View Full Version : OKC Economic Outlook 2013



bchris02
12-28-2012, 08:23 PM
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
12-28-2012, 09:12 PM
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
12-28-2012, 09:16 PM
It wouldn't hurt none if we saw a bump in the natural gas prices. It would certainly sweeten my 2013 economic outlook.

progressiveboy
12-28-2012, 10:19 PM
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
12-28-2012, 10:26 PM
Why don't we have a refinery in Cushing seems like a very ideal location for a refinery

bchris02
12-28-2012, 10:41 PM
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
12-28-2012, 10:43 PM
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
12-28-2012, 10:56 PM
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
12-28-2012, 11:07 PM
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
12-28-2012, 11:47 PM
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
12-29-2012, 12:34 AM
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
12-29-2012, 12:58 AM
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
12-29-2012, 09:05 AM
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
12-29-2012, 12:37 PM
Oklahoma Economy Ends 2012 On Strong Footing - News9.com - Oklahoma City, OK - News, Weather, Video and Sports | (http://www.news9.com/story/20464316/oklahoma-economy-ends-2012-on-strong-footing)

Pete
12-29-2012, 01:08 PM
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:



http://www.okctalk.com/images/pete/okcemployers2012.jpg

Plutonic Panda
12-29-2012, 01:12 PM
Wow. Hobby Lobby is huge.... I never knew!

Pete
12-29-2012, 01:16 PM
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
12-29-2012, 01:58 PM
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 (http://seekingalpha.com/article/1051331-bakken-crude-the-refiners-top-choice)

adaniel
12-29-2012, 02:01 PM
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
12-29-2012, 02:13 PM
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
12-29-2012, 02:17 PM
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
12-29-2012, 02:22 PM
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
12-29-2012, 02:36 PM
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
12-29-2012, 02:37 PM
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
12-29-2012, 02:57 PM
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.

adaniel
12-29-2012, 03:21 PM
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.

Maybe some of you who lived through it can correct me, but it seems the bust of the 80's was just as much a banking/real estate crash as it was an oil and gas crash. So you had 3 major sectors of the economy wiped out at the same time. I don't see a similar effect now, with oil and gas indirectly affecting but largely decoupled from these sectors.

Pete
12-29-2012, 03:28 PM
Yeah, it was a real domino effect in the 80's and a lot of it had to do with lack of proper oversight in both banking and corporate governance.

Much has changed since then but if oil really tanked again, there would certainly be a cascading effect throughout Oklahoma.

Commodity prices are always, ALWAYS cyclical, so oil will come back down, it's just a matter of by how much. I know SD and CHK are more heavily weighted on natural gas but I wonder if they could weather a downturn in the record oil prices. I think Devon and Continental would probably be fine.

LordGerald
12-29-2012, 04:04 PM
The OKC region is definitely skewed to the oil and gas industry if you compare our region's oil/gas/mining cluster to another metros. This is not necessarily a good or bad thing, but it does indicate either a strength (boom) or vulnerability (bust) if either were to happen.

From Page 34 of the Central Oklahoma Comprehensive Economic Development Strategy…

Location quotient analysis provides the ability to identify specialization within an economy. Typically, sectors with high LQs are considered export industries as they employ more workers than would be necessary in a local economy.
By far, oil, gas & mining has the highest LQ (6.40) in the Central Oklahoma region. This means the sector employs nearly six-and-a-half times as many employees as would be expected, given national employment rates.
Other high LQs include federal government (both civilian and military) and state government (including public education).

For the full document, go here:

http://acogok.org/Newsroom/Downloads12/cedsfinal812.pdf

This document also shows the greatest opportunity for future job growth is in healthcare, "but over the last five years, the oil, gas, & mining sector has been the key driver for job growth within the OKC metro region, experiencing a net increase of nearly 12,000
positions."

mugofbeer
12-29-2012, 04:45 PM
From what I can see, the economic outlook for Oklahoma City is pretty bright. Chesapeake isn't posting colossal losses which would fortell of an upcoming bankruptcy and their asset sale program is moving along at a reasonable pace. The main risk to Chesapeake is a hostile takeover by a major oil company or a vulture like Carl Icahn. Hobby Lobby isn't going anywhere - their issues are national in nature, not local. Nothing will change if they move to another state. OKC could always stand to diversify the economy and the 100K government jobs may not be what some of you want but they are relatively stable jobs. Further development of downtown, the convention center and other MAPS projects will further strengthen the economy and be a draw for new business from outside the state.

Plutonic Panda
12-29-2012, 06:17 PM
I think a light-rail service would do some good.

Praedura
01-02-2013, 01:11 AM
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:



http://www.okctalk.com/images/pete/okcemployers2012.jpg



There's a few names I don't see there (but might expect), such as: Sonic, Love's Country Store, 7-Eleven, Paycom, Ralston Purina, etc. But likely they're just further down the list.

Well, I looked around the Chamber's site and finally came up with this link
Greater Oklahoma City Economic Development - Major Employers (http://www.greateroklahomacity.com/index.php?src=directory&view=employers)

But this stops at UCO as well. Bummer. Would be nice to see a much larger list -- e.g. the top 100 employers.

bchris02
02-11-2013, 10:34 AM
Sandridge relocating is starting to look more and more like a possibility. From what I understand, they are a high profile employer but their number of employees in the metro is relatively small. Other than possibly killing the possibility of a tower being built, what effects will Sandridge's departure have on OKC longer term?

catch22
02-11-2013, 12:25 PM
I doubt they move even if they got purchased. They have spent way too much money on that campus, I doubt they could sell it for a profit.

adaniel
02-11-2013, 12:51 PM
Sandridge relocating is starting to look more and more like a possibility. From what I understand, they are a high profile employer but their number of employees in the metro is relatively small. Other than possibly killing the possibility of a tower being built, what effects will Sandridge's departure have on OKC longer term?

The only thing that's looking like its "relocating" is Tom Ward.

Sandridge is actually a profitable company, although that increases the likelihood of them being purchased. Even still it is rare for entire companies to just get up and leave absent some major financial problems.

The bigger threat in the short term losing a big corporate sponsor for this area.

Praedura
02-17-2013, 08:30 AM
An optimistic note here:

Economist says Oklahoma City's economic trends remain positive | News OK (http://newsok.com/economist-says-oklahoma-citys-economic-trends-remain-positive/article/3754798)



Oklahoma City may be in the “nascent years” of an economic transformation marked by widespread growth, an economist told the Oklahoma City Council on Tuesday.


This according to Russell Evans of the Steven C. Agee Economic Research and Policy Institute at Oklahoma City University.

Sure hope he's right.

Praedura
02-17-2013, 09:47 AM
In the article, Evans projected three scenarios for sales tax growth:
2.6% - pessimistic
4.4% - baseline
7.1% - optimistic

Evans leaned towards the optimistic number, but advised the Council not to plan the budget on it, out of prudence.

I think that's pretty good when a 2.6% increase in sales tax over the last year is the "pessimistic" outlook.

Praedura
02-17-2013, 11:59 PM
Bizjournals recently released their ratings for "Best cities in America for small business"
(i.e. metropolitan areas that are highly conducive to the creation and development of small businesses).

Best cities for small-business vitality: Austin, Oklahoma City, Denver, Raleigh, Salt Lake City - The Business Journals (http://www.bizjournals.com/bizjournals/on-numbers/scott-thomas/2013/02/austin-ranks-no-1-for-small-business.html?page=all)

OKC comes in at number two (Austin takes the top spot).



The runner-up in this year's rankings, Oklahoma City, has been booming in recent years.
It currently holds first place in the On Numbers Economic Index, a broad measure of all-round economic strength.

Oklahoma City also fares well in indicators that deal specifically with entrepreneurship.
It's among just six major markets adding small businesses during the past year, while also maintaining a concentration
of more than 25 small businesses per 1,000 residents. (The typical U.S. market has a concentration of 22.9 per 1,000.)

Praedura
02-24-2013, 07:14 AM
Oklahoma City ranks second among leading U.S. metropolitan areas in terms of the number of jobs recovered over the past year,
and fourth when it comes to jobs recovered since the onset of the Great Recession which started in 2008.

http://flyers.newmarkkf.com/NewMarkContent/Items/25902/FWI_Metro_022213_c_OP.jpg

Further info on these charts here:
View Email (http://flyers.newmarkkf.com/public/eViewPublic.aspx?cID=317554&eID=843de821-b592-49a6-b2dd-1f6d8e6c0e3a)

Source:
OKC Ranks High in Jobs Recovered « OKC Review (http://okcreview.com/okc-ranks-high-in-jobs-recovered)

adaniel
02-24-2013, 06:06 PM
^^
Good stuff. Thanks for posting this.

Praedura
02-25-2013, 08:40 AM
^^
Good stuff. Thanks for posting this.

Thanks for the thanks! :wink:

I don't know how long OKC can keep up with these good economic numbers. But as long as it keep topping lists like these, it bodes well for the city and its immediate future.

bchris02
02-25-2013, 06:03 PM
Things right now are not looking good for Sandridge and this could put a dent in the downtown renaissance.

SandRidge proxy fight could affect downtown Oklahoma City | News OK (http://newsok.com/sandridge-proxy-fight-could-affect-downtown-oklahoma-city/article/3758324)

The good news is economically speaking I think losing Sandridge will be easily absorbed. Little Rock absorbed the loss of Alltel and Charlotte absorbed the loss of Wachovia. As a percentage of OKC's workforce, Sandridge is a drop in the bucket compared to those companies. The worst of it will be the psychological impact. OKC has a history of being perceived as one of if not the worst city in the nation to live in for its size. Only in the past few years has that perception begun to change, and that is largely because of the community re-investment from companies like Sandridge. Anything that might derail the renaissance isn't something this city needs right now. While OKC has come a long ways, its not there yet.

Hopefully the Sandridge/Kerr McGee tower will be able to find another occupier and will not sit dark with unfinished construction for years. Anybody with more insight care to comment on possibilities?

Teo9969
02-25-2013, 07:01 PM
I doubt many outside of Oklahoma or the Energy/Investment industry know about SD.

And when a company goes under because of impropriety (real or conceived) that is different than a company up and moving because they don't like OKC, or a company failing because OKC and/or its businesses are not viable.

SD leaving (which is by no means a certainty, even with a board takeover or a buyout which is also not a given) probably only slows the growth to the extent that they were involved in the growth. I don't think any entities will take anything more from SD going under/out than that SD was a poorly managed company.

Yeah, someone probably just buys their tower rather than building a new one (OGE or CLR), but even that is not guaranteed.

adaniel
02-25-2013, 09:44 PM
I don't know why its already assumed SandRidge is lost. I certainly don't agree with some of their executive decision making, but proxy fights are par for the course for publicly traded companies. It remains to be seen if the upset shareholders even have the votes to make any changes. That could be good or bad, of course.

Praedura
03-13-2013, 01:12 AM
I came across an interesting entry about OKC in a blog for Metropolitan Capital Advisors (MCA) - a Dallas based mortgage brokerage firm:

Oklahoma City Commercial Real Estate | Metropolitan Capital Advisors (http://blog.metcapital.com/tag/oklahoma-city-commercial-real-estate)



Oklahoma City (OKC) has been flying under the radar for quite some time.
While the big boys may look at OKC as a secondary market, the city has made a name for itself.


Recently, some representatives of MCA visited OKC, and the city made an impression:



Last week, MCA attended the American Heart Association Ball fundraiser partly to celebrate our recent success.
We stayed at the Hilton Skirvin, a newly-renovated hotel that was originally constructed in 1912.

To our surprise, the entire block surrounding the hotel was full of entertainment and businesses that could match any major city.
From bars and restaurants to museums and sport venues, downtown OKC has it all.


http://blog.metcapital.com/wp-content/uploads/2013/03/MCA-group3-768x1024.jpg


After listing some of the projects MCA was involved with in OKC, there are some final thoughts about the OKC market:



MCA was successful in attracting national and international lenders to these transactions primarily because OKC
has a terrific economic engine combined with strong real estate fundamentals.

Our firm expects the story in OKC to get even better, and we are actively pursuing a number of new financing transactions
throughout the State of Oklahoma.