OKC Economic Outlook 2013

[bchris02]

I am a bit nervous with all the problems at Chesapeake as well as the Hobby Lobby case. If we lose both companies this year, that will bode very bad for OKC. Of course that is a worst case scenario and many other scenarios could play out, but we can all agree these are very uncertain times. Many on this forum are much more "in-the-know" than I am. What is your opinion on the local economic outlook for the next year?

[Pete]

I'm sure the Hobby Lobby issue will be worked out and they will continue their rapid growth. They are quietly building a massive empire.

Chesapeake is a legitimate worry and so is SandRidge, but I wouldn't bet against either. I'd be happy if they just stabilized, even though both have been growing like crazy the last three years.

On the other hand, Devon and Continental look to continue their strong runs.



As long as one of the big boys doesn't completely implode, I think the local economy will continue to be excellent.

[Stew]

It wouldn't hurt none if we saw a bump in the natural gas prices. It would certainly sweeten my 2013 economic outlook.

[progressiveboy]

I "still feel" OKC needs more diversification. Still heavily dependent on the Oil and Gas Industry. OKC has somewhat diversified, however not enough to soften the blow if Oil and Gas plummeted or Chesapeake went belly up and bankrupt, or the board of Sandridge decides to move corporate HQ out of OKC. Scary thought. OKC historically has always had a boom and bust cycle in their economy.

[1972ford]

Why don't we have a refinery in Cushing seems like a very ideal location for a refinery

[bchris02]

I "still feel" OKC needs more diversification. Still heavily dependent on the Oil and Gas Industry. OKC has somewhat diversified, however not enough to soften the blow if Oil and Gas plummeted or Chesapeake went belly up and bankrupt, or the board of Sandridge decides to move corporate HQ out of OKC. Scary thought. OKC historically has always had a boom and bust cycle in their economy.

My question is how likely is a complete bankruptcy of CHK to happen or Sandridge moving out of OKC?

[adaniel]

I "still feel" OKC needs more diversification. Still heavily dependent on the Oil and Gas Industry. OKC has somewhat diversified, however not enough to soften the blow if Oil and Gas plummeted or Chesapeake went belly up and bankrupt, or the board of Sandridge decides to move corporate HQ out of OKC. Scary thought. OKC historically has always had a boom and bust cycle in their economy.

Boeing, Midfirst, Hobby Lobby, Bancfirst, Farmers, Paycom, Dell, FAA, pretty much everything at OUHSC...need I go on?

Although I'm under no delusion and that anything can happen, I think 2013 will be just fine for OKC. The CHK thing doesn't worry me as much as it did this summer (although I think layoffs are coming, they pretty much admitted as such when they made their voluntary separation program public). The energy business in this state has unhooked itself from the Chesapeake gravy train during their last brush of death in 2008-09. Pretty much every energy company, even Sandridge, is in expansion mode right now. Heck I work and oil and gas and the calls from the recruiters are starting to get annoying, and trust me, I'm nothing special.

Also in 2013, you will see Boeing transferees start to move in, MAPS3 construction to ramp up, and whatever "mystery company" will relocate here.

I think the biggest risk to OKC right now is whatever comes out of the "fiscal cliff" in terms of defense cuts and how that will affect Tinker.

[adaniel]

Why don't we have a refinery in Cushing seems like a very ideal location for a refinery

Not disagreeing with you, but this is highly unlikely. Their was momentum to get a refinery in Cushing at one point, but that has since faded. The dynamic of the refining business has changed completely, with most US refiners working at much less capacity than just a few years ago (and the US now net exports refined fuels now). You would most likely see a new refinery out east, where the refineries are the oldest but can only handle "sweet" Arab imported oil vs. "sour" oil from Canada/ND that is increasingly entering the mkt.

[progressiveboy]

My question is how likely is a complete bankruptcy of CHK to happen or Sandridge moving out of OKC?

With CHK getting pressure from their board to sell off assets and raise capital for expenditures for 2013, it appears CHK is in a "cash crunch" mode and having to take these extreme measures so that it can continue to operate. To answer your question, IMO the likely of CHK filing for bankruptcy is a "somewhat" with me. Hopefully, if this does occur, it is not Chapter 7. Sandridge is also feeling the heat and pressure from many including stockholders and members of their board to remove Tom Ward as they do not have the faith and confidence in his leadership. If this were to occur, perhaps the new CEO would decide to operate corporate HQ and move them out of OKC. IMO this is "somewhat" likely too.

[catch22]

With CHK getting pressure from their board to sell off assets and raise capital for expenditures for 2013, it appears CHK is in a "cash crunch" mode and having to take these extreme measures so that it can continue to operate. To answer your question, IMO the likely of CHK filing for bankruptcy is a "somewhat" with me. Hopefully, if this does occur, it is not Chapter 7. Sandridge is also feeling the heat and pressure from many including stockholders and members of their board to remove Tom Ward as they do not have the faith and confidence in his leadership. If this were to occur, perhaps the new CEO would decide to operate corporate HQ and move them out of OKC. IMO this is "somewhat" likely too.

I doubt the Sandridge board and shareholders would now allow a move out of OKC. They have spent a ton of money on that campus and would be foolish to take on additional costs to build a new facility or buy a similar one. That is unless they got a sweetheart deal on the campus.

[bchris02]

I doubt the Sandridge board and shareholders would now allow a move out of OKC. They have spent a ton of money on that campus and would be foolish to take on additional costs to build a new facility or buy a similar one. That is unless they got a sweetheart deal on the campus.

Agreed. Out of all the uncertainty in OKC's economy this year, I think this is probably the least likely. Companies change CEO's all the time and don't relocate the HQ.

[progressiveboy]

I doubt the Sandridge board and shareholders would now allow a move out of OKC. They have spent a ton of money on that campus and would be foolish to take on additional costs to build a new facility or buy a similar one. That is unless they got a sweetheart deal on the campus.

Hopefully, this will be the case!

[OKCisOK4me]

I think the biggest risk to OKC right now is whatever comes out of the "fiscal cliff" in terms of defense cuts and how that will affect Tinker.

Not bagging but why do you think Tinker would be affected? It is the centralized logistics base for the Air Force. Home to the AWACS. Surely you don't think they'd close this base and move those operations elsewhere? I would be more concerned with Vance or Altus closing.

[Plutonic Panda]

Oklahoma Economy Ends 2012 On Strong Footing - News9.com - Oklahoma City, OK - News, Weather, Video and Sports |

[Pete]

For those that think our economy is too heavily reliant on oil & gas, this recent list of largest employers from the OKC Chamber shows much more diversification than most would probably assume.

SandRidge and Continental are high profile, but not huge employers at this point.

And in fact, only two of the top 30 employers are in the energy industry, representing just 4% of the total jobs listed here:

[Plutonic Panda]

Wow. Hobby Lobby is huge.... I never knew!

[Pete]

Hobby Lobby is growing faster than anyone on that list.

And even though a lot of their jobs would be considered blue collar, they pay very well.

They have very ambitious expansion plans and have said that all their distribution will stay in OKC, in addition to the HQ jobs.

[ou48A]

Not disagreeing with you, but this is highly unlikely. Their was momentum to get a refinery in Cushing at one point, but that has since faded. The dynamic of the refining business has changed completely, with most US refiners working at much less capacity than just a few years ago (and the US now net exports refined fuels now). You would most likely see a new refinery out east, where the refineries are the oldest but can only handle "sweet" Arab imported oil vs. "sour" oil from Canada/ND that is increasingly entering the mkt.

The new crude oil from North Dakota (Bakken) is very high quality crude oil.

Its low sulfur and gravid make it a very desirable feed stock for refinery’s.



It’s been trading at a significant discount to Brent crude, making it even more desirable for the US refinery market especially on the east coast where new rail capacity has been increasing.


You can read more about it on this link.


Bakken Crude: The Refiners' Top Choice - Seeking Alpha

[adaniel]

Not bagging but why do you think Tinker would be affected? It is the centralized logistics base for the Air Force. Home to the AWACS. Surely you don't think they'd close this base and move those operations elsewhere? I would be more concerned with Vance or Altus closing.

Oh I don't think that Tinker is in any danger of closing, although I do think defense cutbacks, if sustained, will increase the odds of another BRAC before the 2016 elections. The generals at Tinker have positioned the base very well. However there are lots of non-maintenance things that go on there, and when you are talking about a 10% across the board cut to the DoD budget everybody will be feeling some pain.

There could be upside if the military decides to place more emphasis on maintaining what is has instead of adding any new planes to its fleet.

You are right about Vance though. I sadly think that place's days are numbered.

[ou48A]

Clearly the impact of the oil and NG industry cannot be fairly judged based only on the jobs based in the OKC area.

OKC people need to remember the following very well.
The oil & NG jobs that are created in the more rural areas of Oklahoma are extremely important to the health and well-being of OKC area and to the state.

The industry’s compensation historically far exceeds any other industry group. The industry creates large amounts of wealth that is often spent in the OKC area on industry supplies / equipment and on personal items.
.

[LordGerald]

But we do have an over-dependence on government jobs: local, state, federal, public educaition and local school districts are technically considered government jobs as well. Six of the top seven employers could be considered "government" jobs if you placed them in an employment cluster. It is good that we have nice stable employment in the health care sectors. We need more manufacturing to help with balance.

[progressiveboy]

I do agree with your statement somewhat, however the Oil and Gas Industry historically has been a boom and bust cycle. When O&G does well in Oklahoma then our economy seems to be humming along with lots of new infusion of cash in the metro area. The down side as some of us remember the fiasco of the oil bust of 1982 (My senior year in HS), and subsequent failure of Penn Square Bank should be a call to action to strive for continuous diversification to cushion and soften the blow of another bust!

[WilliamTell]

Six of the top seven employers could be considered "government" jobs if you placed them in an employment cluster. It is good that we have nice stable employment in the health care sectors.

I've been saying the same thing for quite some time...

I will say one thing you over looked, the medical field. Those are ran in large part off government spending since the vast majority of medical dollars spent in a persons life is in their last two years...so dont look so brightly at integres, ou medical, mercy, and the other one thats up there. Outside of Medicare /Medicade they are supported by government employees insurance plans.

I had a big thing awhile back about Mary Fallin boasting about 500 boeing jobs coming to OKC and how we are thriving despite Obama's government. The part thats left out is those jobs are paid directly by the US Tax payer and are in support of work going on at Tinker. Our ecomony is ran off bleeding a pig dry and two oil companies. One of those that is horribly ran and in the process of getting ready to cut staff. Wait i forgot, and warehousing cheap chinese goods at Hobby Lobby.

If you really step back from that list its kinda scary.

[ou48A]

I do agree with your statement somewhat, however the Oil and Gas Industry historically has been a boom and bust cycle. When O&G does well in Oklahoma then our economy seems to be humming along with lots of new infusion of cash in the metro area. The down side as some of us remember the fiasco of the oil bust of 1982 (My senior year in HS), and subsequent failure of Penn Square Bank should be a call to action to strive for continuous diversification to cushion and soften the blow of another bust!

The oil and NG industry is boom and bust, but it’s always been. I like to think that most in charge of corporations remember the bust of the 80’s in their decision making process. It was no fun being unemployed as I was during part of this time. But most smart people in the industry manage their risk well and never get overly exposed with debt. Unfortunately SD & CHK are not particularly good examples.


I would agree that economic diversification should be a goal but IMHO it needs to be a state goal just as much or more than an OKC goal.

We should use the energy wealth in our state to become more economically diversified and to make our state more attractive to business relocations and start up’s. .

[Pete]

There is no question that the OKC economy is coupled to the fortunes of oil & gas but it's also true that dependence has lessened since the last big bust of the 80's.