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Why You Should Be Worried About The Entire Energy Market

Why You Should Be Worried About The Entire Energy Market


The current state of some energy companies should be alarming to most. To the untrained eye it would appear it is "just another cycle" and will certainly "Go back up." In this of course most people are speaking about oil when I ask them. Oil has gotten somehow to be the only source of energy people associate with. Where we are right now is economically exciting and drastically different than any other time in history. We are now allowed to export oil, solar is exploding not just in the US but worldwide, and it seems each day now with the advent of social media platforms that we are being introduced to a new or more efficient way of life using a "more green" conduit.

The old adage that oil, gold, and the dollar cannot move in the same direction is being tested and perhaps may be a good thing. With shale and oil sand operations becoming more efficient and far less expensive that drilling between Canada and the US we are looking more independent. So why would it appear the energy industry is falling on hard times? The simple answer is again to the untrained eye abundance. That is the word on the television anyway. Is that the real problem though? Certainly not. Take a look at some of these publicly traded energy companies and you will see a much bigger less discussed underlying problem. Less discussed because unfortunately most do not know how to read a balance sheet or delve into how to look up future warrants to be executed on notes due.

What these will tell you is the banks will fair well from more than likely the rising rates and probable auctions coming up from selling off bad debt and writing off tax losses from over leveraged energy companies that like the real estate developers of the 2000s thought the good times would never go away. But they always seem to don't they? Kinder Morgan, Chesapeake, and Offshore Drilling. Look at the debt on the books for these companies. Staggering. Even worse quite a few solar companies are currently racing down the same track at lightning speed to bankruptcy and appear to only be keeping their eye on their version of the "carrot in the stick." I am of course talking about the 30% ITC that was extended until 2019. Case in point Solarcity. A Elon Musk company that has pretty much never made a real profit from its own reinvestment (Sound familiar? Space X, Tesla) and continually has to borrow money from Uncle Larry Page of Google.

With the recent correction in the market sadly most it seems are content and think that washed out the over extended companies and made them focus. To those of us that are a little more financially adept, we are becoming more worrisome than ever. It appears we are back to another "Greed is Good" speech from Gordon Gecko. Buckle up and be smart about your business plans and investing for the foreseeable future, it would appear the inmates are running the financial asylum.
  • #market
  • #energy
  • #oil
  • #gold
  • #solar
Ted "The Wolf" Strzelecki
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