BUSINESS IS BACK. NO RECOVERY.


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Malls in at least ten states have reopened for business… but shoppers are not flocking to them.
Shopping hubs in Florida, Georgia, and Texas were open but saw few cars in their parking lots last week.
Many mall stores remain closed even though the malls themselves are open. Food courts greet few diners. Children’s play areas are shut down. Security guards remind people to wear masks.
Government guidelines recommend that states begin to lift lockdown restrictions only after they see 14 days of steady declines in new virus cases or positive tests.
At least 17 states, however, which have begun to reopen malls and stores have not followed this guideline, according to an Associated Press analysis. Some states have eased restrictions even while their numbers of virus cases have continued to rise.
Malls that had invested in resort-like amenities to attract shoppers face particular difficulties.
For example, the Pyramid Management Group, which owns 11 malls in Massachusetts and New York, invested hundreds of millions of dollars in recent years to add mini-golf courses, theme restaurants, comedy clubs, and other spangles to lure visitors, as shoppers drifted away online or to more novel shopping venues.
Now, amid the lingering economic lockdown, the company owes $1.6 billion in mortgage-backed debt on 11 of its malls and was late making its April payment on six.
Meanwhile, 56 percent of shoppers plan to avoid areas like theme parks while only 30 percent will stay away from clothing stores, according to a survey by Jeffries Equity Research.
Investors holding Pyramid’s securities could face a 50-percent loss, Fitch Ratings has predicted.
TREND FORECAST: Under the “New ABnormal,” with a wide array of laws limiting seating, occupancy, and social distancing enforcement, the pall on the malls and decline in brick and mortar retail that existed before the coronavirus pandemonium stuck will continue to dramatically worsen.
As fears of virus contagion decline, hometown shopping in small upscale cities will rebound moderately.
Oil Down, Some Going Out
The deeper the global economy falls, the less people drive to work, the fewer airplanes that fly, the more businesses are closed down… the further oil companies decline.
Yesterday, burdened in debt, shale pioneer Chesapeake Energy warned that as a result of low oil and gas prices, it might go out of business.
ExxonMobil reported a first-quarter loss this year of $610 million, its first quarterly loss in three decades, and it took a “market-related” charge of $2.9 billion.
The figure contrasts starkly with the company’s $2 billion in earnings during the first three months of 2019.
The oil giant also ditched $10 billion, or 30 percent, of its planned capital expenditures for this year.
Chevron booked $3.6 billion in profits during the first quarter, a gain of 36 percent from the previous year’s period. The company, however, has trimmed its capital budget this year from the planned $20 billion down to $14 billion, and cut $1 billion in operating expenses, anticipating far worse performance in the months ahead.
ExxonMobil has announced global production cutbacks of 400,000 barrels a day, including 100,000 in Texas’s Permian shale-oil basin. Chevron plans to shut in 200,000 to 300,000 barrels a day of its global production this month and 200,000 to 400,000 in June.
Occidental Petroleum, the largest U.S. independent producer, reported losing $2.2 billion in the first quarter this year.
The company has hired an investment bank to help it find ways to manage the $40 billion in debt it took on last August to buy Anadarko Petroleum.
Occidental had planned to sell $15 billion in assets to raise cash, but the idea was shelved when oil prices tanked and the economic lockdown vaporized demand for oil.
To raise the money for its Anadarko purchase, Occidental sold $10 billion worth of preferred shares to Warren Buffet. The shares carry an annual dividend payment of $800 million. Last month, Occidental paid the dividend in shares instead of cash.
During the first week of May, the number of oil and gas drilling rigs at work in the U.S. sank to 374, a low not seen in a century.
PUBLISHER’S NOTE: ExxonMobil’s cut amounts to about 10 percent of its production and Chevron’s a slightly higher percentage. When oil demand returns, these relatively modest cuts leave the majors well positioned to take U.S. market share from hundreds of independent producers that have slashed their output by half or more in response to the world’s oil price crash.

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