Key lifeline for smaller operators fades, as losses pile up and prospects dim for big investment returns
The once-powerful partnership between fracking companies and Wall Street is fraying as the industry struggles to attract investors after nearly a decade of losing money.
Frequent infusions of Wall Street capital have sustained the U.S. shale boom. But that largess is running out. New bond and equity deals have dwindled to the lowest level since 2007. Companies raised about $22 billion from equity and debt financing in 2018, less than half the total in 2016 and almost one-third of what they raised in 2012, according to Dealogic.
The loss of that lifeline is forcing shale companies—which have helped to turn the U.S. into an energy superpower—to reduce spending and face the prospect of slower growth. More than a dozen companies have announced spending reductions so far this year, even as crude-oil prices have rallied more than 20% from December lows. More are expected to tighten budgets as they release earnings in coming weeks.
The drop in financial backing is especially being felt by smaller, more indebted drillers. But even larger, better-capitalized frackers are facing renewed investor skepticism about whether they can keep spending in check and still hit growth and cash-flow targets.
‘Quite a shock’: The priest was a D.C. luminary. Then he had a disturbing fall from grace.
“There was a brashness about him that I always associated with the Wall Street ethos,” the Rev. John Paul Wauck, an Opus Dei priest who knew McCloskey, wrote in an email. “You could say that, as a priest, he maintained an entrepreneurial attitude. For some, this was off-putting; for others, it was, I’d say, invigorating and even entertaining.”
McCloskey harnessed that entrepreneurial spirit to persuade people, mostly men, to become Catholics. In New York in 1997, he converted Kudlow, who was recovering from addiction. Mark Belnick, a former general counsel of Tyco International, who described McCloskey as a “great friend” in a New York magazine article, soon followed. They would be among the first in a long line of high-profile conversions that McCloskey facilitated.
“It’s just like the brokerage business or any business of sales,” McCloskey told the National Catholic Reporter in 2003. “You get a reputation, you deal with one person and they mention you to another person . . . and all of a sudden you have a string of people.”
The conversions came naturally to McCloskey because “he just had an absolute certainty about what he was proposing, and he had no hesitation at all about unapologetically offering Catholicism as an option,” said Shaw, his co-author.
.. Although he left Washington at perhaps the height of his fame, McCloskey’s legacy is the ongoing influence of the Catholic Information Center. The center’s board includes Leonard Leo, executive vice president of the Federalist Society, which helped shepherd the Supreme Court nominations of Brett M. Kavanaugh and Neil M. Gorsuch. White House counsel Pat Cipollone is a former board member, as is William P. Barr, who served as attorney general under President George H.W. Bush and is now President Trump’s nominee for the same position.
.. The small center — its members and its leaders — continue to have an outsize impact on policy and politics. It is the conservative spiritual and intellectual center that McCloskey had imagined and its influence is felt in all of Washington’s corridors of power.
Trump has always been erratic and impulsive. Why is Wall Street surprised now?
Was the president trying to shore up his support with a base grown tired of foreign interventions? Did he cave when Turkish President Recep Tayyip Erdogan told him over the phone that he was going to carry his operations against the Kurds into Syrian territory? Was Trump’s decision a momentary whim now incredibly become indelible history? Who can say? Just in time for Christmas, Trump has finally brought us the peace that passeth all understanding.
Even by Trumpian standards, the troop-withdrawal announcement looked haphazard. And it wasn’t the Trump administration’s only holiday surprise. On Saturday, Treasury Secretary Steven Mnuchin announced (on Twitter, naturally) that the president had no intention of firing Federal Reserve Chair Jerome H. Powell. Which of course raised the possibility that he might. On Sunday, Mnuchin returned with a stunning encore: He said he had spoken with the heads of the United States’ six largest banks to confirm that they had “ample liquidity available for lending” and haven’t had “any clearance or margin issues . . . the markets continue to function properly.”
.. Mnuchin’s actions are both more and less mysterious than the president’s. Less, because it seems clear why his Twitter feed developed a sudden nervous tic: He was trying to appease his boss. More, because neither Mnuchin nor anyone else understands how to calm the impetuous, irascible occupant of the Oval Office.
Presumably, the president is displeased by the recent decline in financial markets. It’s less clear whether he, or anyone else, actually believed that investors would perk right up if the treasury secretary, for no apparent reason, started shouting, “Guys, everything’s fine! We’re not going to have another financial crisis, okay?”
To be fair, it’s not clear what would cheer them up. Which brings us to the deepest mystery of all: Why were investors so optimistic in the first place?
I asked a number of financial professionals that question back when the bull market was still charging ahead. After all, Trump had promised tariffs, which large, publicly traded corporations tend not to like; he had promised immigration restrictions, which such companies really don’t like; and finally, he had promised lots of uncertainty, which those firms hate with the white-hot fire of a thousand suns.
The boom could be viewed as a collective sigh of relief that Democrats wouldn’t be finding new and creative ways to regulate the private sector. But given the protectionist drawbacks of a Trump administration, this didn’t really justify a 35 percent increase in the value of the S&P 500 from November 2016 to September 2018.
The best answer I got was that investors and chief executives assumed that Trump was planning to do the stuff they wanted — the tax cuts, the deregulation — and that the rest of his campaign promises were just base-pandering rhetoric that would be quickly abandoned. Their belief seemed touchingly naive, even quaint. But also sincere and strongly held.
.. Which may solve the twin mysteries of boom and the bust: Wall Street believed that Trump was just playing erratic and impulsive for the cameras, but that behind the policy scenes, what they’d be getting was a normal Republican presidency, only maybe a bit more so. The current correction may simply reflect Wall Street’s belated realization that investors would be getting exactly what they’d seen on the stump: a man who substitutes reaction for planning, and angry tweets for policy.
One thing, of course, is totally unsurprising: that when those on Wall Street finally figured out who they were really dealing with, and prices slumped, the guy from the campaign stump was going to find a way to make it all worse.
Your Smartphone’s Location Data Is Worth Big Money to Wall Street
Thasos is at the vanguard of companies trying to help traders get ahead of stock moves like that using so-called alternative data. Such suppliers might examine mine slag heaps from outer space, analyze credit-card spending data or sort through construction permits. Thasos’s specialty is spewing out of your smartphone.
.. Thasos gets data from about 1,000 apps, many of which need to know a phone’s location to be effective, like those providing weather forecasts, driving directions or the whereabouts of the nearest ATM. Smartphone users, wittingly or not, share their location when they use such apps... Before Thasos gets the data, suppliers scrub it of personally identifiable information, Mr. Skibiski said. It is just time-stamped strings of longitude and latitude. But with more than 100 million phones providing such coordinates, Thasos says it can paint detailed pictures of the ebb and flow of people, and thus their money... Thasos says it can count the phone-carrying shoppers who ditch their regular grocers when a new Whole Foods opens, or gauge drilling activity by sizing up the crowds at oil-patch bars. By identifying the census block where each phone spends the night, Thasos algorithms estimate how far customers travel to malls and shoppers’ incomes... Thasos won’t name its clients, but Mr. Skibiski says it sells data to dozens of hedge funds, some of which pay more than $1 million a year... This month, Thasos is set to start offering data through Bloomberg terminals. A measure of mall foot traffic will be widely available.. Mr. Skibiski and scientists at Sense studied movements of prepaid phones, looking for users who arrived at the airport on Monday mornings for business flights or dined in expensive restaurants... Census data is the model, Mr. Pentland said—detailed enough to have value, but not so detailed that individuals can be identified… In September, as Hurricane Florence churned toward the Carolina coast Thasos watched evacuation zones and found that in well-to-do census blocks, 65% of the people fled, while only 39% left poor areas. Such information could inform disaster response or infrastructure spending, yet it might also have commercial value. “You might look at that and say, ‘Gosh, I could price insurance differently,’ ” Mr. Pentland said.