global Supply and Demand : Quarterly
84
88
92
96
100
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
Supp
ly/D
eman
d (m
mbb
l/d)
Und
er/ S
uppl
y (m
mbb
l/d)
Implied Inventory Change Supply Demand
Undersupplied
Oversupplied
Note: A missing barrels adjustment is made to projected inventories, but not shown on this chart. Thus, they will not match with the supply and demand differences.
The market remains undersupplied, even with OPEC increasing supply 1.2mmbpd in 17
Global Demand The Big Uncertainty
26 Source: IEA, TPH Research
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Our assumption of 1.1% global demand growth in 16 & 17 is consistent with the long term average growth rate
Global Demand
27
20
25
30
35
40
45
50
55
60
2000 2004 2008 2012 2016
Dem
and,
mm
bpd
OECD Demand
Non-OECD Demand
Non-OECD demand growth has been much more resilient than OECD demand
Source: IEA, TPH Research
28
Analyst Certification: We, Dave Pursell, Barndon Blossman, Jeoffrey Lambujon, and Erik Stevens, do hereby certify that, to the best of our knowledge, the views and opinions in this research report accurately reflect our personal views about the company and its securities. We have not nor will we receive direct or indirect compensation in return for expressing specific recommendations or viewpoints in this report. Important Disclosures: The analysts above (or members of their household) do not own any securities mentioned in this report. For detailed rating information, distribution of ratings, price charts and disclosures regarding compensation policy and investment banking revenue, please visit our website at http://www.TPHco.com/disclosures or request a written copy of the disclosures by calling 713-333-2960 (United States). OTHER DISCLOSURES Trade Name Tudor, Pickering, Holt & Co. is the global brand name for Tudor, Pickering, Holt & Co. Securities, Inc. (TPHCSI) and its non-US affiliates worldwide including Tudor, Pickering, Holt & Co. International, LLP. Legal Entities Disclosures U.S.: TPHCSI is a member of FINRA and SIPC. U.K.: Tudor, Pickering, Holt & Co. International, LLP is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. OC349535. Registered Office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE. Canada The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein and any representation to the contrary is an offense. United Kingdom Tudor, Pickering, Holt & Co International LLP does not provide accounting, tax or legal advice. In addition, we mutually agree that, subject to applicable law, you (and your employees, representatives and other agents) may disclose any aspects of any potential transaction or structure described herein that are necessary to support any UK income tax benefits, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, with no limitations imposed by Tudor, Pickering, Holt & Co International LLP or its affiliates. The information contained herein is confidential (except for information relating to tax issues) and may not be reproduced in whole or in part. Tudor, Pickering, Holt & Co International LLP assumes no responsibility for independent verification of third-party information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by, reviewed or discussed with the managements of your company and/ or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and Tudor, Pickering, Holt & Co International LLP materials. This information is intended only for the use of professional clients and eligible counterparties or persons who would fall into these categories if they were clients of Tudor, Pickering, Holt & Co International, LLP, or any of its affiliates. Retail clients must not rely on this document and should note that the services of Tudor, Pickering, Holt & Co International, LLP, are not available to them. Under no circumstances is this presentation to be used or considered as an offer to sell or a solicitation of any offer to buy, any security. Prior to making any trade, you should discuss with your professional tax, accounting, or regulatory advisers how such particular trade(s) affect you. This brief statement does not disclose all of the risks and other significant aspects of entering into any particular transaction. Notice to UK Investors: This publication is produced by Tudor, Pickering, Holt & Co. Securities, Inc. which is regulated in the United States by FINRA. It is to be communicated only to persons of a kind described in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. It must not be further transmitted to any other person without our consent. Any other person should not rely on or act upon the content of this publication. Persons falling within Article 19 include authorised or exempt investment firms, UK or overseas governments, UK or overseas local authorities or international organisations. Person falling within Article 49 include companies or unincorporated associations with net assets or called-up share capital of 5 million or subsidiary companies of the same that have net assets or called-up share capital of 500,000. Tudor, Pickering, Holt & Co. International, LLP is a limited liability partnership registered in England and Wales (registered number OC349535). Its registered office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE. Tudor, Pickering, Holt & Co. International, LLP (TPH International) is authorised and regulated by the Financial Conduct Authority, and is a separate but affiliated entity of Tudor, Pickering, Holt & Co. Securities, Inc. (TPH Securities). TPH Securities is a member of FINRA and SIPC. Unless governing law permits otherwise, you must contact the Tudor, Pickering, Holt & Co. entity in your home jurisdiction if you want to use our services in effecting a transaction. See http://www.TPHco.com/disclosures for further information on regulatory disclosures including disclosures relating to potential conflicts of interest.
Copyright 2016, Tudor, Pickering, Holt & Co. This information is confidential and is intended only for the individual named. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Tudor, Pickering, Holt & Co. This communication is based on information which Tudor, Pickering, Holt & Co. believes is reliable. However, Tudor, Pickering, Holt & Co. does not represent or warrant its accuracy. The viewpoints and opinions expressed in this communication represent the views of TPH as of the date of this report. These viewpoints and opinions may be subject to change without notice and TPH will not be responsible for any consequences associated with reliance on any statement or opinion contained in this communication. The viewpoints and opinions herein do not take into consideration individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. Past performance is not indicative of future results. This message should not be considered as an offer or solicitation to buy or sell any securities. Institutional Communication Only. Under FINRA Rule 2210, this communication is deemed institutional sales material and it is not meant for distribution to retail investors. Recipients should not forward this communication to a retail investor.
Analyst Certification:
We, Dave Pursell, Barndon Blossman, Jeoffrey Lambujon, and Erik Stevens, do hereby certify that, to the best of our knowledge, the views and opinions in this research report accurately reflect our personal views about the company and its securities. We have not nor willwe receive direct or indirect compensation in return for expressing specific recommendations or viewpoints in this report.
Important Disclosures:
The analysts above (or members of their household) do not own any securities mentioned in this report.
For detailed rating information, distribution of ratings, price charts and disclosures regarding compensation policy and investment banking revenue, please visit our website at http://www.TPHco.com/disclosures or request a written copy of the disclosures by calling 713-333-2960 (United States).
OTHER DISCLOSURES
Trade Name
Tudor, Pickering, Holt & Co. is the global brand name for Tudor, Pickering, Holt & Co. Securities, Inc. (TPHCSI) and its non-US affiliates worldwide including Tudor, Pickering, Holt & Co. International, LLP.
Legal Entities Disclosures
U.S.: TPHCSI is a member of FINRA and SIPC. U.K.: Tudor, Pickering, Holt & Co. International, LLP is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. OC349535. Registered Office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE.
Canada
The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein and any representation to the contrary is an offense.
United Kingdom
Tudor, Pickering, Holt & Co International LLP does not provide accounting, tax or legal advice. In addition, we mutually agree that, subject to applicable law, you (and your employees, representatives and other agents) may disclose any aspects of any potential transaction or structure described herein that are necessary to support any UK income tax benefits, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, with no limitations imposed by Tudor, Pickering, Holt & Co International LLP or its affiliates.
The information contained herein is confidential (except for information relating to tax issues) and may not be reproduced in whole or in part. Tudor, Pickering, Holt & Co International LLP assumes no responsibility for independent verification of third-party information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by, reviewed or discussed with the managements of your company and/ or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and Tudor, Pickering, Holt & Co International LLP materials.
This information is intended only for the use of professional clients and eligible counterparties or persons who would fall into these categories if they were clients of Tudor, Pickering, Holt & Co International, LLP, or any of its affiliates. Retail clients must not rely on this document and should note that the services of Tudor, Pickering, Holt & Co International, LLP, are not available to them.
Under no circumstances is this presentation to be used or considered as an offer to sell or a solicitation of any offer to buy, any security. Prior to making any trade, you should discuss with your professional tax, accounting, or regulatory advisers how such particular trade(s) affect you. This brief statement does not disclose all of the risks and other significant aspects of entering into any particular transaction.
Notice to UK Investors: This publication is produced by Tudor, Pickering, Holt & Co. Securities, Inc. which is regulated in the United States by FINRA. It is to be communicated only to persons of a kind described in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. It must not be further transmitted to any other person without our consent. Any other person should not rely on or act upon the content of this publication.
Persons falling within Article 19 include authorised or exempt investment firms, UK or overseas governments, UK or overseas local authorities or international organisations. Person falling within Article 49 include companies or unincorporated associations with net assets or called-up share capital of 5 million or subsidiary companies of the same that have net assets or called-up share capital of 500,000.
Tudor, Pickering, Holt & Co. International, LLP is a limited liability partnership registered in England and Wales (registered number OC349535). Its registered office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE. Tudor, Pickering, Holt & Co. International, LLP (TPH International) is authorised and regulated by the Financial Conduct Authority, and is a separate but affiliated entity of Tudor, Pickering, Holt & Co. Securities, Inc. (TPH Securities). TPH Securities is a member of FINRA and SIPC. Unless governing law permits otherwise, you must contact the Tudor, Pickering, Holt & Co. entity in your home jurisdiction if you want to use our services in effecting a transaction.
See http://www.TPHco.com/disclosures for further information on regulatory disclosures including disclosures relating to potential conflicts of interest.
Copyright 2016, Tudor, Pickering, Holt & Co. This information is confidential and is intended only for the individual named. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Tudor, Pickering, Holt & Co. This communication is based on information which Tudor, Pickering, Holt & Co. believes is reliable. However, Tudor, Pickering, Holt & Co. does not represent or warrant its accuracy. The viewpoints and opinions expressed in this communication represent the views of TPH as of the date of this report.These viewpoints and opinions may be subject to change without notice and TPH will not be responsible for any consequences associated with reliance on any statement or opinion contained in this communication.The viewpoints and opinions herein do not take into consideration individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. Past performance is not indicative of future results. This message should not be considered as an offer or solicitation to buy or sell any securities. Institutional Communication Only. Under FINRA Rule 2210, this communication is deemed institutional sales material and it is not meant for distribution to retail investors. Recipients should not forward this communication to a retail investor.
**Office of Tudor, Pickering, Holt & Co. International, LLP. Employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and is not registered/qualified with FINRA and is not an associated person of Tudor, Pickering, Holt & Co. Securities, Inc.Anish Kapadia, Shola Labinjo, and David Gamboa are employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and are not registered/qualified as research analysts with FINRA. Mr. Kapadia, Mr. Labinjo, and Mr. Gamboa are not associated persons of Tudor, Pickering, Holt & Co. Securities, Inc. and as such are not subject to NASD Rule 2711 restrictions on communications with subject companies, public appearances and trading securities held by a research analyst account.
RESEARCH
W. Mark [email protected]
Oil Service / E&CByron [email protected]
George [email protected]
Taylor [email protected]
Shola Labinjo**+44 20 3008 [email protected]
Integrated Oils Anish Kapadia**+44 20 3008 [email protected]
David Gamboa**+44 20 3427 [email protected]
Refiners
Matthew Blair, [email protected]
Erik [email protected]
TRADINGSALES
HoustonClay [email protected]
Mike [email protected]
Rusty [email protected]
Mike [email protected]
Oliver [email protected]
John [email protected]
Houston - (800) 507-2400Scott [email protected]
Seth [email protected]
Ally [email protected]
New York - (800) 507-2400Jason [email protected]
DenverWin [email protected]
New YorkCraig [email protected]
James [email protected]
Harry [email protected]
LondonJonathan Wright**+44 20 3008 [email protected]
MacroDave [email protected]
Brandon [email protected]
MidstreamBrandon [email protected]
Colton [email protected]
Erik [email protected]
Utilities / PowerNeel [email protected]
Ryan [email protected]
Kevin [email protected]
E&PMatt [email protected]
Michael [email protected]
Jeoffrey [email protected]
Jamaal [email protected]
Sameer [email protected]
Oliver [email protected]
E&P InternationalAnish Kapadia**+44 20 3008 [email protected]
Shola Labinjo**+44 20 3008 [email protected]
David Gamboa**+44 20 3427 [email protected]
Confidential Colliers International 2016
FAS 13 Change
Effective January 2018-19
ALL Leases over 12 months will be on the BALANCE SHEET
Still two types
Capital Lease will be a Finance Lease (Type A) Asset is a Finance Right of Use
Operating Lease will still be Operating Lease Asset is an Operating Right of Use
Sale/Leaseback Accounting impacted structure now as Finance Lease not operating or beneficial accounting treatment lost.
All lease structuring will need more analysis to optimize.
Confidential Colliers International 2016
Jobs Texas / U.S.
-8.0%
-4.0%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
Percent Change in Employment: Texas vs. US Minus Texas December 2007 to December 2015
Texas U.S. Minus TX
Confidential Colliers International 2016
2012 Dr. Ray Perryman, the Perryman Group: For every oilfield job created two jobs are created in Houston
Jobs
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
2009 2010 2011 2012 2013 2014 2015 2016
Houston-Sugar Land-Baytown Annual Job Growth
Forecast 21,000
Confidential Colliers International 2016
Jobs
-20,000 -15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000
Manufacturing
Mining and Logging
Financial Activies
Other Services
Professional and Business Services
Trade, Transportation and Utilities
Information
Construction
Government
Education and Health Services
Leisure and Hospitality
Houston 2015 Annual Job Growth
6.8%
5.3 %
-6.2%
2.7%
-3.5%
-7.4%
4.3%
1.4%
0.1%
0.1%
-1.4%
Energy
Confidential Colliers International 2016
Office Big Picture End of Q4
Total Market 225,864,400 SF
Vacancy increases 80 basis points to 15.4%
Absorption is up slightly, but still significantly low compared to average
Under Construction is slowing
Confidential Colliers International 2016
Houston Office 212.9M SF
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2,70
7,10
7 3,
147,
990
4,32
7,15
9 5,
283,
149
5,65
4,19
3 6,
039,
320
Available Office Sublease Space Houston, TX
Class A Class B
Available Sublease Space Q4 2015 Class A: 6,039,320 SF or 4.9% Class B: 1,872,129 SF or 2.1%
8.0M SF of Available Sublease Space
Confidential Colliers International 2016
Houston Office 212.9M SF
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
$22.00
$24.00
$26.00
$28.00
$30.00
Houston Average Rent Houston Average Vacancy
Forecast
Confidential Colliers International 2016
Average Class A Vacancy: 14.8%
Houston Office Class A Submarket Vacancy
Confidential Colliers International 2016
Houston Office Class B Submarket Vacancy
Average Class B Vacancy: 16.7%
Confidential Colliers International 2016
Average Cap Rate (Yield) Average Price ($) Per SF
Sales by Total $ (mil)
0
1,000
2,000
3,000
4,000
5,000
6,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Rolling 12-mo. Total Quarterly Vol.
0
50
100
150
200
250
300
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
4%
6%
8%
10%
12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
Data Source:
Houston Office 212.9M SF
http://www.rcanalytics.com/
Confidential Colliers International 2016
Industrial Big Picture End of Q4
Total Market 512,487,900 SF
Vacancy increases 20 basis points to 5.0%
Absorption is down Less New Construction
Under Construction is slowing
Confidential Colliers International 2016
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
$5.00
$5.20
$5.40
$5.60
$5.80
$6.00
$6.20
$6.40
$6.60
$6.80
$7.00
Houston Average Rent Houston Average Vacancy
Houston Industrial 512.5M SF
Forecast
Confidential Colliers International 2016
Average Industrial Vacancy: 5.0%
Houston Industrial Submarket Vacancy
Confidential Colliers International 2016
Sales by Total $ (mil)
Data Source:
$0$200$400$600$800
$1,000$1,200$1,400$1,600$1,800$2,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Rolling 12-mo. Total Quarterly Vol.
Average Cap Rate (Yield) Average Price ($) Per SF
$0$10$20$30$40$50$60$70$80$90
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
2%
4%
6%
8%
10%
12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
Houston Industrial 512.5M SF
http://www.rcanalytics.com/
Confidential Colliers International 2016
Retail Big Picture End of Q4
Total Market 283,605,000 SF
Vacancy is remains steady at 5.8%
Absorption is up - Tenants move into newly delivered space
New Construction is slowing
Malls in motion Baybrook and San Jacinto Mall Redevelopment (Fidelis), Greenspoint
Confidential Colliers International 2016
Houston Retail 283.6M SF
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
$12.00
$12.50
$13.00
$13.50
$14.00
$14.50
$15.00
$15.50
$16.00
Houston Average Rent Houston Average Vacancy
Forecast
Confidential Colliers International 2016
Obligatory Numbers Chart
Property TypeRentable
AreaDirect
Vacant SF
Direct Vacancy
Rate
Sublet Vacancy
SF
Sublet Vacancy
Rate
Total Vacancy
SF
Total Vacancy
Rate
Q4 2015 Net
Absorption
Class A Rental Rates
(in-line)*
Strip Centers (unanchored) 34,727,522 2,959,462 8.5% 32,992 0.1% 2,992,454 8.6% 106,978 $27.00-$45.00
Neighborhood Centers (one anchor) 70,949,103 6,642,494 9.4% 66,910 0.1% 6,709,404 9.5% 387,259 $28.00-$46.00
Community Centers (two anchors) 45,521,283 2,341,745 5.1% 67,939 0.1% 2,409,684 5.3% 69,947 $28.00-$45.00
Power Centers (three or > anchors) 25,664,500 979,702 3.8% - 0.0% 979,702 3.8% (36,106) $28.00-$45.00
Lifestyle Centers 5,239,605 259,759 5.0% 33,789 0.6% 293,548 5.6% 248,430 $40.00-$85.00
Outlet Centers 1,594,333 163,598 10.3% - 0.0% 163,598 10.3% 3,363 $20.00-$40.00
Theme/Entertainment 533,474 19,450 3.6% - 0.0% 19,450 3.6% (1,920) $25.00-$35.00
Single-Tenant 75,376,376 1,412,187 1.9% 25,728 0.0% 1,437,915 1.9% 234,763 N/A
Malls 23,999,275 1,341,442 5.6% 24,750 0.1% 1,366,192 5.7% 141,193 N/A
Greater Houston 283,605,471 16,119,839 5.7% 252,108 0.1% 16,371,947 5.8% 1,153,907
Confidential Colliers International 2016
New Construction 2016 Delivery Scheduled
2,709,629 SF 76% Pre-Leased Grand Parkway & Greenfield Dominant Largest Projects: Shoppes at Parkwest Monzer Hourani 450,000 SF 100% Pre-Leased Baybrook Mall Lifestyle Expansion General Growth 500,000 SF
Confidential Colliers International 2016
Active Larger (Anchor) Tenants
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjr8szfhs_JAhWFSCYKHa_-CdAQjRwIBw&url=http://www.storebrandsdecisions.com/news/2011/08/23/h-e-b-to-add-two-joe-vs-smart-shop-stores&psig=AFQjCNH0VuZLqFxkrGvYMCPN-X3IwU_u5Q&ust=1449759930866093
Confidential Colliers International 2016
High Street Home Run River Oaks District
Confidential Colliers International 2016
Sales by Total $ (mil)
0200400600800
1,0001,2001,4001,6001,8002,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Rolling 12-mo. Total Quarterly Vol.
Average Cap Rate (Yield) Average Price ($) Per SF
0
50
100
150
200
250
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
4%5%6%7%8%9%
10%11%12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
Data Source:
Houston Retail 283.6M SF
http://www.rcanalytics.com/
Confidential Colliers International 2016
Multi-Family Big Picture End of Q4
Total Market 606,431 Units
Absorption is down Demand is slowing down
Under Construction Inner Loop Hot Spot
Developers pushing new projects to 2018
Confidential Colliers International 2016
Current Multi-Family Projects Under Construction 98
Confidential Colliers International 2016
80.0%
85.0%
90.0%
95.0%
100.0%
$600
$700
$800
$900
$1,000
Houston Average Rent Houston Average Occupancy
Houston Multi-Family 606.4K Units
Confidential Colliers International 2016
Data Source:
Average Cap Rate (Yield) Average Price ($) Per Unit
Sales by Total $ (mil)
0
1,000
2,000
3,000
4,000
5,000
6,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Rolling 12-mo. Total Quarterly Vol.
020,00040,00060,00080,000
100,000120,000140,000160,000
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
4%5%6%7%8%9%
10%11%12%
Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15
Houston United States
Houston Multi-Family 606.4K Units
http://www.rcanalytics.com/
Confidential Colliers International 2016
Single Family Big Picture End of Q4
27,778 housing starts in 2015 down 7.1% over 2014 Metrostudy forecast for 2016 - 25,500 starts
Average 2015 Sales Price $280,290 up 3.7% from $270,182 in 2014
Months Supply 3.2
2015 Home Sales 81,224 down from 2014 record high of 83,307
Slumping oil prices and limited inventory slow home buying for a third straight month in December
Source: HAR, Metrostudy
Confidential Colliers International 2016
Consultants have seen a slight decrease in demand for services. But for the most part they are staying busy, with layoffs only in their energy sector studios.
General Contractors continue to work through their backlog. Concern is mounting for 2016 projects. Industrial, retail, and medical still going strong.
Subcontractors workload is still challenging their capacity. Personnel that came to Houston during the boom now have the option of returning home to a recovered local economy.
Commodities have held steady, and in a few case decreased in cost. But we havent seen construction material prices significantly affected.
Long lead delivery times for critical path material and equipment continues to drive completion dates.
Construction Comments
Confidential Colliers International 2016
Office
Retail
Hotel
Industrial
Apartment
Phase I Recovery
Phase II Expansion
Phase IV Recession
Phase III Oversupply
Rent Increasing
Rents Decreasing
Above Long-Term Avg.
Occupancy
Below Long-Term Avg. Occupancy
SELL
HOLD
BUY
Houston Commercial Real Estate Market Cycle
Thank you, have a great 2016.
Slide Number 1Crude Oil Facts and FearsHouston Trends 2016The NewsRemember When Oil was a $100 Commodity?The Market Doesnt Have a Clue About the FutureGlobal Supply and Demand : Quarterly OECD InventoriesThe US Has Been The 800 Pound Gorilla Of SupplyThe NewsThe Shale Revolution Brave New WorldSame Old Rules Apply U.S. Rig Count Setting New Shale Era LowsPainful Realities of Current Macro EnvironmentUS Drilling Activity Quick-Cycle ReactionUS Oil Production Declines are HappeningNow!The NewsExports?...What About Imports? The NewsNon-OPEC Oil Production Growth Aint HappeningOPEC: Volatility, Growth and DeclineThe NewsIran: The 1mmbpd Supply Risk? Iran and Iraq Leakage?The NewsGlobal Supply and Demand : Quarterly Global Demand The Big UncertaintyGlobal DemandSlide Number 28Slide Number 29Slide Number 30FAS 13 ChangeJobs Texas / U.S. JobsJobsSlide Number 35Slide Number 36Houston Office 212.9M SFHouston OfficeClass A Submarket VacancyHouston OfficeClass B Submarket VacancyHouston Office 212.9M SFIndustrial Big Picture End of Q4Houston Industrial 512.5M SFHouston IndustrialSubmarket VacancyHouston Industrial 512.5M SFRetail Big Picture End of Q4Houston Retail 283.6M SFObligatory Numbers ChartNew Construction 2016 Delivery ScheduledActive Larger (Anchor) TenantsHigh Street Home Run River Oaks DistrictHouston Retail 283.6M SFMulti-Family Big Picture End of Q4Current Multi-Family Projects Under Construction 98Houston Multi-Family 606.4K UnitsHouston Multi-Family 606.4K UnitsSingle Family Big Picture End of Q4Construction CommentsHouston Commercial Real Estate Market CycleSlide Number 59