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CCIM. November 6, 2009. Dr. Loren C. Scott Loren C. Scott & Associates, Inc. www.lorencscottassociates.com. The National Economy. Recession (NOT Depression) Environment. RGDP Forecasts(10/09). Quarter Moody’s Consensus 08-I -0.7 -0.7 08-II 1.5% 1.5%
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CCIM November 6, 2009 Dr. Loren C. Scott Loren C. Scott & Associates, Inc. www.lorencscottassociates.com
The National Economy Recession (NOT Depression) Environment
RGDP Forecasts(10/09) QuarterMoody’sConsensus 08-I -0.7 -0.7 08-II 1.5% 1.5% 08-III -2.7% -2.7% 08-IV -5.4% -5.4% 09-I - 6.4% -6.4% 09-II -0.7%-0.7% 09-III 3.5% 3.5% 09-IV 2.5% 2.7% 10-I 1.1% 2.7% 10-II 1.8% 2.8% 10-III 2.4% 2.9% 10-IV 3.0% 3.1%
RGDP Forecasts(10/09) QuarterMoody’sConsensus 08-I -0.7 -0.7 08-II 1.5% 1.5% 08-III -2.7% -2.7% 08-IV -5.4% -5.4% 09-I - 6.4% -6.4% 09-II -0.7%-0.7% 09-III 3.5% 3.5% 09-IV 2.5% 2.7% 10-I 1.1% 2.7% 10-II 1.8% 2.8% 10-III 2.4% 2.9% 10-IV 3.0% 3.1%
Index of Leading Economic Indicators:Up 6 Straight Months 2004=100 Source: Conference Board
RGDP Forecasts(10/09) QuarterMoody’s 10-I 1.1% 10-II 1.8% 10-III 2.4% 10-IV 3.0% 11-I 3.8% 11-II 4.8% 11-III 5.4% 11-IV 5.7%
Job Killers: Congress & Obama Administration • Higher taxes • Pro-union • Anti-Free trade • Restrictions on Mexican trucks coming into U.S. in violation of NAFTA • “Buy American” provision of stimulus bill • 35% tariff on Chinese tires • Carbon tariff as part of House passed cap & trade bill • Must-make-cars-in-America part of auto bailout package
Add tariffs: Guess what always happens? Retaliation!
Job Killers:Congress & Obama Administration • Higher taxes • Pro-union • Anti-Free trade • Extreme pro-green • More regulation • Government-run health care
Wait Times? What Will America Tolerate? NOTE: English National Health Service (NHS) and Department of Health (DH) have set TARGETED WAIT TIMES of 18 weeks (126 days) for all specialist appointments and hospital treatments. As of 1/1/2009, they were well short of this goal.
Another Big Problem The credit crunch
The TED Spread • Fear and distrust between financial institutions. • LIBOR rate (opaqueness v transparency) • Fear among average consumers • 3-Month T-Bill rate • The TED spread (normally 10-12 basis points) • Was 4.64 (4.75-0.11); now 0.21 (0.28-0.07) • Financial institutions are different depending on where they are
Oil Price Forecasts The “Onagistic” Approach
Supply Side Considerations • U.S. gas production: The Shale Plays • 2003: 0.9% • 2004: –2.7% • 2005: -3.0%* (hurricane effect) • 2006: 2.4% • 2007: 3.3% • 2008: 5.9% • First ½ 09: 1.6% • Barnett Shale-Texas (29tcf?) • Fayetteville Shale-Arkansas (11 tcf) • Haynesville Shale-Louisiana (234tcf!!)
Haynesville Shale • One estimate: 234tcf of natural gas • Largest natural gas field in U.S. • Well production • Conventional gas well: 2-3 mmcfd • Fayetteville Shale: 5 mmcfd • Marcellus Shale: 9.8–12 mmcfd • Haynesville Shale: 22-24 mmcfd!!
Obama’s Energy Policy • $33 billion tax on the extraction industry • Eliminate expensing of intangible drilling costs • Eliminate allowance for percentage depletion
Oil Companies Don’t Pay Taxes • Robert Shapiro and Nam Pham study of oil company stock ownership • 43% owned by mutual funds and asset management companies that have mutual funds • 55 million Americans • Medium income: $68,700 • 27% owned by other institutional investors like pension funds • 2004: 2,600+ pension funds run by federal, state and local governments held $64 billion in oil company shares • 14% held in IRA’s and personal retirement accounts held by 45 million Americans
Obama’s Energy Policy • $33 billion tax on the extraction industry • Eliminate expensing of intangible drilling costs • Eliminate allowance for percentage depletion • HR 2454: American Clean Energy & Security Act • National Petroleum & Refiners Association • $330 mm a year for a 100,000 barrel a day refinery • ExxonMobil in Baton Rouge $1.65 billion • Passed by 219-212 in House; Senate unlikely to pass
NO Future • $9.3 billion in construction projects • But watch Marathon • Many earlier announcements on hold & iffy • Manufacturing iffy • Lockheed Martin (1,700 to 300-600?) • NG, Textron stable • Trinity Marine gone • Tourism? • Convention business (-) • Casino revenues Oct-Sept down 5.2% • Six Flags (+)
Future “+” • $5.1 billion in construction activity • SNF Polymer Project: Iberville Parish • $362 mm capex • 500 jobs (100in 2011; 100 each additional year) • Digital media company • 105 jobs as of 8/09 • Will be at 250 by end of 2010 • Shaw: keep its HQ in BTR and add 150 a year btw now and 2018
Future “+” • Staples: at 154 jobs; must add 100 in 2010 & 2011 as well • Old Tembec Paper Mill sold to PanAmerican; reopened as Renew in 7/09 • 200 new jobs initially • To 400 w/I three years
Losses in BTR • Dow Plaquemines: • -160 (permanent) • -400 contractors (temporary) • IFC: -516 jobs 3/09 • Capital One: -180 • Trinity Marine: -190 (temporary?) • Excide Batteries: -132 jobs temporarily (3/09)
Concerns • State government? • Chemicals/Refineries? • Cap & Trade?
Lafayette Future • Lethargic Extraction big problem • $474.2 million in construction • Much done in 2010 • Stuller adding 100 • Acadian Ambulance adding 25 • TransComm: +700 • Flight Safety International: • $120 mm, 70,000sq ft flight simulator facility (about finished) • 50-60 jobs @ $60,000 • TETRA creating 140 new jobs @$35k: start 11/09
Houma Future • Lethargic extraction sector • Shipbuilding a plus • Edison Chouest: at least +1,000 • Bollinger: stable • Fabricators: If hit on contracts • Gulf Island: +350 • J. Ray McDermott: +250 • $184.6 million in road & coastal restoration
Good News for Houma • Performance Energy • $26 mm investment at Port of Terrebonne • Start 09-III; complete mid 2010 • 350 new jobs; retain existing 800 jobs • Fourchon: $14 mm bulkhead completed by fall 09 to attract new companies • Expert Risers adding firm there • CalDive new facility there • Building another 1100’, already full of committed companies. • New $11 mm helicopter facility at South Lafourche Airport.
Lake Charles Future • Sugarcane Bay Casino (1,600-1,800) • (Casino revenue Oct-Sept up 6.3%) • Global Modular Solutions (+1,400) • Aeroframe (+250) • NG: some additions? • $350 mm a year in maintenance at petrochem plants • $108.7 mm highways & coastal restoration • Leucedia? $1.8 billion • But cap & trade???