Despite some relentlessly sunny interpretations from Texas economists, it's becoming increasingly clear that things aren't exactly getting better in the oil industry.
The latest sign of trouble comes in the form of yet another merger. This time it's a couple of pipeline giants, Energy Transfer Partners and Regency Energy Partners. The companies announced on Monday that they plan to, you know, merge in an $18 billion stocks-and-cash deal that will create the second largest energy infrastructure company in the United States (the largest being Kinder Morgan).
And don't be fooled by the attempt to spin this whole thing as a sign of optimism in a cynical world, because Mike Bradley, the CEO of Regency, straight up stated that this merger was all about the tumbling oil prices, according to Bloomberg:
"In light of the current volatility in commodity prices and the changes in the capital markets, it became apparent over the last several months that Regency needed more scale and diversification, along with an investment grade balance sheet, to continue its growth."
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
You have successfully signed up for your selected newsletter(s) - please keep an eye on your mailbox, we're movin' in!
Translation: The price of oil is rotten and low and it looks like it's going to be rotten and low for a while to come, so Regency decided to get with Energy Transfer Parners, another company with a bunch of "exposure" to shale plays in the Permian Basin and the Eagle Ford.
What makes this more interesting than a run-of-the-mill merger is the fact that it's pipeline companies, which are further downstream in oil production. If the low oil prices were an infection in the energy bloodstream, this would be a sign that the infection is moving pretty fast.
More predictably, British Petroleum is still in the midst of a court battle to get the fines owed for the BP oil spill reduced. But while that fight wraps up in court, BP announced a pay freeze for its more than 80,000 employees. The company had already announced a plan to cut thousands of jobs back in December, and now the ones who still have jobs won't be getting raises.
Meanwhile, despite all of the determinedly sunny predictions and pronouncements of economists and energy analysts, even the oh-so-shiny Wall Street ones, the Dallas Fed issued a Texas manufacturing report on Monday, and, shockingly, it turns out that Texas is making less stuff. In fact, every business indicator (a fancy way of saying "sign") was down in Texas, aside from inventory, as the Wall Street Journal pointed out.