On Wednesday, the Fed released it’s energy survey for Q3. Not surprisingly, it posted the worst readings since ‘16.  In today’s post- we face facts. Q4 will be far worse than Q3. I’ll say it again for effect: FAR WORSE.

At least 100 frac crews have idled since the spring; HZ rigs are down 180 and are almost at my 700 target; companies HAVE to hit or beat their ‘19 capital so will slow further and there is no new capital coming into the industry for the 2020 budget cycle. The level of over capitalization is staggering- both in # of wells and with service sector equipment and rentals.

How could this possibly be good? Because shareholders have subsidized low energy prices since ‘15. Period. That massive destruction of shareholder value was a choice MGMT teams made and now- share prices are starting to reflect that.

The good news is- it is self correcting. With no new money coming in, insolvent Cos will die; Cos with bad assets will decline and die; and Cos with good assets will survive and start to run an innovative, smart and savvy business. That needs the best and brightest.

I have long said- 30% of companies will disappear in the next 24 mos. That will take with it a lot of jobs. But what remains will actually be investable.

#hottakeoftheday